Coalition split on future for car subsidies

Two Liberal frontbenchers are urging the Coalition to rethink its plan to reduce federal subsidies worth more than $3 billion to Australia's car manufacturing industry.

But other opposition MPs are deeply uncomfortable with that, arguing the industry must be weaned off an addiction to taxpayer handouts.

Both sides of politics like to spruik their free market credentials, but both the Coalition and Labor say the automotive industry deserves subsidies because it is a repository of technical expertise and skilled jobs.

The Opposition has taken a slightly tougher line than Labor, proposing to cut $500 million from taxpayer assistance.

But Opposition resources spokesman Ian Macfarlane and its industry spokeswoman Sophie Mirabella are about to recommend that the Coalition review that proposal.

Mr Macfarlane says there are good reasons to help car makers.

"For those economic rationalists I'd urge them to consider the car industry is our most sophisticated manufacturing industry," Mr Macfarlane said.

"It is the basis of 50,000 jobs in Australia." The industry has received government money for decades and several Coalition MPs argue taxpayers should not continue to prop up the industry if it cannot produce cars that Australians want to buy.

Liberal backbencher Mal Washer describes the handouts as "bloody stupid" and former Liberal Premier of Victoria Jeff Kennett says car companies have to face market reality.

"Each of those manufacturers would desperately love to be able to design and produce a car that excites the Australian public but they haven't been able to do it," Mr Kennett said.

"And you've got to ask yourself the question whether that is the responsibility of the Australian taxpayer to pay money for them to become more innovative and more creative, or is that the basic responsibility of the industry itself? And I've got to say to you, I think it's the industry." Mr Macfarlane says he is advocating targeted assistance, not subsidies.

"If government is to be involved then it needs to be involved in a very strategic approach where taxpayers' dollars are reaping a return to the country," he said.

The Government is keen to exploit the internal debate; employment minister Bill Shorten says the Coalition must clarify its position.

"They can't on the one hand say that they're going to cut the money if they are elected which we're using to fund the industry, and then say 'but we really want to fund the industry'," Mr Shorten said.

The Federal Chamber of Automotive Industries says every nation that makes cars supports the industry through tariffs or taxpayer assistance.

The chamber's chief executive, Ian Chalmers, seems confident the Coalition will not abandon subsidies.

"There's a difference between being in opposition, where politicians have the time to reflect and to muse on possible policy options, and the tough, grinding, difficult daily business of being in government and running the nation," Mr Chalmers said.

"At the end of the day I'm quite certain that whichever party is in government, the right decisions for the nation will be made." But he says the Government's carbon tax will put an additional burden on car makers.

"It just happens that - and it's entirely coincidental, I think - the amount of money that is being discussed with the Australian Government in terms of further co-investment pretty closely matches the amount of money likely to be taken from the industry in the new carbon tax arrangements," he said.

Mr Chalmers says Labor must keep that in mind when it considers any industry assistance.

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