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					             COMMONWEALTH OF AUSTRALIA



   Official Committee Hansard

                  SENATE
RURAL AND REGIONAL AFFAIRS AND TRANSPORT
         LEGISLATION COMMITTEE


  Reference: Motor Vehicle Standards Amendment Bill 2001

          MONDAY, 24 SEPTEMBER 2001
                         CANBERRA




                   BY AUTHORITY OF THE SENATE
                                                               WITNESSES

CUTHBERT, Mr William (Private capacity) ..................................................................... 93

DEAN, Mr Craig, Managing Director, Crossover Car Conversions ................................ 92

DIER, Mr Kym (Private capacity) ....................................................................................... 90

GASCOYNE, Mr Alan Raymond, Director Certification, Vehicle Safety Standards,
Department of Transport and Regional Services ............................................................. 109

KRANZ, Mr Stephen Gerard, Manager, Lone Star Vehicle Imports .............................. 75

LYNCH, Mr Brian Brendan, Managing Director, Trucks Plus........................................ 81

POTTS, Mr William Douglass Ridley, Director and Senior Consulting Engineer,
Australian Technology Pty Ltd............................................................................................. 75

ROBERTSON, Mr Peter, Assistant Secretary, Vehicle Safety Standards, Department of
Transport and Regional Services ....................................................................................... 109

VANSTONE, Mr John William, Secretary, Vehicle Importers and Converters
Association of Australia......................................................................................................... 65

WALL, Mr Garry, General Manager, Manufacturing, Engineering and Construction
Division, Department of Industry, Science and Resources .............................................. 100

YAP, Mr Hian, Manager, Automotive Policy Section, Department of Industry, Science
and Resources ...................................................................................................................... 100
Monday, 24 September 2001         SENATE—Legislation                            RRA&T 63

                                         SENATE
       RURAL AND REGIONAL AFFAIRS AND TRANSPORT LEGISLATION
                                      COMMITTEE
                               Monday, 24 September 2001

Members: Senator Crane (Chair), Senator Forshaw (Deputy Chair), Senators Cherry, Ferris,
McGauran and Mackay
Substitute members: Senator Forshaw for Senator Mackay
Participating members: Senators Abetz, Bartlett, Boswell, Brown, Buckland, Calvert,
Chapman, Coonan, Crossin, Denman, Eggleston, Faulkner, Ferguson, Gibson, Harradine,
Harris, Hutchins, Knowles, Lightfoot, Mason, McKiernan, McLucas, Sandy Macdonald,
Murphy, O'Brien, Payne, Schacht, Tchen, Tierney and Watson
Senators in attendance: Senators Cherry, Crane, Ferris, Forshaw, O’Brien and Ridgeway

Terms of reference for the inquiry:
  Motor Vehicle Standards Amendment Bill 2001


Committee met at 8.32 a.m.
   CHAIR—I declare this public hearing of the Senate Rural and Regional Affairs and
Transport Legislation Committee open. The committee is meeting this morning to consider
the Motor Vehicle Standards Amendment Bill 2001. I commented on the origins and
intentions of the bill on Thursday and will not repeat those comments today. Since Thursday
the committee has received a further four submissions from the following: Carramar
Enterprises, Australian Technology Pty Ltd Consulting Engineers, B.B. Ash Pty Ltd and
Lewis Insurance Services Pty Ltd. The committee has authorised those submissions for
publication.
   The hearings are public and open to all. A Hansard transcript of the proceedings will be
available in hard copy from the committee secretariat next week or can be accessed via the
Parliament House Internet homepage. The committee has authorised the recording,
broadcasting and rebroadcasting of these proceedings in accordance with the rules contained
in the order of the Senate of 23 August 1990 concerning broadcast of committee proceedings.
   Before we commence our hearing this morning, with respect to taking evidence let me
indicate that all witnesses are protected by parliamentary privilege with respect to
submissions made to the committee and evidence given before it. Parliamentary privilege
means special rights and immunities attached to parliament or its members and others
necessary for the discharge of functions of the parliament without obstruction and fear of
prosecution. Any act by any person which may operate to the disadvantage of a witness on
account of evidence given by him or her before the Senate or any committee of the Senate is
treated as a breach of privilege.
   While the committee prefers to hear all evidence in public, if the committee accedes to
such a request the committee will take evidence in camera and record that evidence. Should
the committee take evidence in this manner, I remind the committee and those present that it


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RRA&T 64                           SENATE—Legislation            Monday, 24 September 2001

is within the power of the committee at a later date to publish or present all or part of that
evidence to the Senate. The Senate also has the power to order production and/or publication
of such evidence. I should add that any decision regarding publication of in camera evidence
or confidential submissions would not be taken by the committee without prior reference to
the persons whose evidence the committee may consider publishing.
   There have been a couple of small changes to the program: at 10.15 a.m. Mr Kym Dier will
be given five minutes in which to make a statement; and the Department of Industry, Science
and Resources and Mr Bill Cuthbert will swap positions on the program.




                 RURAL AND REGIONAL AFFAIRS AND TRANSPORT
Monday, 24 September 2001           SENATE—Legislation                               RRA&T 65



[8.35 a.m.]
VANSTONE, Mr John William, Secretary, Vehicle Importers and Converters
Association of Australia
    CHAIR—Welcome. I now invite you to make an opening statement.
    Mr Vanstone—Thank you for the opportunity to speak. It is VICAA’s view that both of
the ministers have provided a clear path for small business in the announcement; however,
after 16 months of a two-year transition period, genuine operators have no clear direction or
details. The impact of the announcement of 8 May has been, for genuine operators, mostly
closure—if not, only survival. VICAA’s membership has been impacted dramatically. Prior to
the announcement we had 300 members; today we have 50 survivors.
    For the last 10 years VICAA has been meeting with various departments to help to try and
clean up the industry. Compliance plate forgeries, multiple application scams, noncompliance
of vehicles: we believe all these things have been raised with no action. Many offers from
VICAA to help in as many ways as possible to clean up the industry have, again, met with no
action. We have been involved in the consulting process since 8 May, suggesting many simple
solutions to solve the issues that have been made complex. These complexities have grown
because of the introduction of so-called ‘experts’, who have no expertise whatsoever in our
industry.
    Agreed with by most in parliament, whether government or opposition, was the false
information about huge losses suffered by the multinationals because of our one per cent of
the market. Thirty-five per cent of the market is supplied from Australian plants and 64 per
cent by imports by multinationals, and I remind the committee that we represent one per cent.
The explanation of the drop for the plants is pretty simple as far as we are concerned: it is the
64 per cent of imports that have affected them and not us. No-one in this place seems to have
realised that our one per cent is not even in the same marketplace, so we do not even accept
the one per cent.
    Australian motorists who wish to own a typical low volume car like a Transam or a dual
wheeled, dual cab pick-up are not even interested in a conventional means of transport, and I
would imagine that the senators would know why. The answer again is simple: they already
own a conventional car, and the other car is their second choice. Most of these motorists who
are our customers are unique in themselves—they choose a second mode of transport because
it is something different, it is unique, it has special features. What no-one seems to recognise
is that in a high percentage of the cases it is just a dream: someone has dreamed about having
a car and they have never been able to afford it until later on in life. We fill this void and we
ask the senators this: is it fair that Australians are going to be deprived of this void? Is it
justice for small business that we have been granted life of model and then to have it taken
away? Full volume is unable to provide the weird and wonderfuls that we provide. An
example of this is the Chev Holden Suburban that was brought out full volume a few years
back. They have dropped that vehicle now because there are no car sales. Yet prior to that,
when they did their investigation, they saw that we low volume people were providing lots of
vehicles—but lots for us is 25; it is not thousands.
    With this treatment of low volume operators—arguing nonsenses—and in consideration of
what we have been through in the last 10 years, we agree with the intent of the legislation and
recommend that the legislation be passed immediately to allow CPAs to move forward.



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However, we suggest that VICAA will never—and I emphasise never—sign off on the current
regulations, and we ask that the Senate move an appropriate amendment.
   Just to touch on stakeholders at the moment: the impact of this legislation and regulation
from our point of view has no impact whatsoever on full volume. I do not know any full vol-
ume manufacturer that is a CPA holder, and that is what this legislation and regulation is
about. There have been a lot of arguments about in-service vehicles—again, I suggest to you
that there is no impact because they are not CPA holders. The only impact of this legislation
and regulation is on us—compliance plate approval holders. We are the only ones who have
anything to lose.
   I have been coming to this place on behalf of VICAA for two years now and everybody
seems to duck and weave issues. To me, there is one key issue to the whole argument and it is
called a Toyota Surf. Everyone agrees when you mention this that the Toyota Surf is the
problem, whether it is increasing numbers, brand name protection or multiple application
scams. This issue was dealt with very seriously in January 2000 at a meeting with the industry
and department. VICAA was asked to give away the diesel options with the offer of continue
of life of model. VICAA conducted an Australia wide survey and took this offer as genuine.
VICAA revisited the department two weeks later and reported, regrettably, that we would take
up the offer, and this would be the end of all of the issues pertaining to the review and would
solve most of the government’s problems—only to face a backflip.
   Our members, satisfied in most cases that they had lost half of their core business by
agreeing to this, realising that their 10-year plan could be sustained, felt this would solve the
majority of the government’s problems. We were wrong. The next thing that happened to us
was that, when the legislation and regulation came out, we lost life of model as well. So no
matter how much forward planning we had put into our businesses, it was all out the door the
day the announcement was made. The impact on small business is closure.
   Further to that—and things became more involved in a meeting with Senator Heffernan in
January 2000—it was alleged that there were only 100 CPAs in Australia and the impact was
minimal. Again, the government had been fed misleading information, that it was an
overreaction to multiple applications and potential numbers. We see it as a sledgehammer to a
walnut attitude. VICAA again conducted, at the request of Senator Heffernan, an Australia
wide survey and reported that there were 1,360 CPAs listed, comprising 2,500 approvals. If
the numbers were out of control, why were there not 34,000 vehicles coming into the
country? Thirty-four thousand is 1,360 multiplied by 25. Again, the answer is simple: there is
no market for them. The market is at saturation point at the moment. There are only 17,000
coming in at the moment. It is not 34,000, because there are not that many people who want
those cars. The second interesting thing that came out of our survey was that 50 per cent of
the CPAs were non-existent—and this is a very important part of the whole scenario which we
will get to later. Fifty per cent were not interested. How did we conduct this survey? We rang
every CPA in Australia.
   VICAA could demonstrate many more examples of red herrings that have been dealt with
in this extended period of time, which have gone on to cripple most while these delays have
continued. Backyard operators have been allowed to continue and we believe this is unfair.
We are competing against backyarders today and have been since 8 May. Do senators realise
that genuine CPA operators pay rent, tax, superannuation, council rates, licence fees, both
public and product insurance, wages, GST, WorkCover, water rates, environment permit fees,
warranties—let alone we believe that we compliance the cars to the requirements? We see
vehicles that do not have new tyres, seatbelts and filters. Is this just? We would not have a


                  RURAL AND REGIONAL AFFAIRS AND TRANSPORT
Monday, 24 September 2001            SENATE—Legislation                               RRA&T 67

problem with one backyard operator if he were competing under the same conditions as us,
genuine operators. It is being suggested that the one-year extension be given to all of the
backyarders who have this commercial advantage. A genuine operator will not be able to
survive if this happens. In fact, VICAA recommends that if backyard operators are included in
the extension to the transition period then do not have one. We do not want an extension to the
transition period if it is across the board.
   The solutions to all of these problems, in our view, are simple. They are: that a two-year
extension be given to companies who registered for RAWS prior to 8 May; that ISO 9000
should work alone; that a monitoring group be developed for more appropriate measures to
deal with issues outside of ISO, and that eligibility be put more proportionately for small
business. In principle VICAA has no problems with MA category. We think it could be made
simpler and less subjective by just stating that all coupés, convertibles and pillarless vehicles
should be eligible and meet two out of the four criteria. For all other categories we do not be-
lieve that there is any justification for anything else but a simple statement: all full volume
and variants of full volume are ineligible.
   At a meeting where eligibility was discussed 2½ years ago, our industry was shocked to
hear, ‘If it looks like a camel but it is an elephant, it ain’t eligible.’ We reject this. We would
like it to be fairly simple, and that is—I repeat—if it is not full volume or any variant it should
be eligible. In our view, the scenario that we have at the moment in which a dual cabbed, dual
wheeled Chev pickup is not eligible and that a vehicle similar to a Holden ute is eligible is
absolutely back to front. Two out of four, we have been told, in one year’s time could become
three out of four. Let me say to you that, without a shadow of a doubt if that happens after the
review in 12 months, we are finished.
   The criteria are subjective. There are other people who have talked about TAFE courses.
We cannot rationalise this decision and we think it is nonsense that there are TAFE courses.
We, through the Victorian chamber, did a survey two weeks ago and we cannot find a TAFE
course for low volume. I do not know whether senators are aware that people like me are not
only panel beaters but spray painters, airconditioner technicians, auto-electricians, motor
mechanics, bodybuilders and have a whole array of other specialist skills. I would suggest to
you that you could get the best A-grade mechanic and put him in my workshop with a
Corvette in front of him and he would be lost within five minutes.
   There has also been a lot of talk about spares and availability of spares. VICAA has, for
three years now, had a 1800 number and a plate is put on all of the vehicles and we get regular
phone calls about those things. We did that to protect the second and third generation owners.
We believe that this is under control. We are satisfied, by the number of calls and inquiries
that we get, that there is no justification in this.
   We want to specifically highlight the repeated cost to RAWS. Apart from all the other
issues we have spoken about before, this impact is catastrophic. I am a compliance plate
holder and I will use myself as an example. I have 17 approvals and it has cost me $580,000
to gain my approvals. Three of those 17 are not eligible under the new RAWS and it will cost
me approximately half a million dollars to get those 14 vehicles back. I am not alone. I could
name hundreds who are in the same boat as me. I cannot rationalise how I could have an
approval for life of model and be told, ‘No worries Jack, just apply for them again.’ I cannot
rationalise that statement.
   We do not make a lot of money in low volume. In fact, the position is that people are under
the wrong impression—that we make a fortune out of complying cars. Let me remind you of
what I said earlier and that is that we are CPAs; we are not car dealers. We do not sell cars, we


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comply cars. Our profit margins per unit is $1,000. Two years ago, prior to the announcement,
a normal CPA would have made $50,000 because they had two categories and they had a limit
of 25 cars. How do we run our small business? One of the things that no one has ever
discussed is that I have return customers. I have had return customers over 10 years who keep
coming back wanting to upgrade their Transem, their Corvette, their Cadillac, their Supra.
What is going to happen to these people if we all shut down? I think the damage to the
customers with this announcement is just horrific as well.
   In closing I would like to remind you that we are of the view that the minister has provided
us with a clear path. We have attempted to take that clear path but, with delays over the last 16
months of the two-year transition, we believe that genuine operators have no clear direction or
detail. We agree with the intent of the legislation and recommend that the legislation be
passed immediately to allow CPAs to move forward. However, we remind you that VICAA
will not sign off on the regulations and we ask the Senate to move an amendment so this can-
not happen.
   CHAIR—Can I just make a point that the legislation and the regulations are dealt with
separately. Do you understand that?
   Mr Vanstone—Yes.
   CHAIR—Once the regulations are presented to the Senate we can only accept or reject
them; we cannot amend them. If there are going to be any changes to the regulations that has
to be done before they come into the Senate.
   Mr Vanstone—Sure.
   Senator FORSHAW—You made a statement earlier that you had 300 members but the
number is now down to 50. What has happened there? Have they gone out of business?
   Mr Vanstone—Yes. Fred Sullivan is a pretty good example. He has been a member of
VICAA since 1992. He has been on the committee of management since 1992. He was vice-
president for two years, became national president for one year and currently is our immediate
past president. Fred is shutting his doors on 8 May. He has already moved out of his multi-
complex factory and downsized because the impact of low volume is so horrific. Why is it so
horrific? It is very difficult to get insurance. It is very difficult to get finance because the
customers out there know what is going on in our industry and are fairly paranoid about
backup and whether there is going to be ongoing insurance. What happened to a lot of our
recall customers? This year a majority of the insurance companies wrote to them and said
their insurance would not be extended. I do not know where those people go.
   Senator FORSHAW—What is the basis for the increased difficulty in getting insurance?
   Mr Vanstone—Pressure from major manufacturers.
   Senator FORSHAW—I am getting a bit confused. We had hearings last week on this and
we have got more witnesses to come this morning. There seems to be a range of different
reasons being put forward as to why businesses are going to close down or are being seriously
financially affected. That seems to be the common message we are being given from those
who are either not in favour of the legislation or concerned about aspects of it. That is your
position?
   Mr Vanstone—Sure.
   Senator FORSHAW—You have raised this insurance issue. It appears to me that the big
concern is that there will be a limitation on the types or range of vehicles that they will be



