Cash for Clunkers #1: "Pink Batts on Wheels"

04/08/10

Labor’s cash for clunkers scheme will blow out to the estimated $1 billion that Minister Kim Carr, when earlier arguing against the scheme, said it would cost because the scheme underestimates the value that has to be put on the vehicles to be scrapped.

The government says it will offer people a $2000 rebate on their pre 1995 trade in if they buy a new car from a select range of mostly imported vehicles.

The government says this would encourage 200,000 to upgrade their cars over four years at a cost to taxpayers of $394 million.

However, the Motor Traders Association of NSW estimates that the government would have to offer a minimum of $3000 per vehicle, according to respected online magazine www.goauto.com.au.

In the same article on March 25 last year industry insiders said the price would have to be nearer $5000 to encourage people to trade their cars. Unless the price is set correctly people will be more likely to sell their car than scrap it.

For example the 1986 Holden Commodores as quoted by Ms Gillard can sell privately for more than $2000 and often up to as much as $3500.

Unless the government’s scrap price meets the trade in price then the scheme will fail or blow out in costs.

Even averaging the difference would see the cost blow to $800 million.

This gels with Mr Carr’s Industry Department’s assessment that the scheme would cost $1bn after accounting for administrative costs.

Mr Carr said of the scheme to www.goauto that:

• “The difficulty is that it is extremely expensive and there are finite resources for government”.

The cost of Ms Gillard’s ill conceived scheme has been massively underestimated. For it to operate the costs will have to double to $800 million.

This scheme has all the hallmarks of the pink batt scheme and the BER.

This is just another example of the waste and mismanagement that has characterised her government.

Ms Gillard has form when it comes to managing these sorts of schemes. Even a cursory examination of the costs associated with the Cash for Clunkers scheme shows it will have to blow out if it is to meet its aims.

It is a cost the economy can ill afford to bare.