Holden Closure Confirmed: Has Australia’s Housing Bubble Played a Role?

11 12 2013

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.

Written by admin on December 11, 2013 – 7:33 pm  – Original Article: www.whocrashedtheeconomy.com

 

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