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Published 12:52 PM, 20 Aug 2012 Last update 3:21 PM, 20 Aug 2012

AAP

Former treasury boss Ken Henry has told business the Australian dollar is likely to remain high for the foreseeable future.

Dr Henry told the Australian Industry Group forum in Canberra it would not be prudent to bank on an early sizeable depreciation in the exchange rate.

“There is no silver bullet that is going to rapidly devalue the dollar and make things easier for Australian businesses in the immediate future,” he said.

Many trade-exposed businesses have suffered under the strong currency, which has been lifted by strong demand for the nation’s commodities and economic troubles in the US.

However, Dr Henry said Australia’s economic policy framework – which includes a floating exchange rate, the independent setting of monetary policy and competition policy – had served the nation well.

“These things have helped to protect Australia from the impact of several economic shocks emanating from overseas,” he said.

“It is important that we will build on them and resist the temptation to dismantle parts of the framework, even though we may perceive from that dismantling a short term advantage.”

He also said local businesses must start acting like regional entities, by becoming part of regional supply chains, partnering with similar or complimentary foreign firms or moving parts of their operations to Asia.

Dr Henry conceded that moving components to Asia was not easy because such plans often attracted criticism from unions and local communities.

But he pointed to the example of Australian bootmaker Blundstone, which prospered from moving part of its business offshore despite being criticised.

“It is clear today that if Blundstone had not shifted elements of its manufacturing to Asia five years ago, it would have gone out of business completely,” he said.

Separately, Mr Henry also said his soon to be released Asia white paper will be a strategic plan for the decades ahead, not a shopping list of spending proposals.

Tax debate could improve

The debate about Australia’s tax system needs to be a “hell of a lot better”, Dr Henry believes.

He told the business forum that if governments don’t lead change, change will be forced upon.

“You want to avoid putting yourself on a burning platform,” he said.

“In order to get to the place that we need to get to, we are going to need a hell of a lot better debate.”

Dr Henry agreed with current Treasury Secretary Martin Parkinson, who in a speech last week warned governments may have trouble meeting demands for spending from the existing tax base.

Dr Henry said commonwealth tax revenue, as a ratio to gross domestic product, would not return to where it was before the global financial crisis – at least not under the present system.

He said state revenues were in a much worse position, describing it as “fragile”.

“At the moment, it looks okay for the resource rich states, and for the others it looks desperately bad,” Dr Henry said.

“But even for the resource rich states, at some stage the royalties will deliver less revenue than they have been delivering. They are going to front a grimmer fiscal reality as well.”

http://www.businessspectator.com.au/bs.nsf/Article/Dont-bank-on-early-A-fall-says-Henry-XC56Z?OpenDocument&src=pm&utm_source=exact&utm_medium=email&utm_content=92636&utm_campaign=pm&modapt=news

From: AAP January 10, 2010 4:41AM

Car production in Australia has plunged to its lowest level since 1957.

CAR production in Australia has plunged to its lowest level since 1957, with manufacturers hit by the global economic slump and the high Australian dollar.

Despite strong local car sales, helped by the federal government’s business tax breaks, exports to markets such as the Middle East and the United States have all but collapsed, Fairfax newspapers say.

The industry is set to be further buffeted by a January 1 tariff cut that has lowered the price of imported models relative to locally produced cars.

Figures from the Federal Chamber of Automotive Industries show Australia produced just 225,713 vehicles last year, almost 100,000 fewer than in 2008 and 55 per cent of the output in 2004.

The chamber’s chief executive, Andrew McKellar, told Fairfax a “crucial factor” this year will be the speed of recovery in export markets, warning that the high dollar poses a serious long-term threat to the competitiveness of the industry.

Separate figures from the Bureau of Statistics confirmed the dramatic collapse in exports.

The export slump will leave Australia’s car industry even more heavily dependent on taxpayer-funded assistance, which is mainly provided through the Government’s $6.2 billion car industry plan.

Industry Minister Kim Carr said production had been running at half its usual pace, although local producers had fared better than elsewhere in the world, given no major companies had gone broke.