By on April 8, 2013

After having received  more than $2 billion in subsidies from, the Australian government in the past 12 years, GM’s down-under Holden unit announced that it will lay off another 500 workers in response to falling demand and the high Australian dollar, Australia’s ABC News reports.

Cheaper imports draw customers away from Holden’s locally made Cruze and Commodore models, the company says.

Holden’s managing director, Mike Devereux, lays the blame for much of the Australian dollar’s appreciation at the feet of nations, such as the US and Japan, that have been deliberately devaluing their currencies. “Importantly, the currency plays being made by other countries mean that were are not competing on a level playing field, not even in our own backyard,” Devereux said.

A high Australian dollar makes imports cheaper and exports unattractive. When quizzed about the future survival of Holden’s Australian production and design operations, Devereux said the company was committed to staying in Australia but could offer no guarantees.

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76 Comments on “Holden Fires 500 Workers in Australia, Future Shaky...”


  • avatar
    RobertRyan

    “Mike Devereux, lays the blame for much of the Australian dollar’s appreciation at the feet of nations, such as the US and Japan, that have been deliberately devaluing their currencies.”

    A major problem in Australia affecting a wide range of industries.Looks like Overseas investors want to get a good return on their investment, but are nor worried about destroying the Australian economy in the process. As Devereux said the US and Japan are “devaluing their currencies” or “quantitative easing” another way is to say “printing money” to take down their national debts i.e like Weimar Germany in the middle of the Great Depression.

  • avatar
    Ron B.

    Australia’s high dollar has more to do with Chinese and Russian investors buying land here than anything the japanese do with their Currency , or that America is printing money in the face of historical facts that to do so is always foolish.
    It has also a lot to do with the fact that Holden has to pay the lowliest worker $29 hour base rate and it goes up from there.
    The Australian dollar may start to droop now that it has been tied to the chinese Currency ,where most of Australia’s mist-like wealth comes from.
    I mentioned a month or so back that Gm has been begging money from the Australian tax payer for ever,from 1927 in fact when GM took over the Holden manufacturing company to build Chevys and other GM cars.
    it comes as no big surprise that they are going to close down because history has shown us the Mitsubishi/chrysler example in Australia which played out exactly the same.

    • 0 avatar
      RobertRyan

      @Ron.B
      Exactly and they have no love for Australia. The Printing of money is extremely foolish, today I heard that Industrial production/employment in the US has been disappointing. You need more effective policies to get the US/Japan out of the hole they are in the moment. Not just printing money.

    • 0 avatar
      RobertRyan

      @Ron B.
      It would in the Interests of the Chinese and Russian governments to help destabilize countries like Australia, by allowing the much simpler and more acceptable methods of currency manipulation and investment strategies rather than overt or covert “shenanigans”. The Two countries have similar long term political and economic strategies.

    • 0 avatar
      ect

      Tempting though it is to blame evil foreigners for one’s problems, it just isn’t so. Australia exports resources and other commodities, and commodity prices have risen sharply since the mid-90′s. This extra income drives up the value of the AUD. Canada, whose exports are also dominated by commodities, has had a similar experience.

      When currency values rise sharply, manufacturing will be disadvantaged. When the CAD went from USD 0.63 to parity within only a few years, the manufacturing sector got slammed. No exporting manufacturer can adjust for a 50% increase in costs that quickly, if at all. Neither can a company competing against imported products.

      • 0 avatar
        RobertRyan

        Yes the High Dollar/exchange rate has been a very negative factor but foreign speculators have been pouring money into Australia because of our relative high interest rates.

      • 0 avatar
        outback_ute

        As recently as 2006 the AUD was fairly steady around the 0.75 mark, and had been there for 15 years apart from a dip in the early ’00s.

        • 0 avatar
          ect

          CAD traded in the range of USD 63-70 cents from 1995-2003.

          Commodity proces, which declined throughout the 80′s and 90′s, turned with a vengeance starting on 2002.

          CAD, AUD and NZD started to rise sharply in 2003. Commodities (especially oil) retreated for a bit in 2007-08, and all 3 currencies fell in value. Commodities recovered in 2008, and all 3 currencies went up again.

          That’s reality. It’s not foreign speculation, it’s not central bank policies, its not manipulation. It’s terms of trade, pure and simple.

          Canada, Australia and New Zealand are all developed economies whose exports are dominated by commodities, whether resource or agricultural. This simple fact determines currency rates and national prosperity, and complicates life for manufacturers and service providers, because they cannot control their cost structure relative to foreign competitors.

