While I am saddened by the announced closure of the Australian car assembly industry, and worry about the employment effects as Australia simultaneously heads off the mining investment cliff, there are ways to ensure that the industry’s closure does at least benefit Australian consumers by lowering imported car prices.
First there is the 5% tariff on automotive imports, which should be cut as soon as local production ceases, since industry protection is no longer warranted.
Second, the luxury car tax, which is set at 33% on the marginal cost of vehicles above $60,316, is a defacto tariff designed to raise the cost of more expensive imports and make local models, such as the Fairmont Ghia, more attractive. It has little policy rationale once the car industry has ceased and should also be abolished.
Third, restrictions on importing secondhand cars should be abolished. New Zealand did so after its car industry was shuttered, which opened the market to a large number of high quality Japanese used cars, lowering costs for consumers. It also spurred a small domestic refurbishment industry in New Zealand, whereby imported cars are modified before resale.
Finally, unique Australian technical standards should be abolished in favour of global rules. Again, this would open the market to a wider array of foreign cars and reduce overall import costs.
Preferential government procurement rules, which favour locally made cars, would obviously also be made redundant in the event that the local car industry shuttered, which could save government departments and taxpayers money.
Given that the car industry will soon close, the least the government could do is soften the blow on consumers and increase their spending power.
