JC Political Thread - For All Things Political Part 2

[Reaper]

I posted this in the news thread but it's equally applicable here:

Longish but goes a long way to summarising why Australian made cars are behind the 8 ball. It puts govco subsidies into context and may open your eyes into how lop sided international trade is, even with our FTA partners. In short, Australia is being ####ed over (click on the link - may be easier to read):

http://www.fapm.com.au/Portals/0/eNewsletter/MDW speech to dinner 191012 - MDW.pdf

FAPM NATIONAL DINNER – Melbourne Cricket Ground
Mr Mark De Wit, FAPM National Vice President
FRIDAY 19 October 2012
The Honourable Brendan O’Connor, Minister for Small Business, distinguished guests, ladies
and gentlemen, good evening and welcome to the FAPM’s Annual Dinner. Firstly I'd just like
to publically acknowledge the power of work that Jim Griffin does on behalf of the industry
and wish him well in his recovery.
Unfortunately for all of you, I drew the short straw to make this address. Thanks to Richard
for writing a terrific speech and I apologise for not using it and going with my less politically
correct version instead.
The automotive industry is often referred to as the “foundation” of manufacturing, leading
the sector in research, industrial design & styling, engineering & product development,
testing & validation, tooling & manufacture, lean production, logistics & supply chain
management.....the list goes on.
But it is under severe threat. Its survival is far from certain.
And I want to touch on why we think this is the case
Let's start by having a look at the Playing Field:
 In the last few years, about 1 million vehicles per year have been sold in Australia.
 In 2011, Australia only produced 14% of all 1 million vehicles sold in this country.
 5 years ago, this was ~20%, 10 years ago was ~30% and 20 years ago this was ~53%?
 So what has changed……. I heard some self proclaimed experts on the radio saying we
are not making the right cars that people want.
 RUBBISH….in fact of the 5 platforms built in Australia (Commodore, Cruze, Falcon,
Territory and Camry), in 2011, 4 were in the top 10 selling cars.
 If you add up the volume of the top 10 selling cars in 2011 it equates to only 295,212
vehicles. So even if we build every one of these top 10 in Australia, we would still only
be at 29% domestically produced as a ratio to total sales.
 So we produce a meagre 14% of all vehicles sold here, but if we include all export
production as well, we made ~220,000 cars in total (140k domestically produced & sold
+ 80k for export) - so Australian total production to total sales ratio of 22%.
 Of the 1 million cars sold here, 86% are imported, with almost all ( 95%) coming from
just 4 countries. Japan accounts for 44%, Thailand 21%, Korea 20% and Germany 10%.
 Let's compare our 22% production to sales ratio to these 4 countries.
 In Japan, sales of 4.4m vehicles versus production of 8.4m vehicles (190%)
 In Thailand, sales of 800,000 vehicles versus production of 1.5m vehicles (188%)
 In South Korea, sales of 1.5m vehicles versus production of 4.7m vehicles (318%)
 In Germany, sales of 3.2m vehicles versus production of 5.9m vehicles (185%)
 So why are we at 22%? Why has it come down from 53% 20 years ago? What do we
have to do to get it right like these 4 countries - and many others as well - from my
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research, almost every other car making country has a ratio > 50% and the majority are
in triple digits
Let's look at the dreaded ‘ T’ word....Tariff's
 For any imported car into Australia, the inbound tariff applied is 5%, unless of course we
have a free trade agreement with that country (which we do with Thailand and the USA,
and next year, Malaysia), where the tariff becomes zero.
But unfortunately this isn't reciprocated in return.
 If Australia tries to send a car to Japan, there is a 10% tariff + a 5% consumer tax +
technical roadblocks that make it virtually impossible to get regulatory approval to get a
foreign car on their road.
 If we send a car from Australia to Germany, there is a 10% tariff + a 19% VAT (which isn't
applied to EU built cars), a total of 29% versus the 5% for a German car sent here!
 If we send a car from Australia to Korea, there is a 10% tariff applied + there is a long
and painful process to try and get it registered + an unwritten rule that anyone buying
an imported car in Korea will likely be subjected to a tax audit
 And finally, when free trade isn't free…..Thailand send 180,000 vehicles a year into
Australia (and growing) with ZERO tariff. Logically, with a free trade agreement, we
should be able to send cars from Australia back to Thailand with a ZERO tariff……and we
can…..BUT there is a 'duty' to be paid dependent on engine size. In essence it means
that if we try and send an Aussie made car to Thailand, the 'duty' applied is anything
from 50% to 80%
 The exception that appears lower is the USA, who have a 2.5% import tariff on
passenger cars…….however, what many people don't realise is that the local producers
in the USA make a very large number of "pick-up trucks" (like the F150 Ford, Chevy
Suburban, Toyota Tacoma etc), and in fact the majority of profit for the North American
producers comes from these types of vehicles……and if you want to import a pick-up
truck into the USA, it attracts a 25% import tariff !! They protect their Golden Goose !!
