An Analysis of Trade Performance of the Australian Passenger Motor Vehicle Industry: Trends, Patterns, and Determinants

Abstract

This article presents an empirical analysis of the trends, patterns, and determinants of the Australian passenger motor vehicle industry trade in the context of policy liberalization. Although export orientation and import penetration ratios have shown rising trends, especially since the early 1990s, faster growth in import penetration has led to a surge in the industry's trade deficit. Econometric results appear to suggest that tariff protection, export incentives, and government assistance have made the industry less competitive, in domestic and world markets. These findings indicate that further liberalization may help improve the Australian passenger motor vehicle industry's trade performance.

Trade Liberalization and Productivity Performance: Evidence from the Australian Passenger Motor Vehicle Industry

“…By the mid-1980s, with protection of other sectors being reduced, the Australian automotive industry remained one of the most highly protected industries behind only the textile, clothing and footwear sector. It was widely recognized that a high level of industry protection, which was as high as 140% by the mid-1980s, had led to significant inefficiency, giving way to a wide range of reforms under the Button Plan announced in May 1984 (Capling and Galligan 1992;Sharma 2012;Bopage and Sharma 2014a). As shown in Figure 1, the industry enjoyed a highly protective regime until 1985-1986 and has moved toward an increasingly liberal and open regime since 1986-1987.…”