18/01/2012 - 10:49

Auto support package doesn’t add up

18/01/2012 - 10:49


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The federal government’s preference for the big end of town comes at the expense of small business operators.

The federal government’s preference for the big end of town comes at the expense of small business operators. 

AUTOMOBILE sales are an intriguing economic indicator, so I pay attention to the figures even though we don’t manufacture cars in this state.

So I’ve watched the collapse of Ford’s market share, mainly as its Falcon model has lost out to Toyota’s alternatives, notably the Camry.

It’s not necessarily as simple as that, but a helicopter view suggests that is the key theme. Holden has also lost out but Ford has been whacked the most.

Why is it that Ford has kept making cars that no-one wants? Why is it that the federal government has agreed to throw in $100 million to this US company to keep it making Falcons for another five years?

Will the government pay publishers to keep printing newspapers when the market wants online news? No. The federal government is doing the opposite; it is spending $40 billion or more to accelerate the rollout of broadband, which will mainly be used to download video entertainment and news – a direct competitor to newspapers. 

Why is one industry getting special treatment while another gets slammed?

Just to be clear, I am not advocating support for newspapers; we can look after ourselves.

But I do object to endless financial support, estimated to be around $5 billion from this federal government, for an industry that will never walk on its own two feet.

There are three key reasons for such largesse, all which are valid at first glance: reducing imports to improve our trade balance; the need to maintain strategic manufacturing knowledge just in case this country was isolated; and protecting jobs.

Reducing imports is a furphy. In a dynamic and export-driven economy like Australia, the objective is to provide flexibility for business and consumers to buy their inputs as cheaply as possible and sell their production for as much as possible. Distorting that simply encourages investment in the wrong places; but then again, all three of these excuses do that.

The strategic knowledge argument is also wrong. If we really wanted to develop, and retain, knowledge for either defensive reasons or competitive advantage, then making cars is not particularly helpful. Notwithstanding the success of the Libyan rebels using Toyota Hilux utes with mounted machines guns, I’m uncertain how Australia’s car manufacturers would be able to retool to make us self-sufficient in something like tanks.

Arguably, taxpayers’ money might have been better spent on aircraft, but perhaps the Collins Class submarine gives us insight into how that could work out. Alternatively, the government could spend money on developing a mining truck industry, specialist long-haul trucking technology or short-range passenger aircraft that can land at a mine site. 

Or maybe just let industry work it out itself; but please don’t demand that subsidies be pushed into developing electric cars, an area we’ll never get a competitive advantage and just another feel-good strategy leading to a dead end (or more subsidies).

Finally, protecting jobs in the old Australia is just plain pork barrelling and, as experience shows, the more protection given, the more is needed as industries in cotton wool become less and less competitive. The argument over jobs is flawed because it isn’t really the job being protected – it is the place where the job is. Every one of those workers building cars could get a job tomorrow if they were prepared to move to the new Australia, where the work is and the workers aren’t.

All this brings me to the real reason I started this column – the anti-new business stance of the current federal government.

I have been advertising for a graduate journalist position and doing some interviews with candidates. One question I often ask is what the interviewee’s parents do professionally. I ask this because, having grown up in a household dominated by small business, I realise how much insight into business a young person gets if they are confronted with commercial issues at the kitchen table, on the drive to school and every other family moment. 

Not everything about being the child of a small business parent or family is a good thing, but it does open your eyes to things that children of parents who are employees, rather than business owners, may never see or experience – including the impact of government policy and bureaucratic pedantry.

It creates a kind of empathy that is hard to attain if your only experience of business is through the eyes of an employee.

Not everyone needs to grow up in a small business family to understand business; and not everyone who grows up in a small business family will understand business, or want to follow that same path.

Nevertheless, I believe a lively small business culture is important to our economy. This breeds on itself; if conditions are right, not only will small business thrive, there is a sort of generational passing of the baton.

Right now, the opposite is the case. The balance is weighted heavily in favour of being an employee, a prevailing condition that generally on its own makes small business tougher. It’s not just rigid industrial relations and overly generous unfair dismissal provisions, it is tax laws targeting independent contractors, restrictive migration and work safety rules making owners guilty unless proven innocent. 

A trend to bigger government is also part of this. Massive old industry subsidies are another.

That is not surprising from a government ruled by unions. Unions are the big winner in this environment. Big business pretends to complain at the margins, but bureaucracy and regulations are easier to deal with in large corporations, where everyone from the CEO down is, typically, an employee rather than an owner to any significant extent.

The outcome is not just short-term productivity issues. The longer a bias to employees remains in place, the more it becomes ingrained in our culture – taking us back to the 1970s when people seemed to think the country owed them a living.

Employees can be entrepreneurial and big companies can be innovative, but if you want a dynamic economy that can reinvent itself you need a lot of small business to be constantly pushing the boundaries.

I recall a conversation with a local Labor power broker some years ago where he admitted his preference was to deal with big business, including multinationals. They tended to follow the rules, both the written and politically correct ones, which he said made it easier to do deals and get outcomes the (then) state government wanted.

The reference was really around mining companies, but the car industry is a good example.

This protected species is sucking billions in subsidies to keep certain jobs in certain electorates, but the profits go to multinationals. It is bizarre that an entirely foreign-owned industry, which employs fewer people than mining, gets massive subsidies while the only partly foreign-owned mining sector is expected to pay additional taxes. Why does Perth-based Fortescue Metals Group, for example, need to pay taxes to prop up Detroit-based Ford, especially when the US company is keeping workers from where they are needed, on FMG’s mine sites. 

The local car industry’s inflexibility is a result of these politically motivated subsidies which encourage workers who, in turn, knowing they are a protected species, to resist changes that would allow automobile manufacturers to be competitive. 

Or for other sectors to develop in areas where they can compete more naturally, without the burden of keeping a legacy industry on life support. 

• mark.pownall@wabn.com.au



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