We are paying to protect an industry that no longer exists. We see it almost every day in the media; rent-seekers like the motor industries extracting benefits for themselves through political influence and lobbying at the expense of the broader community. It has very little to do with markets.
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 absurd.
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.
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.
To read the other entries in the Lobbyland series please see below:
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
4 responses to “LobbyLand. The used motor vehicle lobby.”
Come on, John, are you really imagining that the current characters in charge have any spare time from their work of producing greater returns for the already wealthy and priviledged to engage in reforming outdated and irrelevant rules and regulations.
They’re far to busy with enriching their mates to be bothered with the actual business of running the country.
It suits the Morrison government, in the absence of any electric vehicle policy to continue this rort. Good secondhand electric vehicles are available overseas right now, and could form part of Australia’s move to renewable technologies.
But no, the Morrison government is the world leader in doing nothing about climate change and as long as they are in government, nothing in this space will change for the better.
Ken … totally agree that in addition to the self-serving lobbying by Australian motor vehicle traders, anther serious issue exists. A disruption to Australia’s fossil fuel supplies will mean this nation’s fuel stores, currently sitting ‘safely’ on the other side of the Pacific in the U.S.A., will likely have to stay there, or more likely be used by the locals. We have about three weeks fuel reserves on shore. In case of supply disruption, we should not be surprised when the U.S.A. ’emergency requisitions’ the lot, in order to ‘save the (their) free world’. Those early adopters who spent so much money to purchase an EV, will probably, at that point be feeling pretty smug with themselves. Unless the LNP government calls on ’emergency powers’ and commandeers EV’s (the technology they savagely derided at not long ago), to replace all the Govt. ICE vehicles siting around with empty fuel tanks. It does beggar belief that a decision to store our nation’s fuel supply, thousands of kilometres away, in another country, was made by this LNP government. Not sure if the Labor opposition would do that much better … but surely, as the ineptitude continues, any alternative is worth a try?
It is interesting how many things still exist, despite that they have outlived their “stated purpose”. Another example is the fringe benefits tax exemption for dual cab utes. This is not really a 100% exemption, but it is treated as though it is and the restrictions are largely just ignored, but given so many of these vehicles (they are not utes or cars by any measure) are driven by “non-tradies”, what happens is that structured properly (salary sacrifice using a novated lease), drivers of these vehicles get the economic equivalent of a tax deduction for 100% of their personal, private vehicle use. This has well and truly outlived its usefulness, but continues to support a massive increase in these vehicles on our roads despite that they are, like SUV’s, gas-guzzlers and along with the huge rise in the numbers of these vehicles on urban roads, responsible for an enormous percentage of the globe’s emissions. Perhaps people (almost exclusively men) would buy these vehicles anyway, but time for a costly and pointless middles-class tax benefit to be removed. It won’t happen though.