The Government has long been committed to ensuring Australia has a competitive manufacturing sector, including a sustainable and profitable automotive manufacturing sector.
The Government has therefore tasked the Productivity Commission to examine the best way that the Australian Government and Australian economy can ensure the ongoing viability of the automotive industry.
This inquiry has now commenced.
The Terms of Reference of the Inquiry include examination of:
- The Australian automotive manufacturing industry's current structure, productivity, investment, profitability, international competitiveness, exports, workforce structure and practices, skills levels and long-term sustainability;
- The changing international automotive environment, including further potential for Australian made cars to be exported overseas, and the type and level of support provided to overseas manufacturers;
- The changing nature of domestic demand and consumer preferences, including demand for new products and technologies; and
- Australia’s attractiveness as an investment location for all phases of automotive manufacturing activity.
This inquiry will provide the Government with necessary information to respond to the challenges facing the car industry in a measured way that will focus on long-term sustainability and will identify options that are sustainable, accountable and transparent.
As the Australian Government, the manufacturing industry, employees and consumers need policy certainty to plan for the long term, the Productivity Commission has been asked to deliver an interim report to the Government by 20 December 2013, with the final report due to the government by 31 March next year.
The Government is already implementing significant measures that will assist the Australian automotive industry. The Government has pledged not to proceed with the previous Government’s $1.8 billion Fringe Benefits Tax hit on the automotive sector. Further, we have already released draft legislation to rescind the carbon tax. The carbon tax adds, on average, $400 to the cost of every vehicle produced in Australia.
It is vitally important that the Australian automotive industry is sustainable, internationally competitive and integrated with the broader global automotive sector.
Interested parties are invited to make a submission to the Commission. To register an interest in the inquiry or to find out more, details are available from the Productivity Commission website.
Review of the Australian Automotive Manufacturing Industry
Terms of Reference
I, Joseph Benedict Hockey, Treasurer, pursuant to Parts 2 and 3 of the Productivity Commission Act 1998, hereby request that the Productivity Commission undertake an inquiry into public support for Australia’s automotive manufacturing industry, including passenger motor vehicle and automotive component production.
Australian and State Government support for the automotive manufacturing industry is provided through the current Automotive Transformation Scheme, which provides assistance in respect of production and support for research and development and capital investment, through ad hoc grants provided to vehicle and component manufacturers, through tariffs and through relief from some state taxes.
With the withdrawal of some manufacturers from local production in Australia, recent uncertainty surrounding tax policies affecting the industry, variability in exchange rates and the increasing openness of Australia’s automotive retail market, the circumstances under which assistance is provided to the industry warrant review.
Scope of the Inquiry
The Australian Government desires an internationally competitive and globally integrated automotive manufacturing sector and wishes to ensure that any support for the local automotive manufacturing industry is accountable, transparent and targeted at the long-term sustainability of the sector. In consultation with a broad range of stakeholders, and in the context of the Australian Government’s desire to improve the overall performance of the Australian economy, the Commission should, in its Review of the Australian Automotive Manufacturing Industry (the ‘Review’):
- Examine national and international market and regulatory factors affecting:
- the Australian automotive manufacturing industry’s current structure, productivity, investment, profitability, international competitiveness, exports, workforce structure and practices, skills levels and long-term sustainability;
- Australia’s attractiveness as an investment location for all phases of automotive manufacturing activity, from research and development through to production of components and vehicles;
- domestic and international demand for Australian design and engineering services, vehicles and automotive products; and
- consumer preferences, including consumer demand for new products and technologies.
- In examining these factors, take into account the following matters:
- international automotive industry assistance arrangements, including reporting on and quantifying tariff, non-tariff barriers and budgetary assistance provided by major and emerging automotive-producing countries and the barriers and opportunities for Australian manufacturers and suppliers;
- the impact of current workplace arrangements in the industry, domestic industry assistance, government vehicle purchasing policies, the Government’s broader deregulation agenda and the taxation environment (noting fair work laws and taxation reform are subject to separate comprehensive review processes); and
- the spill-over benefits of the automotive sector, such as technology diffusion.
- Taking into account all of the above, identify and evaluate possible alternative public support mechanisms that:
- improve the long-term profitability, sustainability and productivity of the industry;
- facilitate research into, and the development of, innovative alternative vehicle and component technologies by the industry;
- contribute to national productivity growth;
- promote mutual obligation, accountability and transparency; and
- are consistent with Australia’s international trade obligations.
- retargeting of assistance, including within the Automotive Transformation Scheme; and
- introducing more internationally-competitive workplace, regulatory and taxation policies; and
- identifying any significant transition issues or adjustment costs that may arise from alternative support mechanisms or policy changes and how they might be best managed.
- Assess the significance of the capabilities within the industry, its direct employment and economic benefits, its secondary impacts on other sectors of the economy, and quantify the costs and benefits, including at the economy-wide and regional level, of existing and alternative assistance mechanisms.
The Commission is to undertake an appropriate public consultation process, inviting public submissions and releasing a preliminary findings report to the public.
The preliminary findings report should be released by 20 December 2013, with the Final report due to the Government by 31 March 2014.
J. B. HOCKEY