There will be much gnawing and gnashing of teeth over the recommendations of the Bracks report into car industry assistance whose report was dropped this morning. Bracks’ report calls for the federal Government to continue with the planned cut of car tariffs to 5% within the next two years, from the current 10%. To ease the pain Bracks calls for additional funds to help shift the industry towards greener vehicles and exports.
We will hear all the usual rubbish about car jobs losses and the like, and not a mention from the rentseekers that more people are employed selling cars, especially imported cars, and that the tariffs drive up the costs to consumers, who seem to have been ignored. There’s talk of a $1 billion green fund: slush fund mid you for the poor car companies, like Toyota to get its snout into, along with its poor cousins, the struggling US giants, Ford and General Motors. There will also be a lot of talk about the threat from nasty China and how the playing field isn’t level. In this story from The Sydney Morning Herald there’s an interest set of comments from a ‘consultant” “(Our) view is that it is correct to preserve the 10% tariff,” said Christopher Hire of Melbourne-based 2ThinkNow, an innovation consultancy, in an email. “China and other competitors mostly have various forms of protection for their car industry, including de facto steel and energy subsidies.”

“Australia needs to keep some manufacturing skills here in Victoria after gutting the broader manufacturing industry,” Mr Hire said. “The automotive industry is one way to retain skills, and also learn from competing nations like Japan.” But commentators like Mr Hire and the Bracks’ report seem to have missed a major change in policy in China in recent days towards taxing cars. China has done the most obvious thing and lifted sales taxes on cars with big engines to make them more costly: without actually saying so, it’s effectively a tax on fuel consumption. It has also cut the tax on smaller-engined cars. China said this week (The Finance Ministry, actually on Wednesday) that the tax on passenger vehicles with engines bigger than 4 litres will be doubled to 40% from 20%, effective September 1. Cars with engines sized from 2 litres up to 4 litres will have to pay a 25% tax, up from the current 15%: the sales tax for cars with engines at or smaller than one litre will drop to 1% from the current 3%, while rates of 5% to 9% for vehicles with other-sized engines remain unchanged. Now that seems to bleedin obvious that you would have thought an Australian politician would have cottoned onto the idea. China is rightly bagged for a lot of things, but taking tough decisions that will hurt car companies larger and small and consumers doesn’t seem to worry them. Changing the sales tax rate is hardly a ‘subsidy’ for cars, as claimed by Mr Hire. Its actually a form of discrimination.  It seems to be such an obvious way to promote the use of small, more fuel efficient cars in Australia. For years Japan had a similar system of taxing cars on their engine size which made it more profitable for the car companies to build vehicles with engines of up to two litres. That’s why Japan has had such an advantage in small, fuel efficient cars for so long. Many people who don’t like climate change and greenery say we should wait until big polluters like China sign up to carbon laws and the like. Does that mean we should reciprocate and follow the Chinese with such a simple idea to start curbing oil consumption and emissions of carbon and other pollutants?Or are the anti greenery mob merely one rule for us and bugger what China does?

Peter Fray

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