Will Commercial Property Keep on Performing?

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Ford-Holden

THERE HAS BEEN a whole lot of negative talk recently about the detrimental impact of the Car Industry leaving Australia.

And clearly, our hearts go out to all the affected workers and their families in car manufacturing and those related component suppliers.

Most of us cannot even begin to imagine the shock and surprise they are now feeling — particularly right on Christmas.

And yet, if you just focus upon the likely impact on the Australian economy … much of the commentary can be seen as misguided.

It appears to be emotionally charged, and politically motivated — with the talk of a recession quite wrong, and bordering on mischievous.

Certainly, Holden’s departure will have a short-term impact. But let’s look at the facts:

  1. As Saul Eslake (chief economist at Bank of America Merrill Lynch) points out … car and components manufacturing represents about 0.4% of total employment. An adds only a similar amount to Australia’s gross domestic product (GDP).
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    As you would probably realise, this is no more than what we already experience now as quarterly GDP fluctuations.
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  2. A study by Flinders University found most workers, who were made redundant by Mitsubishi’s 2007 closure of its Lonsdale and Tonsley Park factories (in Adelaide) … found alternative work within 18 months.
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  3. Unlike Mitsubishi, the actual closures for Ford and Holden are not happening immediately. Rather, they have been foreshadowed well in advance; and will occur progressively through to 2017.
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  4. State and the Federal governments (plus the companies involved) will be providing millions of dollars of support and retraining help, for every displaced worker.
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  5. Apart from those close to retirement, this means everyone who is serious about finding ongoing employment has a once-in-are-lifetime opportunity for a “financed transfer” across to a new employer — whose future is not dependent on government subsidy for survival.

You only need to cast your mind back to the bushfire devastation Victoria went through in early 2009. As a result, the recovery process (funded by the State & Federal governments and, in that case, the insurance companies) left the Victorian economy in a far stronger position.

Now it enjoys positive net migration, when compared with other States. And more importantly, that process has also resulted in Victoria’s present solid Budget position; as well as an escalating Commercial property market.

Bottom Line: You need to look past the knee-jerk, emotional reactions … plus the inevitable short-term adjustment. And instead, focus upon the long-term sustainable benefits, which these current events will deliver — both to the economy and the Commercial property market.

Chris Lang

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