Oz Car manufacturing sacrificed for low interest rates and off shore debt

This comment was made this week at http://www.macrobusiness.com.au  (link may be locked)


I think it is worth keeping in mind that the ongoing but gradually reduced protection of the motor vehicle industry was nothing more than an attempt to ring fence a particular manufacturing industry from the impact of an exchange rate that was bloated by currency warfare and our own dimwitted policies that saw channeling predatory capital inflows into unproductive investment as a magnificent achievement.

If the exchange rate reflected our trade performance (perhaps including some moderation of the rate of mineral resource extraction) it is quite possible that we would have local car manufacturing that can compete with imports and is profitable without protection.

In December new car sales totaled 95,000 vehicles. That requires a lot of dirt exported to cover the cost if they are all imported.

Sure even with a less bloated exchange rate an unprotected industry may not survive but it would have been good to find that out before the currency finally tanks.

All that rubbish about Australia moving up the value chain is just pie in the sky dreaming.

None of it will happen while we tie a great big inflated exchange rate (fueled by capital depletion) around the necks of any business located in Australia.

If you support the existing model of the Australian economy stop worrying about the next generation of industry in Australia and just enjoy the national credit limit until our creditors (read secured creditors) yank it.

Just don’t expect too much warning – creditors have a habit of extending credit right up to the point that the value of the security equals the debt and than BANG they turn off the tap.

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