The Abbott government has abruptly reversed a key funding cut to the automotive sector as Australia’s major car manufacturers prepare to close their doors.
The government on Tuesday said it would not proceed with plans unveiled in last year’s budget to axe $500m from the Automotive Transformation Scheme (ATS) between now and 2017.
The industry minister, Ian Macfarlane, told reporters in Adelaide the government had backflipped on the ATS cut because the carmakers were concerned the components industry would not be able to supply Holden and Toyota right through to their planned departure in 2017.
“There was a level of uncertainty in the automotive industry and particularly the component industry that was concerning the government, in that we need the component industry to be there, the very last day that Holden and Toyota roll cars off the assembly line at the end of 2017,” Macfarlane said on Tuesday.
“So we won’t be proceeding with the cuts that were in the budget last year for the ATS.”
“What Holden was saying to us and what Toyota was saying to us and to a lesser extent Ford, was that they couldn’t be sure their components suppliers were going to be in business in 2017,” he said.
“So this gives not only certainty to the components suppliers but it gives the car industry manufacturers the opportunity to pass some of this money through to the components suppliers to ensure they’re continuing until the end of 2017.”
The U-turn contradicts the Abbott government’s previous strongly held disposition against providing multi-million dollar handouts for the Australian car industry – and the move will not be universally popular within government ranks.
In a press conference in Kalgoorlie, the prime minister, Tony Abbott, told reporters the decision had not been taken by the full cabinet, but by a cabinet sub-committee – the expenditure review committee. “The decision not to proceed with the legislation is the sort of decision which does not necessarily go to cabinet,” Abbott said.
“There is nothing unusual, nothing irregular about the decision not to proceed with the legislation to repeal this particular scheme,” the prime minister said. “I know that you’re always looking to find fault but I think that the decision not to proceed with the repeal legislation is a perfectly sensible one given the situation in the Senate.”
Macfarlane said the pre-2017 $500m was back on the table “but only on the basis of cars produced.”
An additional $400m has been allocated to the scheme for four years beyond 2017. The industry minister made it clear that additional money was not back on the table for the industry. “When cars stop rolling off the end of the assembly line, the scheme stops,” he said.
Given all the caveats it is unclear precisely how much money will return to the industry courtesy of Tuesday’s decision, but Macfarlane contended the value of the reversal was in the hundreds of millions.
The industry minister later confirmed Tuesday’s backflip, unlike the recent axing of the Medicare copayment, had not only bypassed a conventional cabinet discussion, it had not gone to the Coalition party room for discussion because of concerns the news might leak.
Macfarlane told Sky News it would have been a “disaster” had the news leaked ahead of a public announcement. He said MPs in South Australia and Victoria had been briefed.
The decision to restore hundreds of millions to an industry in the process of winding down cuts across the recent imperative outlined by the Intergenerational Report to cut back on expenditures
The ATS about-face is the latest contribution to the government’s current effort to clear so-called “barnacles” – policies causing the Coalition political grief. Like a number of unpopular measures from last year’s budget, the Senate had opposed the ATS funding cut.
In a press conference to confirm the ATS backflip, the minister was asked whether restoring some industry funding was like “sending the ambulance to the bottom of the cliff after the patient has jumped off”.
In responding to that question, Macfarlane attempted to play down the Abbott government’s role in the departure of Holden. He said it was clear to him from the time he took the industry portfolio post election that Holden did not intend to stay in Adelaide.
The Labor leader Bill Shorten argued Tuesday’s decision was too little too late. “When the Abbott government was elected 18 months ago, there were thousands of people with jobs in the car industry,” Shorten told reporters in Sydney.
“Now we face the very real prospect that tens of thousands of people are losing their jobs in the car industry. So when Tony Abbott or Joe Hockey or the rest of them start saying that they want to do something about the car industry, it is very late in the piece – and I think this is a government who can’t be trusted to look after manufacturing in Australia.”
South Australian senator Nick Xenophon said the announcement was a pea and thimble trick. He said the outlook for the components industry remained perilous. “This leaves 140 auto component firms with 33,000 direct jobs and conservatively another 70,000 that are dependent on the sector, potentially disappearing by 2018,” Xenophon said.
“Forgive me for being cynical, but the government is trying to win a political battle by announcing scrapping the cuts, but in effect they will still achieve what they wanted unless the criteria for the ATS funding is changed in respect of the new landscape,” he said.
The Greens deputy leader, Adam Bandt, said he celebrated the fact the Senate had successfully stared down “the government’s plans to throw thousands out of work by cutting almost a billion dollars out of the auto industry without a transition plan.”
“But this backdown is not enough to create sustainable jobs in a cleaner Australian car industry,” Bandt said Tuesday.