EDITORIAL: by Peter WestmoreNews Weekly
SPC Ardmona and Holden: Australian icons disappear
, February 15, 2014
The federal Coalition government’s decision not to contribute $25 million to upgrade the struggling SPC Ardmona factory in Shepparton, Victoria, after its earlier decision not to contribute a requested $150 million to Holden, makes clear that the federal government is not willing to bail out struggling industries, despite the prospect of the loss of thousands of jobs.
At one level, the decisions are understandable. The Abbott government inherited a massive deficit from the Rudd Labor government. Originally, the deficit was estimated to be $18 billion; but the present Treasurer, Joe Hockey, in his mid-year financial statement last December, put the figure at $50 billion.
However, it is clear, that the current government’s decisions regarding SPC Ardmona and Holden have far wider implications than the government’s bottom line.
The announced closure of General Motors Holden (GMH) will have a devastating effect on both business and employment. The immediate impact will be the loss of nearly 3,000 manufacturing jobs in South Australia and Victoria.
The multiplier effect will be many times this, and, according to one study, could cost the country $4 billion in lost production. The fact that GMH was going to close its manufacturing operations anyhow, regardless of government support, shows the danger of Australia’s excessive reliance on decisions made in Detroit as part of the company’s global operations.
South Australian Labor Premier Jay Weatherill implicitly acknowledged this, saying that the SA government would try to find others to take over Holden’s Adelaide plant.
A somewhat similar scenario faces the fruit-processing industry in Australia.
The losses from the closure of SPC Ardmona — if it happens — will not be as heavy. But it would mark the closure of the largest remaining major fruit-processor in Australia and have a devastating effect on the city of Shepparton in northern Victoria. Additionally, it would probably destroy the fruit industry in the area, with crippling effects on hundreds, if not thousands, of farming families.
Farming communities will be the first to suffer if the food manufacturer collapses.
The federal government pointed to the fact that the parent company of SPC Ardmona, Coca Cola Amatil (CCA), is a highly profitable business, with a large U.S. shareholding, and should stand on its own two feet.
It also called on CCA, which bought SPC Ardmona in 2004 for $500 million, to accept responsibility for its Australian workforce and for the wider community which depends on the plant.
There was no indication from CCA that it would accept this responsibility. A statement issued by the company after the government’s announcement said, “CCA had strong investment plans for SPCA which were dependent on the receipt of both federal and Victorian government grants, and had committed a further investment of more than $90 million to support the government contribution.”
It added, “CCA’s alternative plans for SPCA will necessitate a material review of SPCA’s carrying value, and a write-down of its assets, including brands and goodwill, the amount of which will be considered by the Board and announced on February 18 at CCA’s 2013 full-year results presentation.”
Some have speculated that it will sell off the subsidiary, which has made a loss in recent years.
At a time when the media, politicians and economists are calling for Australia to become the food bowl of Asia, the closure of SPC Ardmona is a real wake-up call.
While direct subsidies for struggling business are not the function of government, it is clear that if Australian manufacturing and agricultural industries are to survive, the government needs to adopt a different approach to the flood of imported foods coming into the country.
The federal Agriculture Minister, Barnaby Joyce, whose commitment to the future of primary industry cannot be doubted, has established a taskforce within the Prime Minister’s Department to produce a White Paper on agricultural competitiveness.
Mr Joyce said the goal of the paper would be to generate jobs and impact on farm-gate returns, investment and economic growth in one of Australia’s key export industries.
“The White Paper will be about bringing history, our natural competitive advantage and our future together,” he said.
“We have a unique set of assets in Australia, and proximity to the fastest-growing markets in the world. This paper will be about asset-building and national wealth — it will be an examination without prejudice of Australia’s natural competitive advantage into the future.”
The White Paper will develop recommendations for boosting agriculture’s contribution to economic growth, export and trade, innovation and productivity by building capacity and enhancing the profitability of the sector.
Some of Barnaby Joyce’s colleagues have opposed the idea of supporting embattled Queensland farmers facing the drought crisis. So it will be a battle to get the government to commit to any support for Australian agriculture — or industry.
But if Australia is to be more than a quarry and a tourist destination, this is the great challenge which must be addressed.
Peter Westmore is national president of the National Civic Council.