Are we a stupid country?

[SumoDog68]

From today's Age :


I used to get red faced when having to admit to foreigners that Australia charged an import duty of 57.5 per cent on cars. Obviously, we were incompetent manufacturers. But it meant we made 80 per cent of our cars and imported 20 per cent.

Now our import duty has dropped to 10 per cent and we import 80 per cent of our cars. In spite of that, we are planning to drop the import duty to 5 per cent. Do we have suicidal tendencies? Do our politicians understand what is going on in the world?

I asked the Irish what import duty they levied on passenger cars. Would you believe 50 per cent? And the import duty on wine is 72 per cent. Are they ashamed of being such terrible protectionists? I found no trace of it. The same with other countries within Fortress Europe.

While we are at it, Australians pay 6.25 per cent interest, the Irish 4.2 per cent. Would you like to save 2 per cent on your mortgage? Do you think our runaway current account has something to do with it?

If in doubt, study the figures in the table, taken from The Economist magazine's Pocket World in Figures 2007 edition.

As a child I was told the fable of the wolf who said he did not like the taste of fruit, because it was too high for him to reach. We are like that because we keep losing mountains of money "on current account" and are saying it does not matter because the world's accounts will never balance.

Therefore, some countries must lose money. True enough. But why should we have to be the champion long-term losers? Would it not be better to be champion winners?

It is not that we are finding it hard to sell goods or services abroad. On the contrary, we are champion exporters. Especially lately, with the phenomenal demand from China and with India following suit.

But somehow we are determined to prove to the world that we are "free traders", even if it sends us broke. Very commendable, but is it sensible? Is it looking after the interests of our children and grandchildren? And in the midst of an unprecedented export boom, should we not be putting some export money aside for a rainy day?

History shows that excess demand is in time replaced by excess supply, because higher world prices stimulate more research and more production. Then, we will need all our export earnings to pay for essential imports because new substitute goods and extra supplies eventually reverse the market. Then, it will not help to control imports because we will need all our export earnings to pay for essential imports. Too late, then, to control imports.

It seems that in their endeavour to make us world competitive, our leaders ignore the effect of "purchasing power parity". That is the result of having exchange rates that are completely out of kilter. To have an Australian citizen working for you in Australia for a day costs about $100, including on costs. But you can buy a day's work from an able-bodied Chinese citizen in China for about $6. So the Australian would have to produce in 3½ minutes what the Chinese produces in an hour. Silly, isn't it?

Ernest Rodeck is patron of the Society for Australian Industry and Employment, a former national president of the Australian Institute of Management, and chief executive of Fler Co Ltd.


I could't agree more with a bloke...

[SLugg]

hmmmm its a case of you get what you vote for
sadly most think a little more money in the pocket is all that matters

[Jac001]

From today's Age :




I could't agree more with a bloke...


Its about balance.

If the import duty on cars was still 57.5% then there is less choice for the average joe because imported cars are more expensive due to this tax.

Now lets look at our beloved LS1/LS2 motors etc, well they come from overseas so are you willing to pay an additional tax on those parts too? (remember we manufacture engines here so those jobs need to be protected).

[Alex(AUS)]

Protecting our auto industry while it gets on its feet is a good thing ... protecting it for decades is not ... we should be able to build world class cars at world class rates ... if that is not the case now then the government should make sure it is and be done with it quickly ... most europeans car manufacturers probably pay more in salaries than we do anyway ... so it would actually cost them more to produce a car on the labour costs alone ... reducing the import duties on cars may mean that our cars must improve and become world competitive, otherwise we are essentially paying much more for sub standard cars ... and for what? why shouldnt Australian cars be as good? why is this not possible to date? We would get greater choice at home and the industry would grow to export much more.

Protection that goes longer and longer probably means that we are virtually lining someones pockets instead of pushing them to get on their feet and helping the industry to grow. Opening the market would mean that Holden may next build the $10Billion commodore ... because it would sell 10 times as many cars, requiring 10 times as many workers and a 10 times better car for us at a competitive price ...

My 2c,

Alex

[SumoDog68]

So ,in that case why not open the borders to cheap agricultural produce? Or farmers are more important than car industry?
Dropping the tarrifs to 5% is just a bit too much of a service to car importers.
We can not compete with asian labour costs,so why even bother trying. We will never beat them at their game, protecting our market might be the solution.
Not that i expect that goverment is actually try to protect our car industry. Our car manufacturers have to compete with imports, and will go out of business.

[Tombo]

All good in theory, tell that to the textiles, shoe, clothing industry... Its all good until the boom in the export market ends and the dollar loses its buying power. Free trade is OK if you have a huge local market (economies of scale) or a super cheap labour force... not so good if you haven't i.e. Australia...

[Alex(AUS)]

Hold on ... I thought we were talking cars here?

Alex

[SumoDog68]

Same rules apply for any industry. If you try to compete ,and are not succesfull ,you go out of bussiness. Car industry is not an exception. Market is flooded by cheap imports, and local content of locally made cars is in decline. Soon (very soon) it will make more sense to make those cars in asia.
Once you lose your manufacturing base,it is very hard to establish it again.
Take Falcon for example.. which imported car has space ,pace and size with decent fuel economy (for its size) and at that price point?
Still people buy Corollas,Kia's and rebadged Deawoo's. Why? It simply because they are cheaper.

