The effects of the motor vehicle industry on employment and research innovation in Australia

The purpose of this paper is to examine the likely economy-wide impacts of the complete shutdown of the motor vehicle industry on output and employment in Australia using the latest input-output (IO) table (2009-2010).

Both supply- and demand-driven IO models are employed to determine the extent, and pattern, of the resulting output and job losses in upstream and downstream industries. An analysis of the first-order field of influence is also conducted to observe how output multipliers in other sectors respond to changes in the self-use-input-requirement of the professional, scientific and technical services (PSTS) industry.

The PSTS industry (with a significant research and development (R & D) component and the highest forward linkage index) would be hardest hit with the collapse of the motor vehicle industry.

This paper identifies a number of industries that are more likely to be heavily influenced by the resulting lack of R & D in the PSTS industry in the near future. Unless more funding is allocated to other research and technology-intensive industries, the extinction of the motor vehicle industry, coupled with the recent budgetary cuts for strategic organisations such as the Commonwealth Scientific and Industrial Research Organisation, can reduce the positive spillover effects of R & D activities on the Australian economy.

This is the first study to examine the effects of the shutdown of the motor vehicle industry on employment in Australia. The results also have broader implications for other developed countries that have declining motor vehicle industries. The findings suggest that the global decline in the motor vehicle industry can adversely affect investment in R & D in upstream and downstream industries. More generally, the results suggest that the shift in motor vehicle production to developing countries, will contribute to increased R & D intensity in them at the expense of developed countries.