Wind Power Price Pounded Ford: Maurice Newman points to the “Elephant in the Room”

FINALLY – someone has the nacelles to say what STT has been bellowing long and loud: that the RET policy and the REC tax on power consumers is killing what’s left of Australian industry and punishing the poorest and most vulnerable to boot.

elephant in the room

Carry on, Gentlemen – don’t mind me, I’m just here to wreck everything and ruin your lives.

****

RET/REC driven power prices are the Elephant in the Room that no-one is game to talk about – Maurice Newman just has – The Australian reports. And to make sure no-one misses the previously “invisible” pachyderm, we’ve highlighted it.

Ford failure shows up ALP hubris
The Australian
Maurice Newman
27 May 2013

HAS Ford’s Broadmeadows assembly line already reached its use-by date? Seeing parts conveyed across the shop floor by a man driving something like an airport baggage train seems quaint compared with the silent robots in German factories.

China’s Chang’an factory in Chongqing resembles Ford Australia but wage rates are one-20th of Melbourne’s.

For Ford Australia, the writing has long been on the wall. Its models have struggled to find buyers. It has chalked up losses of $600 million over five years despite hundreds of millions in taxpayer-funded subsidies and, with costs double Europe’s and four times Ford Asia’s, it is not possible to export profitably. So why invest billions in modernising? The decision to shut down in October 2016 was the only rational one.

For employees and those who are dependent directly and indirectly on them, it is tragic in human terms and destructive economically.

The overall reduction in the scale of Australia’s automotive manufacturing must add to the unit costs of the remaining manufacturers.

The political imperatives, just months from a federal election, have led to calls for everything from “temporary” tariffs and more financial support to the establishment in Geelong of the administration headquarters for DisabilityCare. While well intentioned, none of this addresses the crisis facing our manufacturing industries.

Governments may want to blame Ford and the high Australian dollar. But this tells only part of the story. Perhaps Ford did misjudge Australian demand, but radical model changes require significant investment and long paybacks. Confidence in the country’s manufacturing future is required. Taxpayer subsidies make headlines but can’t compensate for an increasingly unfriendly business environment.

For Ford, the high Australian dollar may have intensified import competition, but it also provided cheaper imported gearboxes and other high-value components. Retooling and further plant upgrades would have been less expensive, but the rapidly escalating domestic costs of production, particularly energy and labour, negated the benefits.

While no manufacturer receiving government patronage will admit it publicly, the combination of the carbon tax and clean energy policies has catapulted Australia’s power prices, critical to manufacturing profitability, from among the cheapest in the world to the most expensive. According to a March 2012 study undertaken for the Energy Users Association of Australia, Victoria’s household electricity prices are, after South Australia and NSW, the fifth most expensive in the world. While not conclusive, (comparable global industry statistics do not exist) and recognising that some emission intensive industries receive compensation from the government, there is little doubt that, even purchasing power parity adjusted, our energy costs are no longer competitive.

Add the relatively high wage costs, entrenched organised labour arrangements with accompanying industrial relations rigidities, low productivity and the red and green regulatory tape imposed by all tiers of government, and the handicaps manufacturers face are daunting.

This has grave consequences for long-term employment. We get a glimpse of this in the US where there are signs that it will be difficult for them to get the jobless rate down from 7.5 per cent.

After the global financial crisis, hours worked are increasing, hourly wage rates are rising and firings are declining. Yet the skills in demand are not being found among the 5.5 million officially unemployed.

Re-skilling an ageing workforce takes time and money.

Prominent economist Ross Garnaut expressed similar concerns for Australia when he said: “If we continue with the current economic policy settings and mentality, then a recession is very likely and the economy may kick along the bottom for a long time.”

He says our costs and incomes have kept rising compared with the rest of the world. He sees our resources and investment boom ending and that “the coming requirements are going to be the need for broad-based restraint, shared sacrifice across the board and an emphasis on reforms to deliver productivity”. This will mean an “uninhibited pursuit” of productivity growth, regulatory reform, efficient and fairer taxes, cuts to middle-class welfare and retaining immigration with a high skill base.

This message has not resonated with the government. Since the GFC, it has demonstrated an unrealistically optimistic outlook wrapped in hubris, illustrated when the Trade Minister performed his “Whyalla wipeout” stunt. He may have been seeking to make a political point but, as the redundant Ford workers will attest, that hubris does not put food on the table.

It matters little whether the first casualty of the carbon tax and general economic mismanagement is Geelong or Whyalla. What matters is that we prepare for what Garnaut says will be a hit to the economy “that we have not experienced in modern times” and work urgently to restore our international competitiveness.

If elected in September, that task will fall to an Abbott-Hockey government. They must find the courage to act decisively.

Maurice Newman is a former chairman of the Australian Securities Exchange and the ABC.
The Australian

Maurice Newman will soon be the personal adviser to the next PM, Tony Abbott. STT is chuffed to know that Maurice will have Tony’s more than ample ears, come September.

abbottcover

So, Tony – is Australia meant to be a first world economy, where our kids will be meaningfully employed, or should we start teaching them all to say: “would you like fries with that”?

burger flipper

Come on Tony, kill the RET and the scrap the REC – Australia just can’t af-FORD this insanity any longer.

See you at the Rally, June 18, Parliament House, Canberra.

About stopthesethings

We are a group of citizens concerned about the rapid spread of industrial wind power generation installations across Australia.

Comments

  1. Looks like the GREENS are getting what they want , More Turbines means less Australian manufacturing, means less pollution, good on ya Greens!

Trackbacks

  1. […] pressing the Head Boy to scrap the mandatory RET in its entirety (see our posts here and here and here). Kill the RET and the wind farm scam dies in a […]

  2. […] the demise of motor manufacturer, Ford and lots of other energy intensive businesses (see our posts here and here and […]

  3. […] in SA is the fact that it already has the highest power prices in the world (see our posts here and […]

  4. […] Maurice has also previously made the connection between spiralling power costs – being driven by the insanely expensive and utterly pointless Renewable Energy Target – and the death of manufacturing in Australia (see our post here). […]

  5. […] With Denis “in charge” heaven help Victorian power punters.  On Denis’ watch – Ford will close its car making operations at Geelong in October 2016, leaving thousands out of work – put there by factors including RET driven spiralling power costs – see our post here. […]

  6. […] it for struggling manufacturers – do it for the tens of thousands of families who can no longer afford electricity – and do […]

  7. […] Australia’s economy has hit the wall with tens of thousands of jobs lost in the manufacturing sector during Labor’s chaotic term in Government – thanks to the escalating cost of doing business here  – including the spiralling costs of electricity being driven by the RET. […]

  8. […] retail power costs are killing demand from businesses that once used buckets of the stuff – like Ford.  If you send 75,000 manufacturing jobs out of Australia – it’s no surprise that we’re using […]

  9. […] while ago we reported on the moment when Maurice Newman had the courage to point to the elephant in the room: spiralling […]

  10. […] Australia really wants to see more manufacturers, like Ford, close their doors, then it should stick with the current RET/REC policy – which is a perfect […]

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: