Auto Shutdown Will Deliver Another Economic Blow

by Jim Stanford

We’ve known for over two years that this day was coming.  But that won’t ease its economic and social pain.  The shutdown of Australia’s mass motor vehicle assembly industry is now upon us.  Ford’s assembly plant in Broadmeadows, Victoria, was the first to go dark: the final Aussie-made Ford has already rolled off the assembly line.  Remaining workers are preparing the factory’s final shutdown.  Holden’s assembly plant in Elizabeth, SA, and Toyota’s Altona factory (also in Victoria), are scheduled to close next year; both have already begun phasing down production.  Engine plants operated by Ford and Holden will also close.

This briefing note reviews the direct and indirect economic consequences of the closures, which will extend far beyond the plants being shuttered.  After all, motor vehicle manufacturing purchases $8 billion in inputs from 100 different economic sectors in Australia — and most of those are services.  Ultimate job losses will be many times larger than the direct jobs eliminated at Ford, Holden, and Toyota.

The briefing note also addresses the damaging effect of Australia’s lopsided trade agreements have played in hastening the industry’s end.  In particular, the implementation of 5 free trade deals with major auto-producing nations (the U.S., Thailand, South Korea, Japan, and China) over the past decade provided global automakers with a free ticket for selling their products in Australia, without necessarily producing anything here.  The FTAs have had no positive impact on Australian vehicle exports, and resulted in a forty-to-one imbalance in automotive trade flows.

In addition to taking action to ameliorate the economic and social hardship that will be experienced in automotive regions over the coming months, government must also learn the lessons of this failed strategy — before other industries here experience a similar fate.

Full report