Are our cars about to get much cheaper?

Idealogically the Harper Review will encourage more competition across broad swathes of the economy, if the politicians let it through.

The government could make cars a whole lot cheaper with one simple act. So why won't they do it? Source: Supplied

A NEW report has revealed how the federal government could make cars a whole lot cheaper with one simple act.

The Harper Review, which examined Australia's competition policies, is the latest piece of research to recommended the removal of restrictions on parallel imports on second-hand cars.

The removal of the restrictions would mean that cars coming into the Australian market would no longer be controlled by multinational motor companies, which would allow consumers to buy vehicles from independent dealers. The likely result is new and used cars would flood the market, making them a whole lot cheaper for Australian consumers.

The restrictions against parallel imports were originally implemented to protect jobs and local industry. However, with the domestic car manufacturing industry set to cease production in 2017, many believe there is no reason to leave the restrictions in place.

The Harper Review, which was released on Tuesday, is not the first to endorse the idea and is actually the latest in a string of like-minded recommendations, including the 2014 Productivity Commission's review.

At the moment, a consumer seeking to buy a new car must approach a dealer, which then buys a car from a national distributor that sources cars from global headquarters or overseas factories. The second-hand car trade within Australia exists solely from this arrangement.

Those advocating the removal say we should follow in the footsteps of New Zealand, which did away with the regulation 27 years ago. Imported Motor Vehicle Industry Association of New Zealand chief executive David Vinsen believes it is the best course of action.

Speaking to ABC radio this morning, he was adamant that allowing parallel imports would benefit the Australian public.

"Australians are paying too much for cars because of unnecessary protections which were originally designed to protect the multinational manufacturers," he said.

Mr Vinsen said the change in policy would mean cheaper prices and more choice for consumers.

Luxury cars are subject to considerable taxes in Australia. Source: News Corp Australia

The regulatory regime that governs importing luxury cars also makes these vehicles far more expensive in Australia than in many of our overseas counterparts.

We pay more for brands like BMW, Mercedes-Benz, Land Rover and Ferrari than we otherwise would, due to strict regulations and taxes.

The US, for example, has car prices well below Australia. A Porsche 911 Carrera S sells for roughly $180,000 in Australia while costing $A105,000 in the US.

Conversely, when Holden exported its Commodore SS to the US as the Pontiac G8 GT in 2013, it cost about $10,000 less than the $55,290 price tag in Australia.

The 2014 Review of the Motor Vehicle Standards Act said "if restrictions were removed [on parallel imports], the price of a Mercedes-Benz C-Class would fall by between $20,000 and $25,000 in Australia."

The bottom line is Australians are getting less bang for their buck with motor vehicles. But despite repeated calls for parallel imports to be allowed, the government and some within the industry don't want to see it happen.

New Zealand lifted restrictions 27 years ago, but the Australian Government is reluctant to follow suit. Source: AP

In the wake of the Productivity Commission's review, the Australian Government said the country would not become "a dumping ground" for used cars.

People opposed to parallel imports say the practice could expose Australians to unsafe vehicles, criminal activity and less consumer protection.

Federal Chamber of Automotive Industries chief executive officer Tony Webber says opening our borders would severely diminish safety standards and vehicle quality.

While many people uphold New Zealand as a perfect example of why we should remove the restrictions, he says the economics is not so definitive.

"We have done independent analysis that shows used car prices are more expensive in New Zealand than they are in Australia," he told ABC Radio.

His main concern is the added difficulty in maintenance, warranties and potential recalls that could arise from independent imports.

Mr Webber said the major car companies' position was about "protecting the consumer."

But James Goodwin, the acting chief executive of the Australian Automobile Association completely rejects the notion, calling the growing pressure a "wake up call" for car brands and dealers.

The AAA is not involved in lobbying for the removal of the restrictions but said the increased price Australians pay for many cars is "unjust."

"We are confident that there would be no decline in safety," he told news.com.au.

"Few people in Australia can say they are absolutely happy with the car buying experience in Australia ... and we need to ensure there is strong competition in the marketplace," he said.

The Toyota FT-86 II concept car is displayed on the booth of Japanese car maker Toyota during a preparation day before the opening of the international car show IAA in Frankfurt, western Germany. Source: AFP

Despite the finding from the Harper Review, the government has made no indication it will act upon the suggestion.

"It is my understanding that used vehicles is off the agenda off the government," Mr Webber said. "The reality is, if you were to introduce a scheme, you would need a whole raft of compliance to make it work … and I don't see that happening in the current environment."

However, with the disappearance of domestic car manufacturing, the role of the parallel import restrictions is likely to be viewed with increasing scepticism by future governments.