          • 0 avatar
            RobertRyan

            @ect,
            It is not terms of trade. Foreign Speculation and investment not the Mining sector per se determimes the value of the dollar.

  • avatar
    olddavid

    You’re comparing the U.S with Weimar Germany? That will undoubtedly be preaching to the choir for a segment of our fellow gearheads. And one particular correspondent. Start with a negative G.M. title heading, add a swipe at organized labor for failing to show proper deference to their corporate betters, stir and sit back. Voila. Next, the new TTAC series, G.M DeathWatch. Oh, wait, already done. How about……only Hank Greenberg really understood the bailouts, and had the balls to do something about it?

    • 0 avatar
      RobertRyan

      @olddavid,
      Nothing to do with Unions. The economic policy is basically foolish and it is no surprise we are hearing that the unemployment results have been very disappointing.Economic Policies of the US and other National Governments have to be much more effective. Speculative Investors do not really help.

      • 0 avatar
        olddavid

        I agree it is foolish. How anyone can believe anything but Keynesian economic theory for financial recession is baffling to me. Spending now while rates are manipulated to historic lows while rebuilding the infrastructure and the resultant workforce resurgence is the only sensible policy. At least this artificial economy could, possibly, be beneficial to someone other than banks and the other “customers” at the Federal Reserve teller “window”.

        • 0 avatar
          RobertRyan

          @olddavid
          Which is what should be happening. Unfortunately it is not and a general malaise is taking hold. We have General Elections coming soon in Australia roughly 6 months away and there will be a change of Government, the opinion polls for the current incumbents are terrible.Still a change of Government will give a small boost to the Economy but that is about all.

          • 0 avatar
            olddavid

            I’m a dual US/Canadian. Most of my strongest earning years were spent in Canada, so this rise in currency value has benefited me to the tune of 30%. However, I do not want my good fortune to come at the expense of everyone coming after me. If this is the new “normal”, someone smarter than me is going to have to figure out some equitable method to equalize these exchanges. My Father always told me the future is more important than the past. The political classes need to adopt this mantra. What has happened to wanting our children to do better than we did? Is it a lost ideal? I would sacrifice, as should all boomers, if it would benefit the population as a whole – not a privileged elite. The idea that we are all in this together seems lost. Why? Where did all our idealism go?

          • 0 avatar
            jpolicke

            British Leyland was nationalized in 1975. The late Mrs. Thatcher took office in 1979. Under her watch, the government began privatizing or closing these brands.

          • 0 avatar
            danio3834

            @olddaavid – “However, I do not want my good fortune to come at the expense of everyone coming after me.”

            If you truly believe this, then why advocate rapidly expanding the debt and and using defecit spending as a means to supposedly resolve an economic crisis?

            All this could possibly mean is putting off financial prudence a little longer, and shoveling the mess onto the next generation to save yourself.

            The debt will need to be paid on, and a higher debt to GDP ratio than ever seen can only mean a higher tax burden on coming generations.

  • avatar
    Big Al from Oz

    The AUD has become a psuedo reserve currency even though it is a commodity currency as well. The paragraph below is a cut and paste. Our dollar is being bought by foreign governments as a solid “investment” to hedge against the weaker developed economies.

    “As of 2011, the Australian dollar is the 5th most traded currency in the world, accounting for 7.6% of the world’s daily share. It trades in the world foreign exchange markets behind the US dollar, the euro, the yen and the pound sterling.”

    The Swiss Franc had this issue with its currency 2 years ago until the Swiss government intervened and reduced its value.

    Mining and mining investment is driving the AUDs value as well. I think this will be around for some while. The value might drop, but by not more than 15-20%.

    India is slowly coming online as well and will require many of our resources. This is what happens when you live in the most economically dynamic region and have the raw materials to build countries and exports.

    Not many people would have heard but a shale oil find around Cober Pedy in SA has the potential to hold as much oil as Saudi Arabia. This find was 2 months ago. The news article stated if the find is only a fraction it is still huge.

    Another killer for Australia is our wages. The average wage is now $72 oooUSD. We also have additional cost on our wages like compulsory superannuation contributions etc.

    GM’s only hope is to use its GMH division as a potential BMW/Merc/Audi etc challenger like Toyota has done with Lexus.

    Australia can then continue with its tradition of building some of the finest rear wheel drive chassis in the world.

    Ford Australia should do the same.

    We are a very expensive country at the moment. Look at car prices.

