How much is the car industry really worth to Australia?

THE level of government support the automotive sector has received indicates it’s crucial to Aussie manufacturing but the numbers tell a different story.

How much does auto manufacturing contribute to the national economy? Source: ABS.

Toyota yesterday announced that it will cease making cars in Australia, meaning that by 2017, all of the major car makers will have pulled their manufacturing plants out of the country.

The news comes as a blow both to the manufacturing industry and the Australian government, which for the better part of the past decade has been supporting the sector through ongoing subsidies and tax breaks, largely in a bid to prevent job losses, reports Business Spectator.

To give you an example of just how much the sector is receiving, the Productivity Commission says automakers received just under $620 million worth of funding and tax breaks in the 2011-2012 financial year.

While the level of support indicates that the sector is crucial to Australian manufacturing, a closer look at the Australian Bureau of Statistics’ latest industry data tells a rather different story.

Auto manufacturing jobs as part of total manufacturing jobs. Source: ABS.

While still substantial, the amount of jobs in the auto manufacturing sector pales in comparison to the rest of the industry.

Auto manufacturing jobs versus other sectors. Source: ABS.

It also seems that over time, the sector’s productivity has been slipping. Since 2003, it’s been producing fewer and fewer cars.

Source: Key Automotive Statistics 2002-2012.

And as a result, it appears to contribute little to Australia’s overall GDP.

How much does auto manufacturing contribute to the national economy? Source: ABS.

These figures haven’t stopped arguments from the world’s largest automakers that there is a need for ongoing government support of the sector, as it contributes to the wider economy.

Source: Productivity Commission.

This article was originally published on Business Spectator.