Cash for clunkers doomed

... but the loss of the "green car" fund is expected to damage the Australian automotive industry.

The two schemes have been axed as part of $2.8bn in spending cuts to pay for flood rebuilding.

Federal Chamber of Automotive Industries chief executive Andrew McKellar said the loss of the $430m clunker scheme in which people were to receive $2000 to trade an old car for a more economical model was doomed from the start.

"There wasn't a lot of industry consultation before that scheme was proposed and it wasn't the best designed," he said.

"There is probably no great sorrow over the decision not to proceed. The issue that it is of much greater concern is the loss of the green car innovation which is a bitterly disappointing outcome."

The $1.3 billion green car fund announced in 2008 was aimed at encouraging local development of low-emission, low-consumption cars.

"It was an important mechanism for attracting new investment to the Australian automotive industry and in particular in ensuring that the industry was taking up a range of cleaner more environmentally friendly vehicle technologies," McKellar said.

"By removing that particular program it really does send a very worrying signal to international investors. It (government) reneged on an agreed policy outcome that was supported by a wide variety of stakeholders in the industry. It really does undermine our credibility with international investors. That will cause damage and find it harder to ensure future investment."