The Pascometre has written a timely piece explaining why Australian car buyers are ripped-off and demanding policy action:
With manufacturing on the way out anyway, [the Productivity Commission has recommended] to drop the present stiff barriers on importing second-hand cars.
…if you have an existing fleet of vehicles, that is a potential disaster…
The immediate response from the federal government, no doubt after a quiet word or a million with the Federal Chamber of Automotive Industries, is a great deal of wariness about letting consumers enjoy a free trade price of cars instead of paying the “Australian premium”…
In wording that could have come from a car importer, Industry Minister Ian Macfarlane said “…the government has no intention of allowing Australia to become the dumping ground for other countries’ old second-hand vehicles.”
Never mind that the PC didn’t recommend anything like that, suggesting imports should be limited to cars less than five years old and phasing the changes in to give fair warning of the disruption…
Looks like the poor who insist on driving will just have to stick with their old, less-safe and less-fuel-efficient bangers.
Pascoe makes a lot of good points that support my own arguments last week following the release of the Productivity Commission (PC) report.
With the local automotive industry scheduled to shutter by 2017, there will no longer be any justification for punishing Australian consumers with over-inflated car costs. New Zealand consumers have gained greatly from opening its market to high quality Japanese used cars, lowering costs for consumers without compromising the safety of its vehicle fleet.
As reported by in the PC report, “a survey of prices for second hand Toyota Corollas found that vehicles of similar mileage were on average almost 20 per cent cheaper in New Zealand than in Australia”. Moreover, a 2005 study by researchers at the Monash University Accident Research Centre supported the safety efficacy of used imports, finding that “the used imports [into New Zealand] were as safe as those sold new when compared on a year of manufacture basis, and that the difference in crashworthiness performance between an average used imported vehicle and an average new vehicle was attributable to the date of manufacture of the used vehicle rather than its previous use in its country of origin”.
Of course, allowing the importation of high quality second-hand cars is only part of the solution to lowering car costs for Australian consumers. Other worthy measures include:
- abolishing the 5% tariff on automotive imports;
- scrapping the the luxury car tax, which is set at 33% on the marginal cost of vehicles above $60,316, and serves as a defacto tariff designed to raise the cost of more expensive imports and make local models, such as the Fairmont Ghia, more attractive; and
- Scrapping Australia’s unique technical standards in favour of global rules, thereby opening the market to a wider array of foreign cars and reducing overall import costs. Indeed, the PC report also recommended accelerating “the harmonisation of Australian Design Rules with the United Nations Economic Commission for Europe (UNECE) Regulations and the mutual recognition of other appropriate vehicle standards”.
As noted last week, there would obviously be negative revenue impacts from the above reforms, namely the abolition of tariffs and the luxury car tax. However, such concerns could be overcome by simultaneously moving to increase the GST to, say, 15%, along with the usual compensation measures for the poor? This way, the tax burden would be spread more evenly across all goods and services, rather than concentrated on the car industry – a far more efficient and competitively neutral outcome.
Again, given that the car industry is set to close anyway by 2017, the least the government could do is soften the blow on consumers and increase their spending power.
It’s a shame that the Abbott Government has chosen to side with the automotive industry rent-seekers, kicking consumers’ interests to the curb.
