A report released today says a government supported package to prop up Australia's automotive industry is doomed to fail.
The Centre for Independent Studies report says that taxpayer-funded financial assistance represents wasted money.
The Rudd Government announced a 13-year, $3.4 billion investment last November to help the auto industry sector stay viable and go green as part of a $6.2 billion package.
The package also included more than doubling of the Green Car Innovation Fund to $1.3 billion and bringing forward the funds to be spent from 2010.
There has been plenty of criticism for the package.
Report author Dr Oliver Hartwich argued that the November policy makes less sense now than it did on its release.
"The Commonwealth's car plan was built around three policy objectives: to strengthen Australia's industrial base, help the environment, and support jobs," he said.
"None of these arguments holds up to closer scrutiny.
"In fact, all that the Rudd Government's car plan amounts to is an old-fashioned, protectionist industrial policy, neatly hidden behind a giant green smokescreen."
However the government has pointed out that the Green Car Innovation Fund is a co-investment fund which means no taxpayers' money goes to automakers until they provide their investment.
Senator Carr said the $7.7 billion automotive industry was critical to Australia's economic future because it employed over 60,000 Australians.
He also said it was also critical to national research and development, and exports.
"Automotive manufacturing sits at the core the nation's manufacturing effort, because building a modern car involves almost every advanced technology we use, from microchips to light metals," Senator Carr said.
However Dr Hartwich said the $6.2 billion pledged to the Australian car industry would inevitably flow to US parent companies.
"With the global car industry in decline, Holden's US parent General Motors teetering on bankruptcy, and Ford also in trouble, the Rudd Government's strong support to Australia's car industry needs a radical rethink," he said.
"Otherwise, it risks becoming an even more costly engagement for Australian taxpayers."
When General Motors submitted a restructuring plan to the US Treasury, the company included a line saying the car industry in Australia was subject to unique challenges.
Dr Hartwich said this should be a reminder to the Australian Government that the company could pull out of Australia without public assistance.
He suggested Prime Minister Kevin Rudd should discuss the future of Holden with US president Barack Obama on his upcoming trip to Washington.
Visit www.cis.org.au for the full report.
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