Holden closure confirmed; Has Australia’s housing bubble played a role?

December 11, 2013 admin Australian Economy, Australian Housing 35

Holden managing director Mike Devereux has today officially confirmed the closure of Holden’s manufacturing facilities in Australia. The company has decided to cease manufacturing operations at the end of 2017.

Today’s announcement puts at grave risk Australia’s entire automotive manufacturing industry as land man standing, Toyota and the dependant component industry is forced to evaluate if it can survive with lower economies of scale. Toyota is expected to announce a decision on its Altona plant early next year.

Yesterday, I explained the persistently high Australian dollar, caused by a bad bout of Dutch Disease was one driver of many for the decision to pull out of Australia. Australia’s automotive assembly plants need to produce more cars than consumed locally to remain at a competitive scale, but the dollar makes our exported goods expensive on an international market while reducing the cost of imported cars.

But, it wasn’t the only. As Alan Kohler hits on the head today, The price of land is [also] hurting Australia.

Australian’s demand high wages as the cost of living is un-sustainably high in Australia, namely the cost of put a roof over one’s head. Kohler writes :

The high price of land in Australia is one of the reasons businesses like Holden and Qantas are uncompetitive and the combination of several recent developments is making the situation much worse.

Australian house prices are already among the highest in the world, both in absolute terms and relative to income, and are now starting to rise rapidly again, especially in Sydney.

On many metrics Australia has some of the most overpriced housing in the developed world. Abnormally high housing costs is slowly killing Australia.

» Holden to stop Australian manufacturing in 2017 – The Australian Financial Review, 11th December 2013.

» The price of land is hurting Australia – Business Spectator, 11th December 2013.




35 Comments

  1. The corrupt government/real estate/banking industry conspiracy with voter backing will only continue to lead Australia further into economic oblivion.
    SPREAD THE WORD-DONT BUY NOW!!

  2. I know a LOT of people working at the Holden factory. HEAPS of them cheered for joy when they were told they are getting shut down. A LOT of them are getting 6 figure payouts paid for by the government and a lot of them have had the king of job security and pay we can only DREAM of for decades.

    Some of the people there just do QC and checks. Some just push a button ALL day. Not a single one of them shouted or objected when they were told the plants shutting down. They all KNOW they had it WAY too good for WAY too long. It was a government supported gravy train.

    I know SO many people who’s goal in life was to just get a job down at the factory becuase its so easy and the pay is HUGE for what they do.

  3. I know a LOT of people working at the Holden factory. HEAPS of them cheered for joy when they were told they are getting shut down. A LOT of them are getting 6 figure payouts paid for by the government and a lot of them have had the kind of job security and pay we can only DREAM of for decades.

    Some of the people there just do QC and checks. Some just push a button ALL day. Not a single one of them shouted or objected when they were told the plants shutting down. They all KNOW they had it WAY too good for WAY too long. It was a government supported gravy train.

    I know SO many people who’s goal in life was to just get a job down at the factory because its so easy and the pay is HUGE for what they do.

    I know technicians and engineers who simply went to work, surfed the net all day and had bbqs then knocked off at 4.

    It was fkn STUPID.

    Meanwhile in the Toyota plant they are innovating and building smarter and cheaper.

    Just like a rich kid Holden suffered the consequences of a mom and dad who just gave it all the money it could want then at the end of the day when he realized he cant get any more hand outs instead of putting back in and reinvesting he just up’s and leaves. I saw SCREW HOLDEN. You kept us back for too long already.

    Maybe now those grants can be used for hyper sonic scram jet transportation research at Brisbane university. Or super efficient solar cell research. Or one of a MILLION other ideas that will be the NEXT wage of the future that the world has to rely on us to build.

  4. Grace Collier of the Australian says the “average [Holden] production-line worker will walk away with a redundancy package of between $300k-500k.”

    I guess the real crisis will be among employees of the component industry. Without a planned shutdown, the component makers are likely to go belly up, call in the administrators and employees are likely to lose any entitlements they are owed.

    And the component makers employ many more people than Holden, Ford and Toyota.

  5. If nothing else this makes us realise we need a better model for unions here in Australia. There’s everything right with protecting workers, but when it ends up in the situation where workers have no reason to work hard then we have failed.

    Germany is heavily unionised, so perhaps we could learn something from their model.

  7. What pisses me off is it’s not only the automotive industry, and not only manufacturing – it’s everything in Australia. We are too expensive and progressively shutting down.

    The Holden announcement drowned out Kellogg’s announcement they are shutting up shop in Australia with the loss of 100 jobs. http://www.abc.net.au/news/2013-12-12/kelloggs-pulling-out-of-central-coast/5153198

    But have a thought of all the small businesses, retailers etc – they don’t get a mention, or a bailout/support package.

    Why should the government be reactive towards an assistive package for automotive, when they should be focusing on the root cause of these problems – why are costs/wages so high? – so housing costs, Australian dollar, red/green tape, our broken taxation system, speculation.

    Fix the structural problems and then we might have a bit of a fighting chance, without wasting bucket loads on assistance to bailout everyone.

