Political support for protection of the Australian automotive industry has been largely bipartisan, with two noteworthy exceptions. In 1973, the Whitlam Government announced a 25% across-the-board slashing of tariffs. In an attempt at flagrant political blackmail, Holden immediately announced 5,000 sackings. Ironically, it was Bob Hawke, then-ACTU leader, who led the combined industry-union campaign against the federal government’s cuts. A compromise was produced which resulted in an 85% local industry production plan, and an agreement that Holden would re-hire the retrenched workers.
The oil crisis, import penetration (despite protection) and poor productivity produced Australian auto industry crises in the 1980s. Holden closed Pagewood (NSW) and Acacia Ridge (Queensland), while Chrysler sold its remaining equity to Mitsubishi, including its Tonsley Park (South Australia) plant, in 1980.
Although the Fraser government increased tariff protection, Industry Minister Philip Lynch developed a gradualist approach to reductions in protection in 1981. These proposals were amended and fast-tracked by John Button, Hawke’s new industry minister, in 1983. Button’s approach was reformist, but corporatist. He envisaged bureaucratic regulation (establishing the Automotive Industry Authority); phased tariff reductions (2.5% per annum); export credits schemes; minimum annual model production (40,000 vehicles per model); joint ventures, model-sharing and R&D cost sharing; fewer separate manufacturing facilities; and fewer domestic manufacturers.
Subsidies persisted under the Button car plan. The Commonwealth helped fund both Falcon and Commodore in the late 1980s, as Ford and Holden developed new models. But industry rationalisation meant further plant closures were inevitable. In 1992, Nissan withdrew from Australian manufacturing, while Ford ceased local Laser production in 1994 with Homebush (NSW) closing its doors.
Despite these closures, Toyota Australia made a substantial $AUD500 million investment commitment in 1992. Behind closed doors, Bob Johnston and Paul Keating negotiated Australia’s first single union agreement – without which, Toyota would build the plant in Malaysia.
It was at this point that the second political disjuncture on car industry policy came in the form of John Hewson’s election to the Liberal Party leadership in 1990. Coalition policy throughout 1990-93 under Hewson envisaged a zero-tariff regime by 2000, a position that was vigorously opposed by industry leaders, who publicly derided such proposals.
Hewson’s position was further undermined by his confrontationist approach towards the Federated Chamber of Automobile Industries (FCAI). Bob Johnston (Toyota) recalled him striding into an FCAI meeting and saying: “Make no mistake. When I become prime minister, you’ll get zero tariffs.”
The shocked response of Ford’s Jac Nasser was: “You’ve got to be joking. Don’t you want a car industry?”
Hewson replied: “If you need tariffs and subsidies to survive, then, no, I don’t want an automotive industry.”
The Hewson position exemplified the “flat earth” and “level-playing field” approach to industry policy that the Federal Coalition advanced throughout the 1990-93 period. The FCAI warned of the decimation of the car industry under a Hewson-led government. It was an unusual excursion into Federal politics by industry leaders, and it was highly influential – certainly in Victoria – in contributing to Keating’s narrow 1993 election victory.
Hewson thought – incorrectly – that industry leaders were crying wolf and had sheltered for too long behind tariff walls. He was wrong on two counts: first, the level of protection had decreased substantially since Whitlam’s first cuts in 1973. Second, the level of investment required to develop a car purely for the Australian market did not justify the risk in a zero-tariff regime. The threat made by Jac Nasser – that Ford would cease manufacturing in Australia – was very real.
Make no mistake: the Australian car industry persists only because of industry protection and government subsidies. Both sides of politics recognise this.
What is often overlooked is the downstream automotive components industry, which hosts both local and international firms. As the Federation of Automotive Product Manufacturers notes, this sector provides 45,000 jobs, some 5% of national manufacturing employment, with almost $49 billion in turnover. Indirectly, the job head count this industry supports is even higher. The multiplier effect of this sector’s investment and turnover upon Australia’s economy is significant.
