JOHN MENADUE. We are paying to protect an industry that no longer exists.

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.

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7 Responses to JOHN MENADUE. We are paying to protect an industry that no longer exists.

  1. David B Gillett says:

    This is a topic which should get lots of attention … thanks for raising it John … if the cost of cars could be reduced by 5k to 10k say on average (second hand and new) billions of disposable income would be freed for saving or other buys instead of money going to the car industry intermediaries … dealerships and the like. We have the worst of outcomes with no local industry and high import prices.
    The restrictions on second hand car imports only supports high second hand and new car prices. I wrote to Minister P Fletcher about this and the response was environmental and safety concerns .. obviously not aware of dieselgate and Takata airbags!! Gov action should benefit the buyer not the intermediaries

  2. Nigel Drake says:

    John, the kind of behaviours which you describe here have been human normality for as long as history has been recorded.
    They are a part of our everyday lives and, without greater control and oversight, will continue to be so.
    Existing in every stratum of society, they pervade the essence of liberalism – that ‘dog-eat-dog’ philosophy so beloved of those who seek wealth and power for their own sake; “knowing the price of everything but the value of nothing”.

  3. Evan Hadkins says:

    From an ecological perspective, isn’t this a good thing?

    • Nigel Drake says:

      Good question, but I believe that the answer is “No.”
      The ecological cost of manufacturing new cars etc. outweighs the polluting effects of marginally older vehicles.

    • John O'Callaghan says:

      Not if the cars are electric!

    • Chris says:

      Manufacturing a new car is a very energy-intensive process though, so keeping serviceable second-hand cars on the road is highly desirable (excepting old V8s etc, however the Japanese fleet tends to favour smaller engine sizes anyway).

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