Policy of Economic Restructuring in Australia - Essay Example

Australian Car Manufacturing Industry University Student Id Course Date Introduction This essay is exploring the causes of the collapse of the Australian car manufacturing sector. A large number of the car manufacturing corporations like Holden Company, Ford Company, Mitsubishi and the Toyota Company have exited from the automobile industry. However, the car manufacturing industry in Australia has collapsed despite its great contributions towards the growth of the economy through the provision of job opportunities to the Australians. Therefore, the car companies in the automobile industry have decided to take their business enterprises overseas where there is the low cost of production as compared to the Australia (Beer and Thomas, 2007). The unions are the one which mostly contributed to the collapse of the car manufacturers by raising wages and also demanding for good working conditions. These actions taken by the unions resulted in high costs of production, hence forcing the car manufacturing companies to take their business operations in overseas countries which have low costs of productions (Fujimoto, 1998). The collapse of car manufacturing industry in Australia The collapse of the Australian automobile industry has been linked with the various policies that have affected the industry. The conditions that are prevailing in the Australian market for the car manufacturing companies have become unfavorable and also unbearable for the entire car industry. However, these unfavorable market conditions can be associated with various factors such as the demand of the union for the companies in the car industry to provide high wages and also good working conditions for the employees (Hopkinson, et al., 2006). In addition, reduction of significant tariffs has also resulted into increase in the competition level in the Australian market. The increase in the value of the Australian dollar has still contributed to the collapse of the Australian car industry because of reduced returns. The reasons behind the collapse of the Australian car manufacturing industry include the small size of the Australian market thus making car manufacturers unable to fully exploit the economies of scale. Hence, for the car manufacturers to remain solvent, they have no other choice rather than making use of the production inputs from the foreign countries since they are relatively cheaper. Also, the prevailing conditions in the Australian market such as the free trade agreement and the reduction of the import tariffs are unfavorable to the car manufacturing industry. The Ford Company which is among the car manufacturers in Australia stated that it would sustain its center for production development after ceasing its operations (Hopkinson et al., 2006). Also, the Holden car Company stated that it would still sustain its global design studio even after stopping manufacturing. Also, after the collapse of the car manufacturing industry in Australia, more technological innovation would be needed to prevent adverse influence on the survival of the technology-intensive industries (Fujimoto, 1998). Moreover, the Australian government signed an international trade agreement with various nations which include; China, Korea and also Japan which would help in driving the prosperity of the Australian economy. However, the Australian government is mostly concerned with doing investment as well as creating new job opportunities for the people in Australia through the formation of the Trans-Pacific Partnership. Furthermore, the government of Australia is putting a lot of efforts to establish a competitive and also innovative economy which would assist the nation in addressing the recent economic challenges which face the people in Australia. For example, in the year 2014, the innovation minister in Australia announced that 155 million dollars had been provided by the government so as to assist the automotive workers to look for new jobs (Liow, 2009). Besides, the government of Australia is working closely with the automotive industry in ensuring that there is a clear transition in the passenger vehicle manufacturing. The role of unions in the collapse of automobile industry Unions have contributed a lot to the collapse of the Australian automobile manufacturing industry mainly because of the expenses associated with maintaining the workers. For example, the demand of the union for the high wages and also better working conditions for the employees has resulted in high cost of production in Australia. Consequently, as a result of high cost of production, it makes it quite difficult for the car industry to compete well in the market when labor costs in other countries are relatively cheaper (Liow, 2009). The demands for improving the employment terms and the minimum wage in the automobile industry has led to increasing the costs of labor. However, according to the current Australian Bureau of Statistics, the Australian manufacturing sector has provided job opportunities for more than one million people in Australia. Moreover, the orthodox economic have made an argument that the car manufacturing industry should be permitted to exit the Australian market since it is not more productive than the other industries (Fujimoto, 1998). Also, the argument presented by Hopkinson et al., (2006) stated that