Tim Harcourt

In Australia the car industry is unique. It has unique Australian characteristics and capabilities, and its closure is a self-inflicted wound.
 
The exit of Toyota from Australia really symbolises the way the Australian economy has now moved on from the days when it was a manufacturer, and it now has more of a dependence on the resources sector.

Toyota has confirmed that it will cease all production in Australia by 2017. Approximately 2,500 jobs are expected to be lost when the Japanese car maker closes its Altona plant in Melbourne.

The exit of Toyota is very sad, and really signals the death knell of car making in Australia. In hindsight we should have focused on export orientation and trade promotion, supporting the free trade agreements, and building on our export success in Asia and the Middle East and emerging markets.

When I was on the Bracks Review, I made it clear the government could intervene with tariffs or support, but despite that changes in the global economy are had a huge impact Australian car industry. One crucial issue was until recently the very high Australian dollar which would have wiped out any impact of a tariff freeze and the protectionist lobby would have only had a pyrrhic victory of a few months.

However in the current debate over the future of the industry there are two extremes hogging the limelight. There’s one camp that says protect the industry no matter what the cost – and indeed protect manufacturing at whatever the cost – and there’s another camp that sees it as a badge of honour to say Australia should not produce cars and they belittle any outcomes by the industry to raise international competitiveness. I recall a former Australian ambassador in Washington, loudly and proudly telling an American audience that the optimal number or car companies in Australia is zero. Fortunately, Bracks, like Button before him, eschewed both extremes and advocated a moderate path of reform for the industry.

This steady reform is what we should have had; instead, we had Ford, GM, and now Toyota falling like dominos. If only GM had gone Ford & Toyota might have just hung on. Alas maintenance of manufacturing and the constant changing of promotional gears as global economic and environmental conditions change was very important.

Australia failed – and to hang out the car industry to dry is very sad.

Tim Harcourt is the JW Nevile Fellow in Economics and an adjunct professor in International Business Strategy, at the Australian School of Business, the University of New South Wales.

Tim Harcourt was also an economic adviser to the Bracks Review of Australia’s Automotive Industry.