    • 0 avatar
      RobertRyan

      “The Swiss Franc had this issue with its currency 2 years ago until the Swiss government INTERVENED AND REDUCED IT’S VALUE”
      We are primarily a trading nation. The High Dollar is doing it’s best to stop this from happening. We need Government intervention to devalue the Australian Dollar. All our competitors are doing the same. Unless we do something along those lines we will not have a happy future.

      • 0 avatar
        ect

        SFR is a unique case, because it is much more of a “haven” currency (tax and political), as reflected in the imprtance of the banking sector in Switzerland’s economy.

        Trading nations have no real ability to artificially determine exchange rates, without resort to rigorous foreign exchange control systems – which nobody should want. Interest rate policies can have some effect in the very short term, but these effects don’t last, as they cannot overcome economic factors.

        The only factors that will put significant downward pressure on the AUD are either a drop in commodity prices, or sheer bloody incompetence by government that destroys the Aussie economy.

        • 0 avatar
          RobertRyan

          @Ect.
          “Trading nations have no real ability to artificially determine exchange rates, without resort to rigorous foreign exchange control systems”
          The Australian Reserve Bank is happy at the moment about the Capital Inflows, but others in the Economy are much more worried.

    • 0 avatar
      KixStart

      “GM’s only hope is to use its GMH division as a potential BMW/Merc/Audi etc challenger like Toyota has done with Lexus.”

      It probably complicates things a bit that Australia is RHD and the larger market(s) would be LHD.

  • avatar
    MrWhopee

    The word “Fires” seem to suggest those poor workers did something wrong. Reading the content of the article, I think the word ‘laid off’ might be better suited.

  • avatar
    doctor olds

    General Motors is committed to Australia. This is their statement.
    http://www.abc.net.au/news/2013-04-02/holden-reveals-billions-in-subsidies/4604558
    “We’ve received $1.8 billion worth of incentives – both duty reductions and cash – over the last 12 years, and that’s allowed us to undertake automotive manufacturing in Australia and spend over $32.7 billion, and $21 billion of that in the supply of those,” Mr Hobbs said.

    “It’s a lot of money to receive but it’s a huge amount to spend in the economy and we’re very, very proud of the fact that we’ve been building cars here and spending a lot of money in the economy.”

    The amount averages out to $150 million a year for Holden.

    Seems a good value, spend $0.15B to get $2.725B in annual domestic economic activity?

    Australia is a socialist state with costs for doing business that leave them little choice but to subsidize the continued existence of a domestic industry.
    The US dollar is not weak, and as a matter of economic reality, against logic, I know, we can print at a far higher rate with little to no affect on our low inflation rate.

    The AUD is strong. Let me know if you see a plan to devalue it. Mom has a little cash over there. GREAT interest rate.

    • 0 avatar
      RobertRyan

      @doctor olds
      A “Socialist State” would bail out its failing car industries like has happened in the US, UK and now France. In the US they actually helped bankrupt entities and in the UK the car companies were nationalized by the Margaret Thatchers Government.The Australian Government will certainly not be doing that.
      Cost of doing business here is primarily the high Australian dollar. Subsidized industries that exist in the US i.e Farming do not exist here.
      Yes the high interest rates which show strength in the Economy, are also bringing in the speculators that are driving up the Aus dollar.

    • 0 avatar
      Big Al from Oz

      @DocOlds
      For someone who professes to be quite intelligent you have the view that support American Exceptionalism close to your heart.

      Believe it or not, per capita of GDP we spend 40% less than the US government. This is why your country is in a mess.

      As far as total taxation goes we lie between the US and Canada as a percentage of GDP. US = 27%, Canada = 32% and Australia = 30%. Compare the average Euro country which is between 40% to 50% tax of total GDP.

      Also, the Australian economy is the second or third freest in the world, well above the US/Japan/Eurozone countries.

      From a social perspective (not welfare) our freedom as a society we are freer than the US ie, topless bathing, abortion issues, censorship etc. We also have guns and hunting, but we are freer to express ourselves.

      From a welfare perspective we have one of the best medical systems in the world, yes it is partially public.

      Just because it isn’t “American” doesn’t make it Socialist. You are not as free or the freest in the world.

      American Exeptionalism clouds judgement. Be wary of it.

    • 0 avatar
      doctor olds

      Gentlemen, perhaps “socialist state” was extreme, though it is clearly more so than is the US. More a nanny state as well. My family and I have travelled very extensively and maintained friendships with Aussies for decades. You are assuredly not as free nor as well to do from very many perspectives. I am jealous of RWD Commodore, and Falcon, for that matter. The Commodore’s price is around 60% higher at home than the car can be sold for here in America for one example.

