Gillard: Australia economy strong despite end to Ford production

Australian Prime Minister Julia Gillard moved to allay fears about the economy on Friday saying it had strong fundamentals, after US carmaker Ford announced an end to production in the country.

Ford said Thursday it will stop making vehicles at its unprofitable Australian plants in 2016, prompting concern for the manufacturing industry which is struggling due to the high Australian dollar.

Gillard admitted the Ford decision to halt production and cut 1,200 jobs had made people anxious.

But she said: "Even with Ford's decision yesterday we can be reassured that the Australian economy is resilient and it has strong fundamentals.

"Our economy has come out of the global financial crisis strong. We've got economic growth, we've got low inflation, low interest rates, relatively low unemployment and strong public finances."

Gillard told reporters the Australian economy was in transition as the investment boom in the mining and resources sector wound down, and there would be a loss of jobs as a result.

"We do need other sectors of our economy to step up and grow more strongly," she said, adding that Australia's proximity to Asia and its rapidly growing middle class would provide opportunities.

But she said she was not in favour of increasing tariffs on imported cars, a measure suggested by several backbenchers within her centre-left Labor government to counteract the high Australian currency.

"I would rule that out, I don't think that that's going to assist our manufacturers in the long term," she said.

"I don't believe that imposing tariffs and getting in the way of us being able to be an exporting nation by potentially sparking trade reprisals is the right strategy for Australia."

The Australian Council of Trade Unions (ACTU) has warned that Ford's decision could have a flow-on impact which could jeopardise up to 10,000 other jobs in manufacturing.

Ford Australia chief executive Bob Graziano said Thursday the cost of manufacturing cars in Australia was double that of Europe and nearly four times that of Ford in Asia.

The company's after tax losses hit Aus$600 million over the last five years, he said.