We see it almost every day in the media; rent-seekers extracting benefits for themselves through political influence and lobbying at the expense of the broader community. It has very little to do with markets.
It is about political favours for the powerful. No wonder that more and more people around the world are concluding that the economic and political system works for the influential and powerful insiders and not for the general community.
The Australian Motor Industry Federation and the Federal Chamber of Automotive Industries have successfully lobbied the Australian government to continue restrictions on the imports of second-hand vehicles.
The Turnbull government accepted many of the recommendations of the Harper Review into competition policy, but it decided to continue Australia’s archaic system where there is a $12,000 specific customs duty on second-hand vehicles. Retailers are further restricted because they can only import a single second-hand vehicles at a time.
The Productivity Commission recommended that Australia should progressively relax these ‘parallel import restrictions’ and scrap the $12,000 excise duty straight away. It pointed out that New Zealand abolished these sorts of restrictions on importation of second-hand cars 25 years ago.
A large number of quality used cars could be imported for example from Japan where the ‘Sharken’ system stipulates that when the registration of a new car expires after five years, it must be rigorously tested at that time and every three years thereafter. To support their car manufacturers, Japanese governments encourage Japanese consumers to buy new cars and sell their old cars. That is what Sharken is designed to do. As a result there are a large number of quality second-hand cars on the market in Japan. But it is very hard for Australian retailers and consumers to access this market.
Australia’s restrictions on used car imports might have been justified to some degree to support our motor vehicle production industry. But the closure of our car manufacturing industry makes a continued restriction on second-hand vehicles even less defensible.
The rent-seekers tell us that these import restrictions are necessary for safety and emission control reasons. But our own safety controls do address these issues. Furthermore, the emissions standards in many overseas vehicle manufacturing countries are more rigorous that ours.
In short, the actions of the Australian Motor Industry Federation and the Federal Chamber of Automotive Industries in opposing liberalization of second-hand vehicle imports is a clear example of the power of rent-seekers to extract wealth from consumers. And they are getting away with it. As a result, consumers will have to continue to pay a lot more for used cars and with much less choice.
John Menadue is the Founder and Editor in Chief of Pearls and Irritations. He was formerly Secretary of the Department of Prime Minister and Cabinet under Gough Whitlam and Malcolm Fraser, Ambassador to Japan, Secretary of the Department of Immigration and CEO of Qantas.
Comments
3 responses to “JOHN MENADUE. We are paying to protect an industry that no longer exists( A repost)”
Far more important is to update our vehicle emissions standards both of pollutant NOx, HC and CO as well as CO2 – which is tied to fuel consumption. This has been stymied by the manufacturers and dealers here and in US as it would require them to sell more smaller less profitable vehicles. This is because the standards work by averaging out emissions over the total of sales.
Also an immediate ban on new diesel vehicles under at least 5 tonnes GVM.
The suggested greater access to hard Japanese vehicles is an excellent idea that’s been around for decades. Good luck with it though.
Thank you John for a well written piece and an introduction into an area in which I should be giving more careful consideration. Mark what a great idea.
I wonder if lowering that duty would increase revenue from used car imports. Today, importing a used car makes no economic sense so it is very rare and only a few car enthusiasts would do it. If the duty was lowered to $1000, or $2000, there might be hundreds of thousands people driving imported used cars and it could generate hundreds of millions of dollars in revenue.
Ideally there would be no duty but a lower duty would be better than $12,000.