Activity 12(f)

1. This is because assistance effectively raises the relative price of imported products that compete against products in the protected industry. As a consequence, the subsidies effectively operate like tariffs to protect Australian firms from the effects of imported competition.

2. This can occur if the assistance is given to businesses that are involved in the production of goods or services that confer positive externalities to the economy. For example, assistance to businesses engaging in training and education, or those creating clean energy solutions, helps to encourage greater production of these goods/services, which has spillover benefits for other economic agents.

3. This is because the industry became increasingly uncompetitive and more reliant on government support/protection. It felt that the economy would be better off in the long run if the uncompetitive firms ceased operations and Australian users  (consumers) sourced their supplies/products from any remaining (efficient) domestic firms or more competitive foreign suppliers.  Ultimately, the reduction in industry assistance was designed to improve the overall efficiency in the allocation of Australian resources, with resources moving to those activities where Australia had a comparative advantage and away from those activities with a comparative advantage resided in other countries.

4. Some of the resources will become idle (e.g. unemployed) for a variable period of time, while other resources will move to other sectors of the economy, particularly those which are relatively efficient or have a comparative advantage. For example, the closure of Ford and Holden in Australia meant that some workers will have offered their labour services in other markets or industries (perhaps at a lower price/wage), such as in hospitality or tourism or some other non-automotive manufacturing business. 

5. Ultimately, the closure of these firms will have meant that government funds previously used to support the industry can be used to fund other government activities (e.g. health or education) that support Australian living standards. In addition, material living standards are further enhanced by the lower cost of motor vehicles that will now be imported free of tariffs.  [These types of benefits are expected to outweigh the transitional costs that impact on those economic agents most closely connected to the motor vehicle industry].

6. This is because their existence continues to raise costs for Australian businesses and consumers and erodes export competitiveness