As The Last Carmaker Shuts The Door On Australia, Abbott Needs A Plan To Keep The Lights On

Getty / Stefan Postles

Thousands of families across Australia will be rethinking their futures after Toyota’s decision yesterday to shut its plants, dramatically bringing an end to the nation’s once-burgeoning car-making industry.

While the affected 2,500 employees of the company will be grappling with the thought of how they will be paying their bills and mortgage repayments in a couple of years’ time, there are tens of thousands more who will be worried about being caught in the flow-on effects of the plant closures.

The companies that supply parts and other goods to the Toyota plant operations will start to see their orders dry up – some sooner rather than later.

Some estimates put the potential impact of this at around 40,000 jobs. One expert pegs it at a more catastrophic 100,000. Unions are warning of a recession on the south-eastern seaboard over the coming years.

When Holden announced it was pulling out in December the government started work on putting together a $100 million support package (including $20 million from the company) to help its 2,900 workers with retraining and finding new employment. But the Toyota decision, because of its effect on suppliers, is likely to require a more far-reaching government response.

And as federal Treasurer Joe Hockey has been saying for months, there’s no money in the bank for grand new spending projects.

Opposition Leader Bill Shorten has been quick to saddle the Coalition with responsibility for the closure. “The car industry has died under the Abbott government,” Shorten said. “It’s a disgrace.”

The announcement has been sudden but there has been a growing sense of impending doom building around the Australian car industry for some time. In April last year, former Ford president Jac Nasser declared the death of the industry “inevitable”. Both Holden and Toyota blamed the high dollar and high manufacturing costs in Australia for their decision to quit.

The government can’t have helped Toyota’s enthusiasm with Hockey’s declaration that the AMWU was “at war” with the company. But car-making has been an increasingly uncompetitive industry for a long time now and regardless of who or what blame is assigned, it would be sensible for everyone to acknowledge up front that the fate of the car industry is in a large part due to factors far beyond the control of Australian political leaders, of any stripe.

(See: These 10 Charts On The Australian Car Industry Show Why Holden Was Doomed)

Since taking office last year the Coalition has been largely doing what it said it would do on the economy – reviewing spending and paving the way for some austere cuts in its first budget in May. But the test for any government is not just in delivering against their mandate but also in how they respond to the challenges that arise in office.

The economic equation for Australia with the end of the mining investment boom has been clear: other parts of the economy like construction and manufacturing have to pick up steam quickly in order to ensure continued growth. Against this backdrop, the Toyota decision is a crushing setback.

After years of Labor failing to deliver budget surpluses the Coalition has made a habit of crowing about their track record and positioning themselves as the better economic managers. The circumstances in which they now find themselves present a stern test of that claimed credibility.