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Why are cars so expensive in Australia?

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As the title says, what makes cars (especially Japanese cars) so expensive in Australia?

 

So I've been comparing car prices in Ireland / UK with Australia and I just can't work it out. Cars seem so expensive back home, compare say a 90's Toyota MR2, A Honda S2000, Nissan Skyline R33 / R34, Mazda RX-7 and even after doing currency conversions the Australian market seems way over-priced or at least they hold alot more value for a longer period of time than what they do in Europe or even the US for that matter.

 

Is it to do with the price of these cars new? Say for example a Mazda RX-7 / 300ZX used to sell for around 80,000 AU brand new. Where as in the UK an RX-7 was 35,000 pound.

 

Been trying to work out why cars over here loose so much value so quickly and cars back in Australia hold value for so much longer.

 

 

 

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It's quite simple really.

 

We the consumer determine the price of anything.  We are prepared to bend over and pay too much for many things not just cars.  We are the most expensive place in the world to buy the iPhones and iPads etc.  I believe it is the same with Xbox etc.

 

Economists will perpetuate the great myth that we are a small market and far away, so we can't offset the cost of import with large turnover, but the truth is things are expensive here because we will pay it.  We have to have the best of everything, each new toy and we will and are now used to paying it.

 

We do it with houses.

 

Don't get me started on the negative effect of the dual income family after WWII!!

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That makes sense. We have a great consumer culture and we have a high proportion of high income earners IIRC. Sucks hey! Still I'd rather pay more for my toys and live here than anywhere else :)

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Don't get me started on the negative effect of the dual income family after WWII!!

 

Knock yourself out, this is the off topic section after all :).

 

The Australian market is flooded with second hand cars, so it seems strange that cars are priced so high. I'm sure there are more cars for sale then there are buyers so it still perplexes me.

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The biggest issue in the UK which drives depreciation is the huge cost of vehicle insurance and the separate cost of the third party liability cover (we pay this as a fixed sum in te rego) . which depends on vehicle type , engine size etc.

Also cars with over 2ltr engines plummet in value due to the perceived running cost expense.

 

When I lived in the UK in the mid 90's I was stunned by the "cheapness" of relativley new cars......I bought a 1989 BMW 325i for 3000 pounds in 1994 (the same car was still over $30k here in Australia)............but then when I went to insure it in London I was quoted $2500 for comprehensive cover! So I stored it and shipped in home.

I was content on driving a little 1984 1.3 ltr Ford Escort (a Laser here in Oz) which I bought for 200 quid and didn't bother with insurance (or road  tax or MOT for that matter ) - but officer I am a tourist - what is this "tax and MOT you speak of ??

 

 

 

 

 

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The biggest issue in the UK which drives depreciation is the huge cost of vehicle insurance and the separate cost of the third party liability cover (we pay this as a fixed sum in te rego) . which depends on vehicle type , engine size etc.

Also cars with over 2ltr engines plummet in value due to the perceived running cost expense.

 

When I lived in the UK in the mid 90's I was stunned by the "cheapness" of relativley new cars......I bought a 1989 BMW 325i for 3000 pounds in 1994 (the same car was still over $30k here in Australia)............but then when I went to insure it in London I was quoted $2500 for comprehensive cover! So I stored it and shipped in home.

I was content on driving a little 1984 1.3 ltr Ford Escort (a Laser here in Oz) which I bought for 200 quid and didn't bother with insurance (or road  tax or MOT for that matter ) - but officer I am a tourist - what is this "tax and MOT you speak of ??

 

Very good points, I tend to agree. I'm trying to get myself into an FD-RX7 which is pretty cheap here and I was wondering the same thing about storing it and then shipping it back to Australia. I'm pretty certain you have to own the vehicle for at least 1 year before you can import it into Australia duty free.

 

However does this mean you have to have had the car registered and been driving it for 1 year or just stored it away? I guess this is what I'm trying to clarify.

 

Here in Ireland it's NCT (National Car Testing) which is the same as a RWC in Australia, then you have road tax which is based on engine capacity as you mentioned. With the rotary they pull out some b.s figure of 1.7 ltr engine god knows how they got to that figure from a 13B. Then insurance and that's the killer 2,500 euro ouch! and I'm 28, no claims, perfect driving record full licence etc.. "oh but you have no experience on Irish roads" load of bollocks, I've been driving rental cars around for the past 3 years without a bother.

 

Like you said I can get an FD-RX7 pretty cheap, compare that to Australia and you are looking at min 20k for an older 1992 / 1993 model. I can get a 1999 model for less than half that.

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Volume.

 

If youre talking about new cars then with any mass production volume brings down cost.

Australia struggles to sell 1 million new cars a year. China do it per month. Combine this with the large brand mix we have here further reducing volume per maker, each maker has to charge a premium per car to recover costs in geting it here (or building it). To further reduce new car sales are the soft roadworthy and emissions laws meaning old cars stay on the road longer careating a large used car market to compete with new cars..

 

If youre talking used cars (which you are), then there would be spill on effect from the price of new cars, making it only possibly for many to afford used cars thus propping up the used car market. Combined with the above mentioned soft roadworthy rules, used cars a a viable option and therefore worth more.

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Every year I usually spend 1 or 2 months in Korea.  Perhaps the most boring country in the world as far as cars go (but excites me by the prospect I could import a Z from Japan so cheaply ;D).  By Korean standards, a 5 year old car is too old, and a 2L 4 door sedan top of the range Samsung, Hyundai, and to a lesser extent Kia is a "luxury" vehicle (something we would call here a family car!).  My view on the different Australian pricing was simply the demand for longevity in Australian vehicles, the longevity of value, and the higher social value we hold our cars at.  Where as in another country, Korea for example, where cars don't have that same social and asset value, you can get by without them.