    That said, I hear noise on HotCopper that the government is looking at abolishing Negative Gearing! Getting rid of NG, 50% capital gains discounts, SMSF leverage property laws, and get house prices down to historic trend levels fast would be a good start. I don’t know why the Abbott government is looking at NG, is it genuine concern our housing bubble is killing Australia, or do they need to balance the budget.

    When we close down industry, we will never get it back.

  8. If housing costs were like the good old days (i.e. when baby boomers bought their houses)the average house would be 3 times the average wage.

    A person earning $40,000 a year could survive comfortably and due to the lower wages companies would be more competitive, there would be incentive to manufacture in this country, utilities would be cheaper the list goes on….

    High house prices only benefit the banksters!!

    We have dug ourselves into a huge hole and even if the Govt scraps NG, CGT 50% discounts, etc we need a deep recession to address all the imbalances in this economy and bring pricing and wages back to normality.

    Easy solution: Bankrupt the banks, nationalise the financial sector and start again as it it them and the govt that have got us into this mess.

  9. http://au.pfinance.yahoo.com/our-experts/michael-yardney/article/-/20308155/whos-right-the-property-boomers-or-the-bubble-busters/

    An article telling people to ignore sites like this one and people who think houses are too expensive.

    I hope you find this as amusing as I did… it ends with a little blurb about the author… whose business is solely involved with property, yet is completely unbiased. Like those unbiased cosmetic surgeons and psychics.

    “Michael Yardney is a director of Metropole Property Strategists who create wealth for their clients through independent, unbiased property advice and advocacy. He is best-selling author, one of Australia’s leading experts in wealth creation through property and writes the Property Update blog. Subscribe today and you’ll receive a free video training – The Golden Rules of Property Investment.”

    If you ask me, the golden rules of property training is right here.

  12. @Jj – top link! Sounds like the Accountant has done thorough research and knows exactly what he is taking about.

    “As we got more into the conversation I discovered he was concerned that the ongoing economic troubles overseas, including problems in China, were yet to have their full impact on Australia. He quoted many sources including a popular book by US economist Harry Dent that suggests the economies of a number of countries were going to implode.

    He was also concerned that credit levels in Australia were too high, our economy would falter, unemployment would rise and the day of reckoning was ahead.”

  13. @jj

    just quickly went through half dozen articles that Michael guy wrote – he really has an extraordinary ability to bullshxt people. P.S. some of the articles are quite amusing.

  15. What I find funny is that there is kicking and screaming about losing 4000 jobs by 2017 from Holden. How they need a ton of support and payouts and extra financial assistance….

    All the while jobs in mining construction are dropping 91% over the next 3 years which is around 80,000 jobs…

    Why has no one pointed out what a tiny tiny blip on the radar Holden is compared to the money that is about to be pulled from the greater economy. I mean, how can 4000 people losing jobs make headlines while 80,000 people losing jobs get nothing? Holden will pull out 0.1% of the economy. Mining which has higher wages will pull out 1-2%.

    Why keep trying to help out a totally fked up tiny non-essential sector. It’s fkn rediculious. Those workers were extremely well paid for what they did.

    Pretty sure Australia is about to hit a brick wall with rates at zero and no more jobs I’d like to see house prices keep rising from just mom, dad and chinese investors buying.

    Wish the Australian government would do something right for a change and quit selling off our land.

  16. Yep Realitybites @15,

    To your wish…

    Wish the Australian government would do something right for a change and quit selling off our land.

    Fat chance of that, if this is stopped (crrraaaassssshhhhhhhh)

    The biggest Chinese investors have plenty of US T Bonds

    They are buying up all round the world before they become worthless

    Whats going on here.

    http://www.youtube.com/watch?v=BfYazDsFMPU&feature=youtu.be

    prepper

  18. Why the hell are the retailers charging so much for all their goods? Little point in working for a living if your pay is inadequate and you can’t buy much?

  19. Retailers have a triple whammy. High rents, high wages, high overheads (electricity, red tape etc)

  20. Australian business is now dominated by corporate monopolies who are destroying small business and employment. THERE IS NO SUCH THING AS A JOBLESS RECOVERY.
    These parasitic entities must realise that when they kill their host they too will disappear.

  21. Aha, so how do we correct this vicious circle? Start by cutting wages, perhaps sneak it in and have a wage freeze?
    So this now errodes my affordability and standard of living, ok I’ll have it for a couple of years, but I’m afraid no one else is interested, petrol prices will rise yet, so will my rent, my groceries bill, power bill, water bill, phone bill, insurance, car rego, you get the idea!
    A lotto jingle springs to mind “Who wants to be a millionare” EVERYBODY! at least here in Australia it seems!

  22. So basically the government just made it so banks can’t claim the assets in a super fun only the asset itself. Isn’t that just going to encourage spending on housing by SMSF like crazy? I know if I had a heap of money and the government guaranteed I could do anything with it with no consequences and minimal tax I would leverage the hell out of my accounts. Why would I play it safe. Ever.

    Farrrrk the younger generation is getting totally ass raped by the government. Why aren’t they standing up for themselves?