[Alex(AUS)]

I am saying compete where you can ... protect the everything else ... the question still remains ... why should we not be able to compete with the europeans?

Alex

[drone14]

I think the government is trying to protect us where we can be protected.

We will NEVER NEVER NEVER compete pricewise with asia for manufactured goods. That is an acknowledged fact. We can compete in raw products like coal, iron, anything that comes out of the ground basically. This is where free trade comes into it. We don't meet tariffs when we export our raw materials and we don't impose tariffs when importing cheap asian goods. We will theoretically win there because most of our raw goods go to asia while they export everywhere. Economy of scale is on our side.

And if you don't think the mining or agriculture community is propping up Australia, just remember who is keeping country businesses afloat, who in turn are keeping all businesses kicking along.

The Australian economy has rarely been in such form so lets enjoy it while we can, eh. Instead of trying to find reasons to whinge and complain about government policy.

[EfiJy]

like the textilr industry watch our car makers go to china. sumhow a commo from china dosent seem right

[M&Ms]

And if you don't think the mining or agriculture community is propping up Australia, just remember who is keeping country businesses afloat, who in turn are keeping all businesses kicking along.

The Australian economy has rarely been in such form so lets enjoy it while we can, eh. Instead of trying to find reasons to whinge and complain about government policy.


Agree 100%. If it wasn'y for the Mining industry in Australia, we'd be poorer than Vietnam!

Back to the original post; At the end of the day there is always a downside in economics. Live for the moment because no one knows what's going to happen to OZ in the future.

[EfiJy]

and bc the mining undustry is doin well the rest of australia should stop complainin. yeh just like the homeless, the jobless the indigenus. we dont need to complain about anything. all probs solv ed thnks mining.

[Tombo]

[QUOTE=EfiJy;953448] I agree while some are doing well out of Oz mining i.e. UK and South Africans (BHP Biliton and Rio Tinto). Not all Australian are living in the lap of luxury, and should the commodities market slow down what is in the wings to replace it? BTW to compete with the european cars will take time as a holden/ford as good as they are do not have the prestige of a Merc or BMW Yet!!

[Holden Man]

We are a big country with a small population (21,000,000 is peanuts on the global scale)

Yet we have 2 locally built and designed cars (Commodore & Falcon / Camry-Aurion don't count in my book) which is a fantastic feat - what other country with our population size does that ?

We need protect our way of life (including our love of big cars) before we get swallowed by the big internationals. What's wrong with protecting things that are Aussie.

Do you think Japs are going to build a 307kw V8 RWD sedan or a 290kw turbo 6 RWD sedan at affordable prices ? (forget the germans, nice cars but you pay big big money for them)

Get rid off tarrifs and we may aswell bend over now and get ready to cop it !

[Marco]

Actually Holden Man, the answer is right there in your own post - nobody else builds cars like the Falcon and Commodore, and that's good news for Australia, because it means we have a unique product that we can (and do) sell overseas. Tarrifs make no difference to that, seeing as there's nothing imported that directly compares to the big Aussie cars.

As to the idea of putting tarrifs back up, while it sounds like a good idea from a 'save Australian manufacturing' point of view, it's actually a very bad one. Cheap imported cars have been good news for the Aussie consumer who can now buy a brand new Korean hatchback for $14k if they want. We couldn't build a small car in this country and sell it for $14k, so if we put tarrifs back up, every single car sold in Australia would cost more - your $14k Barina would become a $20k Barina, and everything else would move upwards in price too.

There's a part of economics called Absolute and Comparitive Advantage - it's a little while since I studied it, but basically the idea is that each country should do or make what it's good at or best at, and trade with other countries to get the things it isn't good at making. So, in Australia's case, we make big cars here and sell them overseas, which we're very good at, and we import small cars from other places, because we're not good at making them. If we put tarrifs back up, we'd be back to trying to make small cars here, and we'd be wasting resources that could go to making more big cars and earning export income.

[Alex(AUS)]

(Commodore & Falcon / Camry-Aurion don't count in my book)

Geez Magna doesnt even make the list :D ... at least Camry-Aurion got a mention :D

Alex

[Oztrack Tuning]

A strong unionist school friend told me at a school reunion the best way to protect Aussie businesses is to get strong unions happening in China and other cheap labour countries. (fat chance) Then they wont be able to wipe our businesses out. Its sad that decency to workers in our country can spell an end to lots of businesses unless we are smart. The same time as we have this happening we have schools that are far inferior in learning outcomes overall than some of the countries building lots of our goods. We are losing on two fronts.

[Jac001]

A strong unionist school friend told me at a school reunion the best way to protect Aussie businesses is to get strong unions happening in China and other cheap labour countries. (fat chance) Then they wont be able to wipe our businesses out. .

As countries like china and korea become more wealthy their average wages increase thus the competative advantage decreases. Look at what has happened to japans wages and living conditions over the last 40 years or so.

