Aussie dollar poison II - the car industry

As noted previously Aussie manufacturing is in crisis thanks to resurgent China trade, capital flows and the currency war causing a high exchange rate.  In addition to the Economist, many in the media and politics have been despairing about the future of the country's at risk car industry.  It was all kicked off by news of Holden's cuts and comments from ex-Ford chairman Jack Nasser at an industry function.  As noted elsewhere the industry in Australia has seen a mix of union skullduggery, inconsistent policy, poor consumer interaction and small scale.  Nasser said:

....''As soon as you have a reduction in the scale of domestic manufacturing - let's assume one of the three decide to exit Australia in terms of manufacturing - then you end up potentially with a sub-scale supplier infrastructure. And once that happens, I think it's a domino effect.''He then neatly spelled out the challenges facing the car industry: ''You've got an exchange rate that's at . . . a 30-year high, you've got higher costs in Australia, you've got excess capacity in the automotive industry worldwide, you've got a very weak currency in Japan, and you've got a weak Euro. And when you put that mix together it's very difficult then to expect a relatively small but talented Australian automotive industry work its way.'' (here).

Doesn't bode well for the future.

Aussie dollar poison

Poor South Australia.  Last year it lost the Olympic Dam megaproject and now the Economist points out that Holden (the local GM subsidiary) is looking to cut jobs in the state.  Not only that, the magazine lists whole industries which are being struck off as uncompetitive thanks to the record high Aussie dollar:

....Holden, a subsidiary of General Motors and one of Australia’s biggest carmakers, cut 500 jobs, most of them in Adelaide, the state capital. The job cuts and Australia’s trade boom with China have a common thread: Australia’s mighty dollar. Chinese trade not only helped Australia survive the global downturn. It has also boosted the currency’s strength, and made it harder for manufacturers to find markets for their exports. The problem is unevenly distributed around the country. South Australia has suffered the greatest pain: in no other state does manufacturing account for such a big share of the economy....
.....Australia’s dollar recently soared to its highest level in nearly 28 years, on a trade-weighted basis.... The currency’s rise [has] meant that making things in Australia is almost three-fifths dearer than it was ten years ago. It has overwhelmed successive governments’ efforts to steady the carmakers with subsidies. Five years ago, Mitsubishi closed its plant in Adelaide. Australia’s remaining carmakers, Holden, Ford and Toyota, have shed jobs steadily since then. Australians are buying imported cars more cheaply than ever, especially from Japan; their dollar has risen by 26% against the yen since October (here).

As the article notes Julia Gillard is pressing onwards and upwards in engaging with China.  Her own constituents may wish for more efforts directed at home.