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The Coalition government today shelved plans to cut $500 million in assistance to the Australian car industry between now and 2017.

It is ostensibly a bid to ensure the three local car-makers do not shutter their factories earlier than planned in 2016/17, though detractors are calling for more and questioning the purpose of proposing the controversial cuts in the first place.

Last year the government announced in the May Budget a $500 million cut to the Automotive Transformation Scheme fund for car-makers and component suppliers between 2015–17 and the total abolition of the ATS program from the end of 2017, four years early. 

This would result in a total cut of $900 million, given the ATS is understood to be predicated on there being a local manufacturing industry, and there was as much as $400 million earmarked over the period of 2018-21 that could be saved thereby.

The ATS covers the big three car-makers, as well as the local component industry that supplies them. Speculation suggests those firms will either have to diversify beyond automotive or risk shedding workers. Thousands of jobs depend on this sector.

The proposed cuts — which have not passed the senate anyway — prompted concerns that Ford (with dwindling sales and due to cease local production in late 2016), Holden and Toyota (both slated to close a year later) could pull up stumps even earlier than planned. Ford called today’s announcement “sensible”. 

However, industry minister Ian MacFarlane announced today in Adelaide, home to the Holden plant, that the fight to push through the cuts would be ceased.

MacFarlane claims he began discussions in August last year in response to expressions of concern from the industry that the cuts could hasten the demise of local car-making, and that it was not a knee-jerk response to poor Coalition polling.

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The backdown follows decisions last week to axe the Medicare co-payment and to increase the defence pay offer.

“What we are talking about today is not proceeding with the legislation to cut the automotive transition scheme by $500 million,” Mr Macfarlane was quoted as saying in the Australian Financial Review.

ABC Adelaide quoted the minister as saying that a a decision “has been made, primarily to ensure that the industry goes the full distance in terms of its already slated closure at the end of 2017”.

“Whilst the decision of people like Holden to cease manufacture was a decision they made separate to anything the government did — and they are their words not ours — we don’t want anything to jeopardise the survival of the industry until Holden finally closes.”

Prime Minister Tony Abbott is scheduled to visit South Australia and Victoria this week. He will be in Adelaide on Wednesday. MPs in affected electorates were apparently told in advance of the about-face.

While the $500 million cut has been shelved, the aforementioned $400 million in proposed savings to be had by bringing forward the closure of the scheme from 2021 to the beginning of 2018 appear to still be on the agenda.

This is unacceptable to firebrand independent senator Nick Xenophon, who said today:

“On the surface, the Government announcement sounds good, but scratch below the surface and it could end up being a pea and thimble trick.

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“Under the current rules of the ATS, the Government will never have to spend that $400 million, because Ford, GM Holden, and Toyota will have ceased car manufacturing by then. This leaves 140 auto component firms with 33,000 direct jobs and conservatively another 70,000 that are dependent on the sector, potentially disappearing by 2018.

“Forgive me for being cynical, but the Government is trying to win a political battle by announcing scrapping the cuts, but in effect they will still achieve what they wanted unless the criteria for the ATS funding is changed in respect of the new landscape.”

The Australian Manufacturing Workers Union added: “… We shouldn’t forget that it was these ATS cuts and the Government’s Trade Agreements that the industry cited as the main barrier to continuing manufacturing in Australia.

“Now that the Government is walking away from these cuts, you could be forgiven for asking – what was the point?”

Federal opposition leader Bill Shorten was quoted by the ABC as saying the decision was “very late in the piece”.

“Very belatedly we’re seeing the Liberal National Government in Canberra junk some of their unfair, crazy policies, but I do not believe for one minute that the Liberal National Government in Canberra has changed its mind.

“They’re just changing their tactics,” he said.




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