The Australian Financial Review, March 3, 1972, p. 5.

Liberal backbencher Mr C. R. Kelly, yesterday criticised the Government’s new Australian percentage motor car plans, as adding more than $300 million annually to Australia’s inflationary problems, and providing “a comfortable feather bed for the Australian component manufacturers.”

He said that the Australian market was too small for the four major car producers to operate efficiently and that British Leyland Motor Company and Chrysler could not hope to remain economic if GMH and Ford were to remain so.

Mr Kelly claims that the proposal to force Australian manufacturers to use a greater percentage of Australian components would increase the high costs of protecting the Australian car industry.

“The average effective rate of the present protection is 67 per cent,” he said.

“The subsidy equivalent of this works out at over $300 million a year and it is estimated that this imposed an immediate extra cost of $600 for an average car.”

Mr Kelly said this burden was unlikely to lessen with the new car plans.

“The high cost of protection for this car industry is only due to the frantic efforts in the past to overprotect the Australian car industry.

“The truth is that if we only had one manufacturer of cars in Australia, we would hardly need to protect it at all,” he said.

“It would have a volume of production which would allow economic production.

“If we would only allow economic production we would have many more people engaged in making cars because we would be much more competitive with imported cars and we would only need a very low duty on them.

“The fact that cars could come in over a low tariff wall would position effective competition for the Australian manufacturer, so that he would have to keep his prices in line with imported cars.

The whole object of the Government’s plans seems to be to provide a comfortable feather bed for the Australian component manufacturers.

“These are not doing badly as it is.

“The bottom third averaged in 1969-70 a return on funds of 11 per cent and the top third averaged 23 per cent.

“It is worth noting that on February 23 the biggest component manufacturer of them all, Repco, announced a 13.2 per cent increase in profit showing a profit of $4.337 million for the half year, and a 44 per cent increase in sales of original equipment.

“This will enable the usual 16 per cent dividend to be comfortably continued.

“Surely there is a lesson here for us to guide us to a sounder protection policy.

“It is obvious that too lavish protection encourages uneconomic proliferation of factories with the inevitable effect on increased costs.

“But far more seriously it diminishes the opportunity for increased employment in the industry at increased real wages,” he said.


Here’s Bert Kelly’s Modest Member article a week later on the same subject.