The Federal Government should not fund the Australian new-car manufacturing industry, once existing assistance schemes expire.
That’s the finding from a Productivity Commission report released this week, which says the industry is undergoing “significant change”.
The $30 billion of Federal Government investment into the local car industry between 1997 and 2012 has “forestalled, but not prevented” the inevitable - that the days of building local cars were always going to end.
While some component manufacturers will be left behind once the major carmakers pull the pin, the report warns that policy supporting industry-specific assistance is “weak”, with the costs outweighing the benefits.
The report adds the Automotive Transformation Scheme should be closed once the three remaining players exit from local manufacturing.
“Component manufacturing firms are currently set to receive over $300 million in industry-specific assistance between 2014 and 2017,” the report says.
“There are both efficiency and industry equity arguments against extending assistance beyond that already committed, or introducing new assistance programs that would advantage component manufacturers ahead of other firms that face adjustment pressures.”
The Commission estimates up to 40,000 people could lose their current jobs as a result of the changes, but believed the losses would be staggered between now and the end of 2017.
Government assistance to such people should be targeted, the report said, particularly to older workers, low-skilled workers and those who struggle with English.
The report concluded that the luxury car tax should be scrapped, along with current import duties.