Peak motoring body, AAA, has called on the federal government to abolish automotive tariffs in the name of road safety. From The Australian:
A report by peak motoring body AAA shows only four of 33 safety targets agreed by state and federal transport ministers in the 2011-20 national road safety strategy are on track to be met.
The safety strategy promised a 30 per cent reduction in road deaths and serious injuries in car accidents, but the road toll is down by just 14 per cent, and authorities failed to collect data to track improvements in the number of serious injuries…
Mr Bradley said the most effective measure the Turnbull government could implement to improve road safety would be the abolition of the $5bn car tariff, which was designed to protect an industry that no longer exists.
“The car tariff is a tax on technology, locking Australians into older, more dangerous cars, and penalising safety technologies being rolled out elsewhere in the world,” he told The Australian.
He cited research showing more than 1300 lives would be saved on Australian roads over the next two decades if Australia reduced the age of its light vehicle fleet by just one year.
The AAA is also calling for the reinstatement of the federal office of road safety, axed by John Howard, to develop and implement national road safety programs…
While AAA’s claim surrounding road safety and vehicle age seem overly bullish, I agree with it that there’s little justification in maintaining automotive tariffs now the domestic car industry is gone.
Australia has already lowered or eliminated automotive tariffs with its various free trade agreement partners, which has created efficiency distortions via trade diversion (i.e. when trade is diverted from a more efficient exporter towards a less efficient one). Removing tariffs on automotives for all trade partners would eliminate these distortions.
That said, eliminating tariffs is only part of the solution to lowering the average car age as well as reducing costs for Australian consumers. Other worthy measures include:
- allowing the importation of high quality used cars (so-called ‘grey imports’), such as occurs in New Zealand;
- 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 initially designed to raise the cost of more expensive imports and make now defunct 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”.
While there would obviously be negative revenue impacts from the above reforms, namely the abolition of tariffs and the luxury car tax, such concerns could be overcome by broadening the tax base through genuine tax reform. This way, the tax burden would be spread more evenly across the economy rather than concentrated on the car industry – a far more efficient and competitively neutral outcome.
Again, given the domestic car assembly industry has closed, the least the government can do is soften the blow on consumers and increase their spending power, while also encouraging greater vehicle safety.
