Minimal threat to Qld economy from car industry shutdown

The demise of Australia’s car manufacturing industry was always inevitable, but even I have been surprised at the pace with which Ford, GM Holden and now Toyota have announced their plans to cease production in Australia. While the plant closures will have significant impacts in some regions, particularly Geelong, Melbourne’s western suburbs and Elizabeth, SA, the overall macroeconomic impact should be small and I expect minimal flow-on impacts to Queensland.

Jobs at risk in Queensland due to plant closures down South would mostly be in the motor vehicle and parts manufacturing sub-sector, particularly jobs in businesses in the supply chains of the car manufacturers. According to the Automotive Environmental Scan 2013 (p. 32), there were 7,500 people employed in this sub-sector in Queensland in June 2012, which is only around 0.3% of all employed persons in Queensland. Even if half these jobs were lost, it would be hard to distinguish the impact on the unemployment rate from the usual noise you get in the data.

My previous posts on Australia’s car industry have included:

New Government should reject car industry begging

Future of Australian car industry depends a lot on the exchange rate

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This entry was posted in Industry policy, Labour market, Macroeconomy and tagged , . Bookmark the permalink.

6 Responses to Minimal threat to Qld economy from car industry shutdown

  1. Craig Wilson says:

    great blog, really punchy

  2. Katrina Drake says:

    Heard you on the ABC612 this morning with Steve Austin – very reassuring generally. Perhaps not so much for the 7,500 people who are forecast to lose their jobs in the automotive industry.

    Hopefully there will be a job for them in an innovative small-cap company somewhere, that makes high tech widgets, that every body needs, with low transportation costs, and little competition…………better get out thinking caps on……… . I wonder, thinking caps, have they been invented yet ?

    • Gene Tunny says:

      Thanks Katrina. The 7500 figure is people employed in vehicle and parts manufacturing in Qld only, sorry. I wish I had made that clearer now. It’s much more nationally but still I think the economy can handle the shock.

  3. Jim says:

    Gene

    You have made some good points. Given the fact that most of the actual jobs in the car industry (parts manufacturing, wholesale and retail trade activities) don’t tend to be in Elizabeth or Geelong, I think it is fair to say most people who lose their jobs on the back of the demise of car manufacturing will find alternative employment.

    I know you have looked at the industry a few times. I’d be interested on your views about:
    1) The consumer welfare benefits from the closures (i.e. cheaper cars, both new and second hand). The second hand car market in NZ is a great case study, where the demise of the NZ car industry led to cheaper imports, lower prices, and a significant reduction in the age of the national vehicle fleet.
    2) Any changes to the distortionary tax treatment of cars that could be fixed. I cannot imagine the Commonwealth Government would give up on any revenue at the moment, but wouldn’t it be better to replace things like the luxury car tax (that simply props up prices) with some sort of levy based on vehicle emissions that also raises the equivalent tax revenue. Given the fact that the bulk of lifecycle car ownership costs are dominated by he initial purchase cost, depreciation and other fixed costs, emissions price signals at the point of vehicle purchase are likely to be more effective than price signals at the petrol pump. Over time this would significantly change the structure of the national vehicle fleet towards more efficient vehicles.

    • Gene Tunny says:

      Yes, agree re second hand cars, and I included a comparison with NZ in my 2011 article on the car industry in Policy.

      Good idea re levy based on vehicle emissions to replace luxury car tax. Thanks for your comments, Jim.

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