Thursday 5 August 2010

using a smokescreen to reduce the smoke, why I think Oz cash for clunkers is the wrong policy

The Australian Government in the lead up to the federal election have announced that owners of pre 1995 cars will receive a $2000 rebate if they purchase a new fuel-efficient vehicle, under a Oz "cash for clunkers" scheme. If the Labor party is re-elected the government will from next January offer a $2000 rebate to car owners manufactured pre January 1995 if they trade them in for a brand-new car meeting fuel-efficient standards. The scheme is proposed to cost $394 million and will be financed by cuts to other climate programs, including reducing $220 million from the solar program.

Ms Gillard said when launching the imitative that it would see nearly 200,000 pre 1995 vehicles removed from the roads as well as reducing carbon emissions by an estimated 1 million tonnes. It is believed that there are approximately 2 million pre 1995 vehicles on our roads. The move is very similar to President Barack Obama's own cash for clunkers subsidies for new cars, which was introduced as a stimulus measure in the USA last year in the middle of the GFC. However this measure was about stimulating the depressed car industry in the US. Tony Abbott opposition leader has correctly pointed out that the US schemes aim was to encourage people to buy locally built cars but resulted in more imported cars being purchased and that in Australia since locally built large cars, such as the Ford Falcon, Holden Commodore and Toyota Aurion, were excluded and that this could result In further job losses in this sector of the industry. Some of the finer details of the scheme include rules covering that people must have owned the pre 1995 vehicle for at least two years. The new vehicle must have minimum greenhouse rating of six or higher and that eligible cars cannot be in the luxury offerings. Any old vehicles traded in under the scheme must be scrapped and under no circumstances are they to be returned to the road.

I think this policy is flawed on a number of grounds and that it is really no more than PR spin, is not required and will do little to achieve the targets it sets out too. I think it is admirable to be taking cars off the road however if the aim is just to replace them with more cars its seems like a pointless exercise, yes there will be carbon emissions reductions but imagine how much if the new cars did not replace the ones removed That would be innovative thinking wouldn’t it? Also It is not clear if the rebate is payable if you choose to forgo the car altogether and utilize public transport some thing that should be included if this silly scheme does see the light of day. I also think that this will not help the balance of trade with a surge in imports adding to the problems of a country that manufactures very little our selves anymore, and the irony that this is an imported idea . I also think that reducing funding for the solar initiative is short-sighted and finally after the debacle that was the insulation scheme I don’t know if the government is even able to run such a scheme.

What do you think? Do you think this is good idea? Leave me a comment your thoughts are always welcome here.

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