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Coalition moves into reverse over plan to cut car subsidies

| 12.01,12. 07:41 AM |


 


 

Coalition moves into reverse over plan to cut car subsidies


January 12, 2012

THE federal opposition is rethinking its plan to cut $500 million from car industry assistance as a new political consensus emerges about the need for taxpayer subsidies to protect Australian manufacturing jobs.

The opposition's industry spokeswoman, Sophie Mirabella, and resources spokesman, Ian Macfarlane, finalised a review of manufacturing policy for the Coalition leader, Tony Abbott, late last year.

The Herald understands it recommends that the Coalition review its plan to cut $500 million from the Automotive Transformation Scheme, saying continued subsidies should require long-term investments from the carmakers for models with export potential.

Advertisement: Story continues below Economists have challenged the efficiency of car industry subsidies. Before the 2010 election the Coalition raised similar concerns about ''industry welfare'', promising to reduce car subsidies by 2015. But more recently Mr Abbott has said car-making was absolutely essential to Australia's status as a ''First World economy''.

The report has yet to be considered by the shadow cabinet, and a decision to reverse the $500 million cut would add to the Coalition's already difficult job of finding billions of dollars in savings to pay for its policies without the government's carbon or mining taxes.

The shift in the Coalition's position comes as the future of Holden's Australian manufacturing operations rests in the hands of federal cabinet, state cabinets and General Motors' international board.

On his way home from meeting auto industry bosses in Detroit, the Minister for Industry, Kim Carr, told the Herald the government wanted to finalise the negotiation ''urgently''.

It has already announced $34 million in funding for Ford Australia to secure a $103 million investment and a promise it will continue operations until 2016.

The Holden co-investment package - which could be sourced from remaining money in the green car fund, research and development programs or new industry programs funded from the carbon tax - must now be agreed by federal cabinet and at a meeting of the GM board. The Victorian and South Australian governments also need to finalise their financial contributions.

It is understood the government wants to secure 900 jobs at Holden's plant at Fishermen's Bend in Victoria as well as more than 3000 manufacturing jobs in Victoria and South Australia.

The acting industry spokesman, Eric Abetz, said yesterday the Coalition supported car manufacturing and accepted the need for co-investment, but the government needed a ''more coherent approach''. Before the last election, Senator Abetz said Australians were suffering from ''auto fatigue'' and were asking ''how long do we have to keep subsidising this industry?''

Coalition sources yesterday said the only alternative to reversing the funding cut was ending all subsidies and ''letting the industry go'', which was unlikely given Mr Abbott's bid to win over Labor's blue-collar heartland.

Labor has attacked the Coalition over its promised funding cut, with the Prime Minister, Julia Gillard, saying yesterday, ''what disturbs me is when we've got work to do to keep making sure that the car industry is in the country, that on the other side of politics Mr Abbott's plan is to rip half a billion dollars out of industry support.''

SMH

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