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Wednesday, 18 March 1987
Page: 876

Senator CHANEY —My question is to Senator Button in his capacity as Minister for Industry, Technology and Commerce and as Minister representing the Minister Assisting the Treasurer on Prices. I refer him to the Prime Minister's threat last week to penalise car makers with respect to local content if the Automotive Industry Authority believes that price increases are unreasonable and that such a move-and I quote Mr Hawke-`would have a substantial adverse impact on the motor vehicle producers' profitability'. Does the Government believe that there have been excessive increases in local car prices and, if so, is it suggesting that manufacturers reduce prices? Does the Minister support moves to decrease the profitability of producers, who have just suffered their worst year for 15 years and who constitute the majority of companies in the transport equipment sector of the economy which, according to this month's Australian Bureau of Statistics figures, suffered a 70 per cent drop in profitability in the past 12 months? Is this threat of punitive action the Government's only response to the car industry crisis other than this Minister's `all we can do is cross our fingers and hope' statement of a couple of weeks ago?

Senator BUTTON —On the general question of the motor vehicle industry let me say that in the context in which I made the remark about crossing our fingers and hoping-I do not think that is quite the correct interpretation of what I said, but it is near enough; I do not wish to dispute the substance of the allegation-I was at pains to make the point that the motor vehicle industry in the last two years has been characterised by sharply increasing prices at the same time as there has been considerable restraint in the Australian community in respect of incomes. I suppose there are some exceptions to that; for example, the performance of particular companies which import very highly priced cars which have retained market share as a result of sales to the wealthier section of the community. But generally speaking, restraint in incomes has been quite apparent, and quite essential in terms of the Australian economy, and that has come at a time when prices of vehicles have increased significantly.

That is the context in which the motor vehicle industry finds itself at present. I think the provisions of the motor vehicle plan can only assist companies to adjust to that process of a difficult market situation. Insofar as the price of motor vehicles is concerned, in respect of some companies there has been some evidence of price taking in the past 18 months when they might have been better advised to seek to increase market share by restraining price increases. That is essentially their business, but for some of them that may well have been a better strategy.

Insofar as the future is concerned, of course the Automotive Industry Authority will be keeping an eye on automotive industry prices in the same way as the Steel Industry Authority keeps an eye on steel industry prices. I think it is important that that happen in the general process of restructuring the industry and so on. I do not think I can take it any further than that. That is the Government's strategy and we will stick to it.

Senator CHANEY —I regret that practice admits only one supplementary question. The Minister referred to the increase in the price of motor vehicles being in excess of the general movement in the consumer price index. Before the Government made its threats to the motor vehicle industry did it do any analysis on the extent to which those increased prices relate to costs inevitably incurred because of the devaluation-bearing in mind that for all but one maker imports are a significant element of manufacturing-the changes in sales tax, of which there have been two, the cost of the switch to unleaded petrol and other government caused increases in the cost of motor vehicles? Before the threats were made was any analysis made of the extent to which those higher than CPI price rises could be attributed to those government caused factors?

Senator BUTTON —In relation to the motor vehicle industry I did not refer to CPI increases and automotive industry car prices in my answer to the question, as I recall.

Senator Chaney —You said that there had been a greater rise than the general CPI increase.

Senator BUTTON —I do not think I said that, but it does not matter. I do not want to argue about it. The increase in motor vehicle prices has been far in excess of the CPI and the basic reason for that is the devaluation. It is not true, as Senator Chaney said in his supplementary question, that only one manufacturer--

Senator Chaney —One car.

Senator BUTTON —That only one car has a local content which reduces the effects of the depreciation significantly on that company. A number of high content cars are made in Australia, but the fact is that the prices of the imported components are very significant because they are key components in the motor vehicle. Of course the Government has taken into account the effects of the depreciation on motor vehicle prices. When I answered the first part of the question I assumed that Senator Chaney would understand that. I am also asked in the supplementary question whether we have taken into account a range of other factors in the course of making an assessment of these matters. The answer to that question is yes. There have been a number of increased costs to the motor vehicle industry which have been debated here for some time. The particular items to which Senator Chaney referred were the sales tax on luxury motor vehicles, the increased sales tax in the last Budget and unleaded petrol. I think we have been through all of that debate before. The decision on unleaded petrol I think is just a consequence of the way that the system of government generally operates in this country. I do not think it was the smartest decision that governments of a variety of political persuasions have made. I think it was a Liberal government which adopted the legislation following a decision of the New South Wales Government.