Should Australian Government Provide Money to Car Manufacturers?

Published: 2021-06-29 06:57:07
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Category: Business

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Should Australian Government Provide Money to Car Manufacturers?Due to strong Australian dollar, high production costs, heavy regulations and environmental factors, Australia car manufacturing industry is declining. The three largest automotive manufacturers decided to terminate their manufacturing businesses in Australia. Ford and Toyota will stop manufacturing at around 2016-2017 (Mercer, 2014). Holden, a subsidiary of General Motors will stop making cars in Australia by the end of 2017 (“GM`s Holden”, 2013). This essay will discuss if Australian government should provide money to car industry to prevent automotive manufacturers moving their operations overseas or not, and contemporary situation will be used to illustrate reasons and recommendations. According to statistics, unemployment rate raised from 5.2% in January 2012 (“Australian bureau”, 2012) to 6% in March 2014 (“Australian bureau”, 2014). Holden, Ford and Toyota are the leading brands in Australia, their market shares account for 38% in Australia (Australian Government Department of Industry, 2012, p.6). Without government support, other car manufacturers may follow to close down or move their productions away from Australia due to high production costs. As a result, over 30,000 automotive industry workers will be affected (“Government”, 2014). Previous research explored that job loss will bring bad influence to social welfare, economy, mental health or even family life. When people lost their work or income, they may adjust their consumption pattern and turn out to get public assistance (Jolley, Newman, Ziersch & Baum, 2011, p.412-414). Thus, government’s burden may increase and tax income may reduce.Moreover, automotive industry is the original equipment manufacturers (OEMs), hundreds of component suppliers and related businesses like aftermarket and retail sale are involved (Hawker, 2011, p.59-60). If government does not subsidize the industry, car manufacturers may leave and many related parties will be affected as their revenues may shrink. According to Federation of Automotive Products Manufacturers (FAPM) CEO Richard Reilly, it is estimated that “50 to 70 suppliers will be affected by Ford’s leaving decision” (“Ford Australia”, 2013). Car components or plastic parts manufacturers may have difficulty in sustaining their businesses if the industry continues to shrink. In addition, total car export rate increased from 3,424 million in 2009 to 3,654 million in 2013 (“Australian Government”, 2013, p.2). If the government subsidizes the industry, automotive industry, export trade and government income can all be enhanced.

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