                  RURAL AND REGIONAL AFFAIRS AND TRANSPORT
Monday, 24 September 2001           SENATE—Legislation                               RRA&T 69

able to import—particularly these Toyotas and four-wheel drives. Is that a major concern for
your association?
    Mr Vanstone—That is a major concern for the future. Our concerns at the moment are
why people are going out. I cannot predict what is going to happen in a year’s time. But today
people are going out of business through insurance and finance.
    Senator FORSHAW—But they are issues that are not directly consequent upon this
legislation?
    Mr Vanstone—That is right, but what is going on in the industry at the moment that is
having the biggest impact is what we call backyard operators—cowboys, pirates; they have
been called everything you can think of. It is clearly demonstrated in the paper to Senator
Heffernan that 50 per cent of the CPAs are not in existence. Let me state where they are. They
have got a deck chair and a mobile phone and they are selling compliance plates. That is
affecting the genuine operator whilst those people are allowed to continue and sell compliance
plates for $200.
    Senator FORSHAW—That is going to be fixed up by this legislation?
    Mr Vanstone—By this legislation there is an extension across-the-board for one year and
that means—
    Senator FORSHAW—But aren’t the registered workshop arrangements going to address
that problem?
    Mr Vanstone—If registered workshops worked in isolation it absolutely would address the
problem, but working in conjunction with an extension for backyarders, no, it would not.
    Senator FORSHAW—You made that point earlier, that you did not want an extension if it
included backyarders.
    Mr Vanstone—Yes.
    Senator FORSHAW—Backyard motor mechanics have operated ever since we have had
motor vehicles in this country.
    Mr Vanstone—Sure.
    Senator FORSHAW—I have never heard that they are a major problem to the motor
repair industry. Why is it a problem in this small sector? You can either take your car to a
major dealer to get it serviced, or you can take it to a registered garage, workshop or motor
mechanic, or you can take it around to Bill Smith on Saturday morning in his backyard and he
will do it for you.
    Mr Vanstone—I think there is a fairly simple difference. The backyard motor mechanic
changes the oil, changes the filter and puts a sticker on your car and out the door it goes. After
that if you have problems you go back and tackle him—all those sorts of scenarios. A CPA
has—
    Senator FORSHAW—Do not get me wrong. I am not here encouraging it. I am just
saying that there is a big concern about backyarders here yet I have always understood, and I
might be wrong, that it was a tradition in the motor vehicle repair industry. I just wonder why
it is so much a problem here.
    Mr Vanstone—The simple thing to say is that we are licensed to fit compliance plates. We
have to apply through the department to get approval to fit plates. The guy that services the
car down the corner does not have to get approval from anybody. We have to get that
approval. Some people work out of a post office box because it all gets too hard. I have been

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through ISO accreditation and I cannot convert a car in a post office box—it is pretty difficult.
I cannot convert a car at home in the garage.
    We believe that the operation of backyarders is unfair because of all those things I have
listed before. These people do not even pay taxes. They do not pay superannuation and things
like that. We just cannot compete. The comparison with the guy that services the car is the
same, but we have had to go through a very stringent approval process to be licensed to do
this. The backyarder has been through a similar process, and I say it is similar because some
of these people have got compliances when the inspections have been done.
    Every inspection that I have had done, and that I like to think other genuine operators have
had, has been in my workshop and it has been an inspection of not only the car but the
workshop and all the facilities. In one particular instance, and I will refer back to Fred
Sutherland again, the inspectors rolled up at his place one day because it was raining where
they were doing the CPA inspection. They were doing it in the backyard of a private home. As
I said earlier, if the backyarders had to do all the things we did, we would not have any
problems at all.
    Senator FORSHAW—I wanted to get that on the record and that is why I asked you.
Finally, so we understand the position of your association—your submission does jump
around a bit even though it is quite detailed—are you saying you are in favour of the
legislation being passed—
    Mr Vanstone—Yes.
    Senator FORSHAW—but that you disagree with the regulations? Which ones in
particular do you disagree with?
    Mr Vanstone—I say to you again that we stated that the two-year extension would be
given to companies, ISO and the monitoring group and eligibility, and if we really wanted to
look at it from a one-answer scenario there was nothing wrong with the old scheme—nothing
whatsoever. It just was not enforced. And if we stuck exactly where we were today and
introduced ISO accreditation, I believe that all the problems would instantly disappear
because, for us, the numbers issues are a nonsense—the potential numbers issues are a
nonsense. The Surf is a nonsense because if eligibility was implemented in the correct manner
in the first place, the LN 61 and LN 130 would never have been eligible. The issues have been
circumvented by everybody. If the enforcers were in place and the original scheme was
enforced, I doubt that we would be here today.
    CHAIR—Following on from the last question of Senator Forshaw’s, there is a theme
coming through the evidence that has been given to us that most people can live with the
legislation, if I can use those words—there may be some things on the edges that they are not
very happy with—but it is the regulations that have been thrown up to us by a number of
witnesses that we have had so far. Can you do a detailed paper on those areas of the
regulations that you think should be amended?
    Mr Vanstone—Yes—we have that available today.
    CHAIR—You have that available, do you? Your submission does not really deal with that
matter.
    Mr Vanstone—We have it right here.
    CHAIR—Can we have those tabled, please? Obviously we cannot look at them in the
short time that we have now, but we will look at them. I am trying to think about how we



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should work through this as a committee—it seems to me that there is an almost a necessity to
separate the legislation from the regulations.
   Mr Vanstone—Agreed.
   Senator CHERRY—I have two questions—I want firstly to ask you about the issue of
insurance. We have heard an awful lot about these cars not being able to be insured. Are you
saying that up until essentially this year there was not any difficulty getting insurance for
these cars but that the major insurers have changed their position this year?
   Mr Vanstone—That is correct—not ‘this year’ but since 8 May.
   Senator CHERRY—Is that because of the uncertainty over the scheme?
   Mr Vanstone—Firstly, it is because of the uncertainty over the scheme and, secondly, it is
because of the pressure put on by major manufacturers.
   Senator CHERRY—So if the scheme is continued in some form, what then are the
insurance implications?
   Mr Vanstone—If the industry moves forward and has credibility, then we would hope that
the insurance companies would reinsure these cars. What has happened in the last, say, three
months is that there has been one particular insurance company—Queensland Brokerage
Service—that has set up a brokerage to specialise in these vehicles, and they seem to be able
to, through brokerages, get insurance for the cars. The horrifying story is of people who have
been with the RACV, the VACC and other places like that for 20 years just getting notification
out of the blue that their insurance has been cancelled—it has just been devastating.
   Senator CHERRY—My other question—and it is probably dealt with in your paper—was
about the general requirements for the RAWS scheme. You indicated that you wanted the
extension only for those workshops which qualified for RAWS as at 8 May 2002. From
memory, reading through your submission, you said that qualification for RAWS should be
ISO accreditation—
   Mr Vanstone—That is right.
   Senator CHERRY—And that is it.
   Mr Vanstone—That is right.
   Senator CHERRY—What are the specific aspects of the RAWS accreditation that the
government is proposing which really add to that $500,000 cost that you were proposing?
   Mr Vanstone—If you look at the application for RAWS and compare it with ISO—just
that in isolation—then the fee for application in the first year of RAWS is $13,000. Part of the
make-up of that $13,000 is that $1,500 of that $13,000 is to add a model to your schedule. If
you had ISO9001 alone, which costs approximately $10,000, then the fee to enter RAWS
would only be $1,500 if it was ISO alone, so the impact in that area is an additional
$10,000—and that is just one of the areas.
   We do not particularly mind which accreditation program we have, but what we are asking
is: why we do we have to have two? If we only have one and the fee is $13,000, then we are
all prepared to cop that; we are prepared to pay that and we are doing our forward planning to
cater for that. But now we have discovered—and we have known for a while, it is nothing
new—that not only do we have to do that but we have to do ISO as well. The impact of that is
$23,000. I repeat: we would be happy to have the department’s accreditation program, or we
would be happy to have the ISO program—we are not happy to have both.



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   CHAIR—Thank you. Can I explore the insurance angle. Let me put it another way. My
experience in business is that the only reason people will not insure you is that they consider
that, for what they are insuring, the risk is too high. Is that what is happening here—the field
is not big enough? Why is the insurance falling apart?
   Mr Vanstone—Insurance companies have had pressure put on them, just like we have, just
like you have—and you know who from.
   Senator FORSHAW—They must give you a reason—
   Mr Vanstone—I have not heard from the federal chamber any rational reason that our one
per cent does not damage. I have not heard one thing. So it is the same irrationality, isn’t it?
   Senator FORSHAW—But the insurance companies must give you a reason as to why they
will not insure, or are they setting premiums that are so high you cannot afford it?
   Mr Vanstone—All I can say to you is that there is documentation around instructing
insurance people not to insure these cars. They are not letters from me; I can guarantee you
that. Do not forget what we are. We are husband and wife operations, small time operators
who cannot compete against medium size operators, let alone what we are fighting here. We
just have no power at all. We are just banking on the fact that the Australian government will
make a fair and just decision.
   CHAIR—There are a whole host of small businesses, not in the low volume, who would
have the same sorts of pressures on them from a business point of view. I cannot imagine why
for somebody fixing up one sort of car, as against the low volume one, the risk would be any
greater in terms of insuring their business. Are you saying there is a legal pressure being put
on the insurance companies?
   Mr Vanstone—I do not know what the terms would be, but we have seen correspondence
where insurance companies have been told not to insure these vehicles.
   CHAIR—Can you table that correspondence?
   Mr Vanstone—I haven’t got it here with me but I could find—
   Senator FORSHAW—Could it be faxed to us?
   Mr Vanstone—Sure, if I can find it.
   Senator FORSHAW—It would be very helpful if you could. I am not suggesting that you
are not telling us the truth. It is an assertion, or it is anecdotal evidence. It would be helpful if
we had some documented proof of that.
   Mr Vanstone—To answer your comment that surely this car is no different to that car, to
convert a car from left-hand drive to right-hand drive I would suggest to you that there is only
one bloke in the whole of Parliament House today who could do that, and he is sitting in front
of you. It is a very, very specialist field. Take the best, dux, A grade mechanic and put him
into my factory—and we do this, we employ these people—and we will not let him work in
isolation for two years. No TAFE course can educate this bloke. It cannot do it. When a
Pitman Arm and an Idler Arm are different lengths on the end of a draglink, I would suggest
that there are not too many people who could tell you what you do with the Pitman Arm and
the Draglink Arm when you reverse them. There would not be too many people in this room
who probably even know what the hell I am talking about. So the technical requirements in
our industry—
   Senator FORSHAW—There are a lot of people out there who sometimes do not know
what we are talking about in this building either, but that is another story.


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   Mr Vanstone—Fair point. The technical requirements involved in a left- to right-hand
drive conversion cannot be taught at any school. There are no TAFE courses. People with
degrees in mechanical engineering cannot solve some of the problems. It is a very, very
specialist field. If it was not a very specialist field, why are there not thousands of people out
there converting left- to right-hand drive cars? It is because it is too hard. A late model
Corvette takes 1,000 hours to convert.
   CHAIR—But at the end of the day it is a market-driven thing. If all of a sudden there was
a market for 50,000 I am damn sure you could train enough people to do the conversion.
   Mr Vanstone—Left- to right-hand drive?
   CHAIR—What do you really think? You said in your verbal submission that you believe
the market is at about saturation now.
   Mr Vanstone—Yes.
   CHAIR—Is that absolute? Do you think it could get to 20,000?
   Mr Vanstone—The answer has to be no because it would be 20,000 now. It would have
been 20,000 prior to Senator Button’s bringing in the 12,000. It would have been 20,000 when
there was no act in 1988. It has never been 20,000. It cannot get to 20,000 because our
industry caters for very special unique people.
   Senator FORSHAW—But the figures we have been given by the industry show some
substantial increases in percentage terms but come off a low base. I acknowledge that.
   Mr Vanstone—Sure.
   Senator FORSHAW—But I think they showed us figures from about 1991 through the
nineties where it had gone from 1,000 or 2,000 up to 15,000 or 16,000. Why did that growth
occur?
   Mr Vanstone—The major reason for it is that the figures that they have been supplied are
false. The original figures were import approvals only and not vehicles. If we could go back
to the years prior to this huge jump, get out all the import approvals and count the cars, I think
you would be fascinated to find that there has been no increase.
   Senator FORSHAW—That point was made to us as well; it is also in written submissions.
   CHAIR—We are going to have to wind up.
   Mr Vanstone—Sure. The other reason for the increase—and we are shooting ourselves in
the foot in saying this—is that there have been multiple applications. Cars have been eligible
that never should have been eligible. As soon as the Toyota Surf became an option, as in a full
volume variant being allowed to be in low volume, what do you reckon would happen to
numbers? They would shoot out the roof, wouldn’t they?
   Senator FORSHAW—Of the total number of vehicles that come in each year, how many
of them would have to be converted from left-hand to right-hand drive?
   Mr Vanstone—I could not answer that.
   Senator FORSHAW—Is it the majority?
   Mr Vanstone—It is a minority. The department would have those figures but I do not have
them.
   Senator FORSHAW—I will try them.
   Mr Vanstone—It would be definitely the minority.


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   CHAIR—Mr Vanstone, thank you for being here. You have agreed to send us a bit of
material and we have the submission on the regs. If we need to find out anything we will get
in touch with you or you can contact us if there is additional evidence you want to give us. We
have to report on the legislation immediately. We will have to consider our position on the
regulations.
   Mr Vanstone—Thank you kindly.




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[9.15 a.m.]
KRANZ, Mr Stephen Gerard, Manager, Lone Star Vehicle Imports
POTTS, Mr William Douglass Ridley, Director and Senior Consulting Engineer,
Australian Technology Pty Ltd
   CHAIR—Welcome. I have to deal with the matter of parliamentary privilege just to make
sure you are fully aware of that. There is no need to repeat the other matters that I dealt with
this morning when I read out all the details of the hearing. We will have to move fairly
quickly because our time is tight. I will allow you to give a short summary of your submission
and then we would like to ask you some questions. But, before the committee commences
taking evidence, let me place on record that all witnesses are protected by parliamentary
privilege with respect to submissions made to the committee and evidence given before it.
‘Parliamentary privilege’ means special rights and immunities attached to the parliament, its
members and others necessary for the discharge of functions of the parliament without
obstruction and without fear of prosecution. Any act by any person which may operate to the
disadvantage of a witness on account of evidence given by him or her before the Senate or
any committee of the Senate is treated as a breach of privilege. Have you any intention to seek
to give any evidence in camera?
   Mr Kranz—No.
   Mr Potts—No.
   CHAIR—Fine, I will leave it at that. We will start with Mr Kranz and then go to Mr Potts.
   Mr Kranz—We have been in the importing and conversion industry since 1990 and have
held low volume compliance since 1992. We are a small family business—there is just my
wife and I. We only import vehicles built in the USA, so my comment on Japanese imports
and other countries imports is probably limited, although I do think left- to right-hand drive
should be in a different category to the ones that do not have to be converted. We only hold
low volume compliance on one particular make and model of vehicle, which is the Ford F
series light truck.
   With the SEVS, I believe that the eligible vehicle should specified by make and model, not
just make. I think the two out of four criteria depend on interpretation. We are still waiting for
an eligibility ruling from the Department of Transport and Regional Services from February
this year. So it is obviously not an easy thing to do. We have been fighting for a long time for
low volume to be able to compete with full volume. We feel that there is a restriction on trade
in that we cannot compete with full volume. In 1996 a company was granted full volume on
the same vehicles that we are importing, but we were given exemption for a period of time
and we are still quite viable. I think we should let price determine viability.
   That company recently went broke, owing millions, and bought itself back at a fraction of
what it owed. It then gained full volume virtually immediately in another company name that
was not even registered. It had to quickly change its name because someone else had that
company name. And it did all this without losing compliance. I am amazed that the
Department of Transport and Regional Services allows this to happen. My feeling is that big
is not always better.
   I do not think any manufacturer, except the original manufacturer, should hold full volume
compliance. Basically, our solution, especially for small operators, would be to introduce a
micro volume scheme of maybe no more than 10 or 12 vehicles per year with a limit on


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approvals held by the operator. That could make them still eligible even if the vehicle sold in
full volume. The price of the vehicle would determine whether it is viable. An identical
vehicle obviously would be much cheaper if it were under full volume, but if the vehicle were
slightly different—for example, trim, accessories, wheel base, engine, et cetera—a micro
volume manufacturer could offer it to the public and still be quite viable. At the moment we
have two clients who want vehicles that are not currently offered by Ford. One wants a
different wheel base and the other wants a more luxurious trim. So that is the case right there.
   The micro volume scheme could operate as the 15-year-or-older scheme operates now.
That category was brought in when the Motor Vehicle Standards Act 1989 was introduced to
basically allow vehicles that were 15 years or older to be brought into Australia and regis-
tered. It is handled by the states and works quite well. I would like to see some low volume
compliance plate holders comment on the system to see what they think of it. The public
should be able to get what they want and, more importantly, need, not be told what they can
get. That is basically all I have on the SEVS.
   I think RAWS will make the majority of low volume manufacturers non-viable due to:
forming a company, ISO9001, auditing, ongoing government charges and what have you. I
have been a sole trader and then been in a partnership with my wife for over 20 years, and I
have had no problems. I cannot see why I need to go to the expense of forming a company. I
reckon it is uneconomical to spend $20,000 to $40,000 for RAWS, especially now with the
low Australian dollar. The Australian economy is not all that flash, and we are having low
sales. Natural attrition will see a lot of businesses go out, basically because of the low dollar,
the economy and sales. What businesses are left will be faced with the choice of getting big or
getting out.
   I do not see that ISO9001 is needed for small business. A wide range of large businesses
are not even having it. I do not think it will offer any better quality. It could even force
businesses to cut corners to save costs. They have set government costs and they have to get
their costs down. ISO9001 is only as good as the people enforcing it. I recently heard of a
franchise that said if all of the operators were ISO9001 compliant they would virtually be
assured of getting government contracts. But, when somebody else got the contract, they
found the contract was awarded on price alone. So it is not always what they tell you.
   A small business with a couple of people—one or two—doing low numbers of vehicles
automatically has its own quality assurance simply because they are involved in every aspect
of the conversion. They would not jeopardise their business through poor workmanship. A
small business would offer its own auditing system, once again because all the work is done
by the owner. Excessive government charges and ongoing costs for RAWS are only robbing
Peter to pay Paul. If there were no RAWS, I do not reckon there would be excessive
government charges.
   Basically, if RAWS and SEVS are introduced we will have no choice but to cease doing
business. We will be left with a business that no-one can buy because of the changing system.
Even our jigs and moulders that have taken years to design and develop will have no value.
Small business is the backbone of this wonderful country. The government should be trying to
help small businesses, not put them out of business with no firm offer of compensation or
anything else.
   Mr Potts—I am a consulting mechanical engineer. My background is that I worked for the
Electricity Trust Transport Office and then I was a project engineer with Chrysler Australia.
Later I lectured in mechanical engineering and I was a consultant to the Australian



