Explore Related Suppliers
Dr Parkinson says the car industry, like all manufacturers, needed to find a role in global production chains or gain a particular comparative advantage to prosper.
However, offering taxpayer assistance needed be in tandem with ensuring the lowering of barriers that would otherwise prevent Australian manufacturers from being successful.
These barriers included "head office" refusing to allow local manufacturers to export or link in with global production chains.
"In the car industry, the challenge for us, actually, (is) to find ways in which we plug into export markets," Dr Parkinson told an Australia-Israel Chamber of Commerce lunch on Wednesday.
"It is unrealistic of us to assume that we can forever and a day produce very small amounts of a vehicle that, as good as it is, the Australian public might not be wanting to buy and we can't export it."
General Motors Holden managing director Mike Devereux said recently that Australia was in competition with other countries for automotive investment.
"The assistance that we seek is the assistance, frankly, that is sought by auto companies and other manufacturing entities around the world," Devereux told ABC Television's Inside Business program in February.
"Australia is one of 13 places in the world - 13 - that can design, engineer and manufacture a car, and a lot of countries want that same kind of capability."
Holden was seeking a taxpayer-funded assistance package for its manufacturing facilities in this country and was in discussions with the Australian, Victorian and South Australian governments.
Dr Parkinson said Australia would not be able to have mass-production manufacturing that relied on scale and low labour costs.
"It is just not the right space for us to be in in this country," he said.
Dr Parkinson, who marked one year in the job since taking over from Ken Henry, said he supported government involvement to support the economy during economic downturns.
"The idea that government has a role in smoothing out, particularly very large dislocating circumstances, to me is essentially a no brainer," he said in response to a question.
"The question is more one of what instruments do you use at what point in time.
"So what is the role of fiscal policy, what is the role of monetary policy."
Dr Parkinson said there was a range of factors beyond industrial relations that affected productivity such as investment in infrastructure, education and skills, and innovation.
"They are all really important," Dr Parkinson said.
"Anybody who thinks that industrial relations is the only issue that is causing a challenge in the productivity space is doing the nation a disservice."