It won't happen over night but it will happen. :)

[KingClifton]

Regardless of the import duty people have always bought imported cars; it depends on what they bought.

I dislike all the negative, protectionist dogma which gets trotted out every so often. Why? Because it's crap, told by so-called 'industry experts' and 'social commenators' with a - usually left-wing - axe to grind.

We are importing 80% of our cars because"

(a) buyers have become more sophisticated and want greater choice - other than a Falcon or a Commodore
(b) some buyers are anti-Australian for various reasons and want an imported car for the prestige, and now these cars are relatively accessible
(c) our industry has rationalised back to its core competencies: large family

[EfiJy]

yep byers are very soph8isctated these days they prefer chinese bilt engines http://www.goauto.com.au/mellor/mellor.nsf/story2/9D7A03154BEBBEE9CA2573070005C27B

yes we are stupid country

[Carby]

I am saying compete where you can ... protect the everything else ... the question still remains ... why should we not be able to compete with the europeans?

Alex

You are not serious are you? The answer is simple we do not have the economy of scale like the europeans do. They are massive markets over there, now that most are in the EU they can sell to any country in Europe. VW, BMW, MB AUDI Fiat and Skoda are all giants and their production would make us look sick. Making more cars means cheaper cars.

Our problem though is not Europe but Asia - we cannot compete with their low wages. Just today it was revealed that the next small 4 cylinder engines will be made in China for GM - the Aussie plant will probably close in 2010.

But there are those who support your opinion - and like the shoe industry, clothing industry and Heavy engineering Industry the Car industry will also shrink and disappear

We will basically become a service provider country :soap:

[Alex(AUS)]

You are not serious are you? The answer is simple we do not have the economy of scale like the europeans do. They are massive markets over there, now that most are in the EU they can sell to any country in Europe. VW, BMW, MB AUDI Fiat and Skoda are all giants and their production would make us look sick. Making more cars means cheaper cars.

Our problem though is not Europe but Asia - we cannot compete with their low wages. Just today it was revealed that the next small 4 cylinder engines will be made in China for GM - the Aussie plant will probably close in 2010.

But there are those who support your opinion - and like the shoe industry, clothing industry and Heavy engineering Industry the Car industry will also shrink and disappear

We will basically become a service provider country :soap:

Hold on ... i think you misunderstand what I am saying ... I am not saying to reduce tariffs to Asia (we can pick and choose how we do this). I am saying we should try opening up our CAR market to europe and the states (where they have comparible wages (read higher) than us). I mean look at the price of the Vauxhall VXR8 ... it is being sold for twice what we pay here and they think it is a bargain!!! So we can sure compete ... so why not reduce tariffs there, ramp up production rates here, employ more people, expand the factory, make more cars, make more money, make better cars for Aussies and diversify the product offering here (with both cheaper imports from that region and new home grown tallents). You are telling us how good it is for Asia because they can sell us cheaper cars ... then why isnt so good for us because we can sell the UK cheaper Aussie muscle? They have said it themselves they cannot get anything like the VXR8 for the price ... sound familiar to your statement about Asia?

Alex

[Carby]

You are using a poor example - how many VXR8's do you think they can sell in the UK? even if was 10,000 we would still be a minnow in manufacturing terms. HSV have a niche market - well done - through their affiliates in the UK they can offload a few Aussie R8's. I hardly think that in the run of the mill type cars we could make them any cheaper than what they do in Europe, and even if we could ,you have a very tough, mature, cut throat market to try and convince that our's is better.

As for having different tariff rates for different countries - The howls of racism from the do gooders would ensure it never happens!

The writing is on the wall for Aussie Mfg anyway - we do make great RWD large cars and a couple of good large FWD cars, but this is a declining market, once the small car sales take over it will be "shut down Aussie manufacturing time" - it's probably too late to make small cars to an acceptable world standard in Oz and there are so many cheap cars about GM Ford Toyota and the rest will just bring them in from wherever - and that looks very much like Asia to me.:flipoff:

[Alex(AUS)]

You are using a poor example - how many VXR8's do you think they can sell in the UK? even if was 10,000 we would still be a minnow in manufacturing terms.

Ok ... so we can only sell 10,000 that is a lot for us to manufacture! I mean we sell 500 HSVs per month here in australia (at the best of times) ... at most ... we would sell what 6000 ... 10,000 cars to the UK alone is increasing HSV production to more than twice what it used to be!!! ... already they will need to hire more people and build many more cars ... which will make HSV spend more money on their development next time ... the market has already grown even when the tariffs are there and the cars cost twice as much.

So, then how many cars are WE really going to buy from Europe instead of our own??? ... we love our large RWD sedans and as you said ... we do this very well as compared to anyone ... so we probably wouldnt buy too many more than what we do now ... so we win. And that doesnt even factor in the US ... where G8 is set to sell 30,000 to 40,000 units ...


As for having different tariff rates for different countries - The howls of racism from the do gooders would ensure it never happens!

What are you talking about ... we do this all the time!!!

Alex