AUSTRALIA’s government yesterday performed an abrupt U-turn after announcing it would no longer cut AU$500m (£254m) in subsidies for its automotive sector.
A commitment to axe the fund had been made in Prime Minister Tony Abbott’s budget last year, but the cut led to fears the manufacturers would bring forward their plans for factory closures.
The plans to make the cuts from the Automotive Transformation Scheme (ATS) between now and 2017 was met with fierce criticism from the nation’s embattled manufacturers.
ATS had been set up by the previous Labour government, with close to AU$900m earmarked for the sector.
If the subsidy cut had gone through, tens of thousands of people employed in the industry and supply chains might have lost their jobs earlier than planned as Holden, Ford and Toyota looked to wind up their operations by 2017.
The companies blamed the strong Australian dollar, high manufacturing costs and low economies of scale, adding to the economic malaise which has beset the country since the end of the commodities boom.
Opposition MPs criticised the move, saying the damage had already been done and urged the government to bring forward AU$400m in funding for the components sector.
However, under the current rules of the ATS, much of the money may never be spent, as many of the car industry firms will have closed shop by the time the scheme expires.