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SILICON SILIC CHIP www.siliconchip.com.au Publisher & Editor-in-Chief Leo Simpson, B.Bus., FAICD Production Manager Greg Swain, B.Sc. (Hons.) Technical Editor John Clarke, B.E.(Elec.) Technical Staff Ross Tester Jim Rowe, B.A., B.Sc Nicholas Vinen Photography Ross Tester Reader Services Ann Morris Advertising Enquiries Glyn Smith Phone (02) 9939 3295 Mobile 0431 792 293 glyn<at>siliconchip.com.au Regular Contributors Brendan Akhurst Rodney Champness, VK3UG Kevin Poulter Stan Swan Dave Thompson SILICON CHIP is published 12 times a year by Silicon Chip Publications Pty Ltd. ACN 003 205 490. ABN 49 003 205 490. All material is copyright ©. No part of this publication may be reproduced without the written consent of the publisher. Printing: Hannanprint, Noble Park, Victoria. Distribution: Network Distribution Company. Subscription rates: $105.00 per year in Australia. For overseas rates, see our website or the subscriptions page in this issue. Editorial office: Unit 1, 234 Harbord Rd, Brookvale, NSW 2100. Postal address: PO Box 139, Collaroy Beach, NSW 2097. Phone (02) 9939 3295. Fax (02) 9939 2648. E-mail: silicon<at>siliconchip.com.au ISSN 1030-2662 Recommended and maximum price only. 2  Silicon Chip Publisher’s Letter Should Australia continue to subsidise the car industry? There is considerable debate at the moment about whether the level of subsidies granted to the Australian car industry should be continued by the Government. As with many debates about government action, it is not a simple question and whichever way it is finally resolved will have major ramifications for the tens of thousands of people either directly or indirectly employed by the car industry and for the whole Australian economy. Much of the debate hinges around high labour costs in Australia, apparently low productivity and falling sales of locally manufactured cars. The real problem is the last item, not enough sales. While the cars manufactured by Ford, Holden and Toyota are undoubtedly well-designed and competitive with equivalent cars made overseas, there simply are not enough of them being sold to make production viable. But what is the real reason not enough Australian-manufactured cars are being sold? Virtually zero tariffs. In the past, Australian cars had considerable protection by dint of the high tariffs levied on all imported cars. Over the years, these have been whittled away by successive governments and reduced to zero for cars sourced from countries with which we have free trade agreements, as in the case of cars sourced from Thailand, for example. That is why we now have such a wide range of motor vehicles. Years ago, the choice was much more limited. Make no mistake, tariffs are very beneficial for a country’s employment, as they make it difficult for imported products to compete with those produced locally. But the downside of high tariff protection is that it makes all products (ie, those protected by tariffs) more expensive. So whether or not a person decides to buy a locally made or equivalent imported product, the cost will always be higher than if there were no tariffs at all. As well as that, as with the car industry, with low tariff protection, the range of products available is bound to be dramatically broader. So where is this headed? Will the Government give in to all the special pleading and carry on the subsidies for years to come as the sales of Australian cars continue to decline? Or will they bite the bullet and say enough: no more subsidies? I suggest that we can look to history for the best guide to what the decision should be. In 1973, the Whitlam Labour Government reduced all import tariffs by 25%. By any measure, it was a precipitate decision and the almost immediate result was that a large portion of the Australian electronics industry was wiped out. Probably more than 100,000 people lost their jobs in the years immediately following. Many people would have regarded it as a complete disaster. But looking at it with 40 years of hindsight, it was a brilliant decision, and I make that statement as one who had worked in the electronics industry. Up to that time, imported electronic appliances such as TV sets, stereo systems, radios and other items were virtually unavailable or very expensive. Then came the flood, mostly from Japan, and prices of TVs and other consumer electronic appliances dropped overnight. They have been dropping ever since. Can anyone imagine Australia ever producing the huge range of electronic equipment that we now enjoy, behind a 25% tariff barrier? Clearly that is preposterous. With a population of only 23 million people, how could an Australian electronics industry ever hope to compete with all that is made everywhere else? Australia still has an electronics industry but as in most other western countries, it is confined to specialised or niche products. Personally, I regret that we will lose much of the large skill base and all the employment that pertains to the car industry but I think it is inevitable, whether subsidies are maintained or not. In the long term though, Australia will be better off. Leo Simpson siliconchip.com.au