Car Industry Makes Significant Contribution to Economy

31st July, 2008

 

The Federal Chamber of Automotive Industries (FCAI) has reinforced the critical importance of car manufacturing to the Australian economy as the Federal Government receives the Review of Australia’s Automotive Industry, headed by Steve Bracks.

“The automotive industry is Australia’s largest manufacturing industry and the largest exporter after mining, generating export earnings of more than $5 billion a year,” FCAI Chief Executive Andrew McKellar said.

“The outcomes of the Bracks Review are critical to securing ongoing and renewed investment in the Australian automotive industry,” he said.

“It is important that the government’s response establishes policy settings that will underpin the development of an Australian automotive industry that is sustainable in every sense,” Mr McKellar said.

To coincide with Mr Bracks handing his report to the Federal Government, the FCAI today released modelling conducted by Econtech into the ‘Economy-wide Impacts of Future Assistance Options for Australia’s Automotive Industry’.

The FCAI says the Econtech research casts further doubt on the modelling into automotive assistance released earlier this year by the Productivity Commission.

“The Econtech modelling highlights the significant contribution the industry makes to the economy and shows why the right policy settings must be in place to see this continue,” he said.

“It is disappointing and concerning that the Productivity Commission ignored a number of key factors when putting together their findings and it is now apparent why the Government did not use the Commission to undertake the industry review,” Mr McKellar said.

The Econtech modelling shows:

  • Reducing or eliminating automotive industry assistance would lead to a reduction in automotive production of between 4.8 and 20.9 per cent.

· The elimination of assistance to the industry would have a negative impact on overall consumer living standards. The modelling projects a reduction estimated at $83 million a year.

· Assistance to the automotive industry is now at the point where further reductions in assistance will yield marginal or no benefits to the economy.

The report says “an important difference between the Econtech and Productivity Commission approaches is that Econtech’s modelling does take into account the diminishing marginal benefit to reducing tariffs. For this reason, Econtech results will show a smaller (or negative) benefit from reducing tariffs compared to the PC results.”

“Importantly, the Econtech results in this report are in line with the results presented in Econtech’s 2002 report commissioned by the Productivity Commission”.

 

For further information contact:
Sheena Ireland, Communications Manager
P: 02 6229 8221
M: 0458 038 555
E: sheena.ireland@fcai.com.au

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