'Every Dollar To Car Makers Is One Less For Industries Of The Future'

The Ford Broadmeadows plant, already facing closure / Getty
Ken Morrison

This is a guest post by Tourism & Transport Forum Chief Executive Ken Morrison and follows the ALP announcing $200 million in funding for the Australian car industry in the first day of the federal election campaign.

This federal election Australia has some big choices to make about our future. Is our national economic prosperity more likely to come from propping up twentieth century industries in decline, or from backing industries with the real potential to grow and boost national income?

Over the past three decades Australia has had the guts to adapt our economy to the needs of the global market place; to focus on those activities where Australia excels at and which the world wants to buy. As a result we have a nimble and resilient economy which has outperformed virtually everyone else in the developed world.

Yet yesterday the federal government threw $200 million at the car manufacturing sector in a decision which beggars belief. Despite more than $6 billion being committed over the past decade, one manufacturer closed its doors in 2008 and another will follow suit in 2016. A third maker recently sacked 500 people and the fourth is threatening to cease manufacturing operations unless the government stumps up yet more cash.

Why throw good money after bad to support an industry that is on the wane? It’s not a question of begrudging people in car manufacturing their jobs, it’s a question of opportunity cost. With a limited pool of taxpayer funds, every dollar that goes to the car industry is one dollar less to promote industries of the future.

While the PM has called time on mining investment boom, the people boom is just getting started.

Right across Asia there is a growing middle class emerging. They have the money and they are travelling. Australia’s challenge is to ensure they spend their money here.

From $13 billion in 2000, spending by Chinese international travellers was $102 billion in 2012, up an astonishing 37 per cent on 2011, and further growth is expected. Add in the potential from India and Indonesia – the second and fourth-largest countries in the world – and federal investment in tourism stands to generate even greater export income than it does currently – more than $25.5 billion a year.

The visitor economy is already important for Australia, but it provides a big growth opportunity for the country. Promoting tourism should be a key economic development strategy for Australia.

Australia’s car manufacturing sector directly employs just over 50,000 people, down from 65,000 just five years ago. By contrast, the tourism industry directly employs more than 530,000 people, up from 480,000 five years ago. In addition, the government’s own figures suggest there are 36,000 job vacancies in tourism across Australia, a figure forecast to rise to 56,000 over the next two to three years.

With 283,000 tourism businesses across Australia, tourism brings economic benefits to every corner of the country. Despite the contribution the industry makes, however, federal support for our national tourism marketing body, Tourism Australia, has fallen in real terms and tourism has been hit with increases in taxes and charges which reduce Australia’s competitiveness as a destination.

Our passenger movement charge (PMC) was increased to $55 last year, giving us the highest short-haul departure tax in the world and the second highest overall of any developed country. In 2015/16, the PMC will reap the government more than $1 billion a year, almost $800 million more than the cost of the passenger processing and border security services it was intended to pay for.

For an island nation reliant on aviation, the PMC raises the barriers to entry for prospective visitors. The cost of many visitor visas has also risen, adding a further financial hurdle. So while we negotiate free trade agreements to facilitate the movement of goods, the movement of people is being treated quite differently.

In the lead up to the election, we are calling on both sides of politics to back tourism as an economic growth strategy for Australia. While the mining investment boom is slowing, the people boom is just gathering steam and the emerging economies of Asia are driving strong growth in demand for services – and that includes tourism.

Australia is well-placed to capitalise on this opportunity, with the right policy settings and support in place.

Tourism is subject to the same global economic challenges and changing consumer preferences as every other sector – including the automotive industry – and has had to make the necessary structural adjustments without the benefit of additional government support.

Governments around the country have committed to the Tourism 2020 targets of growing overnight tourism expenditure to up to $140 billion a year by the end of the decade. With support like that afforded to the car industry, not only would those targets be achievable, but it would put tourism in the driver’s seat and put Australia on the right road towards a prosperous economic future.

Time for the country to back its strengths, not try to hold back the economic tide.

Ken Morrison is chief executive of the Tourism & Transport Forum.

Follow Business Insider Australia on Facebook and Twitter

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.