Decisive action----A big subsidy ($6.2billion over 10 years) to the car companies in Australia by the Rudd Government ---the industry is the backbone of manufacturing and employment in Australia.

The subsidy is premised on the industry bringing new fuel efficient technologies coming on stream and investments to produce new models for consumers ----how can the US industry invest when they are in the process of going bankrupt in the US?

Its decisive action'----that must be the new buzz word or message point---no matter what happens in the US.

Referring to the US Robert Reich says that:

First, understand that the main problem right now is not the supply of credit.... The real problem is on the demand side of the economy. Consumers won't or can't borrow because they're at the end of their ropes. Their incomes are dropping... they're deeply in debt, and they're afraid of losing their jobs.

In the absence of consumer spending, businesses are not going to invest even if the banks are willing to lend. Monetary policy won't work if there's inadequate demand.

This at VoxEU (or the 44pp PDF)is worth reading in detail .

The "odd spot" in it was that Switzerland will need massive foreign aid, as the liabilities of Swiss banks are "multiples" of Swiss GDP.

Any bets that any such aid will be conditional on the Swiss letting non-Swiss law/tax enforcement agencies go through the books: global financial governance might be about to get a LOT better.

Being snarky, going through Swiss bank accounts might even find most of the "assets" that have gone "missing".

Will the most significant developments over the next five to 10 years be industrialisation in China and India, not the US-driven cyclical slowdown?

Nan,
Tim Colebatch in The Age reckons so

The new Australian car plan is just the latest in a long line of support packages for this industry to provide long-term certainty that is needed to underpin future investment etc etc. This industry has always been subsidised, and it is still not providing consumers with access to low emissions vehicles at the cheapest possible price.

The Rudd Government argues that things will be different this time, with "a high level of support at the beginning eventually tapering down to zero". There's was a bold plan to make the industry more competitive, responsive to consumer preferences and better equipped to deal with climate change. Rudd says:

Australia needs a green car industry that manufactures the fuel-efficient, low-emissions vehicles of the future and creates the well-paid, high-skilled green jobs of the future."

We may need this but that doesn't mean the car industry will build it or provide these jobs.

Peter,
yes a solar power industry would also provide the well-paid, high-skilled green jobs of the future. They could built this through a gross feed-in tariff - which pays people for all the power they generate, including what they use themselves and what they return to the grid.

It is this kind of scheme which is favoured by the solar industry.It prefers the feed-in tariff instead of the existing rebate system, which pays $8000 to households on incomes of up to $100,000 to install solar panels. The money has run out on the subsidy.

Canberra moves on car manufacturing but not on a national system for solar manufacturing and installation.

Lots of money for car manufacturers but nothing about mandatory fuel emission standards. It is all carrot and no stick. We are left with gas guzzlers. The local car manufacturers have failed to read consumer trends and to reposition themselves with low-emissions technology.

China's vast foreign currency reserves are currently being used to underwrite US debt through its ongoing investment in US Treasury bonds. Why would China continue to tie up its capital in America's debt-consumption economy instead of investing it in developing China the health, education and environmental well being of the Chinese people?

The Chinese must be starting to ask these kinds of questions, given the poverty in rural China.

Nan,
Shaun Carney in The Age says that there is a powerful fashion, in the federal Treasury, within university business schools, and among many media and political commentators, to deride the car industry.

He does acknowledge that these critics are right when they say that the industry is not efficient and is not productive enough, that it is too reliant on government assistance. His response is that:

The notion that Australia's car industry is somehow uniquely cosseted is a nonsense, as is the idea that governments of either political stripe are passive actors sitting on the sidelines when it comes to economic activity.

True, but we don't get a good product for the money that is put in---no fuel efficient cars. No green cars. What we get are gas guzzlers.

Robert Gottliebsen has a good article in Business Spectator on the car industry in Australia. Entitled Turbo-charged losses he argues that the changes coming in the motor industry are more profound than anyone has so far conceived.

They will affect every car owner, every motor dealer and every motor maker/or importer. Automotive will be the first industry outside property to be fundamentally changed by the banking and finance revolution.....any dealers will go to the wall or sell their business at low prices. Those that survive will do so because their financiers backed them.

They need finance to buy their stock and GE provides between one third and a half of the total finance, and GMAC which has about 10 to 15 per cent of the market, are pulling out around Xmas.

Peter.
Kenneth Davidson in The Age says that despite the promised $6.2 billion assistance, Australia could still end up with a car industry that assembles imported components. Assistance should be conditional on manufacturers agreeing to source transmissions, axles and engines in Australia. Detroit is in no position to argue.