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The exodus of Australia's last three car makers will be a nasty economic blow to the vehicle manufacturing hubs of Melbourne and Adelaide. But the consequences for NSW, and other states, are likely to be much less significant.
About 30,000 jobs in Melbourne are tied up in making cars and car parts, says economist Terry Rawnsley from SGS Economics and Planning. That is about 13 per cent of all manufacturing jobs in Melbourne. But in Sydney only about 3000 jobs are on the line - about 3 per cent of the city's manufacturing workers.
The departure of the three big car makers will be devastating for many individuals now employed making cars and car parts. But Deloitte Access Economics analyst Chris Richardson says it is ''a problem rather than a disaster'' for Australia and ''less of a problem for NSW than elsewhere''. He estimates 0.5 per cent of the national workforce will be directly affected by the closure of Ford, Holden and Toyota plants in 2016 and 2017. But in NSW the proportion will be only about 0.17 per cent.
Over the past few decades the NSW economy has shifted away from a dependence on manufacturing towards the service sectors. Even so, manufacturing remains an important source of employment in the state. A report released last week by SGS Economics and Planning revealed Sydney is now the nation's biggest manufacturing centre - a label long-held by Melbourne. The value of Sydney's manufacturing industry was $21.7 billion in 2012-13, compared to Melbourne's $18.9 billion.
Manufacturing in Victoria has been dominated by large-scale, export-oriented manufacturers, especially the car makers. But these have been hit hard by the higher dollar and low-cost competitors. The nature of manufacturing in Sydney has been different, focusing more on domestic markets and niche, high-tech exports such as biotechnology and advanced electronics. These have been less affected by the high dollar and overseas competition.
Unlike the big car makers based in Melbourne and Adelaide, Sydney's manufacturers have not relied heavily on big government subsidies. Rawnsley argues this has helped many small NSW manufacturers to remain efficient and globally competitive.
Taxpayers will be no longer need to subsidise the big car manufacturers after 2017. The Productivity Commission estimates the equivalent of about $30 billion (2011-12 dollars) was provided to the industry between 1997 and 2012 in the form of tariffs and government assistance. Consumers also stand to benefit because there will no longer be any rationale for the remaining 5 per cent tariff on imported vehicles. There are already calls for that trade protection to be dumped in the budget in May.