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Mitsubishi: let the factory close? « Previous | |Next »
April 29, 2004

As Peter Costello, the Federal Treasurer pointed out the Mitsubishi crisis was a problem for the international car company not the South Australian plant. Mitsubishi's exit from South Australia will come from the decisions that will be made in Japan. I wouldn't expect too much by way of rescue of Mitsubishi Motor Corp though.

Mike Duffy, the Motoring Editor of The Advertiser, in an overview of the Mitsubishi crisis, says that we all should keep our opinions to ourselves:


"The best thing the so-called experts and the politicians can do is cease the debate until a decision is reached in Tokyo. Prolonged talk of doom at Mitsubishi can only be self-fulfilling."


The very opposite of closing down the debate should be what needs to happen. We should be debating the future of SA and the direction it's economy can and should go.

So what is going to happen?

Alan Mitchell, the economic editor of the Australian Financial Review, had an opinion piece in Wednesday's edition (subscription required). It addressed the economic modelling of the possible job loses from the closure of the local Mitsubishi plant. Alan rejected the input-output model with its 22,000 job losses used by John Spoehr as overstating the long term losses and for assuming that foreign car makers would capture Mitsubishi Australia's domestic and export markets. Mitchell argued that the Monash model was better than the Adelaide one. He went on to say that:


"....under the most pessimistic scenario in which the bulk of Mitsubishi's sales are lost to foreign producers, the Monash Model reduces Australian car industry output by about 7 per cent and cuts South Australia employment by 2 per cent or about 14,000 jobs."


As he observes, that would be a hefty blow to the South Australian economy. However, Mitchell goes on to say:

"...if it is assumed that Australian producers capture Mitsubishi's fleet sales, while imports take all its non-fleet sales, the initial loss of total can industry output is only 3 per cent, and this falls to less than 1 per cent after 10 years."


He acknowledges that even this would still be a significant set back for South Australia.

So what should be done here? Mitchell suggests the Commonwealth Employment Service setting up a centre inside the factory and special regional employment assistance package. However, his general point is a good one. The Howard Government should be generously pumping money into finding Mitsubishi worker's alternative jobs in the Adelaide area, rather than trying to keep the car plant going.

What we in South Australia should be discussing is not keeping the status quo going --but figuring how to start building on the initial step to a centre of excellence re manufacturing. We need to figure how how we can move away from being a branch office economy and having a vulnerable manufacturing sector. Moving away generally means developing "new age industries', such as IT, electronics defence, biotech and renewable energy.

As today's editorial in the Australian Financial Review (subscription required) said SA must drive its own future. If it does not then SA will continue to increasingly look like a retirement village in an industrial museum.

| Posted by Gary Sauer-Thompson at 10:16 AM | | Comments (6)
Comments

Comments

"Commonwealth Employment Service"

Just a picky comment but is there such a thing anymore, Gary?


Nope.The CES is long gone. Charities becoming private companies have taken its place.

The words are those of Alan Mitchell not mine.

He says "experience of micro-economic reforms --including the Nissan closure---has provided some useful lessons on how to deal with the regional dislocation of a major plant closure.
For example, when Nissan closed, the Commonwealth Employment Service opened a centre inside the Nissan plant.

Beyond that....."

The implication from the above paragraph is that it could be done again.

I just presumed Mitchell was not being serious, him being a free marketeer and all.

I seem to be getting a hang of this blogging thing and am able to fit in a post a day. Today I've written about this topic too.

I think that the actual number of jobs that will be lost is not worth quibbling over- even the most optimistic places it at 8,000 which is an economic and social catastrophe, whichever way you look at it.

Did you see how the Govt is spending $444 million on the sugar farmers? Some farmers will be given up to $100,000 grants. I can't imagine that happeneing to the car workers, let along the casual workers in the component makers, who will end up with nothing.

These people don't need grants, of course, but they do need retraining and more education. It does leave a sour taste in South Australian mouths.

Yes, it does leave a sour taste. Funny how Free-Trade-Deals lead to Governments distorting the market through subsidies they know deep down won't work.

These are a nice couple of blogs on Mitsubishi - I've also given my 2 cents worth at Jocknessmonster - bit of a flight of fancy about how an IP industry might work in SA.

The sugar industry: why are they being compensated for a FTA that is not yet in operation and may never be if the US Congress doesn't approve it?

Ha! Good point Ron. But why quibble over $444 million when there's votes to be had and an election is due?

Is this the biggest electoral bribe (as in, cash per recipient?) in Australian electoral history?