productivity in Australia could be improved through the reallocation of labor and also capital to the other industries. However, according to the way in which the aspect of productivity is usually measured in Australia, then the productivity level of the car manufacturers in Australia is above the average. Furthermore, the collapse of the car manufacturing industry in the Australian market has a great impact on the output, and therefore numerous employees will lose their job opportunities. For instance, the Australian Bureau of Statistics has shown that the productivity level of the Australian car manufacturing industry ranges from 100,000 dollars per each employee across the economy. Therefore, it means that the exit of the car manufacturing industry from the Australian market will cause a great decrease in the productivity of the economy of Australia. Also, the recent research which was carried out to investigate the Australian economy showed that almost 80% of the total employment opportunities in the Australian economy is usually brought about by the low productive industries (Hopkinson, et al., 2006). Besides, in the service sector of the economy, those industries which have low productivity always provide greater opportunities for jobs. The car manufacturing industry had employed many full-time employees in the year 2009 in the industry that manufactures transport equipment, while the automotive sector had a gross output of almost 20 billion Australian dollars. Besides, the output multipliers in the Australian Car industry are two, which means that 1 million dollars can generate an output of 2 million dollars. Therefore, the collapse of the car manufacturing industry in Australia has adverse impacts on the industries which deal with the provision of services in the scientific research, advertising and also engineering among the others (Conley and van, 2011). However, the number of the employees losing their jobs mostly depends on the extent to which sectors are linked across the industries. For example, in case the entire car industry is closed, a large number of employees from the industry would look for job opportunities in other related industries (Fujimoto, 1998). The Australian car manufacturing industry creates direct job opportunities for more than 45, 000 individuals and also through indirect ways the industry has created job opportunities for around 200,000 people. Therefore, collapse of car industry in Australia would result in a very big economic hole of around 21.5 billion dollars which could trigger the recession of the manufacturing states in Australia (Conley and van, 2011). Moreover, the economic rationalist gave out a warning about the impact the Australian economy would experience after the exit of the car manufacturers from the Australian market. However, the government had come up with a decision to reduce the payments of the co-investment from 400 million dollars up to 200 million dollars without any guarantee of the public assistance in the long term. Therefore, the car manufacturers have made efforts to compete with the overseas rivals since the overvalued dollar of Australia Has made the domestic products to be much expensive (Hopkinson, et al., 2006). Despite the contribution of the car industry towards the Australian economy, the government of Australia has not provided any support to the car industry to sustain their operations. Moreover, the economic rationalist made an assumption that the free market of Australia proceeds on dominating the majority of the economic debate in both federal and in the state parliaments (Fujimoto, 1998). Conclusion The changes in policies especially the regulations of the working conditions have contributed to the collapse of the automobile industry in Australia. This can mostly be associated with the demands of the trade unions which have resulted in high production costs (Hopkinson, et al., 2006). Besides, the decline in trade tariffs for the imports in the car industry has created a lot of competition from the overseas firms which enjoy favorable conditions. The current studies have shown that the car manufacturing industry usually provides transferable skills, technical support and also employee training to the small suppliers. Also, the car industry has an extensive knowledge that spillovers to the other industries. Significantly, the spillovers reveal that the automotive sector is an important part of the Australia`s machinery. As a result, the collapse of the car manufacturing industry would result in a vacuum in the other industries. References Beer, A. and Thomas, H., 2007. The politics and policy of economic restructuring in Australia: understanding government responses to the closure of an automotive plant. Space and polity, 11(3), pp.243-261. Conley, T. and van Acker, E., 2011. Whatever happened to industry policy in Australia?. Australian Journal of Political Science, 46(3), pp.503-517. Hopkinson, N., Hague, R. and Dickens, P. eds., 2006. Rapid manufacturing: an industrial revolution for the digital age. John Wiley & Sons. Liow, J.L., 2009. Mechanical micromachining: a sustainable micro-device manufacturing approach?. Journal of Cleaner Production, 17(7), pp.662-667. Fujimoto, T., 1998. Toyota Motor Manufacturing Australia in 1995: an emergent global strategy (No. CIRJE-F-23). CIRJE, Faculty of Economics, University of Tokyo. Read More