Bert Kelly, “Government car plans going nowhere,”
The Australian Financial Review, June 11, 1992, p. 15.

I was recently criticised in the media because they thought my suspicion of government intervention in commercial matters had an ideological basis.

I replied that farmers were too busy to worry about ideology, but we had learned the hard way that governments usually made a mess of business matters because they were more interested in being popular than right.

I once asked a farmer how he regarded the decisions that the Government was making in his industry. He replied: “Surely, you know by now, Bert, that the Government couldn’t run a booze-up in a brewery!”

You have only to see the mess governments are making in the business affairs of WA, SA and Victoria to see what he had in his mind. I will now spell out the mess that governments have made of our car industry.

There are many reasons for the mess. We have imported a union culture from Britain, where they are still fighting the class war, and our union leaders seem to hate capitalists who make money and stand ready to strike if they get a chance.

We have a management culture reared on the tariff tit, so managers have been trained to give in to union demands, expecting to get a tariff hand-out if they do. But these handicaps are minor alongside the government-imposed handicaps.

The first of these was the Government’s insistence that our car manufacturers use components made in Australia or pay high duties on imported components, so putting our car makers in a strait-jacket.

This is different from the Swedes: their car makers can buy their components wherever they are cheapest and import them duty-free, so they make their cars cheaply. The Volvo car is only 60 per cent Swedish but it is cheap, so the company exports 77 per cent of the cars it makes.

Indeed, Volvo used to sell more cars in the United States than in Sweden, just because it was not made to wear strait-jackets like Australian car makers.

Back in 1966, I warned of the damage we were doing to our car makers by making them wear this component strait-jacket. Indeed, I went so far as to say that our policy would almost inevitably mean that both Leyland and Volkswagen would be forced to leave Australia, because they did not make enough cars to enable them to buy cheap components.

But the component people had their way because they had a friend on high. The head of Repco, the biggest component manufacturer, was also the chairman of the committee that was raising money for McEwen House, the Country Party headquarters in Canberra.

Ten years later, we had another car tariff debate.

Leyland and Volkswagen had gone, of course, but our Government was anxiously holding the door open for two Japanese companies to replace them. Note that Fraser was our Prime Minister and Anthony was our Trade Minister. These are the chaps who are now eager to tell us how to run the country.

Under their guidance, we had five car makers again as we had in 1966, so no doubt they were really pleased with themselves. But either they did not know, or were too hungry for votes not to realise, that Australia could not support five efficient car makers.

We then had a market for about 500,000 cars a year. If this market is divided between the five car makers and you excluded all car imports, you get an annual throughput of 100,000 cars — far too small a number to justify the installation of efficient labour-saving equipment such as the Japanese use.

The result of this government guidance is that our car makers could not make cheap cars, because they had to use labour instead of labour-saving machinery

A car employee in Australia made, in 1976, 5.9 cars a year while a Japanese working for Nissan made 37.2 cars a year and a Toyota employee, 40.5.

This is not just because the Japanese work harder or better; it is mainly because they are using better equipment than our car makers can afford to install, because we have too many car makers.

Our cars got dearer, so the demand for cars fell.

Everyone in the industry knew this would happen; even the Government had heard of the law of supply and demand. But it wanted to be popular at any price, so it kept the duties high but gave the industry stern lectures after each tariff hand-out and told them they had to try harder.

The industry kept the heat on the Government, which could feel an election coming on. So GMH inserted an expensive advertisement in all the papers saying that 200,000 people would lose their jobs unless the Government gave it more help.

As there were then only 65,000 people making cars and components, it was hard to take the matter seriously. Probably the Fraser Government had not read the IAC report, in which it was all spelt out.

Then the Labor Government won the election and Senator Button became the minister who mattered. He seemed to have read all the reports and he knew that the root cause of the industry’s problems was that we had too many car plants. So he warned us that at least two would disappear.

To make sure that this would happen, he formulated his Button Car Plan. He spelt out how the tariff duties would gradually but certainly come down, so that everyone knew where they stood and what was going to happen in the future.

Then I suppose he felt he had to be seen to be doing something, so he climbed in the back seat to give the industry the guidance he thought it needed. He said, too, that he was not going to give in to any anguished cries for help as the Fraser Government had done. He had his Button plan all buttoned up.

What giant strides forward has the industry taken under the Button plan? In 1976, we had five car plants but we knew that we should reduce these to three so that we could produce cars cheaply. Well, now we have seven.

In October, Nissan will go away and I am told that another will be gone by 1996. We can be said to be creeping up on our problem.

We now have 50,450 people making 271,220 cars a year; each person makes 5.376 cars a year compared to the 5.9 he made in 1976.

So we can hardly claim that the industry is surging ahead under the Button plan. Indeed, we are doing just about as badly as in Mr Fraser’s time.

Worse is yet to come.

Senator Button has imposed a $12,000 duty on second-hand imported Japanese cars which are guaranteed to be of high quality and to have access to spare parts if these are required, which is more than we can get from most of our car yards.

Governments of all kinds seem to hate us being able to buy cheap cars.

There are 265,000 people servicing cars and car tyres. If you really wanted to increase employment, you could remove all the car tariffs and so make cars cheaper. They could call this the Kelly plan.

I said at the beginning that the Government could not run a booze-up in a brewery. See what I mean?