      I am not touting American exceptionalism, though, nor meaning offense. I love Australia! Just noting the realities. Costs of most everything are much higher in AU than US. I wondered how you did it and then realized your system depends on a small population for your huge country with large commoditiy exports to tax. The high costs of statist intervention in your economy will make government support for you auto industry an on-going necessity for it to continue, I am afraid.

      • 0 avatar
        CV Neuves

        What is wrong with “socialist” if it works? What hangups do you have with words?

        • 0 avatar
          doctor olds

          No hangup. Just descriptive. Socialism does inevitably fail. It requires defiance of human nature with predictable and repeatable results that have been demonstrated many times.
          With that said, some level of social support is certainly desirable and appropriate, particularly with the wealth we enjoy today.

          “You can not break the rules. You can only break yourself against the rules.”

          • 0 avatar
            CV Neuves

            “Capitalism” fails inevitably. From tulips to flats in Spain. In between there were some banks in the USA and elsewhere. Any idea what the definition of socialism is, or social-democracy? If you don’t know really, just keep quite on some seats in the back.

          • 0 avatar
            doctor olds

            One unassailable economic reality:
            Capitalism, “imperfect” as it may be, has created far more wealth for more people than any other system in the history of the world.
            The empirical evidence is overwhelming.

      • 0 avatar
        RobertRyan

        @doctor olds
        “it is clearly more than the US”
        We have not bailed out any Bankrupt Automobile company yet and unlikely to do so unlike the US

        “You are assuredly not as free nor as well to do from very many perspectives.”
        Like Big Al from Oz I have extensively traveled the US and found that above quote very representative of the US as a whole.

        “Costs of most everything are much higher in AU than US”
        Smaller population and subsequently a smaller market, means higher costs.

        “The high costs of statist intervention in your economy will make government support for you auto industry an on-going necessity for it to continue, I am afraid.”
        OK you have adequately described the US Governments intervention in GM and Chryslers Bankruptcies what do you see for Australia?

        • 0 avatar
          doctor olds

          Mr. Ryan, for perspective:

          The GM “bailout” will cost 310,000,000 people about $42 each or $168,000 per US job.
          Australian assistance to Holden has cost 23,000,000 people about $96 each or $347,000 per Aussie job.

          I am not trying to make a value judgement,just describing what I see.

          So you tell me, how anyone survive in business with much higher costs than competitors? The Aussie industry will be supported in some fashion or it will die.

          agree with you philosophically, and also recognize the dynamics of the business and the reality that Government has already been intervening for many year. It is a complex issue.

          • 0 avatar
            RobertRyan

            @Doctor olds.
            We are talking about two different issues. The US Governments Statist intervention in a BANKRUPT GM and Chrysler to make sure the US Economy did not collapse(A good move by my assessment) and the Australian Government providing assistance to Holden. As you stated yourself that assistance has a major multiplier effect throughout the economy.
            The costs come from the High Australian Dollar, very different issue when the Australian dollar fell to 80c to the US Dollar then everyone was happy.

          • 0 avatar
            doctor olds

            Mr Ryan- There really is NO difference other than in your imagination. Both cases are government intervention to prevent the collapse of a strategically important industry. The fact is you Aussies do proportionally more of it and on an on-going basis.
            The US situation is different primarily in that it was a one time action in response to factors external to the industry and is unlikely to be repeated.
            Most government intervention in America has been hugely harmful rather than supportive of our industry.

          • 0 avatar
            RobertRyan

            @doctor olds
            If that massive US Government bailout had not occurred, the US would looking at a Depression not a recession. The cost to the Taxpayers would be unimaginable not $42 per person.
            That is the reality. Hopefully the Aus Dollar will eventually go down as the Terms of Trade now is not that favourable.

      • 0 avatar
        Big Al from Oz

        @DocOlds
        I actually read interesting article on American Exceptionalism on the weekend, it was in the Montreal Review, google it.

        DocOlds, Australia is expensive if you come here, just like a Mexican visiting the US. Our currency values are different, but its all quite relative.

        Costs in Australia are astronomical for a business operator, not from taxes any different from most any other OECD economy including the US. 20 years ago a big push for user pays had arrived as well. That means we don’t have subsidised milk like you do or any agri product subsidised.

