Abbott to Cut Red Tape for Currency-Squeezed Manufacturers
Tony Abbott, the frontrunner to become prime minister in Australia’s election next week, said a coalition government would cut red tape and taxes to help manufacturers squeezed by an elevated currency.
“We have to try to ensure that at any given level of the dollar we give manufacturing the best possible chance,” Abbott, 55, said in a telephone interview yesterday ahead of the Sept. 7 election. “We do that by scrapping unnecessary taxes, reducing red tape, trying to produce a more flexible regulatory environment.”
Signaling a free-market approach, Abbott said manufacturers have to find a way to cope with a “market-driven currency.” That contrasts with opponent Prime Minister Kevin Rudd, who has pledged a further A$700 million ($624 million) to support carmakers and styled the ballot as a referendum on the industry’s future.
The nation’s manufacturers have struggled with a local dollar that’s traded about 30 percent higher over the past 12 months than its average since floating in 1983. Manufacturing makes up about 7 percent of the nation’s $1.5 trillion economy, down from about 14 percent 30 years ago.
Economic management has emerged as the defining difference between Rudd’s Labor party and the coalition in the election campaign as growth slows and a mining-investment boom wanes.
“The Australian dollar is a market-driven currency and the right level for the Australian dollar is the level that the market puts it at,” said Abbott.
The Rhodes scholar, who has degrees in economics and law, said it was up to the Reserve Bank of Australia to make “prudent judgments” on monetary policy and noted the central bank’s benchmark interest rate was “very low by historical standards.”
Central bank Governor Glenn Stevens has cut interest rates by 2.25 percentage points since late 2011 to boost growth in employment-intensive industries including manufacturing and construction in the nation’s south and east.
Underscoring the elevated Aussie’s effect on manufacturers, Ford Motor Co. announced in May it would end production in the country after nine decades, with the loss of 1,200 jobs. General Motors Co. (GM)’s Holden division said in April it will cut about 500 positions in Australia, citing the currency’s strength.
A private gauge released Aug. 1 showed manufacturing slumped 7.6 points to 42 last month, the biggest decline since April. Fifty is the dividing line between growth and contraction.
“Some manufacturing can cope at relatively high levels of the dollar, other manufacturing finds it very difficult,” said Abbott, whose coalition has proposed cutting A$500 million from existing government subsidies to carmakers by 2015. He told reporters last week his government wouldn’t wave a “blank check” at automakers.
Abbott has pledged to have legislation in Parliament within his first 100 days in office to abolish Labor’s mining and carbon taxes. The coalition plans to remove a A$1.8 billion tax on company cars, reduce the company tax rate by 1.5 percentage points to 28.5 percent and cut red tape by A$1 billion a year.
Rudd is selling himself as the best leader to steer Australia through a downturn as he flags the end of a China-led mining boom. Spending cuts by an Abbott-led government, including a plan to slash 12,000 public service jobs, risks tipping the nation into recession at a time when the RBA is forecasting slower growth and the Treasury expects unemployment to hit an 11-year high of 6.25 percent next year, Rudd has said.
With eight days left before the election, Abbott’s Liberal-National coalition is leading Rudd’s Labor by six percentage points on a two-party preferred basis, according to a Newspoll published in the Australian newspaper Aug. 26. Online bookmaker Sportsbet said yesterday it was already paying out bets on the coalition winning the election.
A separate poll shows Labor has lost support in its traditional heartland of Western Sydney. A Newspoll conducted Aug. 23-28 of five electorates in the region has the coalition leading 57 percent to 43 percent on the two-party preferred measure. Abbott leads as the better prime minister, 46 percent to Rudd’s 40 percent. The survey of 800 voters has a margin of error of 3.5 percent.
A coalition government would seek strong ties with Australia’s key ally, the U.S., and its biggest trading partner China, Abbott said, continuing the policy of past governments.
“There’s nothing inconsistent between Australia having a very, very strong friendship with the U.S., a strong and growing friendship with China, and the U.S. and China being friends and partners rather than rivals,” said Abbott, who has been opposition leader since 2009.
The coalition has proposed tougher guidelines on foreign ownership of farmland, and said the threshold for scrutinizing proposed overseas purchases of agricultural land should be set at A$15 million, down from the current A$244 million.
Rudd is also calling for a more cautious approach to foreign ownership of rural land.
Abbott said in July last year that investment by China “is complicated by the prevalence” of state-owned enterprises.
Asked yesterday to elaborate on that comment, he said that while some state-owned enterprises operated on a commercial basis, “others are very much in the arms of the relevant government.”
“The last thing any sensible country that needs foreign investment wants to do is antagonize anyone,” Abbott said. “But you’ve got to be candid and say that we deserve the right to knock things back if for whatever reason we think that it’s against the national interest.”
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