Gillard naked emperor

She is just like the Emperor who goes strutting in public without clothes, despite claims of an impressive new wardrobe, in the 1800s short story by Hans Christian Anderson.  In this case, the Prime Minister is wearing nothing for the election despite the impressive claims on her 'Cash for Clunkers' scheme.
How? Why?

The basics of the proposed car scrap scheme look good, with a $2000 bounty on any pre-1995 gross polluter turned in for crushing in favour of a green new car.  The government forecasts up to 200,000 trade-ins over four years on cars which have to meet either a six-star rating in the Green Vehicle Guide or emit less than 220 grams/kilometre of CO2.

It is talking about lots of new cars, with safety benefits on the side, as Australians convert their rusty old hulks into something new in the driveway.  But as you drill deeper into the proposal you find flaws, and then one fatal error.

It all looks simple for anyone who has a pre-'95 car in the family.  You bank the bounty, take the car to a dealership, then drive away in something shiny and new.

But did you know the car must have been registered and insured for two years before the trade-in deal? Or that the paperwork must match the person doing the deal?  It's a way to ensure there are no $20 wrecker's specials rolled out by bounty hunters.

Did you also know the cost of a new car against the valuation on a 1995 model?  The cheapest new cars in Australia today are the Suzuki Alto and Proton S16, which both sit at around $12,000 driveaway. But the Alto is tiny and the Proton is old, so the realistic new-car choices don't start until $15,000 and a new Commodore or Falcon is more like $40,000 on-the-road.

Compare those numbers with the valuations for a '95 Commodore or Falcon.  Glass's Guide says the current figure is $2400 for an EF GLi or $3000 for a VR Executive in average condition.

But what about the success of overseas schemes?  Yes, 'Cash for clunkers' schemes have worked well in other countries, but most have a bounty of at least $5000 against secondhand prices which are much lower than Australia. That's definitely true in Britain and France, where basic new-car prices are also lower.

So now we come to The Big One.  Anyone doing the sums on a clunker deal is probably assuming they get $2000 cash from Canberra in addition to their trade-in. So the numbers don't look too bad.

But the clunker is worth zero. Nothing. Not one dollar.  It will be going straight to the scrapyard, so there is not a single dealer in Australia who will give a single dollar for the car.

That means the changeover price, which is what new-car deals are really about, goes way the wrong way.  And don't forget the Government is planning a $2000 bounty on cars which have a trade-in value above that figure.  That's why Emperor Gillard is wearing no clothes.

Follow Paul Gover on Twitter!