        We do probably have more social benefits. They are the most targeted in the world, but I rather give the money to who needs it than a failing business or industry. As for public servants we have less per capita, less unionism also than the US.

        We do have the most incredible benefit globally, its called the ‘Baby Bonus’, when a kid is born the mother gets $5 000. Some bad decisions have been made with that one.

        Look at all the countries with debt problems, they are the most subsidised and protected economies in the world.

        It’s our wages versus productivity. Our minimum wage is $33 000USD per year. A 15 year old school kid flipping burgers at Macca’s is on $12.00 per hour. This will flow on.

        If our average wage is over $70 000USD then when we buy a car for $35 000 is like you guys paying $25 000. I know a car mechanic and he works for a dealership and he’s on $60 000. I have seen advertisements for truck drivers of road trains in the Top End for $90 000.

        But our productivity is being forced to rise and if our dollar devalues we will be quite well prepared. But I can’t see this happening for a long time.

        As for freedom, that’s open to debate. We are no different except your society is more conformist and we are like a rich Brazil, layed back.

        I also like the US very much it is a fantastic country.

        • 0 avatar
          danio3834

          “I know a car mechanic and he works for a dealership and he’s on $60 000. I have seen advertisements for truck drivers of road trains in the Top End for $90 000.”

          Mechanics and truck drivers over here don’t have much trouble meeting or beating those figures. So with a lower nominal tax rate, their buying power is higher.

          The problem with increasing the minimum wage to $12/hr or more is with the product they produce. How much are consumers really willing to pay for a Big Mac?

          • 0 avatar
            RobertRyan

            Not impressed with a lack of minimum wage in the US. Basically massive exploitation in the service industries.

          • 0 avatar
            CJinSD

            People working at McDonalds are paid at least minimum wage. It is only bars and sit-down restaurants where minimum wage for servers is lower than the overall minimum wage. Exploitation only occurs when foreign tourists pretend they don’t know they’re supposed to tip.

          • 0 avatar
            doctor olds

            @CJ, I think he means a “living wage” kind of minimum wage.

            In AU, there is no tipping as a general rule. There is a noticably lower waitstaff attentiveness under the system.

            Unskilled help, such as the maids at a hotel we stayed at in Bathurst, are typically paid $20/hour. That is according to the hotel owners (a couple from Wyoming).

          • 0 avatar
            RobertRyan

            CJinSD
            ” It is only bars and sit-down restaurants where minimum wage for servers is lower than the overall minimum wage. ”

            Then it is not a minimum wage.Exploitation by definition.

          • 0 avatar
            CJinSD

            They’re so exploited that people with resumes come through the doors of local restaurants every hour when there isn’t a job posting. Decent wait staff make far more than the minimum wage here, in fact they tend to pay rent in apartments a few blocks from the beach, own cars, and many of the other things that might constitute a reasonable definition of aspects of earning a living wage. The only ones complaining about the arrangement are statists, who feel they’re being robbed of taxes on the tips.

          • 0 avatar
            Big Al from Oz

            @danio3834
            That is about the lowest paid mechanic/tradesman working for a business.

            My friend and work mate has just landed a job. $85 000, that’s under training then it goes up to $130 000 and that’s as a technician. No degree, just a tradesman. Wages are high here as are living costs.

            You only need to be a fitter and a tradesman here and that kind of money isn’t uncommon.

            Also, any kid under 18 is on a scaled minimum wage starting at around $12ph and then rises to about $600pw (minimum wage).

            Having those ‘junior’ wages is good for youth employment and it is training young people to work.

          • 0 avatar
            CJinSD

            I guess you guys shouldn’t be worried about a few low paying GM jobs then. Australia has essentially full employment according to official figures. Wouldn’t it make more sense to deploy them in profitable industries?

        • 0 avatar
          doctor olds

          @BigAl- I know you are no different! I love your country and people, particularly the laid back part.

          • 0 avatar
            RobertRyan

            @doctor olds
            “@CJ, I think he means a “LIVING WAGE” kind of minimum wage.
            Yes and will not harp on this aspect and back the main theme of the thread.

  • avatar
    KixStart

    I’d expect that some of the A$’s strength comes from coal exports. They could stop shipping coal to China, thereby doing the entire world a favor.

    • 0 avatar
      RobertRyan

      The Australian Dollar has nothing to do with Coal exports or Mining, both have been affected negatively by the High Australian Dollar.