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Organisation of Quality Control, for whom I presented quality assurance lectures and
information on statistics.
   CHAIR—Are you representing yourself?
   Mr Potts—My client is Lone Star Vehicle Imports, Stephen Kranz, but I also have many
other clients. I rather see myself in the role of expert witness.
   CHAIR—Is this submission on behalf of all those clients or is it a submission you have
individually prepared and put in?
   Mr Potts—I think it is best to see it as a submission I have individually prepared.
   CHAIR—Thank you. You may now talk to your submission.
   Mr Potts—I have been strongly critical of the Motor Vehicle Standards Act from its
beginning, on the grounds that Australian design rules had been in place for 20 years before
the act was introduced. The act was introduced very hastily. It came at a time when the major
industry in Australia was having huge problems. There had been a thousand million dollars
lost in the decade. There was a rise in interest at the time amongst small manufacturers and
small volume operators first of all to purchase vehicles from America in left-hand drive and
bring them to Australia. Often those vehicles were highly specialised E-type Jaguars, MGBs,
Ford Mustangs—cars that had gone to America in the 1960s and 1970s and had high value
here. People were importing them and converting them. That seemed to be working without
anybody being concerned.
   Then someone realised that you could purchase second-hand vehicles from Japan. When
that began there was uproar in the automotive industry. Very hastily, the Motor Vehicle
Standards Act was introduced. It was introduced on the basis of it being a safety act. I have
always repudiated that. Later it was elaborated to enable an escape path for the purchasers
of—we will call them—special interest vehicles. The concept of special interest, enthusiast
and specialist vehicle did not come in until about 1995. One of the issues I take exception to
is the concept of defining a motor vehicle as being an enthusiast vehicle or a specialist
vehicle. I see those terms as applying to people. There are enthusiasts and specialists. I
believe the history of the automotive industry is totally determined by enthusiasts and
specialists. We can see that just by the names of vehicles—Ford, Chrysler, Austin, Bugatti.
These are all individuals that have had a vision and changed the course of transport.
   I see Australian industry as being very much thwarted by not allowing the enthusiasts and
specialists. The Australian automotive industry has always been based on government
schemes. Some of the schemes have been short-lived. I have been involved with the 95 per
cent and 85 per cent local content schemes and the export facilitation plans. Each of them is
put forward as being a panacea. The problem with introducing standards into laws is that the
standard becomes enforced irrespective of the underlying rationality of those standards. Time
and time again there is effort put into the most trivial and mindless action whereas, if you
looked at risk management, you would never spend your money on it. Standards have been
elaborated in different parts of the world so that everybody uses the same body of knowledge
but one area might put a light intensity limit of 360 candela and another puts a limit of 341
candela; and all of a sudden the standards are not compatible so you cannot exchange
products in those areas. It does not take much to see that that can be manipulated.
   CHAIR—Thank you. You have completed your submission?
   Mr Potts—I would like to endorse what Stephen said about the concept of a
disencumbrance for very low volume operators.


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   CHAIR—To make it simple; are you endorsing what Stephen said?
   Mr Potts—Yes, I am.
   CHAIR—Thank you. Senator Ferris has just had to leave but she has asked me to pass on
her regards. Apparently she knows you both.
   Mr Kranz—Thank you.
   Mr Potts—Thank you.
   Senator FORSHAW—I would like to clarify your views on the legislation and the
regulations. We have your written submissions and we have been through those. The general
theme we seem to be hearing from a range of witnesses—not all, I might say, but a number of
them—is that the real problem with this legislation is in the regulations. Is that your view?
   Mr Kranz—Yes. I think the regulations are just ludicrous. You are talking about a minute
number of vehicles coming into the country. We have already got regulations with the Motor
Vehicle Standards Act 1989. I think the act has worked fine; it has worked fine for us for 10
years. Now they see fit to change it and that change is going to cost a lot of people their
businesses.
   Senator FORSHAW—I know that this is being a little bit technical at the moment, but it is
relevant to our consideration of the matters in the Senate. We have had a number of witnesses
say that they are not actually concerned about that.
   Mr Kranz—I would perhaps dispute that.
   Senator FORSHAW—I am not saying that that is the position of everybody; some
witnesses say they could live with the legislation, providing there were some changes to the
draft regulations to remove those parts that they do not like and maybe also some other
amendments which have been suggested.
   Mr Kranz—I feel that what they have actually come up with is just ludicrous, to be honest
with you. Like I said, the system that we had was working fine. I think it should just be tidied
up a little bit so that a few things are verified a bit better than they have been and not be left
so open to individuals determining what they are. Maybe the Department of Transport and
Regional Services could discuss things a bit more with people, rather than just say, ‘No, that is
what it is.’ A lot of the times the department do not know the answers. We do not know the
answers either. If they could just discuss things with you a little bit more, you might be able to
come up with an answer. A couple of times we have actually been in discussion with them and
we have been able to work quite well together, but that is not always the case. Sometimes they
just will not discuss things with you.
   For instance, the vehicles that we import have TRW seatbelts fitted. TRW is the largest
seatbelt manufacturer in the world and the seatbelts comply with Australian standards but,
because the vehicle has dual airbags fitted and the seatbelts work in conjunction with the
airbags, we are not allowed to use the US seatbelts; we have to use Australian ones, which do
not work in conjunction with the airbags. You go to them and say, ‘This vehicle has airbags,
but it does not have to have airbags. I do not know whether we should disconnect the airbags
because the vehicle does not have to have them—and make the vehicle unsafe—or if we
should leave them connected. Maybe they will not work as efficiently, but they should still
work with the seatbelts. But they do not work as they were originally designed, with the
seatbelts in conjunction with the airbags.’ We cannot even get that sorted out.
   Mr Potts—I dislike the legislation because its aim is the provision of uniform standards.
That provision of uniform standards ends up causing enormous problems—of just the sort that


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Steve has spoken about. If you look at motor vehicle safety from a risk management
viewpoint, you might come up with quite different outcomes. I am conscious of the enormous
energy that gets poured into so-called uniform standards, but that energy and funding has
gone into the standards rather than into the vehicles. I do a lot of legal work, so I have people
coming to me from all over about problems with trucks, passenger cars and other vehicles. I
keep seeing examples where a failure mode analysis would have directed attention to this
problem and solved it. But that does not happen, because all the attention has gone into
making sure the standards are uniform.
   I think that is really working against the interests of motor vehicle safety, so I do take ex-
ception to it—especially when the Australian design rules had been adopted and accepted by
all the states. Despite what everybody has said about the reason for legislation, I do not be-
lieve that conditions in 1989 warranted a federal act other than as a trade control act. If that is
the reason for it, that is fine, but it should not be put forward as a safety act. For an engineer
like me, that has just led to 12 years of absolute frustration.
   CHAIR—I have a couple of quick questions. You are both saying, I think—and tell me if I
am wrong—that you would prefer the status quo.
   Mr Kranz—Yes, that is basically correct. But I am also saying that on numerous occasions
we have put forward that we would like to have a lower volume. At the moment, the low
volume is 25 vehicles a year. They have done this revamp and put it up to 100 vehicles a year.
I thought the idea was to try and get some of the used imported vehicles—or whatever you
like to call them—in lower numbers, but they have actually stuck it up to higher numbers.
What they are going to do is lower the numbers of people who are actually importing these
vehicles, but if they lowered the number of vehicles that you are allowed to import, a lot of
small businesses would still be viable.
   That is what I am saying: come down to 10 or 12 vehicles a year but give us a little bit of
leeway. Do not change the act—leave that for those who want to do the lower volume—and
maybe let us work in conjunction with full volume and let price determine things. Nobody is
going to import a vehicle that is going to sell here for, say, $20,000, if you can go and buy the
same one from a dealer for $10,000. But, if someone wants a vehicle that is slightly different,
such as a new vehicle that is not available here—they can get one overseas that has maybe got
a different wheel base or a different engine and so on—and the person can sell that here for,
say, $20,000, then the one available here for $15,000 is not the same vehicle because it has
not got the same engine, trim, luxuries or whatever. So, if they can sell that car for $20,000,
that is good. They have got a small business they can operate. It is not as though you cannot
compete with it.
   CHAIR—I understand what you are saying. Mr Potts, do you support that position.
   Mr Potts—Yes, I do.
   CHAIR—If the status quo were to remain, even with your amendment or suggestion to
move back to 10 or 12 you would still leave all the backyard dealers and operators in place.
Everybody who has appeared before us has said—I cannot think of anybody who has not said
it at this point in time—that the legislation would clean up the industry and make it better in
terms of the backyard dealers. What is your position on that?
   Mr Potts—I meet a lot of the backyard dealers and I do not find those people to be as evil
and as detrimental to the industry as often their competitors might. If I turn up to a little
workshop and there are two young lads working in it and they are making a mistake, I will
say, ‘You can’t do that,’ and I can totally trust them that they will never do it again and that


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they will fix up what they might have done wrong. I do not see this evil side; I do not see
people making huge amounts of money.
    CHAIR—Mr Kranz, do you want to add anything to that?
    Mr Kranz—It depends what you term ‘a backyard dealer’. If it is someone doing bad or
shoddy work, they should not be able to get past the standards act as it is, because I think the
act is pretty secure. No matter what you do or how many rules you make there will always be
someone who will break them and operate underhandedly. It does not matter what you do. I
think the Motor Vehicle Standards Act 1989 tidied up the industry, although it made a few
problems for people. We have worked quite well with it.
    CHAIR—But it would be irresponsible for us as legislators to allow a practice to continue
that involved danger in the workplace, unsafe conditions or substandard work being done.
Wouldn’t that be the case?
    Mr Kranz—Exactly right; I totally agree. I do not believe there should be any substandard
work, but I do not think this legislation they are trying to introduce will make any difference.
It will just get rid of the majority of people in the industry. The ones who stay may have
unsafe practices too. They will just have a lot of money that they can pour into it. I have heard
stories of people wanting to go to the new system because it will mean they could have a
monopoly. I do not think that is quite correct.
    If you have the backyard place doing shoddy workmanship, fine. I do not see it very often.
I do not know if I am called a backyarder. I work from home: I have a workshop at home, I
work by myself and that is all I do. People could put that down as a backyard workshop. I do
not know what the definition is. It depends on the interpretation of what a backyard workshop
is. Shoddy workmanship and shoddy operators should be out; I totally agree with that. Exactly
how you do it, I am not sure. I am certain that doing what they are trying to do is not the way
of getting it out. You are just going to force out a lot of legitimate small businesses that are
going along, doing everything they should and doing it all correctly, because they just have
not got the finances to go to this new system, which, as far as I am concerned, is totally about
having money to spend—the more you can spend, the longer you can stay in it.
    Mr Potts—I believe the paradox of the act is that, once the compliance plate is affixed to a
vehicle, a state inspection agency no longer has the power to disendorse that vehicle. In South
Australia people in the local approval agency say to me, ‘What has just gone through is
appalling, the quality was appalling, but we can do nothing about it.’ The reason they cannot
is because it has a compliance plate affixed. The paradox is: when state authorities inspect and
have the total backing of the road traffic acts, they can disallow anything. They can—and
even have at times—say they do not like the colour, this or that. They can ask for an
engineering report and tests and say they will not approve it until they are happy. They have
got infinite flexibility. Once there is a compliance plate affixed, there is no flexibility because
that is the mark of endorsement. In my opinion the paradox is that the compliance plate works
against the aims of road safety. That has been my point from the beginning.
    CHAIR—Thanks for making that point. We are going to have to wind up now. If there is
any other information that you want to send to us, please email, fax or send it through to the
committee secretariat. If we have any further questions, we will get in touch with you. Thank
you both very much.
    Mr Potts—Thank you very much for making this possible. We appreciate it enormously.
    Mr Kranz—Thank you very much. It was great to be able to do that.



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 [9.45 a.m.]
LYNCH, Mr Brian Brendan, Managing Director, Trucks Plus
   CHAIR—Welcome. Please identify yourself and the capacity in which you appear.
   Mr Lynch—I am the proprietor of Trucks Plus in Moorooka, a small family owned
company that was specifically set up to import vehicles under the Motor Vehicles Standards
Act 1989 low volume scheme. For that reason, my position and the position of my company,
my suppliers, my subcontractors and my customers is central and core to this legislation.
   CHAIR—Are you representing all of those or just yourself?
   Mr Lynch—No, I am representing my company. I have spoken to all of those people. They
have given me advice and they are very pleased that I have been given this opportunity to plea
for a fair, equitable legislative environment in order for me to run my business and, by
implication, for them to continue to be my suppliers, subcontractors and customers.
   CHAIR—You can speak to your submission and then we will have some questions for
you.
   Mr Lynch—I would like to elaborate on my submission so that the senators here of all
political persuasions can take back the message to their respective parties that this law is
unfair, it is unjust and it is inequitable. It is a law designed by—and I will cover this later—
big business for the benefit of big business to get rid of small Australian businesses
competition. We have been hearing this this morning in various forms. In a nutshell, as a
small businessperson with my life savings invested in that business, that is what it is. The
legislation and the regulations are equally abhorrent to me. By the way, as a small
businessperson, the regulations were available to me after work on Friday. I spent most of
Saturday and most of Sunday driving here.
   CHAIR—We got them the same time as you did.
   Mr Lynch—I think that that is unfair. It is unfair for colleagues here to be that tardy with
vital information which affects the life expectancy of my business and my investments.
However, I would like to comment on them—from what I have seen by a very brief reading—
and on the legislation.
   First of all, the legislation is abhorrent to me because it cancels the property that I have got
in my licences. I will give you an example. I refer specifically to my licence. I am sure you
have seen copies of these, but I can submit this one if you want to have a look at it. On the
front the key thing to me is the expiry date. It says ‘life of model’. In my case, the life of the
model is the year 2012. This is tragic for my business, unfair and a gross breach of confidence
between the licensor, the federal government, and me, the licensee. If this were a court, for
instance, I would be saying, ‘Your Honour, I’ve got a legal document here which gives me a
right and I have property in it. I have spent my life savings acquiring it. I’m meeting the terms
and conditions which are listed on the back. There is no mention whatsoever of specialist and
enthusiast vehicles.’
   CHAIR—We have got a copy of that, but we have not had one tabled. For the public
record, would you mind tabling that?
   Mr Lynch—I would be absolutely delighted. To highlight the inequity and the unfairness
of this legislation I will very briefly chronologically cover the process leading up to the
development of my company. In 1994 I received an information kit from the Department of
Transport on how to import vehicles into Australia under the low volume system. I am a

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professional. I have been in middle management with multinational corporations. I have also
managed small businesses for myself. I am very familiar with rules, regulations and laws. I
comply with them every day of my working life and always have.
   In 1994, I checked with the local state authorities, and this is the area of differentiation
which is cropping up here from other presenters. In order to comply with the laws of my state,
the state of Queensland, and Brisbane City Council laws, first of all I had to satisfy Brisbane
City Council in relation to environment and planning by-laws in relation to my premises.
Secondly, I had to satisfy the Queensland state authority in relation to consumer affairs laws,
which is now the Office of Fair Trading. I had to be a licensed motor dealer to import and
convert second-hand vehicles into Australia. It was required by law. Thirdly, I had to conform
to the Workshop Health and Safety Act, which is a Queensland regulation where you cannot
work as an employee of a company—and I am an employee of my own company, as are my
subcontractors—in non-approved premises. After having done all that—and this is the irony
of the whole thing and where the department in question has really muddied the water and
created problems—in November 1994, the then administrator of FORS, Mr Dennis McLen-
nan, said in a public forum at the Colmslie Hotel in Brisbane in response to two of my ques-
tions, ‘We do not want motor dealers involved in the importation or conversion of motor ve-
hicles because the numbers will get out of hand,’ and, for all of those there, that was inter-
preted as meaning ‘to deal without a licence’. It was an official endorsement to do so.
   The same good gentleman—who, by the way, is the real author of SEVS and I will get to
that later—also said, ‘I want to maintain it as a cottage industry.’ Those of us who knew what
the laws were knew precisely what he was saying. Those who did not know what the laws
were saw that as an endorsement to operate out of backyard premises, contrary to council
regulations. Not only did that department endorse that verbally, but it endorsed it later by
actions under the administration of that particular person. I do not want to cast any aspersions
on the gentlemen here today—it is a whole new regime, it is a new administrator and they are
doing their best—but I can explain to you later why they have been coerced into this type of
legislation by our competitors.
   The Department of Transport and Regional Services, up to this day, repeatedly issues low
volume import licences to import a vehicle—to import a vehicle, you have to be the owner of
the vehicle—to unlicensed people, thereby rorting and breaking the laws of Queensland, and
aiding and abetting people to break the laws of Queensland. In conjunction with the officers
of the Queensland transport department, they have allowed their officers to work on sooty
inspections in backyard premises—and this we heard from the previous presenter—with not
even a cover on those premises. By doing so, they have broken the laws of Brisbane City
Council and the laws of the state because those backyard premises are not approved by
Workshop Health and Safety.
   Basically, the people who are solving my problems for me with legislation, who sit over
here—or rather their predecessors—are part of the problem which has got people into a mess.
I am more exposed personally—and so is my family, my family business and my family
savings—because I have complied with all the laws of the land. In summary, the areas of
expense are not only, as you have heard, in complying with regulations but also in travelling
to Japan; studying the supply market there; selecting the product; importing the product;
having it tested to the requirements of the Federal Office of Road Safety, now VSS; and
submitting and maintaining those two vehicles for over 18 months while these people here
took 12 months to issue me with licences. When that is finished, I have to go to Japan and
select buyers, source parts, shippers and insurers—this is just for a vehicle in transit from
Japan. At my end, I then have to appoint the customs brokers and all the infrastructure. When

