Bill Shorten's car subsidy numbers irrelevant, outdated

Updated

The recent announcements by Toyota and General Motors Holden that they will stop making cars in Australia in 2017, and Ford's earlier decision to pull out in 2016, have led to a renewed debate over government subsidies to the automotive industry.

Opposition Leader Bill Shorten says the level of subsides provided to car makers in Australia is lower than in other countries.

"Australia subsidises its car manufacturing in the order of about $17, whereas the Germans do it at about somewhere between $65 and $90 and the Americans, $250," Mr Shorten told ABC TV's 7.30 on February 10.

Measuring car industry subsidies

ABC Fact Check asked Mr Shorten where those figures came from. His office said he was drawing on data contained in a report commissioned by the Federal Chamber of Automotive Industries (FCAI), the peak car industry body. That report, prepared by Sapere Research Group and published in January 2011, compared assistance for the automotive industry in Australia, Canada, France, Germany, Sweden, the United Kingdom and the United States in 2008-09.

The claim: Bill Shorten says the level of subsides provided to car makers in Australia is lower than in other countries.

Bill Shorten says the level of subsides provided to car makers in Australia is lower than in other countries. The verdict: Mr Shorten's claim is based on outdated numbers that are irrelevant to the current debate.

It found Australia gave $573.3 million, which worked out as $US17.80 per capita - the lowest level of assistance per capita among those seven nations. Sweden gave the highest level of per capita support, $US334.18. Germany's per capita assistance was $US90.37 and the United States $US264.82.

The time period covered in the report meant the results were affected by the global financial crisis.

The report said: "It should also be noted that 2008-09 was an extraordinary year for the international automotive industry with the US government essentially providing funding to virtually recapitalise its automotive industry during the global financial crisis."

The figure for the United States includes the entire $US81.3 billion committed by the US government to bail out its car industry at the height of the global financial crisis, most of which has since been repaid.

At the same time Germany more than trebled to 5 billion euros a subsidy to encourage people to scrap their old cars, and lent carmaker Opel 1.5 billion euros as a bailout measure.

For Australia, the total subsidy used in the report was $573.3 million. That figure represented only direct budgetary assistance provided for 2008-09, such as the Automotive Transformation Scheme. It excluded tariff support.

Problems with international comparisons

The Productivity Commission recently referred to the FCAI report in a position paper on car industry assistance released on January 31. The commission received a submission from consulting firm Autopolis, which reviewed the FCAI report and argued that changing the way assistance is measured could produce "considerable differences" in the results. Autopolis said measuring assistance per vehicle, rather than per capita, suggested Australia "has by far the highest rate of assistance of the countries studied".

The commission decided not to produce its own international comparison of assistance to the car industry. It said care should be taken when comparing arrangements across countries.

"In sum, given that the range of international assistance measures is so varied in character, timing and transparency, the Commission does not consider it possible or advisable to attempt an overall quantitative analysis of comparative assistance levels to the automotive industry across countries," it said.

The verdict

Mr Shorten is drawing on data from 2008-09 contained in a report commissioned by an industry body. The report points out there were a number of extraordinary factors affecting the automotive industry at that time.

His claim is based on outdated numbers that are irrelevant to the current debate.

Sources

Editor's note (February 13, 2014): This fact check has been updated to include a recent report published by the Productivity Commission.

Topics: manufacturing, alp, bill-shorten, federal-government, australia, germany, united-states

First posted