      • 0 avatar
        corntrollio

        If you think the Australian Dollar has *nothing* to do with mining, I’m not sure how we could find you credible. Certainly people have made a lot of hay over the fact that the Australian Dollar didn’t tank when mining slowed down and that the high Australian dollar has now started to hurt mining (as well as manufacturing and tourism). Some people point to it being a more frequent reserve currency as the reason for this.

        However, there’s no guarantee that we don’t go back closer to the norm if the Aussie economy doesn’t pick up and Ms. Gillard is forced to take on more debt to meet the budget. That mining tax thing didn’t work out as intended, and the RBA has been cutting interest rates.

        • 0 avatar
          RobertRyan

          @controllio
          Mining has slowed down it is not in a Boom cycle anymore. Coal exports are the same, but the Australian dollar is rising not going down, what you would assume if there was a connection between the two. Investment by speculative investors has been increasing due to the 3 % interest rates.

          • 0 avatar
            ect

            Four years ago today, the AUD was worth USD 1.0435. Two years ago, it was USD 1.0556. One year ago today, it was USD 1.0318. Today, it’s at USD 1.0433

            The AUD is not rising. Its value today is virtually identical to what it was 4 years ago. With occasional fluctuations, it’s trading within a range that reflects the country’s income from trade, and particularly its resource/commodity exports.

            “Investment by specualtive investors” is almost never a significant factor over time.

          • 0 avatar
            Big Al from Oz

            @ect
            In the past 25 years the AUD has ranged from approximately 49 US cents to around a $1.07 US. Along with large interest rate swings.

            The US will be enountering greater swings in the future as well.

            In the past most commodity prices were based on US consumption. Since the formation of the Euro and the rise of the developing economies the US’s influence on commodities is reducing.

            The Pound Sterling had this problem as well. Its not to say the US will not influence, but it will be reduced.

            The outcome will be fluctuations in the value of USDs, commodities and interest rates down the track.

            The past size of the US economy in relation to the rest of the world provided the US with a relatively stable base on which to manage most of your activities.

            But the rest of us fluctuated at the whim of the strength and weakness of your economy.

          • 0 avatar
            RobertRyan

            @ect,
            Yes four years ago the dollar was down and so was the TERMS of TRADE.
            Now the Terms of Trade is going down but the Aus Dollar is going UP.
            Now our interest rates as @doctor olds mentioned are high compared to the rest of the world. Good News for him and investors and speculators.

          • 0 avatar
            ect

            Big Al, no biggie, but I actually live in Canada, whose currency has followed much the same road as the AUD, for, pretty much the same reasons. I am a dual citizen, though.

            The US certainly has not only a much larger, but more broadly based economic foundation than either Australia and Canada. Typically, this should mean less fluctuation in the overall economy, even if particular sectors boom or bust.

            RobertRyan, you misread my statement. The AUD is not down or up over the past 4 years, it is today exactly where it was 4 years ago.

            Terms of trade do matter. A lot. In 2003-2005, Australia”s trade deficit was 3% of GDP. By 2012, the trade surplus was 2% of GDP – due to resource and other commodity exports. Thats a 500 bps swing, which is huge.

            In the same period net inflow of debt (i.e. net borrowing from foreign sources, including those evil speculators) went from 5-6% of GDP down to a touch over 2% of GDP.

            So, foreign borrowing went down, while the balance of trade went up. And the AUD with it.

            My first boss taught me to ignore anecdotal evidence and look at the empirical data. In this case, the numbers speak for themselves.

            Interestingly, UBS reports that China now accounts for 85% of Australia’s trade surplus. That’s a very heavy reliance on 1 customer.

        • 0 avatar
          RobertRyan

          @ect,
          As Big Al has said there have been fluctuations in the Dollar related to the Terms Of Trade over the years. Economists here are frustrated by the apparent resilience of the Aus Dollar to a downturn in the Terms of Trade. In fact it is defying gravity and going up.

          • 0 avatar
            ect

            RobertRyan, with respect, the AUD is not rising. It is treading water – that is, trading within a band.

            Since 2011, the trading range of the AUD vs. USD has been:

            2011: .9653 – 1.0729

            2012: .9760 – 1.0747

            2013 YTD: 1.0277 – 1.0537.

            Today: 1.0423

            So, current price is within the trading band of the past 2+ years.

            2013 YTD has been barely 3 months, so it’s no surprise that the band is narrower than was the case for full-year 2011 and 2012.

            Fluctuations within a short period of time should be ignored. In any thinly-traded currency (which means everything except the USD and EUR, and maybe JPY) it doesn’t take much to shift the supply/demand balance over a day or a week or a month – you have to look at longer periods.