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I had done all of this and landed my first commercial stock in January 2000, it took me eight
weeks to complete my compliance of these vehicles. Less than eight weeks later Senator
Minchin had the audacity, in conjunction with Minister Anderson, to declare the end of the
scheme. I would say this is a terrible act.
   Senator FORSHAW—These vehicles were—
   Mr Lynch—They were Toyota LX 90 diesel cars. The Toyota motor company had
decided, in their wisdom—and I would give them the benefit of the doubt by saying
‘wisdom’—or more specifically, it was Mr John Conomos, Junior Vice-President of Toyota
Australia, who had decided not to make these vehicles available to the Australian public. In
relation to this legislation, he has acted like the proverbial dog in the manger; that is, if he
cannot supply them to the market then I cannot—he has made that choice.
   Senator FORSHAW—How many of these vehicles did you import initially?
   Mr Lynch—My first shipment was five vehicles. By the time the announcement was
made, I had not sold any of them. It was a real hatchet job. They waited until I was
overexposed and then they pulled the legislative rug from under me. Senator Minchin called
me the next morning; it was just before the budget on 8 May—and that is why 8 May has
been mentioned as the key date. He said, ‘Mr Lynch, we are giving you two years notice to
change your business.’
   He was aware that I was exposed and I suppose it was for his own conscience that he called
me and said, ‘You have got two years because we are in the process of changing the act.’ He
told me in summary what the changes were—and this was the first time I had heard about
them. He said, ‘We want to clean up the business.’ I said to him, ‘Sir, I am clean already and I
do not need cleaning. Furthermore, you cannot do this without paying compensation.’ He
went on to say, ‘We do not have to pay you compensation because we are giving you two
years to change your business.’ I said to him, ‘What a nice thing to tell me now when I am
overexposed. I spent all my money on the project. I spent five years on research and now you
tell me at this late date that you are changing the law, and that not only are you changing the
law but you are also not paying compensation.’
   The culprits in all of this are big business—and do not let anybody kid you that it is not a
big business bill. It is the best bill big business money can buy and it is designed specifically
to put small business people like me out of business. ‘How is that achieved?’ you might ask. It
was achieved with all the professionalism a multinational company can muster. I have been an
employee for most of my working life in major businesses and I know their modus
operandi—I can smell it. What he did first was soften up the market with a series of press
releases. These press releases were made at the time of the announcement of the review of the
act. They accused me, and other legitimate business people like me, of ‘providing unsafe
vehicles to the market which were potentially death traps.’ They also said that people like me
were profiteering and we were as bad as drug dealers. I would like to put on the record today
that I am a law abiding citizen; I do not involve myself in those things.
   It achieved its aim. The aim was to overly impress sensitive ministers such as Minister
Anderson and Minister Minchin and to panic them into a panic response. You see the result of
it before you today, masquerading as a fair bill in my country. If we look at the modus
operandi for that we look at a major Japanese multinational company using all of the agencies
within this area and sphere of influence. I refer specifically to the FCAI and the MTAA.
   I refer also to the Toyota dealer network. Do not let these Toyota dealers tell you otherwise.
They are not small business people. I know them. I have a next-door neighbour who is a


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multimillion dollar business. It is a big business by anybody’s definition of the word ‘big’.
Toyota Motor Company would have you believe that these individual Australian businesses
are being badly done by through my 25 diesel cars a year that nobody else supplies to the
market. The only two diesel cars supplied to the market are Mercedes Benz and Peugeot 406.
These are luxury motor cars with luxury price tags.
   CHAIR—We are going to have to get you to wind up now. We have some questions for
you.
   Mr Lynch—Basically, it is very unfair to change the rules halfway through the year. I am a
sportsman. It is unfair indeed when the chips are down—and my chips are on the table—to
then change those rules without compensation. I think it is unfair that the large resources of
multinational companies are directed towards small people like us. They do so with the hope
that they can pass their legislation, which they have written for their big business, past the
highest court of the land—which is the parliament here—and hope that it will put me out of
business. I rely on your good sense of judgment and fairness. I do respect the laws of
Australia and always have because I am an Australian by choice. I came here for a fair go and
I expect a fair go from my laws.
   CHAIR—Thanks very much. I refer to your letter of 28 August that was written to
Andrew Snedden. You have here a number of preferred solutions. I just want to go to (b). On
the second page of your letter you go to your preferred solutions and (b) says:
Amended to give us “Life of our current licences” as per the terms and conditions under which the
licences were issued.
Have you put that to Minister Anderson or Minister Minchin?
   Mr Lynch—Yes, I have written approximately 250 letters to relevant key ministers, the
Prime Minister and even to the good senator sitting here. I have been taken out of my business
for three months of this year trying to defend my business. I have put it to all and sundry.
There is a reason there for saying ‘as per the terms and conditions under which the licences
were issued’ because, if the terms and conditions had been ISO9001, I would not have spent
my money. It is not economically viable for my business.
   By the way, there was a comment before that there was not much problem with the
legislation. The legislation is the death sentence. Do not think otherwise. The regulations are
the gantry to execute it. This has been a comprehensive hatchet job done by the multinational
corporations. You get the government to pass it in such a way that the offer is a Clayton’s. It is
something they know will put me out of business. It is something they know they will get past
you because they know you do not have to pay compensation. There is another aspect of it too
to get it past Minister Anderson and I can expand on that too.
   CHAIR—We are going to run out of time so we have to be a little bit precise for a
moment. You have written to the ministers?
   Mr Lynch—Yes.
   CHAIR—Have you had responses?
   Mr Lynch—I have got formal responses.
   CHAIR—Do you have those letters? Can you table them?
   Mr Lynch—No, I had form type responses. Had I known that was necessary I would have
taken my ute.
   CHAIR—Can you get them sent down from Queensland to us?


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   Mr Lynch—Yes, I can.
   CHAIR—You can telephone now and tell them to fax them down.
   Mr Lynch—My wife and I are here—that is our business.
   Senator FORSHAW—Could you tell us quickly what was the nature of the response?
   Mr Lynch—There were a number of factors but it was a kind of variation on the
department of industry’s response, which was Minister Minchin’s response, and I think the
minister was ill informed. First of all, the response was that there was a substitutability
between four by four imported turbo charged vehicles and locally produced products.
   CHAIR—Do you know who signed the letters?
   Mr Lynch—Yes.
   CHAIR—Was it a departmental officer or the minister?
   Mr Lynch—It was Mr Campbell, who was the adviser to the small business minister Peter
Reith before he became minister for the Army. They have changed around quite a lot. Then
there was a personal secretary to the Prime Minister, various advisers to Minister Anderson—
   CHAIR—If it was from the department we have departmental officers here and we could
ask them for a copy of the letter.
   Mr Lynch—Some of my queries and my comments were passed along to Mr Robertson.
   Senator FORSHAW—Basically what you are telling us is that your proposal about giving
a life of our current licence arrangement was rejected, or not accepted.
   Mr Lynch—It has not been accepted in writing.
   Senator FORSHAW—We will question the department later this morning about their
attitude to that.
   Mr Lynch—Yes.
   CHAIR—Have you canvassed that with like businesses in the industry? What is the
reaction from other people?
   Mr Lynch—Could I say that there are two distinctive types of importers and converters.
We have heard predominantly this morning of Americans who go from left- to right-hand
drive and that is major manufacture. My business is an extension of roadworthy certificates. It
is a very intensive roadworthy type certificate in terms of replacement—
   CHAIR—I do not want to be rude but we are going to run out of time and we are not
going to have the answers. My question was very simple: have you canvassed that with other
operators?
   Mr Lynch—Yes, I have.
   CHAIR—What is their reaction? Are they supportive?
   Mr Lynch—Their reaction is that they think they have a legal property and a legal right in
the licence under the terms and conditions under which it was issued, and that the government
has got not only a moral but a legal responsibility in this regard.
   CHAIR—So is your conclusion that you would get a lot of support for the proposition?
   Mr Lynch—Certainly. So much so that quite a few people in my position who are
legitimate—



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   CHAIR—That is fine. We just have to get answers, black and white, on the paper. We will
ask these other people about your proposition. Do not worry about that.
   Mr Lynch—Yes, great.
   CHAIR—I think I might leave it for a moment because we are running short of time.
   Senator CHERRY—Could you just explain in a little bit of detail the difference between
ADR and ISO, for the purposes of your application?
   Mr Lynch—ADR is Australian design rules.
   Senator CHERRY—Yes, I know that.
   Mr Lynch—They are the set of standardised rules which govern the safety, emission and
security regulations in motor vehicle design. ISO is a quality assurance program which I am
quite familiar with because I have worked with Volvo Australia and with Mack trucks when
they were going through the process of full volume compliance to ISO9001. It took those
multinational companies almost two years to achieve and millions of dollars and they lost
significant efficiency rate in the process. I cannot afford that because I would have to employ
another person in order to do that. It is like asking the local gas station to become ISO
accredited—it would simply put them out of business.
   Senator FORSHAW—Just let me understand this clearly, Mr Lynch. I understand what
you have told us about how you established your business, how you put your life savings into
it and your arguments about changing the laws and the rules at a time which you say has a
deleterious impact on your business. You import Toyota LX 90 sedans.
   Mr Lynch—Correct.
   Senator FORSHAW—What do you have to do to them and who does the work? Do you
do the work yourself to convert them?
   Mr Lynch—There is 47½ man-hours of work in converting and preparing the vehicle for
the market. That starts with the vehicle arriving at the wharf. There are the wharfage charges
and the labour there—all of the labour charges that I get charged until the car arrives at my
premises.
   Senator FORSHAW—But what physically do you have to do to the vehicle?
   Mr Lynch—I could give you a short list.
   Senator FORSHAW—Very quickly.
   Mr Lynch—We have to change seatbelts; change lights; put in child restraints; change
tyres; service the car completely; test it for ADR28, which is noise regulation; test it for
ADR30, which is smoke regulation; put in dash dimmers; fit labels; and inspect the car
completely to ensure that it does comply.
   Senator FORSHAW—You do all that work yourself?
   Mr Lynch—I do approximately 22 hours of that and 25½ hours is subcontracted.
   Senator FORSHAW—Once you have had them inspected and approved, you then sell
them to farmers and country transport operators. Is that correct?
   Mr Lynch—Yes, predominantly to farmers and rural dwellers. The reason for that is these
people put in excess of 50,000 kilometres a year on their family vehicle. At the moment, you
can buy a new Landcruiser or a new Prado—I am sure that you would be aware of those—but
these are very expensive vehicles and they are not motor cars; they are 4X4s.


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   Senator FORSHAW—Just summarising from your submission, these cars you are
purchasing are used vehicles?
   Mr Lynch—Yes.
   Senator FORSHAW—And you are selling them for up to about $15,000 each?
   Mr Lynch—Yes, between $10,000 and $15,000 they are very affordable.
   Senator FORSHAW—At the moment you would be limited to 25 a year. Is that correct?
   Mr Lynch—Yes, my business has not had an opportunity to build up to that level yet
because of the adverse effects caused by the minister. It destroyed my market, and I would
like to support what other speakers have said. Our competitors have got on to the insurers and
financiers and simply put pressure on them. They have then come back to me by phone, not in
writing—because, as I said, they were aware that it was against the Trade Practices Act—and
said that they were sorry but they could not accept my business. That has put pressure on me.
In addition to that—something which is very relevant because you are senators—on 8 March
this year, at the height of the Ryan by-election, Senator Minchin announced on the Andrew
Carroll program that vehicles, such as those supplied by me to the market—low volume
vehicles—did not meet Australian safety standards. That has absolutely destroyed my
business.
   Senator FORSHAW—In terms of this legislation and these draft regulations, is it the
problem that these vehicles would no longer qualify—that you would no longer be allowed to
import them?
   Mr Lynch—Yes, it would cancel my licences. They are a used vehicle and they are not on
the list.
   Senator FORSHAW—So that is the critical part, isn’t it?
   Mr Lynch—The critical part is that it cancels my licence, yes.
   Senator FORSHAW—Are you telling us that you do not believe it is possible financially,
because you are committed at this point of time, to change the nature of your business so that
you imported other types of vehicles within this two-year period?
   Mr Lynch—No, because of the imposts that we have heard of already to set up quality
assurance and save. I do not have the money.
   Senator FORSHAW—I do not need to hear the reasons. You are telling us that you are
locked into a business with this specific type of vehicle. This vehicle at the moment is not
sold in Australia; it is not imported or sold by Toyota.
   Mr Lynch—In any form.
   Senator FORSHAW—That is the crux of your argument.
   Mr Lynch—Yes.
   Senator FORSHAW—You would presumably be able to comply with things like
registered workshops and all of that?
   Mr Lynch—No, not with ISO at this stage in relation to my business, because it has not
grown to that stage.
   Senator FORSHAW—But if you were allowed to continue with your business importing
these vehicles—
   Mr Lynch—Quite possibly over time.


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   Senator FORSHAW—It would seem to me, from what you have put to us, that you would
make every effort to do that anyway. If you are interested in providing a safe and legal
product, those other aspects which concern safety, cleaning up backyard operators and so on
would not affect you.
   CHAIR—Going back to point (b) entitled ‘Life of our current licences,’ I presume— al-
though it does not quite say it on here—that the document you handed up to us is actually a
licence. Is that correct?
   Mr Lynch—Yes, that is correct; it is a copy of a licence.
   CHAIR—I cannot find anywhere on this that tells me what the life of that licence is.
   Mr Lynch—The market tells you, in relation to availability ex Japan.
   CHAIR—Sorry?
   Mr Lynch—The life of the licence is a finite time in relation to the life of the model. I
have got the prerogative in relation to how long I can supply the vehicle from Japan in terms
of supply and demand from my customers up to and including the age of 15 years of that
vehicle. At that time it becomes a 15-year-old vehicle and it is then outside the act in relation
to my licence.
   CHAIR—So you can import them until you cannot get them anymore?
   Mr Lynch—Precisely.
   Senator FORSHAW—Or for 15 years.
   Mr Lynch—Or for 15 years, and then they are dealt with as a 15-year-old vehicle.
   CHAIR—I think the date on this is May 1999.
   Mr Lynch—Yes, precisely.
   Senator FORSHAW—The life of the licence is not actually indicated on here, but what
you are telling us is that it is an essential aspect of the particular vehicle ex Japan that creates
the life of the licence, which runs for up to 15 years.
   Mr Lynch—If, for instance, there was only a one-year window and even, say, a six-month
window available of the model in Japan, and there were very few of them, and they were
going to be taken off the road in seven, eight or nine years respectively in Japan—which they
are—then that would indicate to me that I have a narrower window. But, in this instance, the
model has a broader time span. This is very important: of all the money that I have spent in
my business plan, the costs have been amortised over that span, up to and including the year
2012.
   CHAIR—So, in effect, you are saying that on this licence from 20 May 1999 you should
be allowed to continue either until the model is no longer available or for another 15 years.
   Mr Lynch—Precisely. That is what the licence says.
   Senator FORSHAW—I understand that what you are telling us is that the 15 years would
start to run from the date of the model of the car in Japan, wouldn’t it? So if it is a 1993
vehicle, then you could go until 2008, and if it is a 1996 vehicle then you could go until 2011.
   Mr Lynch—Precisely—this is a 1997 vehicle, hence 2012.
   Senator FORSHAW—So the 15 years maximum relates back to the manufacture of the
vehicle.



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   Mr Lynch—Yes. From the date of last model available, add 15 years and then it becomes a
15-year-old vehicle. This licence applies to anything under 15 years.
   CHAIR—What would your reaction be if we were to decide that 15 years from the date of
the model is an unrealistic period of time in terms of the Australian car industry and we said
that we were prepared to recommend that we extend that to, say, seven years?
   Mr Lynch—I do not think that would be very far-sighted in relation to Australian—
   CHAIR—Bear in mind that that it is a hypothetical question. It could be seven years; it
could be eight years; it could be five years.
   Mr Lynch—I refer specifically to Australia’s signature of United Nations regulation 58,
relating to the world harmonisation of vehicles. By the year 2008 I will be able to import the
car without complying it; we have de facto recognised world standards and I do not need to
comply the car. Once the car has been registered in Japan, which is also a signatory, it is
obviously compliant. This is what is so short-sighted about this RAWS workshops scheme.
   CHAIR—That depends on the law.
   Mr Lynch—Then it becomes purely a trade sanction, not a technical one.
   CHAIR—Just because Australia or somebody else, apart from a couple of countries, has
signed an international agreement, it is just a signature on a piece of paper until it is enacted
in law here. I do not know whether this is or not, but unless it is enacted into law here through
legislation then it is just a signature on a piece of paper.
   Mr Lynch—I believe we have signalled our intent and there will be other speakers later
today who can advise you on that.
   CHAIR—I do not particularly want to have a debate. I am exploring the principle which
you are putting forward to us.
   Mr Lynch—Yes.
   CHAIR—That has answered all my questions. Thank you very much for being with us and
for your evidence. If there is additional information you can get to us, please do so. We may
have further questions for you during the day.




