Last Australian car-maker exits

An emotive moment for many Australians:

On Friday morning, a unique group of workers will slip into their uniforms: denim jeans, dark boots and black collared jumpers. Some will make coffee, or have a bite to eat, before arriving at their factory, a bit later than usual…..

Production has been winding down. By the time they arrive today, the machines will have already stopped for good.

And just before noon, the workers inside – all 1000 of them – will gather around to mark a very special moment: when the last-ever car was built in this country….

The climb in the Australian Dollar from 50 cents in 2001 to $1.10 in 2011 was more than local motor manufacturers could handle. The last straw.

AUDUSD

Could this have been avoided?

“Dutch Disease” is a term coined by The Economist to describe the experience of the Netherlands in the 1960s. Discovery of extensive gas reserves caused an influx of investment to establish new gas fields. Large capital inflows drove up the exchange rate, blighting the local manufacturing sector.

Australia experienced a similar influx of investment in response to the commodities boom of the early 2000s. The Australian Dollar more than doubled in value against the greenback in the 10 years to 2011, while manufacturing employment in Australia headed in the opposite direction.

Decline of Australian Manufacturing

Norway faced a similar problem with the discovery of large oil reserves in the 1980s. To cushion local industry from a steep rise in the Norwegian krone, the government channeled a percentage of oil revenues, roughly equal to the trade surplus, into a sovereign wealth fund. The fund invests mainly in stocks and bonds on major global markets. With assets now exceeding $1 trillion the investment outflow has helped to soften the impact on the currency from rising oil revenues.

Chile followed Norway’s example, investing its trade surplus from copper exports in a sovereign wealth fund.

The Australian government, on the other hand, distributed its trade surplus, hoping to win votes at the next election. Resulting in a housing bubble and a decimated manufacturing sector.

Source: Holden assembly workers despair as last Australian car-maker exits manufacturing

One thought on “Last Australian car-maker exits

  1. Dennis Spicer says:

    It is a sad day for Australia and manufacturing. It is not just Holden etc. that is effected but all of the companies that feed into the manufacturing process. This will result in many more component companies failure hence a knock on effect on the economy in general.
    The political class do not understand the implications of the aggregate losses to the economy from the failure to support the car industry and we Australians will pay more for cars and this profit will mostly go to overseas countries. When will this nonsense stop? probably when we fail to keep up our standard of living and the masses finally notice what rubbish governments we have had in the past.
    RIP wealth and sensible country management.
    Dennis Spicer

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