Study Pegs Cost to Australian Economy of Auto Manufacturing Exit
Job losses would total nearly 50,000 in Melbourne and Adelaide, combined, the study reveals. These jobs eventually would return, but with lower real wages.
The Australian economy would be A$21.5 billion ($20.3 billion) smaller if automotive manufacturing ends in 2018, with Melbourne and Adelaide heavily affected by job losses and a long-term fall in gross regional product.
That’s the conclusion drawn in an economic analysis for the Federal Chamber of Automotive Industries by Monash University’s Center of Policy Studies and researcher Allen Consulting.
The modeling worked on a scenario where Australian automotive manufacturing shuts down over a 2-year period from 2017 to 2018.
FCAI CEO Tony Weber, releasing the report, says without government support for automotive manufacturing, high-tech jobs and skills will be lost. Significant foreign direct investment would cease, as automakers redirect investments to other automotive manufacturing countries.
Weber says the report shows the value of automotive manufacturing to Australia.
“It details the benefits to Australia as a whole – to the economy, communities, the supply chain and other industries,” he says in a statement. “The FCAI will be using this report as a basis for our submission to the Productivity Commission’s review of the automotive sector. I want to be clear – financial support for the industry is an investment in Australia, and this investment needs to be long-term.”
The report says automotive manufacturing in Australia receives about A$500 million ($471.6 million) in government funding each year. For this investment, the Australian economy is A$21.5 billion larger.
Government assistance to automotive manufacturing is about A$18 ($16.98) a person population wide, which the report says is a low figure by international standards. The A$21.5 billion return equates to A$934 ($889.90) per person in benefits.
If automotive manufacturing ends, Australia’s gross domestic product would shrink A$7.3 billion ($6.9 billion) by 2018. Employment losses would equate to some 33,000 jobs in Melbourne and about 6,600 in Adelaide in 2018.
These jobs eventually would return in both cities, but with lower real wages. Employment levels would not recover until about 2027 for Melbourne and 2025 for Adelaide.
The economies of Adelaide and Melbourne would be heavily affected with gross real product contracting by up to 1.4%, and it is likely GRP would remain lower than pre-closure levels until the end of 2031.
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