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 [10.20 a.m.]
DIER, Mr Kym (Private capacity)
   CHAIR—Good morning, Mr Dier. You are a late inclusion to our list. I was not aware
until I got to Parliament House this morning that you were seeking to make a statement. On
Thursday evening when we took other evidence, three or four people at the start of
proceedings made five-minute statements. I invite you to make a statement for five minutes.
   Mr Dier—I have been involved in low volume importation. Some of the dealings I have
had with the department have caused some difficulties and I have been sitting back waiting to
see what is happening with the current legislation. Basically, I could not afford to continue
with the testing of a vehicle if there were going to be hold-ups and I could not bring it in
commercially. It would have been a bigger financial disaster than what some of my previous
dealings have been. I believe that the proposed changes to the act are against the stated
policies of the major parties that they promote free trade, competition and choice. We have
rural industries here—citrus, pork meat or whatever—that seem to be able to compete against
competition, but we have a foreign owned motor industry that has relatively heavy tariffs to
protect it. I believe that we are not protecting an industry and jobs here as such because the
Australian industry does not make anything smaller than the four-cylinder Camry. What we
are doing is protecting the imports that are coming into the country and not giving the people
the choice and better value that would otherwise be available to them. In the market now of,
say, over 800,000 vehicles, 500,000 have been imported. That is not much greater than it was
in the previous record year. Up until recently, the previous record year was in the mid-1970s
where it was 750,000. So we have a stagnating market and we have a relatively old vehicle
fleet.
   If people have the choice between a Korean vehicle and a cheaper Japanese one and have
the option to buy a used vehicle that they see is better value, I think they should be able to do
that. The New Zealand example has shown that the main difference in the market over there,
with the introduction of the used Japanese vehicles, is that Korean vehicles never made an
impact on the market. The local assembly that they were doing was producing vehicles that
were generally too expensive to the market. That is why they had such an old vehicle age.
Their fleet over there was a motoring museum. Now the people have later model, more
affordable vehicles and they are better for it. The Australian vehicles that are made here
would not suffer the same fate because over 80-odd per cent of them—in the case of Holdens,
I believe—go for fleet use. The average Australian purchaser does not buy an Australian built
car, I believe, most likely because of affordability.
   If you took it one step further, if 25 per cent of the market of the new vehicles imported
was used, depending on the price spread of vehicles—and I am talking about it opening up
somewhat—between smaller vehicles and four-wheel drives, which we do not make—for
example, the Mitsubishi is going to be all-wheel drive; it is a four-wheel drive road car and
does not have off-road capability—we would have a benefit to the economy of somewhere
between $500 million to $600 million in our balance of payments. It would save us that much
money. With the dollar under pressure, I do not think we can afford to dismiss that.
   Quite a few jobs would also be generated. We would be effectively value adding to an
import which is, at the moment, coming straight in off the boat. There is a need for more
affordable motoring, and to get older vehicles off the road and to give people the choice. If we
are going to argue that it should be only for an enthusiast vehicle or whatever, then you would
have to assume that the original act was wrong and that the revision of eligibility in 1995 was

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wrong also. I think they recognised then that there was a demand here and a need, to some
degree, for a more economical vehicle. My interest is primarily in diesels. I believe that, if a
person wants to buy one and if Toyota or whoever do not want to put diesels on the market
then there is no reason why someone else should not supply them. I point back to the potential
benefit to the economy of, say, savings of $600 million to $700 million and the income that
would be generated.
   The Federal Office of Road Safety seems to be subject to a certain bias in this regard. We
have had vehicles like the Hummer in Queensland which went through low volumes when
American motors was doing full volume. Have a look at the evolution. Someone was granted
compliancing for that, and then that was denied and Mitsubishi have gone through with the
same model vehicle. That has been accepted. That is an anomaly that would need a lot of ex-
plaining and I suggest that something inappropriate has happened along the way. We are not
treated equally.
   CHAIR—Thank you, we will have to wind up there. If you have any additions, please
email or fax them to us.
   Mr Dier—Yes, I will do that. What time frame are we working to?
   CHAIR—As soon as possible. Certainly no later than mid-afternoon today.
   Mr Dier—That will make it extremely difficult. I did not know about the time frame.
   CHAIR—Thank you. I am not in a position to debate this; it is a great time constraint for
us, as well. I am sorry about that.
   Mr Dier—With the national interest at stake—
   CHAIR—We have received your letter and we have heard the basics of what you want to
say. We are making the offer that you can put something on paper and send it to us, if you
want to.
   Mr Dier—I will see what I can do.
   Senator FORSHAW—Mr Dier, we have the dot point summary that you sent. We have
had about 50 submissions from various people, overwhelmingly opposing the legislation or
raising concerns about it, so I can assure you that, whilst we have a tight timetable, we are
certainly very much aware of the issues and concerns.
   Mr Dier—The interest of the motor industry is not necessarily the national interest, and
that has been one of the problems. We have the big end of town here, and that can exert a lot
of influence—that has happened in the past.
   CHAIR—Thank you. We must finish as we have other witnesses waiting. The issue has
been well canvassed. Thank you for your contribution.
   Mr Dier—Thank you.
                    Proceedings suspended from 10.28 a.m. to 10.41 a.m.




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DEAN, Mr Craig, Managing Director, Crossover Car Conversions
   CHAIR—Mr Dean, before the committee commences taking evidence, let me place on
record that all witnesses are protected by parliamentary privilege with respect to submissions
made to the committee and evidence given before it. ‘Parliamentary privilege’ means special
rights and immunities attached to parliament, its members and others necessary for the
discharge of the function of parliament without obstruction or fear of prosecution. Any act by
any person which may operate to the disadvantage of a witness on account of evidence given
by him or her before the Senate or any committee of the Senate is treated as a breach of
privilege. There are other matters that follow from that, but I have given you the guts of it. I
invite you to now make an opening statement. If you could keep your comments to about 10
minutes, it would be greatly appreciated.
   Mr Dean—As most of you have already read, no doubt, my concern is that the lengthy
process of putting this act into place is starting to burden fair dinkum businesses. There are a
couple of problems in the 17 September draft regulations, which I have now read. There is the
transition period running on till May 2003, which is probably not acceptable for fair dinkum
businesses. We are struggling with competing against backyarders who do not run the
protocols.
   There are a couple of additional exceptions we could run if the transition period goes
through. ISO accreditation could be a minimum requirement to continue after May 2002. That
could be considered. Also, if that is not possible, there could be across the board enforcement
of regulation 13ZF(m) for the current approvals that are operating. The 18-month rule is quite
acceptable for big full volume manufacturers that are running to give them time to decide
what models to run in this country, but I think the eligibility rules are still a bit stringent,
because we are only less than one per cent of the marketplace—we are only a small industry.
That is about all I have to add about the regulations. We need to get this up and running in our
business to move forward.
   CHAIR—I will just clarify that. You would like to see the legislation proceeded with in its
current form and you have identified some alterations or modifications you would like to the
regulations. Is that correct?
   Mr Dean—Yes.
   CHAIR—I have a couple of questions just to clarify things. Are you satisfied, in terms of
this legislation and the way it is structured, that the key issue—it seems to me to be the
principle one—of backyard operators or premises that do not comply with standards and
safety issues et cetera needs to be dealt with?
   Mr Dean—That is correct.
   CHAIR—That is my final question. That was very easy.
   Mr Dean—I am not into bucking systems. I have been through changes for the last 10
years and I just want us to have something concrete that we can run to—and at the moment it
is very difficult. I believe there has to be discipline in the industry because not everybody runs
by the book—otherwise it is not a level playing field, is it?
   CHAIR—We really appreciate that. You have put your position very clearly on the table.
Thank you.




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 [10.47 a.m.]
CUTHBERT, Mr William (Private capacity)
   CHAIR—Thank you for appearing before us today. You have heard all the matters relating
to privilege?
   Mr Cuthbert—Yes, I have.
   CHAIR—Do you have any comments to make on the capacity in which you appear and
whether or not you represent yourself, an organisation or a group of people? After that I will
invite you to make a short opening statement.
   Mr Cuthbert—I have been retained by about 60 low volume CPA holders to represent
them. There was a meeting yesterday in Queensland and I now believe there are about 150
people who follow the policy I am putting forward and think along these same lines.
   CHAIR—Can you get that group of people to fax through the names of members involved
so we have their names?
   Mr Cuthbert—Yes, I will. You should have before you quite a wad of documents.
Hopefully, this will resolve some of the questions that you have been asking over the last two
days. You will see the top right hand corner of the first document says, ‘Not for publication’.
This is a document that was handed to me in 1997 by the author of the document. I have no
problem with it being published—it is a document from the department of transport, but if
they do not want it to go into the public domain I have no problem with that either. It is up to
them. The whole crux of this issue is the question of the intent of the scheme. The
government has stated that we are going back to the original intent of specialists and
enthusiasts.
   The second page of this document gives a bit of background on the low volume industry.
The low volume industry was introduced in about 1970 after the introduction of type
approval. It was recognised that type approval would be an expensive process and, to ensure
that the Australian consumer had the widest possible range of vehicles, a low volume scheme
was introduced. That is fairly well explained in that first page. You will note that down the
bottom it says:
There were no imported used vehicles.
So this was basically a new vehicle scheme. It was to ensure that the Australian public had the
wisest possible range of vehicles. If you look at the second page, it says:
The Intent of the Low Volume Scheme
The intent of the low volume scheme is to make available to the public vehicles which may otherwise
not be marketed due to the need to amortize over a small number of vehicles the high cost associated
with a normal volume certification.
That was the original intent of the low volume scheme. On the next page there are some
principles of the scheme. This paper was a scheme to introduce a registered workshop
scenario. If this scheme had been introduced back in 1990, half the problems we have now
would not exist. On page 5, it says:
Eligibility
The concept of low volume eligibility based on model is retained. It is seen as essential to preserve the
intent of the low volume scheme to apply only to those vehicles which may not otherwise be marketed
in Australia.


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Over the page you will see what the department calls ‘Circular No. 0-2-1, Certification of
vehicles produced in low volume.’ This is issue 12, October 1989, which was following the
introduction of the Motor Vehicles Standards Act in August.
   Then there was an introduction of a used vehicle certification scheme in October. An at-
tachment to that circular, which is another five pages, is ‘Attachment 1, Guidelines to estab-
lish model eligibility under the low volume scheme’. Point 1 is:
1. Intent of the low volume scheme
     The intent of the low volume scheme is to make available to the public vehicles which may not
     otherwise be marketed due to the need to amortize over a small number of vehicles …
It is the same thing again: nowhere does this mention specialist and enthusiast vehicles. What
you will find is that the intent was to provide the Australian public with the widest range of
vehicles. As it happened, the majority of those were deemed as specialist or enthusiast
vehicles because they were in small numbers, traditionally 10, 20, maybe 50 vehicles of that
type. And so it has progressed from there, saying: ‘Yes, most of the vehicles coming in were
specialist and enthusiast and so that is what the original intent is.’
    On page 2 or 3 of attachment 1 of 0-2-1, you will see:
4.2.1 Diesel engines
     Notwithstanding the requirements of para 4.2, a diesel engine variant will be classified as a new
     model if no diesel engine variant is available in Australia.
That is the clause under which the industry has been saying that the department has been lax
by allowing in diesel variants of vehicles that they produced here. The department was not
lax; it was identified as a niche market. It was identified that the vehicles would be a small
market and so it was put in there as a niche market that this industry could cater to. There was
nothing about lax administration.
   You will see there is a circular 0-2-1, dated 1995. This is where the specialist enthusiast
came in—six years after the original introduction of the scheme. The principles of eligibility
criteria became specialist enthusiast vehicles for passenger cars only. That was introduced to
protect the Australian manufacturing base. The Australian manufacturer, apart from the utes,
only manufacture what they call the MA category passenger car.
   CHAIR—We are fairly familiar with the history of the issue. We really have to deal with
the legislation and the regulations before us today; otherwise you are going to use all your
time up and we will not know what people think about where we are today. Can you quickly
summarise that paper. We have a copy. We would appreciate that. Just get on to the crux of
what we are here for.
   Mr Cuthbert—On the crux of it, this whole legislation is based on misinformation at best
and lies at worst. The whole intent of the new scheme is that we are going back to the original
specialist enthusiast vehicle. That was never the intent of the scheme. As I said in my
submission, we are changing the principle from the Australian consumer making a choice on
vehicles to the government deciding which cars consumers can or cannot buy. In an ABC
report in 2000, Senator Minchin himself said the Australian public should be allowed to
choose. The transcript says:
Obviously as industry minister and as a South Australian I would very much hope that they choose
Australian cars. But I think it would be grossly unfair to infringe on their rights to say that they cannot
do it with their own money and drive a car of their choice.
He is saying, ‘If you are buying a new vehicle you can choose which car you want; if you are
driving a used vehicle we will decide which car you can drive.’ The Toyota Surf is one of the

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cars that is causing the problem. Why didn’t Toyota market the Surf? It was because they did
not think the market was big enough. You heard someone from Toyota saying that it was too
expensive to market a Surf. The explanatory memorandum says:
... the Toyota ‘Surf’ imported ... is the same as a (full volume) Toyota ‘4-runner’ in every respect other
than the diesel engine.
Yet to comply with a diesel engine, which is ADR70, an alternative is the Japanese standard.
Toyota did not have to retest it. All they had to do was take the Japanese standard. It was
tested in Japan. They could have submitted that evidence and sold it here, but they chose not
to because the market was too small. It was not lax administration; it was not expense. There
were not millions of dollars in marketing that car here, and ADR70 shows that. On the diesel
vehicles, there is a letter here from a company which inspects natural gas pipelines. They are
required by law to only use diesel powered vehicles. They only place that they can buy short
wheel based diesel powered vehicles is the low volume industry. What you are doing there is
stopping that company from buying those vehicles. What are they going to do?
    CHAIR—Could I urge you to quickly summarise, because we have quite a few questions.
    Mr Cuthbert—Basically, this legislation should be thrown out in toto. It is based on lies
and misinformation. As late as August this year, Minister Anderson wrote to Kay Elson and
stated how well the SEV Scheme was working. He said there was no growth in the used
vehicle industry and one of their aims had been achieved. But the SEV Scheme does not come
in until May next year. How can he say that the growth has been rectified by this legislation?
It is a load of garbage.
    CHAIR—Can you table that letter or send it to us?
    Mr Cuthbert—Yes.
    CHAIR—Thank you. Do not worry about it now. We will get it later.
    Mr Cuthbert—They talk about the New Zealand industry in this document that I am
tabling. There is a report of the motor vehicle assembly industry and analysis of employment
and viability issues. In conclusion 6, the availability of used imports is not considered to be a
decisive factor in the long-term viability of the industry. Yet you hear the multinational car
companies saying, ‘Look what happened in New Zealand.’ Their own government is saying
that it did not have any effect on the closure of the industry there. They allowed parallel
imports, they allowed anything to come in and they allowed very few restrictions on what had
to be done to the vehicles.
    The next page is actually a press release from the Office of the Minister of Commerce in
Wellington. It states:
As the motor vehicle tariffs are removed, vehicle prices will decrease from what they would otherwise
have been.
Since 1990, the tariffs have been reduced. There has been a growth in over 200,000 jobs in
New Zealand. It also says:
Car tariffs are essentially a tax on New Zealand families and businesses.
This was dated 1997. This tax is currently around $300 million. This costs around $200,000
per job. So, for every job in assembly plants in New Zealand, they were being subsidised by
$200,000 per job. This is more tariff assistance than all other New Zealand industries receive
together—that just shows you that. The New Zealand government said, ‘We’re cutting out the
tariffs.’ So companies said, ‘All right, if there is no tariff, we’re closing down.’ It had nothing
to do with imported used cars. The next page is the new scheme. It specifies:


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•   Not marketed in full volume—
I have no problem with that—
•   Supplied to the world market for at least 18 months—
That is very well thought out. The average model runs for two years—maybe a little bit more,
maybe a little bit less. If a car comes in for low volume compliancing, if everything goes well,
you may get it through in six months but usually it is 12 months. That is 2½ years. No-one is
ever going to market a current model car. It goes on to say:
•   Withdrawn from the market for at least 12 months—
I have no problem with that—
•   Meets at least two of four specialist and enthusiast criteria—
What they are doing there is saying, ‘We’re cutting out 90 per cent of the vehicles that you are
now bringing in.’ The scheme also includes:
•   4WD with single-cab and open work-tray.
They said, ‘Here we are; we’re catering for the farmers.’ I had people who looked around
Japan for a month and could not find a single vehicle that meets those criteria. It is very well
planned. Turbo variants have been taken out. That knocks out all of the four-wheel drives that
they have been bringing in and most of the forward control passenger vehicles.
    There is a two-year sunset period on existing approvals. The industry realises that Australia
and Japan have both signed the 58 agreement. What that means is that the two countries will
have agreed to harmonise motor vehicle standards. It will probably take five years at best for
it to be implemented. It could be as long as 10 years. I am sure Mr Gascoyne could give you a
better timeframe on that. They realise that, once those standards are harmonised, it will be
very easy to import cars. It does not matter whether it is full volume or low volume. If they
are made to ECE standards, under the agreement they will be deemed to comply. There will
be very little work done on the cars.
    CHAIR—I might have to get you to wind up, because we do need some time for
questions.
    Mr Cuthbert—There are some graphs there on growth. There has been a lot of talk about
concessions, that this industry operates on concessions. Yes, it does, but so does the full
volume industry. There is a document there which is a summary of evidence document. In
relation to test results: is it ECE approved? If it is, no further testing is required. They operate
under concessions as well. The reason that these concessions came about is that it is a type
approval system, designed for new vehicles. You are looking at growth. I put in some tables
sent to me by the department of transport. You have to realise that these numbers are the
numbers of plates issued. When you talk about new motor vehicles, these numbers are
vehicles registered, whereas with the low volume industry, they are plates issued by the plate
authority.
    In February 2001, there were 685 passenger cars, 40 forward control passenger vehicles
and 346 four-wheel drives. But I had some people look around car yards in Queensland and
they went through seven car yards—one car yard had 45 cars; another had 47 cars; another,
20; another, 50; another, 35. So of those, how many cars are being plated? For that month,
there were 1,127—but they are cars plated, not cars sold. My guess is there would be
probably in the vicinity of 300 or 400 of those cars which are still sitting in car yards waiting
to be sold. Are people going to bring in more cars if they cannot sell those original cars?
    Next, there are some figures for full volume cars. Toyota Landcruiser, for one month in
March 2000, sold 1,191 units. The Honda CR-V sold 1,141 units. They are selling more in

