Cash for Clunkers: “Pink Batts on Wheels” and the destruction of value
17/08/10
Julia Gillard’s Cash for Clunkers scheme would destroy $760 million of the nation’s wealth by failing to allow vehicles to be driven to the end of their useful life.
This ‘destruction of value’ is almost twice the value of the $400 million in rebates being offered by Labor to encourage people to trade in their cars.
Each year, about 5% of the Australian car fleet is scrapped. That means that, of the 200,000 cars targeted by Julia Gillard’s scheme, 10,000 would automatically be sent to the scrap heap regardless.
That leaves 190,000 cars that would normally be resold – but which, under Labor’s proposal, would have to be scrapped and crushed even though they had a productive life left in them.
When a car is traded in Australia, it is normally marked up by $2,000 for resale. Thus a car traded in for $2,000 would typically be marked up by another $2,000 and then put in a second hand yard for $4,000.
This effectively means that 190,000 cars with a minimum value of $4,000 each that still potentially have a productive life would be scrapped. In other words, $760 million of the nation’s productive wealth has immediately been destroyed.
Under Labor, what we are seeing is Australia using part of its productive energy to destroy productive assets.
This is an extraordinary policy from Ms Gillard. It is a policy that effectively advocates, sponsors and pays for the destruction of a nation’s wealth.
The irony is that Labor purports to look after battlers yet would be depriving these very people of affordable cars. Far from looking after them, Labor is denying them access to the personal freedom that a car offers.
Furthermore, because all these cars would have to be crushed and sold as scrap metal, then the market in second hand parts for older cars on which battlers, first time buyers and students rely in order to keep their cars running would also dry up.
That is hardly fair.
Yet again we are seeing the results of a policy hastily conceived; that will blow out in cost; that is open to rorting; and that will impact on those least able to afford it.
This scheme is truly ‘Pink Batts on Wheels’.
It is a dud and should be sent to the wreckers.