The $34m Question

By DeusExMacintosh

Ford to abandon Australian manufacturing by 2016

US car giant Ford Motor will shut all its Australian manufacturing plants by October 2016, after more than 85 years of making vehicles in the country.

About 1,200 workers are expected to lose their jobs from the Broadmeadows and Geelong plants, in Victoria state.

Ford said its Australian operations had lost A$600m ($580m; £385m) over the last five years.

The strength of the Australian dollar has made manufacturing more expensive, while sales have been under pressure.

“Our costs are double that of Europe and nearly four times Ford in Asia,” Bob Graziano, the chief executive of Ford Australia, said. “The business case simply did not stack up.”

He added that “manufacturing is not viable for Ford in Australia in the long-term”…

The Australian government last year announced a $5.4bn fund to support the car industry, including $34m to Ford to continue production until at least the end of 2016.

Ford began manufacturing in Australia in 1925 with the Model T cars in Geelong.

BBC News


  1. John Turner
    Posted May 29, 2013 at 8:07 am | Permalink

    On 4th December last the Centre for Independent Studies held a function in Sydney to launch Hal Colebatch’s book, The Modest Member (the late Bert Kelly), a South Australian politician who championed free trade at a time when protectionism was rampant in Australia. The Hon. Malcolm Turnbull MP was the principal speaker.

    Few people realise how much of the excellent work initiated by the Chifley Government has been undone by the efforts and consequences of Bert Kelly’s work. Chifley, as WW2 was drawing to a close, knew that employment and security providing industries were essential for Australia. His government could see that manufacturing industries are essential for both purposes and as a consequence motor vehicle and home-ware industries were helped to get underway. Australia became virtually self sufficient in white goods (refrigerators and washing machines etc), the hardware for home and factory construction, rail wagon, automobile and truck manufacture and assembly.

    As a consequence the demand for steel, bricks, cement, plasterboard and all sorts of products expanded and generated full employment for returned service people and made sure that the pre-war depression did not return.

    The Modest Member wrote many articles for the AFR advocating that local production of shoes and clothing was not competitive and that it would be cheaper to reduce the tariffs and import those needs and pay the displaced workers their wages and stay at home.

    The problem with that argument is that in a country with a high standard of living, and an a propensity for income justice, any competition is impossible where the imports are produced either under slave wage conditions or where the overseas manufacturers enjoy the advantages of market scale and are prepared to adopt dumping or mechanist policies, and many are.

    It should be obvious to everyone that without a vehicle, whitegoods and fabricating industry we will soon have no steel industry.

    The government of Australia has an obligation to see that essential industries continue in this country and I see the steel industry and its support customers as essential. Soon we will not be able to produce any significant part of the defence services’ needs. We may soon have no oil refining industry. What a pity we privatised Commonwealth Oil Refineries.

    Our mining industry has being expanded to the point where the marked is, or soon will be, oversupplied and then the return on those exports will fall. The Rudd and Gillard Governments attitude to that industry was correct in trying to obtain a reasonable return for the capital value of those resources. Their mistake was to aim to spend those assets on current consumption rather than to obtain ownership of overseas assets as replacements. Norway has shown the way in that regard; they have used the value of their depleting oil reserves to establish an capital fund with an portfolio of shareholdings in productive companies outside of Norway.

    We need to curtail further expansion of the mining industry, tax that industry to establish a Norway style fund, and recreate our manufacturing base with adequate protection where world’s best practice is achieved.

  2. Posted May 29, 2013 at 9:11 am | Permalink

    [email protected] The most obvious problem with your argument is that, under the approach you advocate, Australian standards of living fell down the ranks of OECD countries. Since we dramatically changed direction, we have reversed this decline.

    We are currently the happiest country in the OECD and regularly are in the top three of the Human Development Index, and have not had a recession in 21 years. All the while having high levels of population growth.

    One may well wonder about some aspects of strategic supply policy, for example, but policy changed for very good reasons. Bert Kelly was right.

  3. Posted May 29, 2013 at 9:26 am | Permalink

    [email protected] And yes, the high $Oz has hurt manufacturing exports, but not by very much, with the decline since 2007-08 being reversed in the last two financial years (pdf). We still export $35bn a year in manufacturing exports.