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one model than this industry sells across the whole category. There are also figures for
October 2000. There is a graph there which I produced on exports, the number of vehicles. Mr
Vanstone said he thinks that the market is saturated. I do not think it is quite saturated, but it is
damn near to saturation point. You have to remember that, in 1988, there were somewhere
between 8,000 and 9,000 used vehicles coming into the country. We had a new vehicle market
of 400,000. We now have 800,000 and we are bringing in 16,000, so percentagewise we are
roughly the same. We are back to where we were in 1988. I would say that those figures are a
maximum. They could be a little bit high. There was some talk about the 20,000 mark—my
prediction is that it would probably hit 20,000 somewhere around 2003 or 2004. But there
will also be an increase in new car sales—new car sales then will exceed one million cars.
These cars do not affect new car sales.
   On the third page, there is a letter from Insurance Broking Australia Pty Ltd basically say-
ing that, if this legislation comes in, people will not insure these cars. If they do not get insur-
ance, there will not be a market. That is the third last page. On the second last page of my
submission, there was a scheme proposed and one of the issues was taking the restrictions off
at 10 years of age. The 10 years came from the Department of Industry, Science and Re-
sources when they were talking about a specific duty. They said, ‘At nine years old, you are
not going to affect the new car market—no duty at all.’ So if they say that there is no effect,
why not open up the market to 10-year-old cars and over? They will still have to comply with
Australian design rules and everything else, but you will then be directly targeting the used
car market, reducing the age of the fleet and supplying a viable market to the people who can-
not afford to buy new cars.
   I find that this whole process has been a farce. Both Mr Anderson and Senator Minchin
have misled cabinet and misled parliament, and I think they are not worthy to stay as
ministers of the Crown. As a taxpayer, I find it utterly amazing that this legislation even got
this far. Basically, my view and the view of the people I represent is that this legislation is
based on lies. It should be thrown out in toto and started again with a scheme which is
balanced, along the lines that we go back to supplying vehicles to the Australian market. If
they want diesel vehicles, they should be able to have them. Are there any questions?
   CHAIR—We only have time for one question each.
   Senator RIDGEWAY—Mr Cuthbert, I just wanted to say that one of the difficulties I find
in all of this is that we have to be the arbiter of what is fact and what is fiction and what works
and what does not.
   Mr Cuthbert—That was why I have tabled all these papers.
   Senator RIDGEWAY—In your submission you talk about being retained by some 60 used
vehicle importers across the country. Do you have a list of those 60 importers that the
committee might appraise itself of? In addition to that—and this would be helpful to me—
where you have spoken about that broad generic impact upon the industry, are you able to
come forward as a consultant retained by 60 organisations with case studies of the worst case
scenario, the best case scenario and what is the norm somewhere in between in terms of
impacts?
   Mr Cuthbert—Yes. I have a couple here.
   CHAIR—When I asked Mr Cuthbert at the start, he told me that he would give us a list of
the names of the people he represents.
   Mr Cuthbert—On Thursday night, you spoke to Mr Leon. He is one of the ones who
retained me. He sent me a letter, which I shall table, saying that he has already closed down.


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His business has been greatly reduced; he has gone from 17 to seven or eight employees. If
this continues, he could be out of business completely.
   CHAIR—Thank you.
   Senator RIDGEWAY—You have been employed as a consultant and you have been with
the department of transport for 10 years. Do you want to talk a little about that? What was it
that you did with the department of transport that puts you in a position to be an authority on
the issues?
   Mr Cuthbert—For the first five years, I was a testing supervisor and officer in charge of
the federal government’s testing laboratory in Sydney. We tested exhaust emissions, fuel
consumption, noise and also did some work going out and inspecting vehicles. With the
introduction of unleaded petrol, the laboratory was closed and I moved to Canberra. I was
then in audit and safety investigations. I worked with Mr Gascoyne on a number of projects. I
set up and wrote the specifications for the federal government’s motor vehicle recall system. I
was the senior technical officer in the recall section and safety investigation section for a
number of years. I was also drafting legislation. I was seconded to the land transport policy
division for three months for the drafting, introduction and implementation of the federal
interstate registration scheme. So I have had a reasonable amount of experience in drafting
legislation.
   After resigning from the department in 1991, I went back under contract. They have a
manual that they call a test facility inspection guide. They wanted that reworked, so I did that
with another engineer. Then I took child restraints out of ADR5 and generated ADR34, which
is ADR specific to child restraints. The state governments had trouble understanding the
lighting regulations, so another engineer and I took the technical requirements and the
physical requirements and we produced a vehicle standards bulletin on how the states can do
a physical check on the lights.
   I was also contracted to put the Australian design rules onto CD to do an evaluation and a
costing on that. My last contract with the department was to bring all the Australian lighting
rules into international harmonisation. Those two documents were produced. That was only in
draft form. That is all the Australian lighting rules which are now harmonised with UN ECE.
That has been determined. Now every lighting rule on the ADRs is to ECE standards. On that
SE form, the light is approved to ECE. Do not test it. Do not do anything. That was the last
contract, and it was a six-month contract.
   CHAIR—That is a pretty good summary.
   Senator O’BRIEN—We have, I think, been in receipt of a submission which effectively
suggests that perhaps the solution to this problem would be to allow the import of used
vehicles where that vehicle has not been imported in volume into Australia as a new vehicle.
What would the group of people you represent say to that proposition?
   Mr Cuthbert—That is basically the policy: if it is not manufactured, imported or sold here
as a full volume vehicle, it should be allowed. If someone wants to buy that vehicle—if they
go to Japan, Europe or America and see a vehicle and say, ‘I want to buy that vehicle’—and it
is sold here, yes, they have access to it; if it is not sold here why can’t they buy it?
   Senator O’BRIEN—That would have no impact on the increase in volume of the imports,
would it?
   Mr Cuthbert—No.
   Senator O’BRIEN—They would continue to increase.


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   Mr Cuthbert—That is the current scheme except for four-door passenger cars. The
volume seller is your four-door passenger cars. That is why on my proposal they would not
allow a four-door passenger car until it is 10 years old. That is in line with the department of
industry’s proposal that 10-year-old cars have no effect whatsoever on the new vehicle
market.
   Senator O’BRIEN—The Surf is a five-passenger vehicle, is it not?
   Mr Cuthbert—It is an MC category vehicle. It is what they call an off-road vehicle. It is
not really a passenger car vehicle. There are a lot of Surfs in Canberra. I have talked to people
who own them, and they think they are great. Why didn’t Toyota bring them in? For the
simple reason that they would not sell enough. They are not a high volume selling vehicle.
   It is the same with the Prado. When Toyota brought the Prado out, they brought it out as a
petrol version. That became eligible to the low volume industry. Toyota replied and got an
approval. It was withdrawn as a low volume vehicle but they did not market it. The
department wrote back to the industry saying: ‘Look, this vehicle is still not available. You
can now bring it in.’ Once Toyota realised that, they then brought some out here and actually
marketed the vehicle. I could not find the actual letters where the department has written
saying: ‘Look, it’s not available; it’s now available. It’s not available; it is available,’ but I am
sure Mr Gascoyne from the department could supply those.
   CHAIR—I only have one question, and I think it is answered in the back end, with regard
to safety. Do you support the principles with regard to safety that are in the legislation?
   Mr Cuthbert—Yes—
   CHAIR—I want to clarify that, because you have said, ‘Throw the whole thing out, the
lot,’ and so on. I do not want to have a debate on this, because you have gone over your time.
All I want to clarify is whether you support the need for safety provisions.
   Mr Cuthbert—The need for safety provisions? That is why I have said that all vehicles
shall comply with the intent of the Motor Vehicles Standards Act. I—as well as AAIMA,
VICAA and everyone else—do support the concept of registered workshops. That first paper
was to introduce registered workshops in 1990. If that had been done then, we would not have
half the problems that we have now.
   CHAIR—You have clarified that position in terms of legislation. I thank you, Mr Cuthbert,
for being here today. If there is other information you want to send to us, please do. If we
have any questions for you, we will ask you. Thank you.




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 [11.19 a.m.]
WALL, Mr Garry, General Manager, Manufacturing, Engineering and Construction
Division, Department of Industry, Science and Resources
YAP, Mr Hian, Manager, Automotive Policy Section, Department of Industry, Science
and Resources
   CHAIR—I welcome the witnesses from the Department of Industry, Science and
Resources. I invite you to make an opening statement and then we will have some questions
for you.
   Mr Wall—I thought it might be helpful to the committee if at the start I made some
observations from an industry policy perspective. Even though the MVSA bill is primarily
about Australian design rules, safety and environmental aspects, like many things in life it is
not a self-contained issue. The interaction with industry policy needs to be considered. I have
listened carefully to the evidence presented to this committee over the course of Thursday
evening and again this morning, and it might be helpful if I were to paint an industry policy
context for the committee in which it could assess the views submitted by the various parties.
    Firstly, it is worth noting that most sales of imported used cars are ultimately at the expense
of new car sales—even if there is not direct head-to-head competition, as some witnesses
have stated. Growth in new car demand is driven by two basic factors: population growth and
replacement demand. In a mature market like Australia’s, replacement demand is by far the
most important. A study conducted by the Automotive Industry Council in 1988 showed this.
Demand for new vehicles essentially accords with a typical stock adjustment model, with the
dynamics affected significantly by depreciation and scrappage. If the stock of existing
vehicles is fed from other sources of supply, it triggers a downward adjustment or a slowing in
the rate of new vehicle sales.
    Secondly, it is also worth reflecting on the nature of the Australian automotive industry and
government policies towards it. Although the Australian market is relatively small by world
scale, we have four overseas owned car makers and a supplier infrastructure in excess of 200
firms. Around 50,000 people are directly employed in automotive manufacturing activities.
Despite extremely high protection levels at the time, the survival of this industry was in doubt
in 1984. Since then, successive policies have resulted in steady reductions in tariffs and
industry restructuring. This measured path to restructuring has been with the objective of
securing the future of car manufacturing in Australia. This has been at considerable
community expense over the course of some 20 years but we now have a manufacturing
industry, which is close to the internationally competitive mark. I do not believe there is any
doubt that the $12,000 specific duty on imported used cars, which was introduced in 1992,
was introduced with the clear policy intent of curtailing the impact of imported second-hand
cars on Australian industry. The $12,000 tariff was triggered by fewer imports in 1991 than
we have today—far fewer than the 16,000 vehicles entering Australia last year under
concessionary arrangements which avoid this penalty tariff.
    Some witnesses have commented that the Australian vehicle market has absorbed the
growth in sales of Korean manufactured vehicles. It needs to be said, however, that this
growth has, in part of the market, displaced imports of Japanese vehicles in those same
market sectors. Moreover, those Korean vehicles are entering the Australian market on the
same terms and conditions as other vehicles sold new. Whether made in Australia or
imported, they comply fully with ADRs. It might be helpful to consider how Australia came


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to have a system which allows concessions in vehicle design rules covering important matters
such as safety and environmental performance. Although Mr McIntosh of AAA noted that
context can change over time, my understanding is that the concessions from ADRs were first
given to people manufacturing cars in limited volumes in Australia. The Bolwell, a fibreglass
bodied high-performance car, was able to utilise these provisions. So it was conceived as a
scheme to help specialist manufacture and employment in Australia. I guess it is interesting
that the scheme has since been broadened so that its main effect now is to facilitate imports at
lower standards of compliance. Instead of the concession going to small Australian
manufacturers, it is now being shared between the overseas consumer disposing of his or her
vehicle and the importers of second-hand cars.
   In his evidence, Professor Delaney referred to dumping. Dumping is a good analogy. In this
case it is suppressed prices caused by Japan’s regulatory environment rather than predatory
pricing. It is unfair competition and it cuts across industry policy objectives where those pol-
icy settings have been clearly articulated and based around a system where competition oc-
curs on a much more level playing field. The committee has heard evidence from Professor
Delaney and the MTAA that the disparity caused by having one group, that is the mainstream
industry, complying fully with ADRs, and another group, used car importers, enjoying sig-
nificant concessions is causing serious distortions in the marketplace. If these remain un-
checked the balance will swing to low regulated activities, and undermine new vehicle pro-
duction and marketing. Certainly ISR has had many representations from franchise dealers on
this point.
   How important are 16,000 vehicle sales to Australian industry? The loss of this sort of
volume is important to Australian producers. Sixteen thousand new sales would represent
around a 40 per cent increase in production of Magna Verada and an almost doubling of
Toyota Avalon volumes. In Australia’s small market, the break-even production volume is
often quite finely balanced and extremely sensitive to small changes. Five thousand units
either way can make an enormous difference to the viability of the local manufacturing
operation. You have only got to see the oscillation of the profitability of Ford and Holden over
decades to see that those marginal changes in market share have an impact on viability.
   As relatively small operators in a global context, Australian based carmakers have to pitch
hard to win new investment from their overseas parents. Negative factors in the markets, such
as the rapid growth of imported used vehicles on concessionary terms, make it harder for
them to sustain the case for new investment, particularly where an extrapolation of the current
trend of used car imports suggests that they could reach 65,000 by the year 2005.
   In summary, I believe there are good industry policy reasons for moving to the service
arrangements. Any more than 2,000 to 3,000 used car imports facilitated by regulatory
concessions is beyond what was expected when the current industry policy settings were
devised. Those settings were struck with an eye to further liberalisation of the Australian car
market, but at a continuing, predictable and managed pace which sustains the Australian
industry. The specific $12,000 duty on second-hand cars was considered appropriate to
provide some control on unfair competition. I would argue that, in the light of the recent rapid
growth in used vehicle imports, further measures are necessary. Like many other policies,
SEVS represents a sensible compromise between competing interests. It is about tightening a
loophole, not removing it. In essence there are two changes: one is giving the same treatment
to four-wheel drives as passenger motor vehicles, the other is introducing higher assurance of
safety and environmental standards through registered workshops.




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   Senator FORSHAW—You have heard the evidence given this morning by Mr Lynch from
Trucks Plus. How should legislation deal with that situation? To summarise, Mr Lynch says
that he has established a business legitimately, he has put a substantial amount of capital—his
life savings—into that business, and he now faces the prospect of that business being ruined,
he claims, if these changes go through. If they are designed for good public policy—and even
if one were to accept that everything you have said and other arguments that have been put
about projected growth in used car imports are true—we nevertheless have a situation where
it is argued that this legislation could destroy Mr Lynch’s business and a lot of other
businesses. How do you think we should handle that as a matter of public policy?
   Mr Wall—Senator, I apologise, I did not hear Mr Lynch’s evidence this morning. How-
ever, I have spoken with Mr Lynch on previous occasions and I believe I understand the
situation affecting his business. I believe that the policies announced by the government on 8
June 2000 provide businesses like Mr Lynch’s with a generous period of transition. I believe
that announcements made subsequent to 8 May have enhanced that. I believe that the scheme
that will continue under the SEVS arrangements allows opportunities similar to those that
businesses were confronting on 7 May 2000. I think it is a question of adjustment, a question
of changing trading stock patterns and a question of changing to other models and varieties. I
believe the range of available models is in fact expanded under the SEVS criteria. We would
encourage Mr Lynch and other like-minded businesses to fully explore those opportunities.
   Senator FORSHAW—What is the problem with the four-wheel drive diesel turbo
vehicles? In Mr Lynch’s case it is the Toyota LX 90. They are now going to be treated the
same as passenger motor vehicles. What is the big threat they pose to the Australian industry
that warrants them being prohibited?
   Mr Wall—The threat is in the growth of numbers. The threat is in the number of vehicles
that are entering under what you would call normal arrangements. They are not specialist and
enthusiast vehicles; they are going beyond the intent of the scheme.
   Senator FORSHAW—It has been put to us that the figures supplied by the Department of
Transport and Regional Services—they are also in your submission—that give a total of
16,825 for 2000 and a total of 1,037 for 1993, are the result of an incorrect analysis. That
analysis is not correct because, it is claimed, the earlier figures were based upon licences as
distinct from vehicles. Can you comment on that? Have you heard that criticism, and what is
your response to it?
   Mr Wall—I heard that criticism first on Thursday evening. I believe my colleague from
the Department of Transport and Regional Services will respond to that proposition. The
figures supplied to you via the Department of Industry, Science and Resources were just
passed on from the department of transport.
   Senator FORSHAW—They will deal with that, then.
   CHAIR—For clarification: it is import applications which are represented in the column in
1993, and that could have four, five or six in it, whereas the figures, as explained to us, for
2000 are individual vehicles. Is that the difference?
   Mr Wall—I believe the figures are comparable—they all relate to vehicles. But, as I said,
that is for my colleagues in the department of transport to comment on. It is not something I
am able to comment on.
   CHAIR—I would like to challenge that. I ask you to check the proposition that has been
put to us—and I believe it is the case—that back in 1993 they were applications and they had