 When our production to sales ratio 20 years ago was at 53%, tariff rates for imported
cars into Australia were a high ~32% (down from their peak of 57.5% in the mid 80's)
and they have been rapidly reducing ever since under the 'Button Plan'.
 More recently, they were reduced in 2005 to 10% and then again in January 2010 to 5%
(effective 3.5%)
 Since the Button plan in the late 80's was devised and Australia set a path to reduce
tariffs to zero, we have also seen the emergence of low cost countries as Auto
producers. It is interesting to compare the import tariff should we try and send a car
into one of these so called emerging countries……India 60% tariff + duty of up to a
further 50%; Russia 48%; Brazil 35%, Malaysia 30%; China 43% (25% + 18% VAT). These
countries are all now importing cars to Australia (at 5% or some at Zero).
 I find it interesting that the likes of China, who are now the largest Auto producing
nation in the World (18 million cars/trucks produced per year and growing), with the
World's second largest economy, is seen as an 'emerging' player in Automotive and can
therefore justify 25% Tariffs + 18% VAT for imported cars.
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So what about co-investments or 'hand-outs' our Government gives the Auto sector as some
press label it?
 The annual investment from our Government into the Australian Auto sector hovers
around $500 - $600 million per annum. With 23 million people in Australia, that equates
to between $18 - 25 per person per year of tax payer money to help attract investment
into future Auto production here.
 This economic support requires the sector to more than match these investments, so it’s
certainly not all one way, hence the term co-investment.
What surprises many is that this is extremely low versus the rest of the Auto making world.
 In Germany the amount is $95 per person per annum;
 in the USA it is $260 per person per annum;
 France is $150 per person per annum……and the list goes on
It is a fact that Australia not only has the lowest effective Tariff rates in the Auto making
world but it also has the lowest Government co-investment per capita.
Now combine these two factors above with an Australian dollar that historically averages
$0.72 to the USD and is now 40 - 45% higher, making imports 40% more competitive and
exports 40% less competitive) and it is pretty obvious why Australian produced vehicle
volumes are in decline.
The net effect is that we have the most open Auto market in the world
 Did you know that more vehicle brands and models are on sale in Australia than any
other country in the world (~64 brands at last count, with over 240 model variants to
choose from)?
 By comparison in the USA, where they sell about 14 million cars/trucks per year (versus
our 1 million), there are only 33 brands on sale! That is 14 times the amount of sales but
only half the number of brands!
 20 Years ago in Australia there were 48 brands and only 97 model variants to choose
from.
So there's the Playing Field at present - far from level globally!
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I put it to you that simply more of the same approach will yield the same trend we have
been seeing for the last 20 years.
Things need to change - but what things?
So, should we just raise Tariff's?
 Well, my view is that, with the exception of cutting some slack for genuinely emerging
countries, in a very small manufacturing market like Australia, tariffs should at least be
reciprocated .That is, I have no problem scaling down to zero - as long as everyone else
is doing the same. But clearly they are not. With the onset of the GFC, many nations
chose to freeze their tariff positions, and in fact some (like Brazil), actually raised them
to offset the effect of their high currency. Reciprocity (except for genuine emerging
countries) - you can't get fairer than that. If it is 10% + 19% VAT for us to get an Aussie
car into Germany, then we should have the same for German cars to Australia……Engine
levy’s of 50 – 80% on Thailand cars; 25 + 18% = 43% for Chinese cars; 10% for Japanese
cars etc.
 Let's have FTA's – not Free Trade Agreements BUT Fair Trade Agreements!
 One politician argued with me that this just raises the price of cars for Australians
 NO it doesn't - if you buy an Aussie made car …… and that is the point !
 YES it does - if you buy an imported car. However, a 5% increase in Tariff on a
$35k car is a $1750 increase…….and this pales into insignificance when
compared to the savings that we should be getting from the Aussie dollar
appreciating 40% in the last 5 years!
 If we then continue to buy 850,000 imported cars, an average 5% increase in
Tariff (back to a 10% average like most other mature Auto making countries) on
an average $35,000 car, would raise Government revenue by ~$1.2 billion -
which I'm sure we can all think of some good ways to spend......like improving
the co-investment in Automotive to competitive levels.
As right and fair as I think reciprocity is, the likelihood of Governments altering the tariff
path is slim......
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So what else can be done?
 Well, here are 3 things.....
 1) Government fleets
 Did you know the Federal, State and Local Governments + fully funded
Government bodies purchased 60,000 vehicles in 2011 with taxpayer monies
(down from ~100,000 in 2004 as we've tighten recent spending)
