Friday, January 16, 2015

Detroit motor show surprise: Holden designs Buick luxury car for China and potentially Australia

The ALP started the folly of Australia building its own cars -- at great cost to the car buyer. Subsequent Labor governments trimmed the protections back but Tony Abbott finally abolished them.  So the folly will end soon.  But the prophets of doom did not reckon on Australians having some genuinely marketable skills.  So Australia will still have a presence in the industry

THE next generation Holden Caprice luxury sedan — best known for its popularity on hire car ranks at airports — is likely to come from China when Holden shuts its Adelaide factory in late 2017.

General Motors unveiled a Buick luxury sedan in Detroit overnight that was designed and built in Holden’s styling studios in Port Melbourne.

Although it was a concept car designed for this week’s Detroit motor show, the showroom version is expected to be made in China in the next two years.

Of the 1.2 million Buicks sold globally last year, 920,000 were made in China and it is the second biggest General Motors brand globally.

The car was unveiled by former Holden boss Mark Reuss.

The Buick Avenir — French for “the future” — was a joint design effort between Holden’s styling studios in Port Melbourne and General Motors’ design centres in Detroit.

And Holden built the car by hand before it was airfreighted to the US just before Christmas.

“Australia is really good at some of the bigger luxury cars,” said Mr Reuss.

“The car was built in Australia at Holden, in their shops, and the interior and the exterior was a joint effort between (Australian and US) studios.”

For now, though, the Buick Avenir is just motor show tease. The company wouldn’t say what type of engine is under “the hood” but Mr Reuss did confirm it was rear-wheel-drive, like the current Holden Caprice luxury sedan.

However, Holden insiders have told News Corp Australia that the Buick Avenir will likely be made in China and sold globally.

It may also come to Australia as the eventual replacement for the Holden Caprice, once the Elizabeth car factory falls silent in late 2017.

The Buick Avenir will not reverse GM’s decision to close the Holden factory but it does underline Australia’s transformation into a design and engineering hub, rather than a manufacturing hub, for the automotive industry.


Abbott government to consider even more spending cuts?

The Abbott government will consider making even more spending cuts in coming months as it deals with the dramatic fall in global oil and gas prices, new Assistant Treasurer Josh Frydenberg says.  But economists say it may not be necessary.

One month ago the federal government's mid-year budget update revealed a budget blowout of $10.6 billion, thanks to huge falls in the price of iron ore and coal.

At the time of the announcement, Treasurer Joe Hockey said the government did not plan to make savage spending cuts in response to the blowout because the cuts could exacerbate Australia's already weak economy and rising unemployment.

He said he would rather prioritise economic growth over a return to surplus.

But in the weeks since then, the decline in the prices of iron ore and coal have been joined by huge and unexpected falls in global oil and gas prices.

The price of a barrel of oil has fallen from $US93 ($114) in September to just $US45.70 this week, while liquefied natural gas prices have dropped to $US9.70 for 1 million BTU, half the peak reached a year ago.

The oil price declines have helped petrol prices touch a six-year low, in a boon for consumers, but they could also hit Commonwealth government revenues by billions of dollars via lower company tax receipts and royalties.

Now Mr Frydenberg has warned that the government will have to take these new price falls into account as it prepares its next budget – which is due in four months – and that means more spending cuts will have to be considered.

"Australia focuses its exports on resources and LNG is one of those resources … [we've seen a] fall in the iron ore price by around 50 per cent from the beginning of last year, we've seen the oil price fall by a similar figure, we've also seen downward pressure on coal and wheat," Mr Frydenberg said on Wednesday.

"The numbers will be reviewed when it comes round to the next budget in May but there's no doubt this is putting pressure on government revenues.

"[This] underlines the reason why we have to bring spending under control … we'll announce any further changes in the context of the next budget but we're very conscious we have a structural deficit and we need to bring spending under control."

But HSBC chief economist Paul Bloxham says the fall in global oil prices ought to provide a net benefit for the economy, so even more spending cuts may not be necessary.

He says lower oil prices will boost economic growth, and that in turn will encourage employment growth and boost company tax receipts, and that these should override any declines in mining royalties associated with lower LNG prices.

"The lower oil price is, on net, a positive story for Australia and for the government," Mr Bloxham told Fairfax Media.

"The lower petrol prices, and lower energy costs for Australian households and businesses, should support more growth in household spending and business investment. Those things are likely to translate into more tax revenue for the government overall.

"You've got to be careful not to look at this as some partial analysis that just looks at LNG, you've got to consider the broader effects on the overall economy."

Mr Hockey said in December that the Abbott government would allow Commonwealth revenues to take a hit to absorb the fall in the terms of trade, rather than cut government spending too deeply.

"Previous governments have chosen, in these sorts of circumstances, to spend more money, we haven't," the Treasurer said.