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multiple vehicles in them. I think it is important that we check that and get it cleared up. Have
we got a nod in the back?
   Senator FORSHAW—You said that sales of used cars are part of the same market that
compete with new cars. I would not necessarily disagree with that, but how do you factor into
that—and you say this is a matter of policy—firstly, the fact that a lot of used cars sold in
Australia are cars that are purchased in Australia and may be either manufactured here or im-
ported as new cars? I understand that is the overwhelming bulk of the used car market—a lot
more than 16,000. In that context, is 16,000 imported used cars really a major problem? Do
you have a response to that? Isn’t it the case that, if people are concerned about the sales of
used cars affecting the sales of new cars, that is an inherent issue in the industry anyway, be-
cause for every new car that is sold here, it is likely it will be sold as a used car at some time
anyway and when you import 16,000 or so used cars you are really only tinkering at the
edges?
   Mr Wall—The proposition I was trying to describe is that the demand for new cars works
on a stock adjustment model and that is dependent on the rate at which the existing stock of
cars is retired. There is a linkage between the price of used cars and the price of new cars. If
you have a sudden increase in the existing supply of used cars, you would diminish the
demand for new cars. That is the proposition that I was putting. In the words of the modellers
and the economists, you have introduced an exogenous shock to the market. It really depends
on the size of that shock. You were saying that in the year 2000 the size of that shock was
16,000 vehicles. I think the committee heard evidence on Thursday evening that, if the
mainstream franchise dealers moved into that market, they could make the size of that shock
much larger. That is, of course, a danger to the whole fabric of new car sales in Australia.
   Senator FORSHAW—They would cut their own throats then, wouldn’t they?
   Mr Wall—That is a question you would have to ask them. It is an alternative to their
current line of business. I suggest to you that, if they were to make that decision, that would
not be a good outcome for vehicle manufacture in Australia.
   CHAIR—A number of things concern me greatly about the evidence we have been given.
One is the constant misuse of statistics. I think this sheet here is a classic example. I am quite
certain we will find that we are talking about two different things from the beginning to the
end. You have just referred to a statistic on how this would multiply into that, but we also had
evidence—I think it was from Mr Cuthbert a while ago—that the ratios of used and new
vehicles today, relative to our population, are pretty consistent going back to the 1980s. I hope
I am not misrepresenting Mr Cuthbert, but that is how I understood what he said. We also had
evidence in a similar light—that it had not varied a lot.
   I am finding it very difficult to ascertain how you draw in these conclusions when there
does not seem to have been—from what has been put before us—a major change in the last
20 years between the ratios of imported second-hand vehicles, new vehicles either
manufactured or imported into Australia or the second-hand vehicles operating here. Add two
things together: one is our obvious improvement in the standard of living—a lot of families
now have two cars—and the other is the increase in population. How do you explain this
variation? There seems to be consistency or have I come to the wrong conclusion from what I
have heard?
   Mr Wall—Senator, notwithstanding the doubts you have about the statistical material in
the table, I think the 55 per cent growth rate per annum over the seven- or eight-year period of
the table leads you to a different conclusion. I would say that there is something wrong with
the regulatory environment that is allowing this sort of growth to happen. The so-called stable

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relationship being postulated has been broken by a change in the regulatory environment that
is encouraging this growth. I would like to know where all these stabilisers are over the period
of this seven or eight years we have under consideration if the proportion of total vehicle sales
are going to remain stable.
   CHAIR—I would like to know which are motor cars and which are multiples of motor
cars. I think not knowing makes our job incredibly difficult. I am not particularly criticising
you. You have got the figures from somebody else. But the fact that at this table we have a set
of figures but we do not know whether they are multiples of cars or single vehicles and what
they represent makes our job incredibly difficult. To be quite honest with you, I thought that
at least at the departmental level we could have sorted that out before we sat down here. I will
say the same thing to the leaders of industry organisations. I find it quite appalling that they
come here and put a sheet before us and we do not really know what it is. I do believe we will
find out very shortly.
   I also want to ask you about using statistics. You mention a Mitsubishi model and the
Verada and the 16,000 imported vehicles. Statistically I cannot work out how you can directly
transfer—and maybe once again I misunderstood you—second-hand imported vehicles into
the market, vis-à-vis these two new models of cars, if in fact the market demand from
consumers is for new cars. It just does not seem logical to me. I come from Western Australia.
Anecdotally I know—and I have seen them—that most of these vehicles are out on the
stations or on mining sites. We heard a little about gas pipelines earlier on which I will check
out. I think it is imperative to check that out. There really is not that direct correlation in an
impeditive sense in the marketplace. Can you comment on that? That is another one of these
confusing things. I think if somebody wanted a new Verada or the new Mitsubishi that is what
they would go and buy. That is what the demand would be for, not for the other vehicle. It is
just not logical to me.
   Mr Wall—Senator, the figures I used were by way of illustration to indicate that, while the
number of vehicles produced by Australian car makers may seem large, the loss of any market
share or even small volumes, can be quite critical to the viability of those manufacturers. I
was making the point that the viability of the Australian industry can actually turn on very
small numbers, not that these vehicles were competing with what would naturally translate
into Mitsubishi Veradas or anything of the sort. I was merely pointing out that there is a high
degree of sensitivity of the Australian industry to small changes in volumes. You have 16,000
units that are potentially available, or not available, to the Australian industry as a result of the
rapid growth of this market segment.
   CHAIR—I take the point that you are making, but nonetheless—and I will read the
Hansard very carefully—in terms of the basic use that I know of between a passenger motor
car and the requirements of some of these vehicles, they just do not match.
   Senator RIDGEWAY—Thank you for the explanation of how you see the scheme
operating in the context of Australian industry policy. My question follows on from Senator
Crane’s: how are we to interpret, apply or define policy, given that over the period from 1993,
when there was over 1,000 units, to 2000, when there was just over 16,000 units, in the
context of only looking at it in relation to Australia without considering the automotive
industry in this country, which is also in the business of importing vehicles and at the same
time increasing its share of the marketplace? Should there be unfair treatment in relation to
people that are involved in the low volume scheme in the marketplace in Australia, as
opposed to the automotive industry, which is in the business of making new vehicles? I am
trying to understand how you apply that policy, particularly when you consider that the


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government tells us that the ideology is about competition policy and about being globalised
in our approach. Why is it that this industry is expected to fare under a different set of rules
and different criteria as opposed to the automotive industry generally?
    Mr Wall—I think that is a good proposition, but I would contend that the import of used
cars operates under concessionary arrangements. Why should it enjoy concessions which the
mainstream industry does not? When you look at it, I think there are 39 brands represented in
Australia and somewhere in excess of 200 models all sold new which fully comply with Aus-
tralian design rules. What you are suggesting is that the low volume importers of used cars
should also comply with those same design rules and not enjoy concessions. I think I would
support that proposition.
    Senator RIDGEWAY—Just to follow on from your comments about the sensitivity in the
automotive industry in this country; what is an optimal number in terms of providing the
stability that you refer to? Over the period of the last seven years where we have had an
increase no-one has put forward evidence, in my view, that says what an appropriate number
is. What are we talking about in terms of numbers that retain stability in the Australian new
car making industry?
    Mr Wall—I believe somewhere less than 5,000.
    Senator RIDGEWAY—Is there a reason for that number?
    Mr Wall—I believe that it is sustainable in terms of the import segment and it is also at a
low enough level not to interfere with the franchised car market.
    Senator RIDGEWAY—Do you think there is a way of being able to perhaps come up with
a number that measures the number of vehicles being imported as opposed to the number of
new vehicles being exported, perhaps to the Middle East or other marketplaces that the
automotive industry is into? What I am seeking is: how do you reduce the number from
16,000 to 5,000 and what is the impact of that on those involved in the low volume scheme?
    Mr Wall—I am not sure you can draw a linkage between exports and imports of second-
hand vehicles. Exports are generally brand new vehicles manufactured in Australia, and they
are an important part of the volume objectives and the international competitiveness of the
Australian industry. I do not see the link there to imports of used cars.
    CHAIR—Mr Wall, I think it is for the same reasons that you draw the linkages the other
way.
    Senator RIDGEWAY—What do we do with our left-over vehicles? Do we dump them
somewhere? Is it a practice that is happening elsewhere?
    Mr Wall—I do not believe that there are many second-hand vehicles exported from
Australia.
    Senator O’BRIEN—The information that we have been given—not just from your
department but generally—is that there has been an exponential increase in the number of
used vehicles imported into this country. It has been growing steadily and over the last 12
months it has gone to a new high. Do you agree with that proposition? Is that what is
happening?
    Mr Wall—On the evidence I have before me, I do not believe that the volume of used
vehicle imports has exceeded 16,800 in the past.
    Senator O’BRIEN—And the year before that it was a lot lower?
    Mr Wall—Yes.


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   Senator O’BRIEN—And the year before that it was a lot lower again?
   Mr Wall—That is correct.
   Senator O’BRIEN—Your evidence is that it is ratcheting up significantly.
   Mr Wall—Yes.
   Senator O’BRIEN—And your evidence is that that impacts on the sale of new cars?
   Mr Wall—That is correct.
   Senator O’BRIEN—Can you tell us how that is consistent with statements by your
minister in the Senate that the registration numbers of new vehicles are at record levels?
   Mr Wall—I suspect that they would be even higher if we did not have the market being
taken away at the lower end.
   Senator O’BRIEN—So both new and used vehicles sales are at record levels. Is that what
you and your minister would tell us?
   Mr Wall—Not in the year 2000, but close to it—yes.
   Senator O’BRIEN—If the new vehicle market is reaching record levels, how is it
consistent with your argument that, effectively, the used vehicle numbers take away from the
new vehicle market?
   Mr Wall—It is potential sales lost.
   Senator O’BRIEN—So the used vehicle market is directly taking new vehicle sales. Is
that what you are saying?
   Mr Wall—I said that I would not argue that a used car is directly substitutable with a new
car. I said that I would not do that; I said that it was through the stock adjustment model that
this effect took place.
   Senator O’BRIEN—So somewhere along the way there is a transfer down the line as it
were: someone buying a new car says, ‘I am not going to get so much for it as a trade-in
because it is competing with an imported used car.’
   Mr Wall—Yes.
   Senator O’BRIEN—So they do not buy that new car and somehow they get into the
imported used car market or some other used car market.
   Mr Wall—Yes.
   Senator O’BRIEN—Okay, I will try and rationalise that with your earlier answer. In terms
of the new car market, which four-wheel drive vehicles are manufactured in Australia that
compete with imported used four-wheel drive vehicles?
   Mr Wall—I think it is a questionable proposition to say that four-wheel drive vehicles—
   Senator O’BRIEN—Can you answer my question first—
   Mr Wall—A four-wheel drive vehicle does not compete with a rear-wheel or front-wheel
drive passenger vehicle. I believe that there are plenty of home registered four-wheel drives in
our capital cities.
   Senator O’BRIEN—I understand what you are saying. Let us just get the answer to the
basic question: which four-wheel drive vehicle is manufactured in Australia that is available
new on the Australian market?



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   Mr Wall—I do not believe there are any four-wheel drive vehicles that are manufactured
new in Australia, but certainly there are four-wheel drive vehicles marketed by Australian
new car manufacturers.
   Senator O’BRIEN—Yes, which they import.
   Mr Wall—Which they import—yes.
   Senator O’BRIEN—So, to the extent there is a direct trade-off between those vehicles, it
would have no impact on the manufacture of vehicles in Australia?
   Mr Wall—It may not have any impact on the manufacture of vehicles in Australia, but the
committee should be aware that the operations of Toyota Australia, Holden Australia and
Mitsubishi Australia often include the results of their total vehicle sales. The local operation is
judged on the performance across the entire market. These vehicles that they sell to
supplement their range are often taken as an important indicator of their performance in
Australia, whether the vehicles are made here or not.
   Senator O’BRIEN—To assist the sales results of these companies in relation to their
imported vehicles, we should restrict the Australian market of importation of used competing
vehicles?
   Mr Wall—I did not say it was to assist the sales results of their Australian operations. I just
made the observation that their sales and company performance is judged across the entire
range of vehicles they market and can be quite important to the way that their operations are
viewed by their parent.
   CHAIR—The questions that Senator O’Brien has been asking have been about this
competitive factor, which obviously has an impact, but is it not really the Hyundai and the
Korean imports that have affected that and not—as I am reading from what you are saying—
the import of second-hand vehicles? That is where the real competition is in the market: it is
new against new; it is not second-hand against new.
   Mr Wall—I tried to explain earlier that in fact these used vehicles enter the existing pool
of vehicles. They impact on the flow of demand for new vehicles.
   CHAIR—I heard all that. I am proposing to you, within Senator O’Brien’s questions and I
have interrupted him, that in fact the real impact is new on new not second-hand on new—
from another country or another manufacturer.
   Mr Wall—If the demand leads to second-hand vehicles it does impact on new vehicle
demand.
   Senator O’BRIEN—And to the extent that there is leakage between the four-wheel drive
and the two-wheel drive market there may be an effect by the importation of four-wheel drive
vehicles. Is that what you are telling us?
   Mr Wall—Yes.
   Senator O’BRIEN—To the extent that that is negligible, the effect would be negligible?
   Mr Wall—Yes, and I do not believe it is negligible. I think there is a high degree of
substitutability.
   Senator O’BRIEN—Presumably the department has done some work and market testing
on that? Have you done the market testing?
   Mr Wall—I have not done any market testing.
   Senator O’BRIEN—Not you personally, the department.


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   Mr Wall—I do not believe we have.
   Senator O’BRIEN—Okay. In terms of the regime that is in place at the moment, do you
still say that this legislation, which amends 1989 legislation, is dealing with an anomaly that
was not envisaged in 1989 that the legislation was only intended to deal with specialist and
enthusiast vehicles?
   Mr Wall—I am not an expert on that particular point. I think the origins of the scheme
vary over time. People have said that before this committee. I believe there is evidence that it
was intended to be directed at a limited number of specialist and enthusiast vehicles.
   Senator O’BRIEN—The 1989 legislation?
   Mr Wall—The 1989 and 1992 changes in terms of the specific duty introduction. They
were clearly intended to drive it towards those ends.
   Senator O’BRIEN—I do not have any more questions, Chair.
   Senator FORSHAW—You will probably need to take this on notice and provide it as soon
as you can today. Do you have figures—or maybe the department of transport can supply
them—on the sales of four-wheel drive vehicles in Australia going back over the last five to
10 years? I would imagine there has been a substantial increase, particularly as you referred to
the trend for them to be used as passenger vehicles in the cities. Can you take that on notice?
   Mr Wall—Are you talking about new car sales?
   Senator FORSHAW—If you have got used car sales as well, but I am talking about
particularly the new four-wheel drive car sales. How many of them would have been sold as
used cars—that is, ones that have been imported into this country as new cars and then sold?
   Mr Wall—I think we would stand besides the figures we have got here for used vehicle
sales of four-wheel drives. We can get some figures to you on—
   Senator FORSHAW—The ones you have given are imported used cars.
   Mr Wall—Yes. I am saying that I will supplement that. We will give you some new car
sales. We do not know how many change hands after they are sold for the first time. But
certainly the segment you are talking about has had significant growth in recent years.
   Senator FORSHAW—As I understand it—and I have seen it myself—anecdotally there
has been a growth in the sales of four-wheel drives in this country as new vehicles. That,
presumably, has created a used car market in more recent years. But I am wanting to get a
picture of what has happened with the size of the four-wheel drive market in recent years.
   Mr Wall—We can do that for you.
   Senator FORSHAW—Thank you.
   CHAIR—I thank you both for being here. We have to wind up there because we have to
hear from the department and we have to wind up at 12.30 p.m. So thanks, Mr Wall and Mr
Yap.