    This is why I don’t own in Australia. Way too much government intervention every step of the way. One year you might make 10% the next year half your assets get frozen or you get moved into a special tax bracket. Horrible bunch of paper pushers that only make laws to keep them selves in power and rich.

  24. Forgive me for asking dumb questions here, but isn’t your superannuation supposed to be your retirement fund, so that you don’t need to go the government with a cup in your hand asking for the pension?

    I understand that people can spend their super however they want, but happens once they pour all their super funds into property, does this mean the government will still be paying these SMSF people (the ones who pour their money in property), a pension?

    No wonder Australia is going broke.

  25. @Master Yoda, the idea is that if you pour your super into your house now you will pay it off sooner and will ultimately pay less in interest. Because house prices only ever go up it also means your money is working harder. To give it even a further bump in value, house prices will go up even more because lots of people will pump their super into their mortgages, meaning they pay them off and can borrow more money to get an even better house, therefore increasing their wealth even further.

    Nothing could possibly go wrong.

  26. Master Yoda, it also means that even if you do have to eventually to cap-in-hand to the government for a pension, that will be a government in the future. Today’s government doesn’t have to worry about it. Their immediate job is to keep the housing bubble constantly inflating.

  27. Its interesting reading all about Holden. If people are going to complain about the closure I wonder if they actually own a Australian Built car? I own an Australian Built Toyota. But at least it employed Australians.
    I wonder how many smaller businesses will close or remove employees if they supply to Holden and Toyota. Will Toyota Leave because the local suppliers will not be able to supply just to Toyota. Toyota might just have a smart plan to stay here. But how many suppliers could afford to change from supplying to 2 companies to 1.
    I dislike the new ad which says we are building the best car for Australia (Holden) If in fact it was the best car they would not be leaving.
    But, I have made a blog and a webpage offering information to Holden workers and others who are in trouble of losing a job etc.
    I really wonder if the Liberals have lived in the affected areas like Elizabeth to understand the problems they have created.

  28. @ David “I really wonder if the Liberals have lived in the affected areas like Elizabeth to understand the problems they have created.”

    Your kidding right? Holden existed off the back of the Tax payer: Therefore it is a socialist idea NOT a conservative model.

    How about this for an idea for what the whinning Holden workers can do with their pay outs! They all complain petrol is too expensive: They should use their pay out money to buy/start service stations.

    Or; put that money into buying the facility and building ‘our’ own Australian car

    But this is a dream, it will never happen: These guys/gals are labourers not entrepreneurs/capitalists. And that’s ok, not everyone can be Richard Branson. It just grates my gears that they have NO issue with DEMANDING support from the government.

    Well, here’s some breaking news: The governments are in dire straights financially: I highly doubt that state (SA & QLD especially) and federal government’s can ever pull out of the debt spiral they are in: That means: Bankruptcy will occur:

    I have no sympathy for anyone at Holden: I have family that work there, and they will be more than amply ‘compensated’ for loosing their job.

    Does anyone spare a thought for the millions of low paid Australian’s, self funded retirees and business owners that have paid the billions of dollars to keep the auto industry alive? No.

    What makes my blood boil is the fact that these payouts will end up being spent on new cars, boats, holidays, chinese junk and most likely over valued property. It’s a laugh: Normal Aussies can’t access their super, so why should these payouts be any different: They should be quarantined until full time employment has been gained, and then held for six months: Maybe that way, unlike Mitsubishi workers, they would find jobs.

    I apologize if my tone offends anyone: But I don’t apologize for the content. The MSM are gutless on this one, and so are both of SA’s political leaders: Neither has stood tall and shown leadership: Neither have declared SA will move on to bigger and better things: No, they both sook that we are loosing jobs to poorly paid Japanese, Thailandese and Korean counterparts….. It’s time we got some leaders with grit to tell it how it is: But I fear it is way to late.

  29. So the latests news is house prices rose 10% in the capitals for 2013, yet wages went up only 3%. I guess the state and federal governments are relying on this to make up for their massive shortfalls.

    Interesting way to run a country!

  30. @ chockolate

    Yep, exactly: The SA government is now a significant property developer:

    Clipsal/bowden site.
    Magill site
    Footy Park
    RAH property
    All the schools they closed
    Cheltnam race course
    etc. etc.

    The government believes property WILL be the goose that lays golden eggs.

  33. So Glenn Stevens and the “untouchables” at the RBA with the constant high interest policy which has kept the dollar overvalue to please the Banks has managed to destroy Holden.
    Interestingly , I see absolutely NO criticism levelled at the RBA. The over valued dollar might be good for Banks borrowing overseas but it certainly is not good for other sectors of the economy

  34. How hypocritical it is the car industry received billions in subsidies and yet other industries at best got very little and worse nothing. What is really bad is the car industry enjoyed the best salaries and conditions all payed for by the taxpayer and on top of this the corrupt government is giving the industry many more millions to “ease their pain”. How ridiculous!! Personally I blame the voter for Australia’s economic slide for voting those who best looked out for and increased their financial situation e.g. high land and house prices, instead of what is best for everyone meaning Australia. Hence the ‘correction’ not recession we are having now which will get worse

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