Oz Panel: Allow Used-Car Imports, Drop New-Car Tariff

The Australian Productivity Commission calls for an end to restrictions on imports of secondhand vehicles when local vehicle production ends in 2017.

The commission’s final report on its inquiry into Australia’s auto-manufacturing industry says allowing the secondhand imports would deliver lower prices, improved features and greater choice for vehicle buyers.

The used imports initially should be limited to vehicles no older than five years and from countries that have vehicle-design standards consistent with those recognized by Australia, it says.

At first glance, Industry Minister Ian Macfarlane appears to reject this. “The government has no intention of allowing Australia to become the dumping ground for other countries’ old secondhand vehicles,” he says in a statement.

But while Macfarlane says no decision has been taken to reduce the restrictions, he leaves the door open: “This issue will be considered in detail as part of the government’s review of the Motor Vehicle Standards Act 1989, mindful of the need to maintain the highest safeguards for consumers and the impact of any changes on the domestic car retail market.”

The Federal Chamber of Automotive Industries, perhaps mindful that “never” is a very short time in a politician’s lexicon, welcomes the “no-dumping” assertion, but indicates it will stay on the alert.

“We will continue to engage with the government about this matter,” FCAI CEO Tony Weber says in a statement. “This includes through our response to the Motor Vehicle Standards Act review.”

Webber says used imports are not needed, because Australia has the world’s most competitive new-car market and this competition brings with it the latest environmental and safety technologies for consumers.

“With the significant year-on-year improvements in vehicle technology, it goes without saying that a newer motor-vehicle fleet is better for consumers as newer cars are safer, more environmentally friendly and more reliable,” he says.

Regarding imports of new vehicles, the Productivity Commission finds no justification for maintaining the 5% import tariff once local manufacturing ends.

“There is a strong in-principle argument for the removal of the tariff once Ford, GM Holden and Toyota cease manufacturing in Australia,” it says. “However, the commission notes the effect on government revenue.”

The Australian government expects to collect A$920 million ($856.8 million) from tariffs on passenger vehicles in 2013-2014. The government will consider the effects of lifting the tariff in its report on tax policy, the commission notes.

Job Losses High, But Re-Employment Seen Likely

Addressing the broader effects of the end of local vehicle production, the commission estimates up to 40,000 people employed by the automakers and their suppliers may lose their jobs, but says this does not justify special assistance for them.

“The labor market in Australia is dynamic – many employees lose their jobs in any one year and many people who are jobless are hired,” it says. “The provision of special adjustment assistance to retrenched automotive manufacturing employees, at a level that exceeds the assistance generally available to other jobseekers, is likely to be unwarranted and relatively costly and also raises equity issues.”

The report calls for an end to the Automotive Transformation Scheme once local manufacturing ends. Under the government program, parts-manufacturing firms are due to receive more than A$300 million ($279.4 million) in industry-specific assistance between 2014 and 2017.

Macfarlane says the program will continue until the end of 2017 at the level of funding already announced. “This will help secure local manufacturing and give automotive businesses and workers time to adapt in the lead-up to the closure of manufacturing by Ford, Holden and Toyota,” he says.

The Productivity Commission opposes “extending assistance beyond that already committed, or introducing new assistance programs that would advantage component manufacturers ahead of other firms that face adjustment pressures.”