A Modest Member of Parliament [Bert Kelly], The Australian Financial Review, December 24, 1971, p. 3. The AFR version is garbled. A better version, which we used, can be found in Economics Made Easy (Adelaide: Brolga Books, 1982), pp. 79-81, as “Motor Cars (1),” under the date 31 December 1971.

I hope that Fred doesn’t get to hear of the mess that our State and Federal Governments have made of the car industry. If he did, he would take my liver out, Christmas though it be.

The car industry can roughly be divided into three parts.

One part consists of four large manufacturers, GM-H, Ford, Chrysler and BLMC. These four make most of their cars from Australian components.

The second group assemble cars in Australia with varying degrees of Australian components. They have to pay high customs duties on imported parts, but they can avoid this if they guarantee to use an increasing percentage of Australian components. The Government’s recent action is aimed at increasing this percentage still further.

The third group import cars fully assembled. These cars have to pay a high duty of 45 per cent.

You would think that a tariff wall of this height, with the natural protection of high ocean freights, and the effect of the sales tax on the customs duty component of the cost, would be high enough to protect any industry that was good at making cars.

The reason why governments should be blamed is that by encouraging the establishment of too many car factories, they caused the hot-house growth of the industry without apparently worrying about the inevitable increase in the price of cars or the effect of blocking the channels of trade with countries who buy our products, such as wool.

State governments must take some of the blame.

Each year our Premier goes wandering the world, beating the State drum and inviting everyone to set up factories here. The reception that he gets if he can announce a car factory is deafening.

Fred is not asked to the reception — he’s usually home trying to make enough money to pay off the instalments on his last car. But if he did come, he probably wouldn’t realise the effect of having far too many car manufacturers in Australia.

But it is the Commonwealth that has done most of the damage by handing out overgenerous protection.

The effect of protecting everything that moves is that we have four manufacturers of cars to supply a total of about 400,000 cars.

In the USA they only have four manufacturers for a market of 8 million cars.

Now the Government has interfered to increase yet again, the Australian made component.

The inevitable effect of this will be that the second group, the assemblers, will have two choices.

The first is to cease assembling and to go back to importing built-up cars and paying 45 per cent duty.

The second choice for them is to increase their Australian made component.

But this is only economic if enough cars of a model are made to enable the economies of scale to lower the cost of these components. And it is quite clear that an increase in the sales of a model can only take place at the expense of others already being made here.

There just isn’t room at the top for them all, particularly with GM-H taking up so much room.

Many assemblers will drop off the production ladder, either intentionally or by being pushed off.

No wonder the manager of GM-H received the news with gratification.

And it plays into the hands of the militant unionists who have been twisting the tail of the big manufacturers all the year.

Now, it will be easier for them to give in to the irresponsible union demands, secure in the knowledge that their competitive position against importers and assemblers will be protected.

But the worst thing about the whole business is that it is a decision made by the Government, without the advice of the Tariff Board.

If there had been a Tariff Board inquiry, there would have been public evidence and public report and the facts would have been exposed. But now no one knows what is going on — certainly I’m not told, but I’m only a Member of Parliament.

There are great opportunities for special favours to be done for special people if things are arranged this way. This is not a good way to either govern a country or control an economy.

I am not feeling in a cheerful Christmas mood at the moment, but I suppose I will live through it.

I hope Fred doesn’t learn what is going on. He is getting very tired of the Government preening itself about how much it loves him while at the same time clobbering him in this fashion.