Australian Governments and Automotive Manufacturing, 1919-1939

Conlon, R. M., Perkins, John, The Australian Journal of Politics and History

In recent years the progressive lowering of tariff barriers in Australia has produced a predictable backlash from those who are directly affected. The reaction, however, extends to academics and others who have no pecuniary interest in the outcome, and who have argued that the tariff represented a policy consciously designed to promote the economic development and defence capacity of this country. On the basis of experience in the motor vehicle industry, we argue that these factors had very little to do with interwar tariff policy. Rather, it was the outcome of an interplay between the Commonwealth government's need for revenue, the activities of "the lobby" in seeking rents, and the practices of the Customs bureaucracy.

Overview

Since the 25 per cent tariff cut implemented by the Whitlam government in 1973, Australia has moved away from its highly protectionist orientation, towards greater participation in an increasingly integrated global economy. The gradual dismantling of the tariff has produced significant opposition, not only from industries established under the earlier protectionist regime, but from some political and academic critics. Typical of the latter, in a recent contribution to the debate, Anne Capling and Brian Galligan have employed what they view as a "statist" approach, in which government is accorded an independence in decision-making, in this case with the tariff "weapon" having been apparently employed in the past for the purpose of promoting the economic development of an entity called the Australian nation.(1) The same approach is extended by John Laurent, in a recent article on "industry policy" regarding the motor-vehicle industry, where tariff measures to promote local automotive components manufacture after 1918 are viewed as being consciously directed towards enhancing the defence capacity of Australia. Apparently, the outcome of the resulting "blueprint", as Laurent terms it, was "a debt this country owes to its motor industry" following the Japanese attack on Pearl Harbour, and the subsequent threat to Australia posed by their conquest of Southeast Asia.(2) In particular, Laurent claims that Australia's capacity to produce some automotive components by 1941 provided "incalculable benefits ... for the rapid building of a home-grown air defence industry during the emergency of those times".(3)

We argue, however, that these and other "recollections of time passed" and other similar views of Australian tariff history, show a lack of understanding of the process through which a highly protective regime was established by the eve of the Second World War.(4) "The doctrine of development is an old story in Australia", as S.J. Butlin put it.(5) The related notion of defending a "White" or European "Australia" against a presumed "Asian" threat is of similar antiquity and especially related to the tariff issue. They became axioms of Australian politics to which every mainstream party paid obeisance.

The reality, as this analysis of motor-vehicle components of the development of the tariff is intended to demonstrate, was somewhat different. In practice the development of the tariff was in essence the product of an interaction between the government's desire for revenue, the influence that vested interests -- the "lobby" as it came to be known -- could exert, and the aspiration of politicians involved in a relatively recently created central government to demonstrate its relevance to potential constituent interests in Australia. There was no consensus within the cabinets of interwar governments as to the desirable level of protection for manufacturers of various automotive products, but increases in the level of import duties became typical -- and usually enduring -- responses to immediate balance of payment problems.(6) Tariffs were preferable political alternatives to many other forms of taxation or the likely reaction to a currency devaluation by existing and prospective British investors in Australian government bonds. In short, the history of the Tariff -- exemplified by the case of the automobile industry during the inter-war period -- did not involve a "thought-out" plan relating to either "national development" or "national defence".

Tariffs as a Source of Revenue

From Federation import duties provided the major source of Commonwealth government revenue -- a source of income that was dramatically reduced during the course of the First World War. Australia's involvement as a belligerent also resulted in a considerably increased government internal debt. A "national debt" of around 20 million [pounds sterling] in 1914 had risen to about 400 million [pounds sterling] by the time of the Armistice, and extra revenue was needed to service it.(7) Prime Minister Hughes was unsuccessful in his effort at the Versailles negotiations to force Germany to redeem the war bonds his government had encouraged Australians to buy.(8)

At the time, the Commonwealth government did not have the power to impose income tax, and in these circumstances the motor vehicle was a seemingly ideal target for raising revenue.(9) The major part of the product was imported -- after the Armistice, in increasing numbers -- and there was a lingering, but still widespread perception that the exporter bore the burden of the tax. The motor car was viewed as a luxury by a people that had endured several years of "sacrifice" to support a "war effort" -- and therefore a legitimate object for the imposition of increased tariffs. The locally paid taxes derived from it were imposed on a consumption good, in this case a perfect example of conspicuous consumption. As Senator Greene observed, in 1921 in justifying the increase in duties on automobile components: "Although serving many utilitarian purposes, motor transport was still more or less a luxury, and the government was entitled to get what revenue it could out of it".(10)

At the time rural Australia was significantly more motorised than the cities. In 1921 it was estimated that nearly 75 per cent of vehicle sales were to country residents.(11) Earle Page, as Country Party leader in the conservative coalition, was of the view that cars were "an absolute necessity throughout Australia". Nevertheless he supported increased duties on vehicle components as necessary for revenue purposes.(12)

In the economic downturn of 1921 a deputation from the Associated Chamber of Manufactures presented the Minister of Customs with a list of "luxury" imports it urged be prohibited. The litany was headed by motor cars and motorcycles. An organisation was formed in 1924 to lobby for a ban on the import of automotive products, as an expression of what was then apparently the "popular idea that investments in property, and absorption of factory production is adversely affected through people buying motor cars". In 1927 the Secretary of the Preservation of Australian Industries League publicly expressed the view that motor cars, oil, gramophones and pianos were unnecessary imports.(13) In response to the Great Depression demands for the prohibition of imports of automotive products were frequently presented as at least a partial solution to the economic crisis.(14) The desired objective of the protagonists was almost achieved through a combination of increased duties on motor vehicle chassis, a devastating decline in per capita income, and rapidly increasing unemployment which made potential consumers understandably wary of buying at a time when the great majority of sales were on hire purchase …

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Publication information: Article title: Australian Governments and Automotive Manufacturing, 1919-1939. Contributors: Conlon, R. M. - Author, Perkins, John - Author. Journal title: The Australian Journal of Politics and History. Volume: 45. Issue: 3 Publication date: September 1999. Page number: 376. © 1999 University of Queensland Press. COPYRIGHT 1999 Gale Group.

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