In announcing that federal Cabinet will soon consider allowing Australians to import new cars directly from overseas, federal Assistant Infrastructure Minister Jamie Briggs allowed himself a little rhetorical flourish on Thursday: "Why regulate if you're now part of a global regime?" Those salivating at the prospect of being able to buy a Mercedes ML350 in Japan for $20,000 less than they might expect to pay at an authorised dealership in Australia would agree completely. Prospective Porsche 911 buyers will be even more overjoyed: in overseas markets, these sports cars can be bought at prices $50,000 less than official dealers charge in Australia.
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With Ford, Toyota, and General Motors shortly to wind up their manufacturing operations in Victoria and South Australia, the introduction of parallel import laws was always a distinct possibility. Nonetheless, many in the motor trade have been surprised, and annoyed, by Mr Briggs's announcement. A spokesman for Porsche Australia said the company was "vehemently opposed" to changes in import rules, as this would allow cars with questionable ownership and service histories into Australia and jeopardise the resale values of existing cars. (The deregulation proposal, which could come in as soon as next year, will also allow cars that are less than a year old and have fewer than 4000km on the odometer to be imported by private buyers, but not older vehicles). The Motor Traders' Association warned that deregulation would compromise warranty arrangements and vehicle safety, and argued that the potential savings may prove illusory since Australia's vehicle market was one of the world's "most competitive".
The number of people willing to go to the trouble of privately importing a vehicle from overseas may in fact be quite small. Common or garden-variety cars in different overseas markets tend not to vary significantly in price, and most new-car shoppers prefer to test-drive vehicles before parting with their money. They would also be put off by the expense and worry of shipping a car to Australia – and by doubts over possible warranty claims. However, parallel importation will hold no fears for Australians who are residents of, or frequent travellers to, Thailand, Japan or other right-drive countries, and who hanker to own a luxury or sports cars, particularly if it's sharply priced.
Dealers and importers frequently cite the federal government's luxury car tax (and the GST) as the reason why prestige vehicles are more expensive here than they are in comparable markets like the US or Japan; they have never made secret their desire to have it abolished. Indeed, they have redoubled their efforts since Toyota, Ford and General Motors announced their departures. Ironically, were the LCT to be abolished, there really would be an incentive for private buyers to shop overseas.
Yet, even on vehicles which are below the LCT threshold, Australian new-car buyers frequently pay over the odds. A 2013 Deutsche Bank global price survey found that the list price for a standard Volkswagen Golf 2.0 TDI sedan in Melbourne was $US37,500. In New York, the same vehicle cost $26,000, and in New Delhi $18,500. Currency, tax and shipping variances may explain some of the differential, but certainly not all. As it happens, the same survey also identified significant premiums in the prices charged to Australians for movie tickets, iPhones, Levis jeans, common cold medicines and other consumer durables.
That Australian consumers suffer from the unjustified price discrimination of companies like Apple is generally not contested. They're frequently at the mercy of Australian-listed companies operating in monopoly or duopoly markets, too, such as healthcare, telecommunications, power and rail. The review of competition policy chaired by Ian Harper, and presented to the Abbott government earlier this month, promises some relief, however. It has recommended the removal of barrier to competition in fields ranging from digital technology all the way to taxis and pharmacies.
Private vested interests, however, are already pleading for exemption from some of the proposals put forward by Professor Harper, despite conclusive evidence that competition reform is a key driver of economic growth, opportunity and prosperity. With technological change and globalisation making the removal of anti-competitive regulations all but inevitable, something Mr Briggs alluded to this week, government needs to place the interests of the public above those of vested interests. The motor trade would be a good place to start.