High levels of assistance to auto industry revealed

The effective rate of government assistance to the motor vehicles industry is around 9 per cent, while the rate for the textile, clothing and footwear industries is about 7 per cent.

These figures come from the latest annual trade and assistance review by the Productivity Commission.

The review shows that the automotive and textile sectors fared much better than other sectors. In fact, the effective rate of assistance for manufacturing in general is around 4 per cent and the rate for agriculture is just 3 per cent.

Given the recent decision by Ford Australia to cease all automotive manufacturing in 2016, the high levels of government assistance, as revealed in these statistics, are likely to intensify criticism of continued support.

Industry minister Greg Combet recently defended the level of government support given to automotive makers in Australia and claimed that a future Coalition government would kill the car industry.

The government believes the industry should receive assistance. And Toyota Australia's recently announced profit and committment to remain in Australia for the long term may be seen to validate their position.

The Coalition has pledged to cut $500 million worth of subsidies to the auto sector if it is elected in the September federal election.

In broader terms, the Productivity Commission's review found that, in 2011-12, Australian Government budgetary outlays, tax concessions and import tariffs provided Australian industry with $17.3 billion in assistance in gross terms.

After allowing for the cost impost of import tariffs on industries using goods as inputs, the net assistance received by industry was estimated at $10.5 billion.

Most of this is budgetary outlays and tax concessions of around $9.4 billion, while the net tariff component amounted to around $1.1 billion.