  4. John Turner
    Posted May 29, 2013 at 6:02 pm | Permalink

    And where will we be when our easily mined coal resources are exhausted? The carbon in coal is an essential reducing agent for the production of metals and a relatively cheap and convenient chemical feedstock for many products. Coal and other resources are a country’s capital.
    I don’t have the figures immediately available but I suggest that our balance of payment situation is likely to be very disadvantageous to our living standards not too far in the future.

  5. Posted May 29, 2013 at 6:20 pm | Permalink

    It would appear that, once again, I am required to call on Paul Krugman when it comes to comparative advantage:

    And here is a pdf version for those who want something to take away and keep:

  6. Mel
    Posted May 29, 2013 at 9:04 pm | Permalink


    Back in the 1980s, there was a constant stream of international delegations to Wellington, seeking to learn from the “New Zealand miracle”, in which a group of radical free-market reformers turned around a sclerotic welfare state. While the results had yet to show themselves, everyone was confident that NZ would soon surpass Australia, where the political system threw up many more obstacles to reform. Everyone knows how that turned out. After 100 years of economic parity, NZ GDP per person has fallen to around 60 per cent of the Australian level. The gap closed a little when NZ abandoned radical reform (from the first MMP election to the end of the Clark Labor government) but is now widening again.


    Why is it so?

  7. Mel
    Posted May 29, 2013 at 9:08 pm | Permalink

    Hmm. I hit b for bold instead of the block quote key. Sorry folks.

  8. Posted May 30, 2013 at 3:00 pm | Permalink

    [email protected] Quiggin is being slightly disingenuous — New Zealand lost income parity in the 1970s. Certainly, the trend since has consistently been in Australia’s favour. Our reforms have worked better and we have a broader income base. So, yes, the New Zealand reforms were oversold, but the comparison is between doing liberalising reforms better or worse; not between doing them or not doing them.

    [email protected] Nothing is forever; countries evolve. Our economy now is quite different from what it was 50, 100, 150 years ago. Trying to predict the future of technology is an exercise in futility. The trick is to say flexible so you can stay in the game as well as possible.

    Also, what SL linked to.

  9. Mel
    Posted May 30, 2013 at 5:08 pm | Permalink

    Sounds like you’re being slightly disingenuous, Lorenzo. 1975 looks an awful lot like like 1983 on that chart. The comparatively minor pre-1983 opening shown on your chart largely coincides with an Australian resources boom. The sustained blowout post 1983 coincides with the reform period.

  10. Posted May 31, 2013 at 7:51 pm | Permalink

    [email protected]

    1975 looks an awful lot like like 1983 on that chart.

    That is just the 1982-83 recession dip, even eyeballing, the trend line would show Australia pulling away.

    The sustained blowout post 1983 coincides with the reform period.

    Yes, our reforms did lead to a dramatic improvement in performance.

  11. Mel
    Posted May 31, 2013 at 9:35 pm | Permalink

    L @10:

    “That is just the 1982-83 recession dip, even eyeballing, the trend line would show Australia pulling away.”

    The pre-1983 pull away rose and fell with a resources boom.

    “Yes, our reforms did lead to a dramatic improvement in performance.”

    Did they? Why the NZ reforms coincide with reduced performance?

    Where is Quiggin wrong?

  12. Posted June 1, 2013 at 11:40 am | Permalink

    [email protected]

    The pre-1983 pull away rose and fell with a resources boom.

    (1) Australia was further ahead at the end of that.
    (2) The dip is only a dip; the trend takes all the data points and it is clear that the trend is Australia doing better.
    I actually looked at the pre-reform per capita GDP history of the two countries years ago; it was obvious from the data that Australia began pulling ahead in the 1970s.

    Why the NZ reforms coincide with reduced performance?

    New Zealand did not go backwards, it failed to grow as fast as us while our comparative growth performance picked up dramatically. Since Quiggin is arguing our gradualist-and-negotiated reform path worked better (presumably a signalling-and-information effect), I am not quite sure what I am supposed to be disagreeing with him on apart from when the pull away began.

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