Car industry gets $6.2 billion assistance package

Prime Minister Kevin Rudd and Federal Industry Minister Kim Carr have announced a $6.2 billion assistance package aimed to transforming Australia’s beleaguered car sector into a green industry.

Prime Minister Kevin Rudd and Federal Industry Minister Kim Carr have announced a $6.2 billion assistance package aimed to transforming Australia’s beleaguered car sector into a green industry.

The assistance package, called the New Car Plan for a Greener Future, consists of four main planks.

1. An expansion of the previously-proposed Green Car Innovation Fund from $500 million to $1.3 billion over the next 10 years. The fund, which is designed to encourage car markers to build cars with improved fuel efficiency and lower emissions, will have a one-to-three investment ratio (for every $1 government invests, industry will be required to invest $3).
2. A $3.4 billion Automotive Transformation Scheme that will run for 13 years and invest in R&D on a one-to-two basis and on new equipment purchases on a one-to-seven basis.
3. A $116 million structural adjustment program to help parts companies consolidate and pay for redundancies.
4. A reduction on import tariffs from 10% to 5% in 2010.

Rudd has re-affirmed his support for the car industry, saying he does not want to be leader of a country that does not manufacture anything.

Carr says the assistance package is all about securing the jobs of those 200,000 workers employed directly or indirectly by the industry.

“Today marks a new beginning for the Australian automotive industry,” Carr said this morning.

“It also marks a new beginning for Australian innovation and industry policy – in today’s world, these are one and the same thing.”

The assistance package goes much further than had been anticipated. Former Victorian premier Steve Bracks, who conducted a review into the industry on behalf of Rudd and Carr earlier this year, had only recommended a $2.5 billion industry assistance package, including doubling the Government’s green car fund from $500 million to $1 billion and setting up a special $60 million fund to help component makers.

However, the huge assistance package is likely to be criticised by some economists who consider the plan to be a waste of taxpayers money.

Terry Cuttler, the author of the Government’s review of the national innovation system, has also questioned the logic of investing in the automotive sector ahead of technology-based industries.

See also:

• Good money after bad for Australia’s car industry
• Small and medium technology sector could be wiped out