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Crikey says: poor people drive second-hand cars

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The Productivity Commission’s report on automotive manufacturing, released yesterday, has been somewhat overtaken by events since it was first commissioned, with the local car industry now scheduled to close in 2017. Unsurprisingly, the PC is rather sanguine about the closure and notes that the likely job losses are a small fraction of the total number of Australians who lose their jobs (and gain others every year).

But there are a number of consequences of the looming cessation of the automotive industry with which the PC grapples. The commission recommends the gradual phasing-out of both the current $12,000 tariff on, and regulations restricting the import of, second-hand vehicles, over five years and subject to appropriate regulations relating to safety and environmental performance, as New Zealand allows. A transitional phase-out is recommended by the PC in recognition that existing businesses, such as car dealers and the salary packaging industry, have made investments based on the current restrictions.

In Crikey’s view this is insufficient justification: the potential consumer benefits of second-hand imported vehicles are significant and will help drive down the prices of all vehicles in the Australian vehicle market. In a country where the Treasurer claims that “poor people don’t drive cars”, consumers should not continue to be punished to help industries like the salary packaging sector.

The PC also baulks at the immediate removal of the current 5% tax on all imported vehicles apart from those from countries with which we have a free trade agreement, suggesting there is an in-principle argument for removing the tariff once the local industry has closed. It notes that the current tariff is strong source of revenue for the federal government, yielding nearly a billion dollars a year.

Again, the PC has been too timid. Australians consumers’ interests should be first and foremost, not those of industry or the Treasury. All passenger vehicle tariffs should be removed immediately. If the government wishes to preserve its revenue base, it can tax all motor vehicle sales directly and explicitly.

But the days of protecting this long-cossetted industry should be brought to an end — and now, not in five years’ time.

4
  • 1
    CML
    Posted Wednesday, 27 August 2014 at 4:42 pm | Permalink

    What a load of tosh! Consumers can’t have it all ways. If scrapping the tariff means $1 billion less in government coffers, then who do you think will pay to make up that amount? The taxpayer will pay, or they will have some benefit withdrawn. All up - zero gain for everyone.
    Further, if you withdraw the tariff now, that will bring forward the closure of the car plants and its resultant unemployment. Here in SA we are not talking about a ‘small fraction’ of unemployed. Most estimates are talking about 100,000+, taking into account the car components sector, and all the businesses that provide services to the Holden plant in Elizabeth. We need those three years to plan for the devastation that is coming in this state.
    All very well for you people who sit in offices on the other side of the country and employ your digits for a living. How about including the brain as well!

  • 2
    Roger Clifton
    Posted Wednesday, 27 August 2014 at 5:56 pm | Permalink

    A new car is for most Australians the largest import we can throw our money at. As the largest item of rubbish we can dump into the environment, its disposal should be postponed as long as possible.

    Wouldn’t it be better if new cars remained costly, so that more of us invested in second-hand cars and employed Australians to repair them instead?

  • 3
    Luke Hellboy
    Posted Wednesday, 27 August 2014 at 6:58 pm | Permalink

    If only past governments had the foresight or strength to attach the often recommended conditions of using some of the billions of dollars in corporate welfare to develop hybrid/electric automotive technologies in Australia. We have the science/engineering/manufacturing skill and need for employment in this country to have made this at least worth a shot… The vested interests and their political facilitators on both sides in Australia make it hard to be optimistic for our future.

  • 4
    Matthew of Canberra
    Posted Wednesday, 27 August 2014 at 10:04 pm | Permalink

    A sudden change in the value of stock would hurt resellers - yep, I’m fine with that, let’s not suddenly deflate the stuff on the forecourt, let’s phase it in slowly over several years so those businesses stay profitable (and so we don’t trash confidence in creating new ones). And let’s also ensure that the cars we’re importing meet current standards.

    But protecting an industry which exists for sole purpose of helping people (for a fee) to avoiding paying fair income tax? That’s daft.

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