 Of these 60,000 vehicles, only 19,772 were Australian made!
 In analysing the data further, Federal Government procured about 44% local
vehicles; The Vic and SA State Governments do a reasonable job (at ~70%). NSW,
QLD and WA are poor at 32%, 20% and 17% respectively. Local Councils take the
(poor) cake at 16%.
 An economist tried to tell me it was because Australian cars are too expensive or
did not meet the Green requirements
 Well, it costs no more to purchase a Holden Cruze than a Hyundai i30 or a
Mazda 3……or to purchase a Falcon EcoLPi or Toyota Camry or Holden
Commordore than a Honda Accord or a Hyundai Sonata……so it is not price.
 And local products are now just as 'Green' as any imported car - we now make
LPG Falcons and Commodores, diesel Cruze and Territory, Hybrid Camry, 4
cylinder Falcon…..there is NO 'Green' excuse not to buy Australian for
Government fleets.
 Now, there are some special purpose vehicles that we don't make here - for
example, the Police in the Northern Territory need full 4WD capable vehicles -
but let me be generous and say these special purpose cars may make up 25% of
the 60,000 total procured……so ~45,000 vehicles (minimum) of the annual
60,000 purchased should be local made products.
 At 220,000 vehicles produced here, an increase in Government fleet purchase
from ~20,000 cars to 45,000 cars (25,000 improvements) is an 11%
improvement to our Australian production total………our industry would kill for
that!
 And an 11% improvement in volume should create thousands of jobs!
 2) Safety
 Did you know that of the 1 million vehicles sold here in 2011, ~30% (that's
approximately ~300,000 for the mathematicians in the room) did not meet the 5-
Star ANCAP safety rating?
 Every Australian made car meets the 5-Star ANCAP safety rating.
 The cost of all road accidents in Australia is estimated (by the department of
infrastructure) at $18 billion/year
 So, why don't we put a penalty on new cars that don't meet 5 Star - say $2500
for each star below 5…..so a 3-Star vehicle would attract a $5000 levy.
 This would discourage purchases of less safe vehicles.
 And just a 5% improvement in the accident costs (through prevention and/or
minimising injury) would mean almost $1 billion per year would be saved, not to
mention the revenue generated from the levy.
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 It would also have the potential effect of shrinking the number of brands and
model variants - with people moving to safer (and perhaps local) models.
 And finally 3) Gaseous Fuels
 Australia is a net importer of Petrol / Oil.
 Despite our very high dollar, making importing cheaper, Petrol this morning rose
to ~$1.64 per litre
 Many experts are projecting by 2020, petrol in Australia will be around $6/litre.
 Now, did you know that Australia is sitting on the 12th largest natural gas
reserve in the world?
 And if we converted every car to run on compressed natural gas (CNG) in
Australia, with our projected population growth, we would have enough of our
own current known reserves to last 90 years!
 The current equivalent per litre cost is between 19 - 26 cents!
 Compared to a Petrol engine, CNG delivers 40% less CO2, 80% less CO and 90%
less NO.
 It leads to lower maintenance, is quieter and safer
 In 1996, there were 1 million CNG cars in the world. In 2011 there are 14.8
million......so the global market is growing.
 Now, CNG is not LPG……LPG is derived from Oil and is liquefied (hence the 'L').
CNG is compressed natural gas and its only downside is that it takes up more
space than Petrol or LPG.
 Many buses in Sydney already use CNG. Cars and Taxi's in India, Brazil,
Argentina, China, Iran etc are using CNG. Trains in the Napa Valley in the USA.
 But we can't just flick a switch and move to CNG.
 So, my view is we need to get people in Australia used to using gaseous
fuels….the technology has come a very long way - in fact the Falcon LPG vehicle
is more powerful than its Petrol brother and I would defy anyone to pick the
difference in smoothness or refinement - it also costs less to run than many
small 4 cylinder cars……so let's have Government offer huge incentives for
gaseous fuel cars. It can be justified under the banner of 'Green', as even LPG is
far cleaner than Petrol.
 I think the incentive should be twofold (1) a large rebate, say $5000 from
Government for dedicated factory fit Gaseous fuel vehicles and (2) they be FBT
exempt……the net effect of these two things would provide a very large shift
toward Gaseous Fuel vehicles.
 Now here's the good bit for Australian industry……the only vehicles in the 64
brands and 240 models currently sold in Australia that are dedicated factory fit
Gaseous fuel are the LPG Falcon and the LPG Commodore…..Aussie made, so we
get more production volume, create more jobs, and we get a greener outcome
with 5 Stars.
 The relatively minor cost impost to Government could be covered by the
revenue generated by the safety levy and/or a tariffs initiative
 We then need to shift future Government research funds toward CNG
technology. Given our natural reserves, why not become a global leader in CNG
technology and a niche global export producer of CNG vehicles - the export
markets would be large.
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 In my view we have to build industries and business not just around the skills
and passion of the people, but around strategic benefits we have as a Country -
and we are sitting on one in CNG.

