JOHN MENADUE. As PM, Bill Shorten could help offer cheaper cars without any cost to the budget

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. We are paying a large price for protecting an industry that no longer exists,our auto manufacturing sector

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.

Bill Shorten could quickly fix the problem  but he will need to ignore the cries of the rent seekers,the Australian Motor Industry Federation and the Federal Chamber of Automotive Industries. They don’t believe in markets. They are  about lobbying governments for political favours.


John Menadue is the publisher of Pearls & Irritations. He has had a distinguished career both in the private sector and in the Public Service.

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4 Responses to JOHN MENADUE. As PM, Bill Shorten could help offer cheaper cars without any cost to the budget

  1. Avatar Rob Stewart says:

    Rent seekers, for sure. But John, I might be incorrect about this, but doesn’t the Government still retain import duties on new cars as well, also to protect a car manufacturing industry that no longer exists? Adding thousands of dollars to new car prices.

    Good luck getting the Government to relax imposts on second hand vehicles when they’re still retaining duties on new vehicles.

    Of course those (duty) dollars go to the Government. When Shorten gets the big gig maybe he should get his erstwhile Treasurer Mr Bowen to look into the vehicle import duty. I mean Chris is so erudite, so wonderfully meticulous in ripping to shreds existing policy inequities in areas like superannuation and negative gearing. But I haven’t heard him say much about the farcical situation with vehicle import duties – perhaps I missed it. But of course scrapping import duties would cost revenue to the Budget, Mr Bowen’s other big ideas will raise revenue, or at least save on outlays. Perhaps Mr Bowen’s relentless pursuit of equity and fairness and good old economic sense is tempered by how it impacts Treasury coffers. Just saying……

  2. Avatar Ken Dyer says:

    The car yards are full of overpriced second hand vehicles.

    A more effective and climate friendly solution would be to eliminate import duty on electric vehicles, and to encourage online purchasing of electric vehicles, an example of which is about to be introduced by Tesla, thereby loosening the monopolistic practices of the car dealer network, and the industry organisations.

  3. Avatar David B Gillett says:

    I repeat my comment from your last posting on this subject John and thanks for raising it again … this is just another sad case of government thinking their role is to protect the intermediaries to the detriment of consumers and ignore the wider benefits to consumers (ie voters!!) and assuming that most people wont notice.

    “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”

  4. Avatar Mark Freeman says:

    Good idea John and one brought up periodically. Even better is to allow these import sales via non dealers via internet sellers as Tesla is proposing. Many customers would live the chance to buy cars without having to deal with car dealers.

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