          • 0 avatar
            RobertRyan

            @Ect,
            It’s rise is causing a lot of concern here.
            This was announced during the week that Reserve was worried about the High Australian Dollar but was not going to do anything about it.
            http://www.businessspectator.com.au/news/2013/4/10/interest-rates/rba-changes-tone-high-australian-dollar.

            As of yesterday.
            http://www.afr.com/p/markets/business_hit_by_new_dollar_peak_kjG1FkZv0OQOQC9R0l8kJJ

            As of today
            http://www.dailytelegraph.com.au/business/surprise-leap-in-jobless-numbers/story-fn7ki14e-1226618112902

            The Australian Dollar is one of the most traded currencies around(do a trip of Europe and see where it is listed as far exchange rates go it is usually just behind the American dollar, Euro and British Pound.
            As of the other day it joined the US Dollar and Yen as a currency that can be directly exchanged with the Chinese RMbri.
            http://www.theadvocate.com.au/story/1424260/china-courtship-a-win-for-pm/?cs=86

            “But in an appendix tucked away in the final pages of a new IMF report on statistics, the fund acknowledged the rising use of the Canadian and Australian dollars as reserve currencies among some central banks. It said a survey of countries found that of the 10 other currencies held in central bank stocks, only the Australian and Canadian dollars are held by more than two countries.
            http://online.wsj.com/article/SB10001424127887323353204578129541684589904.html

          • 0 avatar
            Big Al from Oz

            @Robert Ryan and ect,
            The trading of the Chinese and Australian currencies will remove the USD from transactions in commodities and value added Chinese imports.

            Australian imports (commodities) from China and Chinese imports (manufactured goods) will be cheaper.

            This will reduce your financial and commodity markets involvement, which will reduce the US’s influence on price setting.

            As the Asian market increase as a percentage of the global total influences externally are reduced even further.

            The US will remain a significant player just because of consumption.

          • 0 avatar
            ect

            RobertRyan, it’s not surprising that the Reserve Bank is not willing to intervene in the currency market.

            The Bank of Canada made a few attampts to slow the rise of the CAD as it was on its way from USD 63 cents to parity. It was an expensive lesson on trying to stop the incoming tide.

            Big Al from OZ, re your comment:

            “The trading of the Chinese and Australian currencies will remove the USD from transactions in commodities and value added Chinese imports.

            Australian imports (commodities) from China and Chinese imports (manufactured goods) will be cheaper.

            This will reduce your financial and commodity markets involvement, which will reduce the US’s influence on price setting.”

            I don’t understand. Commodity prices are determined by the law of supply and demand.

            Buyers and sellers can negotiate payment in whatever currency they wish. Product prices may be quoted on international exhanges in USD, but a Chinese buyer of Australian coal can agree (and probably already does) to pay in AUD, which he obtains by exchanging CNY for them. No USD transaction involved.

  • avatar
    Big Al from Oz

    Here is a news clipping from an Australian newpaper.

    It seems Holden Cruze sales are enough. Also, when an FTA is cut it has to a two way street.

    I don’t believe in any form of protectionism irrespective of country.

    Only then can a competitive environment be created.

    I have had this discussion many times about protectionism.

    http://www.smh.com.au/business/poor-sales-of-cruze-behind-cuts-20130408-2hha9.html

  • avatar
    Jeff S

    @Robert Ryan–I thought the Margaret Thatcher Government denationalized the British auto industry. I thought one of the great accomplishments of the Thatcher government was to privatise the state owned industries.

    I know that at one time the Swedish government owned Volvo and Saab, then Volvo was sold to Ford and Saab sold to GM and now Volvo is owned by Geeley and Saab is gone. British Leyland is no more and the British do not own any of their car industry. Tata owns Land Rover and Jaguar, BMW owns the Mini and Rolls Royce, VW owns Bentley, the Chinese own the rights to the old Rover autos, and Aston Martin is owned by a group of private investors. The history of nationalized or government subsidized auto industry is one of eventually failure of that industry and the home county losing whatever auto industry it had with foreign ownership of that industry. This might happen to GM as well, with Ford possibly being the only remaining US owned auto industry but then again this could happen to Ford as well. I agree with Big Al this is not an ideal practice for government. I fear this is a slippery slope.

