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Coalition Government Money to Australian Car Manufacturers

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The car industry receives AUD$4.27billion from only three government Initiatives (Productivity Commission, 2014, p9). Many support these funding decisions of the government however many also disagree that one industry should receive such large amounts of funding. This essay will demonstrate that the Coalition government’s decision not to provide monetary support to Australian car manufacturers which resulted in their decision to move manufacturing overseas was justified.

Australia is a capitalist society which private businesses, such as the car industry, aim to make a profit. However, the Australian car industry has endured a combined loss of AUD$1.5billion over a decade (Dowling, 2014, p1). Adam Smith (referred to as ‘the Father of Capitalism) developed a theory of the ‘invisible hands’ of supply and demand which states that the government does not need to interfere in the market as the invisible hands will regulate the economy (Heywood, 2012, p47). This theory thus supports the view that the government should take the approach of the liberal democracy that Australia claims to be and limit government intervention of the car industry and emphasise the free market economy that we are becoming.

In the 21st century Australia is influenced by globalisation. By taking part in the global market it allows countries to specialize in their production of goods and services and give them what is referred to as the comparative advantage. This advantage enables nations to specialize in certain products which then become a major part of their Gross Domestic Produce (GDP). As the Australian car industry only makes up 0.53% of the total GDP it is only logically to conclude that for various reasons Australia is not a country that is able to s...

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...ther $200million in additional funding the car industry. Businesses (specifically the car industry), also played a part with management at an international level taking Australian government handouts whenever offered when they really had little ambition to keep the car manufacturing industry in Australia.

Despite common belief, the moving of the car industry overseas is not necessarily bad for the Australian economy. The car industry cannot survive in Australia in the long term and by addressing this important issue while the economy is strong and can handle the welfare cost ensures that we are prepared for the job losses and can afford to invest to create new jobs instead of waiting for the inevitable collapse of the car industry in the near future where we cannot guarantee a strong economy which will be able to handle the collapse of the Australian car industry.
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