"What we have chosen  to do is to allow the revenue to take the hit but continue with our path of fixing up spending, having structural saves that over the medium-term deliver a sustainable surplus and a believable surplus


Unemployment rate drops to 6.1%, 37,000 jobs created

Australia's unemployment rate dropped to 6.1 per cent in December from a revised 6.2 per cent in November, after the creation of more than 37,000 jobs during the month.

The Australian Bureau of Statistics said on Thursday that the number of people employed rose by 37,400 to 11.67 million in December, against market expectations of 5,000 newly employed.

The participation rate climbed from 64.7 per cent of the population to 64.8 per cent.

The figures were much better than expected, and the Australian dollar spiked about half a US cent to around US81.90 cents.

The increase in employment was driven by increased full-time employment for both females - up 23,300 - and males, up 18,200," the ABS said.

"The increase in full-time employment was marginally offset by a fall in part-time employment, down 4,100," it said.

Improvement was seen across most state and territories, with the unemployment rate down 0.1 percentage point to 5.9 per cent in New South Wales; down 0.3 percentage points to 6.5 per cent in Victoria; and 0.7 percentage points to 6.1 per cent in Queensland. However, in mining-intensive Western Australia, the unemployment rate surged 0.7 percentage points to 6 per cent.

 The latest data is likely to influence Reserve Bank of Australia thinking on monetary policy this year, although erratic figures last year undermined market faith in the ABS's labour force series.

"Again, based on errors from last year the data may not be as significant as it reflects," Quay Equities in note.  "However, on the data we do have it is a good yet volatile number, [which] probably gives the RBA the scope to delay any short term interest rate cuts," Quay said.

ANZ said in a note before the data release, however, that weaker growth and lower inflation in 2015 would "provide the RBA with a reason and the scope to take the cash rate down 50 basis points to 2 per cent over the first half of the year".

"The case for rate cuts has been building over the past two months, with weaker-than-expected GDP numbers released in early December and ongoing softness in non-mining activity outside of residential construction," said chief economist Warren Hogan.

"The big fall in global energy prices means lower than previously expected inflation in 2015 provides the scope for lower interest rates," he said.


Political hot potato: WA government rejects calls for Soviet-style regulator to be abolished

A recent photo of Tovarich Barnett

PICTURE the scene: tonnes of produce sits rotting in fields as government inspectors stop and search vehicles for contraband vegetables. This isn’t Communist Russia — this is Western Australia in 2015.

A WA farmer is giving away 200 tonnes of ‘illegal’ spuds as a public protest against a bizarre, Soviet-style Ministry of Potatoes, which imposes strict controls on the production and distribution of the vegetable.

Like in Soviet Russia, the WA Government wants to control supply to keep prices steady.  In WA, the powerful Potato Marketing Corporation controls who can grow potatoes, how many hectares can be planted and the varieties produced.

The PMC, established under the Marketing of Potatoes Act 1946, also has the power to search vehicles suspected of carrying more than 50kg of potatoes, demand the details of the driver and impound any ‘illegal’ potatoes.

Tony Galati, who has been battling the regulator for the last 20 years, is facing the threat of prosecution for growing about 10 per cent more than his allotted potato quota, The Australian revealed this week.

Mr Galati began giving away the roughly 50,000 4kg bags at his Spudshed stores today. The potatoes would be worth about $600,000 at most supermarkets, where potatoes usually sell for $3 a kilo.

The Barnett government has refused to abolish the outdated PMC for at least two years until the next election, despite a report from its own Economic Regulation Authority in favour of the move, and evidence that the bureaucracy pushes up costs and stifles productivity.

The Labor opposition is leading the growing calls for the PMC to be scrapped. Opposition spokesman Ben Wyatt said the heavy regulation of potatoes in WA was “well past its use by date” and stymied productivity and choice for consumers.

The PMC is the last regulator of its kind in Australia, and widely considered an anachronism in a free market. It sets the price growers receive and acts as a monopoly wholesaler.  Around 80 farms pay licence fees under the system, and growers fear many could go out of business if the industry were deregulated.

Simon Breheny, director of the Legal Rights Project at free-market think-tank the Institute of Public Affairs, said the PMC was a Soviet-style form of industry control designed to protect potato farmers at massive cost to consumers.

“The story of the WA potato farmer giving away tonnes of produce is reminiscent of crops left to rot in Soviet farming collectives,” he said. “It’s an extraordinary situation for potato farmers to be in.”

Bodies like the PMC were once common in a range of primary industries including milk, eggs and wheat — milk pricing and supply were regulated by state and federal governments until the late ‘90s, for example.

Mr Breheny said history showed removing price controls resulted in lower costs for consumers. “Competition means some producers will survive and others won’t, but that is the reality of a free market. At the end of the day the outcomes for consumers are always better with greater competition.”

The WA Potato Growers Association is in favour of keeping the PMC, with chief executive Jim Turley calling for Mr Galati to be prosecuted for overplanting.  “We have a regulated system of 1000 tonnes a week. If all of a sudden someone wants to give away 200 tonnes, that is going to affect the price of potatoes,” he told The Australian.


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