 

[Reaper]

This is why student unionism should not be compulsory. Weather you agree with her politics or not, since when is it acceptable to celebrate a person's death like this?

Melbourne University union officials pass motion to celebrate the death of Margaret Thatcher

 

[vr94ss]

This is why student unionism should not be compulsory. Weather you agree with her politics or not, since when is it acceptable to celebrate a person's death like this?

Melbourne University union officials pass motion to celebrate the death of Margaret Thatcher

I don't see it as a reason for non-compulsory student unions, but it certainly was bad form to do it, even if I do agree with the sentiments expressed. They could and should have done it without student union involvement. So she kicked the bucket, eh? "Ding Dong! The Witch is dead. Which old Witch? The Wicked Witch! "

 

[HamaTime™]

I find it interesting people hate Margaret Thatcher when she literally dug England out of a hole. She made some interesting decisions, but overall she did alot of good for the country.

Dug England out of a severe recession.

Mass Privatization.

Iron Lady and was pivotal in the Western World's standpoint against communism.

 

[vr94ss]

Interesting read..

Margaret Thatcher: 'Ding Dong!' sing the foes of Thatcher

 

[Reaper]

I don't see it as a reason for non-compulsory student unions, but it certainly was bad form to do it, even if I do agree with the sentiments expressed. They could and should have done it without student union involvement. So she kicked the bucket, eh? "Ding Dong! The Witch is dead. Which old Witch? The Wicked Witch! "

The point is that they make political resolutions on behalf of all students weather they agree or not. There is no choice from the students weather they join the union or not. As for your last comment, it is very telling about the type of person you are.

 

[MasterOfReality]

This is why student unionism should not be compulsory. Weather you agree with her politics or not, since when is it acceptable to celebrate a person's death like this?

Melbourne University union officials pass motion to celebrate the death of Margaret Thatcher

It will be the same clowns who will then feign outrage when their hero Whitlam kicks the bucket and someone makes a snide remark.

No class.

 

[vr94ss]

The point is that they make political resolutions on behalf of all students weather they agree or not. There is no choice from the students weather they join the union or not. As for your last comment, it is very telling about the type of person you are.

I suppose it comes down to whether the students get to "vote" on these resolutions.. If so then it's democracy at work, someone is always going to disagree. As for what kind of person I am... Would you feel the same if I said it about someone like Mugabe if he died? Probably not. Anyway what does my comment say about me, feel free to speak your mind. As far as I can see it only says I despised her. Are you one that thinks you should never speak ill of the dead? Should there be a time limit before making jokes?

Edit:
I thought political correctness was a dirty word in these forums anyway. Should I be more "politically correct" about her demise?

 

[Calaber]

I find it interesting people hate Margaret Thatcher when she literally dug England out of a hole. She made some interesting decisions, but overall she did alot of good for the country.

Dug England out of a severe recession.

Mass Privatization.

Iron Lady and was pivotal in the Western World's standpoint against communism.

Well, just ask Jeff Kennett what people think when a leader takes the really tough decisions that have to be taken to fix economies. People will vote for the bloke (or woman) they hope can fix the mess, but don't want to be part of the solution by suffering a bit if that's what is required. Vote in a new government then hate them for taxing you more to pay for the things you want like new roads, hospitals etc. Normal human behaviour, unfortunately.

 

[Reaper]

I suppose it comes down to whether the students get to "vote" on these resolutions.. If so then it's democracy at work, someone is always going to disagree. As for what kind of person I am... Would you feel the same if I said it about someone like Mugabe if he died? Probably not. Anyway what does my comment say about me, feel free to speak your mind. As far as I can see it only says I despised her. Are you one that thinks you should never speak ill of the dead? Should there be a time limit before making jokes?

I haven't ever rejoyced over anybodies death. I did say the world was a better place after the death of Binladen, and something similar after Hussein. I wasn't happy that either was dead however on the balance of history it was the lesser of 2 evils. I don't know enough about what Mugabe has done beyond a superficial understanding. I wouldn't loose any sleep if he were to die but definitely wouldn't take delight in it.

"Ding dong the witch is dead" with regard to an elderly politician who posed no threat to anybody is very different.