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 [12.02 p.m.]
GASCOYNE, Mr Alan Raymond, Director Certification, Vehicle Safety Standards,
Department of Transport and Regional Services
ROBERTSON, Mr Peter, Assistant Secretary, Vehicle Safety Standards, Department of
Transport and Regional Services
   CHAIR—I welcome Mr Robertson and Mr Gascoyne. Can you identify yourselves in the
usual manner. Then I understand you are in a position to deal with a number of the issues and
then we would like a little bit of time for some questions. But could you clear up, to begin
with, whether or not in that chart that has been given to us some of the columns represent an
import licence or whether right throughout they represent individual cars?
   Mr Robertson—We have quite a bit to get through and I know there is a time constraint,
so I will try to pre-empt as many of the committee’s questions as I can and run through.
   CHAIR—Thank you.
   Mr Robertson—To answer Senator Forshaw’s last question on the size of the four-wheel
drive market in Australia for new vehicles, it is in the order of 52,000. In the all terrain wagon
medium class, in which the Toyota Surf would be represented, the size last year was 25,764
new vehicles.
   Senator O’BRIEN—Is that a per annum figure?
   Mr Robertson—That was last year’s figure. I do not have the figures on the growth.
   Senator FORSHAW—Can you get some figures on growth and give them to us today?
   Mr Robertson—We may be able to get them from FCAI. We would have to ask, but we
will try.
   Senator FORSHAW—The total market is 52,000.
   Mr Robertson—Yes, of vehicle sales.
   Senator FORSHAW—Was that for last year?
   Mr Robertson—That was for last year. What I do know is that that is the area that has
been the most significant area of growth since the latter half of the 1990s. You can see that in
the marketplace.
   Senator FORSHAW—Presumably, that is creating a used car market for the future—or
maybe for more recent years than into the future—is it?
   Mr Robertson—Correct.
   Senator FORSHAW—If you can give us the figures for the growth of new four-wheel
drives sales over five years or so, that would be good.
   Mr Robertson—I will just move straight to the question of the numbers. The numbers that
you have in those submissions came from the Motor Vehicle Standards Act review. I am not
privy to how they actually were extracted; the people who did that were not available. Various
things could affect that. There are small elements within the data that you might need to
exclude or not. It also is affected by the month range that you use to determine the year. I have
gone back and taken records from 1994 of the actual number of low volume used cars that are
imported. It does not change the story much. In 1994 the figure was 1,304; in 1997 it was



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4,974; in the year 2000 it was 15,966. So the picture does not change. There has been an
exponential growth.
   While I was there I also took the opportunity to make sure we have absolutely up-to-date
figures for the committee on the number of CPAs that are available. The figure we gave the
committee was in the order of 2,600, which was correct earlier this year. The figure is now
3,212. There has been quite a bit of increase. That is just since the beginning of this year.
   Could I go first of all to the issue of the intent of the scheme. Much has been said about
that. I guess you really need to find a starting place, and 1989 is as good as any; that is when
we had the Commonwealth legislation. You will notice that in the act there is no provision for
a low volume scheme. As I said the other night, the act is very restrictive. It essentially
provides that you can supply a vehicle to the Australian market if it meets the Australian
design rules—a set of standards. The process is that a manufacturer must demonstrate
compliance with those standards to be able to market the vehicle.
   The low volume scheme is a concessional scheme. After the act was enacted, it had been
going for some time and, as Mr Wall mentioned, it was primarily targeted at specialist
manufacturers such as Bolwell and started to extend into the import area. In 1991 Bob Brown,
who was then Minister for Land Transport, issued a press release, which made it very clear
that ‘the scheme should not be distorted to supply large numbers of vehicles through multiple
approvals,’ that it was intended the scheme would remain just that—‘a low-volume
scheme’—and that it should not be corrupted but ‘remains available to the importers of
genuine enthusiast cars.’ That was the 1991 release—it was quite clear. In 1993, Neil
O’Keefe, who was then Parliamentary Secretary to the Minister for Transport and
Communications, issued another release headed ‘Changes to low-volume used car import
scheme’. The first line said:
The Federal Government will not permit car dealers to use the low-volume import scheme for
certification of vehicles to stock their car yards with imported used cars.
He was announcing the reduction of what they called the 100-vehicle concession:
The option to deal with up to 100 vehicles will no longer be available.
The second last paragraph read:
The Government is committed to ensuring that the low-volume scheme remains available to the
importers of genuine enthusiast vehicles.
He said the department would to ‘continue to monitor’ that. In 1995—I think you have heard
a fair bit about this one—again the parliamentary secretary for transport issued a press
release. It said:
‘I am committed to maintaining the low volume scheme for its original purpose’ Mr O’Keefe said. ‘The
Government is conscious of both the interests of the enthusiasts and the need to ensure that the low
volume scheme is not used as an avenue to avoid the costs of full certification for “family” vehicles.’
I can table those if you wish.
   CHAIR—Thank you.
   Mr Robertson—That goes straight to the issue of what the intent of this scheme was. I
will just move on to the issue of eligibility to explain it a little bit. The basic principle
underlying the low volume scheme and SEVS is that you should not have substitute vehicles
competing in the same market where one is operating under a concessionary arrangement and
the other one is not. The low volume criteria outline the sorts of considerations that would
need to be taken into account to determine whether a vehicle is a substitute vehicle. Basically


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what it says is that if the vehicle is available in full volume—in other words, that it has been
certified through a very costly process—it is not available otherwise, unless it is one of those
vehicles that you ‘just must have’. In other words, it is not a fully open window; it is a small
window. If you really want to have your Corvette, your Mustang or your GTR Skyline, the
option is there to have it.
   The first part of that test runs through whether the make is available in Australia. That is a
fairly straightforward test. If you want to bring in a Dodge Viper you look in that category of
vehicle. It works on the basis of category of vehicle. Dodge is not represented in what is
called the MA passenger vehicle category, so the Dodge Viper is in straightaway—no ques-
tions. If for whatever reason Dodge were in that market, you would look to see whether the
model of vehicle or a substitute model was available, for example the Chevrolet Suburban.
Chevrolet is not represented in Australia in the particular category of that vehicle but Holden
was marketing a Suburban, up until recently, and therefore the Chevrolet Suburban was not
eligible. The Suburban is now out of the market: the Chevrolet Suburban is eligible. There is a
lot of movement in and out of the market. It affects vehicles like the Ford F series, Mustangs.
Ford is now bringing in a Mustang in full volume. Therefore anything after the build date,
when the Mustang started in January this year, is not eligible. When someone has a low vol-
ume approval and it says, for example, ‘life of model’, the ‘life of model’ is not strictly cor-
rect: anyone who had an approval for a Mustang up until that point this year would not be
able to market vehicles past that date. Those are the rules on which the scheme operates.
   Senator FORSHAW—Could you comment upon the situation that was raised by Mr
Lynch in his proposal about the life of the model?
   Mr Robertson—Yes, I was going to get to that.
   Senator FORSHAW—As long as we do not forget it.
   Mr Robertson—I will deal with that now. That was a core decision of the government. It
was considered very carefully. In fact, it went to cabinet twice on that specific issue—life of
model. As I have mentioned it is not strictly correct.
   CHAIR—How long has it been operating?
   Mr Robertson—The life of model total process?
   CHAIR—Yes.
   Mr Robertson—For as long as approvals have been issued. That is what appears on the
approval. It just says ‘life of model’, which basically says that you can continue to market that
vehicle under the current rules.
   Senator FORSHAW—Is that the same as ‘life of current licence’?
   Mr Robertson—No. It is life of the model of the vehicle; up to as soon as the vehicle
model changes. It can be not always easy to determine what is a vehicle model. When you go
from the VL Commodore to the VN, it is a different model: it is a different shape of vehicle,
different engine, different floor plan. Going from the VN to the VP, it is not necessarily a
different model: it is basically the same vehicle, same engine, same floor plan, just a few
minor—
   Senator FORSHAW—That is something that is determined basically by the
manufacturer—and not necessarily here in Australia, either?
   Mr Robertson—The manufacturer in that case would call that a model. It is part of the
same model range for marketing purposes. Whether technically it is the same model is the
issue that we are really dealing with here.

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   Mr Gascoyne—To correct one response there: approvals were originally all one-year
approvals; that was full volume and low volume, back in the 1980s. To relieve the
administrative burden on our office in processing all new approvals each year, they were
changed to two-year approvals in the mid 1980s. Within a year or two of that, by the 1990s,
they were all changed to life of model approvals. It moved from one-year approvals to two-
year approvals to the current situation of life of model, which has existed right through the
1990s until now.
   Mr Robertson—Nothing is easy in this area. Can I explain what the change that is causing
all the angst here has been. I mentioned that the basic principle is not substitute vehicles. The
provision in the eligibility criteria that has been removed was always an anomaly. It basically
said that a vehicle would be considered a different model if it had a diesel engine; if it had a
different engine, it was a different vehicle. That of course pre-dated the issue with vehicles
such as the Toyota Surf. It could be any vehicle. It could be Volkswagon Golf. The Golf is
marketed overseas in models with diesel engines but they are not available in Australia. What
no one foresaw was the significant growth in that sector of the passenger vehicle market. That
has been the major cause of the ballooning in vehicle numbers.
   The real issue is that you have vehicles in the marketplace that are in direct competition
with each other. Just because one has a diesel engine and one has a petrol engine is really
neither here nor there. That is why the used car dealers are crying foul, because if they are
marketing full volume vehicles and bearing the cost of certification they are competing
directly with vehicles where that cost has not had to be borne by the importer, and the
importer is getting a benefit from the distortion in the market from the source. That is
basically the inequity. It is simply an issue of equity when you look at it from that perspective;
that is their problem.
   To get a feel for the numbers: when you talk about 16,000 or 17,000 vehicles it does not
sound much. However, it is about the number of new vehicles brought in by Subaru and
Honda. So if you consider how many new Hondas you see on the road, you can get a feel for
how many vehicles are actually in the marketplace.
   Senator O’BRIEN—Is that figure for Subaru and Honda combined?
   Mr Robertson—No, individually. It is argued that the vehicles are specialist and enthusiast
for other reasons. They are used by people in rural areas; the diesel engine is considered to be
important. But on any analysis that does not stack up. When you go through the places where
these vehicles are advertised, you see that most of them are bought either on Parramatta Road
or somewhere in South-East Queensland. There is no real evidence that these vehicles are
used predominantly in regional areas—four-wheel drives, yes; the Toyota Surf, no. I
understand that the reason the vehicle with the diesel engine was not marketed in this
country—and I cannot confirm this—was that there were problems with the diesel engine. It
was not suited to Australian conditions; it was subject to significant overheating. Toyota was
concerned about the brand image of having a vehicle that was prone to failure marketed as a
four-wheel drive vehicle and used off road.
   I should consider some of the arguments that were put forward about the problems the
combination of the cost of RAWS and the contraction in the supply of vehicles, mainly
through knocking out the Surf, will cause to the industry. We did hear arguments from
AAIMA the other night and, as I said earlier in evidence to the committee, you can understand
how they could make those arguments—they are quite entitled to. But it is not really
supported by the analysis. If you consider that we have gone from a situation of only, say,
7,000 used vehicles in the market very recently to the current level, which is pushing 17,000,


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Monday, 24 September 2001          SENATE—Legislation                             RRA&T 113

why would a contraction in the market of 7,000 to 10,000 in the supply of vehicles suddenly
put all these people out of business? It just does not work. The argument is put that the
vehicles that are left are the ones that nobody wants; there is no market for them. That is not
sustainable. You have only to look at the vehicles magazines that are in the market, magazines
which are aimed very clearly at the specialist market; they are quite upbeat. That is mainly
because they are going to be getting access to vehicles that were not available before.
   We heard about the cost of RAWS. As Mr Smiles noted the other night, it starts from a very
low base. The cost of getting into the scheme is very low at the moment. RAWS itself is not
that onerous. If you are in the business of complying a vehicle and you have not had a work-
shop, then you should not have been in the business of complying a vehicle. Many of the peo-
ple who are dealers have workshops. Given the situation in the industry, it is quite reasonable
to expect the scenario outlined by Professor Delaney, that they too would want to get into this
market—that is pretty reasonable. You can expect that there would be a significant impact on
vehicle numbers. All the evidence indicates that the numbers have not yet reached saturation
point. The fact that we have had something like 560-odd CPAs just this year indicates that
people are still pushing hard to get into the scheme.
   Senator O’BRIEN—Why would they want to get into a used car market if they could
bring in the new ones?
   Mr Robertson—Because they make money out of it. It is the used car dealers we are
talking about. It is a question of why they would want to compete with a concessional
operative. If you cannot beat them, join them. It is that simple.
   Senator FORSHAW—I asked that question before. Doesn’t that, in effect, reduce their
capacity to sell even more new cars if they switch from importing new vehicles to importing
used vehicles, and then go through all of the hassles of having to do that?
   Mr Robertson—It could well. They would be looking at their dealer margin. If they are
getting a margin—let us say, for argument’s sake, $2,000 on a new vehicle and they get, say,
twice that, whatever it might be on the imported used vehicle—that is what interests them.
   Senator FORSHAW—Yes, but they are dealing with a smaller supplier, because the
amount they can bring in will still be restricted—and severely restricted compared, firstly, to
what I would assume the market size is and, secondly, to what they can bring in as new
vehicles.
   Mr Robertson—Okay, perhaps I should jump to another point I was going to explain
about the market and how it operates in the industry at the moment. Two questions that you
asked me the other night were: what is going to happen and who is going to be affected? I said
that I did not have perfect information on that but that I can give you a feel for what will
happen if nothing changes. At the moment, the 25 vehicle per limit CPA is a nonsense. What
has changed most recently in the market and has been accompanied most significantly by the
growth in numbers has been the introduction of players who are doing it as highly organised
company networks. They draw from several CPAs. The fact that a CPA has a 25 vehicle limit,
and that they are not meant to be connected, does not really mean anything.
   It is quite easy to get into the market by paying your consultant the going rate of, say,
$5,000 or $6,000, and you then receive an approval. You might not have seen the application
you have put in—you almost certainly will not have seen the evidence package that went with
it—but you get your authority to plate 25 vehicles. You can sell the plate—$2,000 a hit, say,
for a Surf plate. You supply them to the people who are in the business of importing the
vehicles, running them through what they call compliance houses, which have a very cheap


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marginal cost. Vehicles pop out the end and hit the car yards. That is what it is all about. How
do I know this? I have receipts. I know what the going rate is.
    Senator RIDGEWAY—Maybe I have misread the papers, but doesn’t your department
administer the scheme? Why is it happening?
    Mr Robertson—Yes, they do. Why is it happening? Because it has just ballooned too
quickly for us to police it. It is as simple as that. Since you have raised that, there has been a
lot of talk about why we need to have regulations, why is ISO not enough, and all the rest of
it. The fact is that the scheme has been run administratively. It is outlined in general terms in
circulars; they do not have the bite of regulation. The other big problem is that a lot of people
in the industry do not really understand it. It is no good talking about the spirit of the scheme
or the general framework. That is where all the problems start to arise in terms of the
relationship between people participating in the industry and their dealings with the
department. The rules are not clear.
    What we have done here is put, in regulation, the rules in black and white. Everybody
knows what they are: how to make an application, what vehicles will or will not be eligible,
what penalties are applicable, what you must have in your workshop, what fees are
applicable—things like that. It is all clear and on the public record so there can be no debate.
It gives us the ability then to enforce it correctly. Under the scheme at the moment, yes, it is
fair to say that if it were operating as it should have been—and Mr Vanstone made that point
and he is quite correct—and if we had been able to police it, we would not have the problems
that we have now. But, short of camping outside the compliance houses and pinning the
vehicles when they come out, there is nothing we can do about it.
    Now, with the situation as it is at the moment, you ask: what will happen to these people
because of these changes? Will they go out of business? The reality of it is that they are going
out of business now; that is very clear. The dealers are being affected. I have had several
approaches over the last year. I have had dealers complaining, ‘Will you please do something?
What can we do?’
    I have had consultants who are effectively unemployed because they are unwilling to sign
off vehicles that they consider to be not compliant with the Australian design rules under the
concessional arrangement or just basically unsafe. They have shown me pictures of seatbelt
anchorages that are in an appalling condition. So there is a genuine issue of safety there. I
have examples. Mr Vanstone—and I hope he does not mind me mentioning it—has not
complied a vehicle in some time, because at the price that he would be prepared to do it for he
just gets undercut. That is the situation now: people are already being put out of work.
    CHAIR—There are a couple of issues I want to clean up within the five minutes left. You
dealt with the issue of the life of imports. I would like to turn to the recommendation from Mr
Lynch with regard to the amendment to the life of current licences, to let the licences which
have been granted run out, as a mechanism. Can you comment on that?
    Mr Robertson—Yes, I can. The first point I make is that it is not a licence: it is not
tradeable. As I have mentioned, it is an approval that is done under concession arrangements
within the scope of the low volume scheme. It is not a right that is being taken away. On the
general issue that you have raised, that was part of the core policy decision. As I said, I went
to cabinet twice and it was a specific decision of government that there will be no extension to
life of model.




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Monday, 24 September 2001          SENATE—Legislation                             RRA&T 115

   CHAIR—So there is not even any room to move in there. If it is not a licence, is there
some mechanism by which you can satisfy the expectations of people when they got this
approval?
   Mr Robertson—I have outlined the nature of the scheme. It has always been the case that,
if the scheme started to look like it was diverting from its original purpose, the government
would move in to ensure that it stayed where it was meant to be.
   CHAIR—How is that diverting from its original purpose? I presume there have always
been approvals required, from day one. I find it very hard to follow your argument, because
right from day one of the scheme there had to be approvals granted and what have you.
   Mr Robertson—Yes.
   CHAIR—Why shouldn’t an approval run its course in the transition period?
   Mr Robertson—The government recognised that people do make investment decisions
and they do have existing approvals. That is why it provided the two-year transition period, as
Mr Wall mentioned. The option was there for people to use that transition period to their best
advantage.
   CHAIR—Is that two years?
   Mr Robertson—Yes, it was a two-year transition period. The government has extended
that by one year for vehicles that will continue to be eligible. The reasoning there is to give
people further opportunity to consider their options for moving into SEVS.
   Senator RIDGEWAY—I just wanted to go quickly back to your earlier assertion about the
definition of a low volume scheme, and I have heard that definition. My question is: isn’t the
low volume scheme relative to growth in the industry, particularly as it relates to the new car
industry?
   Mr Robertson—No, it is not. As I said, the fundamental principle was that there be no
substitute vehicles competing in the same market while one is under a concessional
arrangement and one is not. The situation we are seeing now is that there are substitute
vehicles. If it became an issue that there was significant growth in one particular model that
was clearly causing an inequity, then I would imagine the government—as was its right—
would step in and change the rules.
   Senator RIDGEWAY—I asked Mr Wall the same question about what is the optimum
number, and he threw up the figure 5,000. I ask you the same question: do you have a view
then, if it is not relative to growth in the new car industry, what is it relevant to? Where do
you cap it? How do you establish a figure?
   Mr Robertson—I am not really sure that you can establish a figure. I think you can start to
see where there is significant growth and I think you can start to make assumptions about
where it might end and what impact it might have, but it is not clear what a precise figure
would be. In the situation we have now, nearly all of the vehicles—all but probably about 500
of them—are Japanese vehicles.
   CHAIR—We are going to have to wind up with that; that will have to be your last word. I
have another submission here. Are you happy for it to be tabled?
   Senator FORSHAW—Yes.
   CHAIR—Mr Robertson, there could be some further questions or communication. The
secretariat or one of us might have to ring you this afternoon.
   Mr Robertson—I apologise that it was so rushed.

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RRA&T 116                       SENATE—Legislation         Monday, 24 September 2001

  CHAIR—It was all the time we had. Thank you very much. Can I thank all the witnesses
who have appeared before us, and also Hansard and the secretariat.
                          Committee adjourned at 12.30 p.m.




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