    • 0 avatar
      RobertRyan

      @Jeff S. Yes she did start the privatisation of the UK Automobile Industry, but had a “blind spot” when it came to the activities of the “City” the UK finance and banking sectors. The “First Rock” Bank failure predated the much bigger failures that came with the GFC. People did not learn the lesson with that Bank’s failure.
      No Volvo was not owned by the Swedish Government nor Saab. They were the car divisions of much bigger private corporations. Volvo and at the time Saab-Scania.

  • avatar
    el scotto

    I’m staying out of the Keynesian, Thatcherite, (God Rest her Soul), communist currency manipulation, and free pints and health care economic theories. Is there a realistic chance these 500 workers will ever be hired back?

    • 0 avatar
      RobertRyan

      Yes if the Dollar drops and they can start selling the Cruze. The lack of sales of the Cruze is a major problem, compared to cheaper imports, it is too expensive.

      • 0 avatar
        outback_ute

        Ford chose not to build the Focus in Australia for a reason, Toyota stopped building the Corolla in Australia years ago, I doubt that Holden’s business case was much different even with $130m or so from the government to help set up production. They probably should have worked on an SUV with higher profit margins.

        • 0 avatar
          RobertRyan

          Agreed. Something like the Territory
          http://www.themotorreport.com.au/content/image/2/0/2011_ford_territory_ts_awd_diesel_03-4d9d2903c8f62-450×240.jpg

          • 0 avatar
            outback_ute

            I was thinking of the Captiva – or a new generation of that, both a global vehicle and one that would fit in the booming compact SUV segment. Doing their own would likely have poor export potential given the Zeta platform is being orphaned and the market segment is too crowded to generate sales levels of Territory in its early years.

  • avatar
    Jeff S

    Robert Ryan–That is interesting, I always heard how Thatcher had privatized the nationalized British industries. The Iron Lady was given to political spin as well. Nothing surprises me. I do agree that government loans and/or nationalization of businesses for the most part lesds to failure. I hope the Holden, Opel, and GM NA survive but I do have my doubts.

    Robert I guess I misunderstood about Volvo and Saab, but didn’t they get loans from the Swedish government?

    • 0 avatar
      RobertRyan

      Jeff S.
      No. The larger corporations had to broken up like Saab-Scania. After selling the car division it became Saab (Aircraft and Military Defence equipment) Scania(Trucks and Marine/Industrial engines). Volvo are the injection of cash from the sale of its car division wanted to takeover Scania and the EU blocked that.

  • avatar
    RobertRyan

    CJinSD
    ,” in fact they tend to pay rent in apartments a few blocks from the beach, own cars, and many of the other things that might constitute a reasonable definition of aspects of earning a living wage”

    No-one in their right mind thinks that waitressing and working as bar staff is a “career choice”. More a supplement to a University course, acting etc. Not fulltime employment. I know people do it full time in the US as they have no other choices

    • 0 avatar
      CJinSD

      You’re not happy if you think they aren’t making a living wage. If they’re making a living wage, it is confirmation that the US is in a death spiral. Australia must not be the land of milk and honey if you have to focus on the US’s problems to distract yourself from your own. Sorry buddy, but reality is that both our nations are going the wrong way.

      • 0 avatar
        RobertRyan

        @CJinSD
        Lost your reasoning on this? just making a comment that is all.
        “Australia must not be the land of milk and honey if you have to focus on the US’s problems ”
        Now I can AGREE with this.
        “Sorry buddy, but reality is that both our nations are going the wrong way.

  • avatar
    Jeff S

    Thanks Robert for the information. At one time Volvos sold fairly well in the US especially the station wagons. Volvos had a reputation of running almost forever. It sounds like this forced breakup is similiar to a US antitrust action. I see lots of Volvo tractor trucks on the roads. I believe several years ago that Volvo bought White trucks.

    I remember either you or Big Al saying about a year ago that Ford could be leaving Australia. Hopefully Holden is able to stay in Australia. The global market has become very competitive and will become even more so. I do understand where Big Al is coming from about the US manufacturers developing globally competitive vehicles, especially in the truck market. It is good to have a global perspective instead of just a US only view.

  • avatar
    RobertRyan

    @ect,
    This article explains the problem a bit more.
    http://www.macrobusiness.com.au/2013/04/a-new-australian-dollaryuan-nirvana/
    It still does not relieve industry of a High Australian Dollar that is having a negative effect on many Trade Exposed industries. I think eventually the Reserve Bank will do more than just drop interest rates. Devaluing the currency like the US/Chinese and Japanese have(dramatically in the case of the Japanese over the last 6 months) by printing more money ,is probably what has to be done.


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