The Productivity Commission has encouraged the Federal Government to remove barriers preventing the importation of used cars, claiming it will benefit consumers by increasing choice and lowering vehicle prices.
The Commission’s intermediary position paper, which also recommends the Government stop providing financial assistance to the Australian automotive industry by 2020, claims restrictions on the importation of second-hand vehicles – particularly the barriers to large-scale importation of such vehicles – reduce competition in the market. It says the policy rationale for prohibiting the large-scale importation of second-hand vehicles in Australia is “weak”.
“The Commission expects that, in the long term, the removal of unjustified restrictions to the large-scale importation of second-hand vehicles would benefit the community as a whole,” the paper finds.
The removal or relaxation of used vehicle import restrictions would most dramatically affect the prices of luxury and sports cars, which often cost twice or three times as much in Australia as they do overseas, but would cost significantly less under the Commission’s proposal.
As CarAdvice highlighted last year, a brand-new Porsche 911 Carrera coupe costs from $206,500 in Australia, but as little as US$84,300 ($96,400) in the US.
Those in favour of retaining barriers to the importation of second-hand claim relaxing the laws would introduce uncertainty about the safety of vehicles being brought to Australia, as well as greatly increase the risk of stolen vehicles entering the used car market.
But the Commission points to New Zealand as an example of a country where the importation of second-hand cars “may have put downward pressure on second-hand car prices and increased consumer choice” without decreasing the safety standard of the vehicles available to consumers.
“All new and used vehicles entering New Zealand must be certified as compliant with relevant approved vehicle standards before they can be registered for road use,” the paper explains.
It says imported used cars are extremely popular in New Zealand – in 2002, more than two-thirds of all vehicle registrations were used imports.
While supportive of relaxing used import barriers, the Commission says the industry would still need to be regulated and monitored closely.
“Careful attention should be directed to ensuring that consumer protection and community safety, and environmental performance standards are maintained.
“These concerns are best dealt with directly, through regulatory standards applicable to all vehicles sold in Australia.”
The Commission is seeking further information on the potential effects of removing restrictions before such a policy change is implemented.