Premier Denis Napthine is set for a showdown with the Abbott government over the impending move to cut subsidies to Toyota, a decision that could cost tens of thousands of jobs and bring to an end nearly 60 years of car manufacturing in Australia.
With a state election just nine months away, the Victorian government is facing thousands of job losses on the manufacturing front, with Ford, Holden, SPC Ardmona and potentially Toyota bearing the brunt of federal decisions not to lend financial aid.
To help create thousands of jobs, the Napthine government is lobbying Canberra to fund major infrastructure projects in Victoria, including a push to ensure the long-term viability of BAE Systems in Williamstown by expediting ship-building contracts.
The Victorian government on Friday slammed a Productivity Commission paper, commissioned by Treasurer Joe Hockey, which called for an end to all financial help for car makers and parts suppliers when the Automotive Transformation Scheme ends in 2020.
In that position paper, released late on Friday, the Productivity Commission said ''current government funding should be reassessed to determine when subsidies should end'', and assistance for Toyota specifically ''should cease in 2020, and not be extended or replaced''.
It said justification for subsidising car makers was ''weak'' and ''ongoing industry-specific assistance to the automotive manufacturing industry is not warranted''.
It also called for local, state and federal governments to axe fleet purchasing policies that favour Australian-made cars.
Dr Napthine said he ''vehemently disagreed'' with the federal government over future subsidies for Toyota, and said ''we believe there is a role for government to work with the car industry''.
Speaking on 3AW, the Premier said the commission ''fails to understand the importance of the skill base and success in our manufacturing industry''.
Over the summer, the Premier's Office put together a 91-page report on the Victorian economy, which was handed to the Abbott government this week.
It stated that ''as an immediate priority, the Commonwealth needs to work closely with the Victorian government to ensure the long-term viability of Toyota Australia. A key element would be a substantial package to secure investments including the next generation vehicle".
Dr Napthine and Manufacturing Minister David Hodgett will host an industry roundtable in Melbourne on February 13, and continue to lobby Canberra for ongoing assistance for Toyota, which has been assembling or building cars in Melbourne since 1963.
''We take issue with a number of proposals in the Productivity Commission report which fail to acknowledge the importance of the automotive sector,'' Mr Hodgett said.
''We have said that the Commonwealth must ensure Toyota remains viable. Toyota employs 4200 people directly, and there are more than 25,000 Victorians directly employed in the automotive manufacturing sector including the supply chain and component sector.
''The loss of skills … would also have flow on effects for defence, rail, mining, aerospace, food and heavy vehicles which would be very significant.''
Toyota remained silent on Friday, but the company's Australian management is hoping to get a decision on whether it will build the next-generation Camry in Australia by the middle of the year.
Federal Industry Minister Ian Macfarlane estimates 30,000 jobs could be gone from the industry in less than three years, should Toyota join Ford and Holden and close its factory doors.
Mr Macfarlane said the findings in the position paper were ''stark'' and underscored the significant challenges ahead for the auto sector, including the need for economic and regulatory reforms.
''That doesn't mean Australia should walk away from the sector, but it does mean that we have to be upfront about the difficulties the industry faces,'' Mr Macfarlane said.
In Victoria, parts suppliers to the car industry employ 18,000 people, and the majority of those jobs will go if Toyota closes its Altona plant.
That ''domino effect'' through the parts industry was evident on Friday, with South Australian-based Exide Batteries announcing it would quit local manufacturing by the end of the year, costing 70 jobs. Exide has contracts to supply Holden, Ford and Toyota and will import batteries to fulfil those contracts.
The Productivity Commission has admitted the impact on already disadvantaged regions of Victoria and South Australia would be severe if Toyota ends local production.
''Loss of employment and economic activity will be concentrated in some regions, with some already having relatively high rates of unemployment and disadvantage,'' the report states.
The Australian Manufacturing Workers Union lashed the commission's findings, which it predicted would kill ''tens of thousands of jobs''.
But the union's Dave Smith said: ''[Friday's] report and the decision taken by the government will likely force Toyota's hand to end manufacturing in Australia.''