 

Also we need to consider the ridiculous value added situation that we have here.  We export our raw materials and minerals for energy and production, which can be a network of travel through several continents in most situations, and then we finally get the product imported back here from the very materials that we sold!

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We have some of the highest import taxes in the world, it makes a huge difference, hence the much cheaper Falcadores etc

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Well im living in thailand atm and the minimum wage here is $3AUD a day  but a new corolla is still gonna cost you $24, 000. You can see why ppl have such a big party when they buy a new car

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I'd say it's probably got something to do with exchange rates. Also our distance from the Euro continent. Also competition as well. I may be wrong but I think the emergence of companies like Hyundai have given the traditional Japs something to think about.

 

But I think for sure, cars have come down in price in real terms.

 

In 1993 my dad bought a new Pulsar Q auto, steel wheels & hubcaps, no power windows or mirrors for $22,000.

 

Last year I bought my new work car-2009 Corolla Ascent auto, no alloys but front fast-glass and 7 airbags, ABS, VSC for $22,900.

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New cars are cheaper in Oz than in NZ and we have no import taxes (well that is what they tell us anyway) but grey JDM imports are cheaper here than Oz.

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Not sure what the import laws are now Gav, as I have both a Pommy passport and an Aussie pass port I only had to own the car for 6 months to avoid the import duty, I still had to pay stamp duty and compliance duty and customs duty etc etc.........from memory it cost me around $3k AUD to land the car so it cost me around $9k all up.

 

 

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We have some of the highest import taxes in the world, it makes a huge difference, hence the much cheaper Falcadores etc

 

The tariffs have actually been slashed which in my opinion is a bad thing.

 

It's a good thing if you want to support the German/Thai/Japanese/Korean economy but not so good if you like to keep Australians employed.

 

If you do a quick search at the bureau of statistics the employment in the automotive sector is very large, larger than the mining sector we hear whinging so much recently. Somewhere like 60,000 Australians from memory. The argument is that import tariffs reduce competitiveness, but how can manufacturing in Australia be comptetitive if you and I are not willing to work for $3 a day like mentioned in this thread.

 

At the end of the day hobbyists like ourselves can restore our Japanese cars or whatever to no harm but there is no gain to be had in trashing the local industry to the mainstream Joe Smith and fleet. Having no local industry will drive ALL car prices up not to mention parts. In the new car market you simply cannot get the features at the pricepoint local cars offer and just because you own an import doesnt make local cars crap, just like if you have an SS ute it doesnt make Japanese cars plastic crap. However due to the cultural cringe your neighbour with his iPad, soy latte and 3 series will think he is of higher social standing even though he is just driving a base model german housewife shopping car. Marketing and the image of prestige is a funny thing.

 

So back on topic, I will use Japan as an argument to support my initial idea. We all have heard of Japaense Shaken or scheduled roadworthy tests. They are an excellent idea from the Japanese government to boost employment and productivity in the auto sector by making old cars expensive and there for unattractive to own/maintain. Dress it up as a safety or environmental act and there you go, strongest auto manufacturing in the world by making used cars worthless.

 

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The price differences between europe and Australia are a result of market conditions.  However, what must be asked, is does the car industry collude to make the prices higher.  If there is collusion then this must be against the law as its anticompetitive.  There is one very simple way to open up the market and this is to bring the Australian car compliance into line with the European standard (this is gradually happening).  European regulations are very tough and are beginning to be accepted as an international standard.  Once this occurs and the government opens the door to "grey imports" then we can simple buy our cars from the UK and have them shipped across. The european market is vast compared to ours thus prices are much lower than ours, also the european union will impose massive fines (and have) on car manufacturers who inflate prices in certain member countries (eg this was once the case in the UK). The government would not loose tax as 5% import duty, 10% GST and LCT would still be collected on the invoice price at the arrival port.  I think over the next few years with the stronger Aus currency people will begin to source more and more products from abroad, this will then force market prices lower in Australia and we will meet a happy equilibrium and we will all be paying less.  The car market is currently protected in Australia as you cannot import a car which is sold in volume in Australia.  You can however import low volume cars such as certain Japanese models, Aston Martins etc..  Interestingly you can actually buy a new Aston Martin, import it, pay your taxes etc all for what we pay for a Jag XF. 

 

In short accept Australia needs to accept the european international standards set by the United Nations Economic Community for Europe (UNECE).  We then need to allow grey imports of all compliant cars thus opening us to a global market of 100s of millions.  This won't destroy our dealer network as they will quickly jump in line and our car prices will suddenly fall by 30%+.  People will always prefer to buy from a dealer than abroad.

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Yer something to be said about the stronger Aussie dollar. I bet all these cheap mustangs I've seen in the last couple of years must be a result of the last time the Aussie dollar hit 0.98 US. Most likely get a bit of a rush on grey imports when your buying at that price. And the dollar is at it again, 95.7 today, I wonder how high it will climb this time. Sounds like there is uncertainty in the US eceonomy again so who knows we might get on parr with the yanks!

 

This line of thinking can get me in trouble with the second half!  ::) :D

 

Sulio

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Have to agree with DJR.

Also if you think volume is small here and that's why prices are high, I disagree.

We are buying cars that are not made in Aus. They are made offshore for the Mass Produced Vehicle (MPV) market. That is, we are buying from makers who are supplying in big volumes all over the world, from strategic manufacturing locations. The manufacturers are moving into the global market and not staying close to their home shores. We are part of that large consumer volume.

I do agree that Aus industry is protected and that's why prices have been so high, but they are slowly coming down now that import tariffs have been progressively cut. Just compare any capacity motor in any make with its new price tag from 1990 and its current 2010 price tag. Along with all the standard features that are now included in the package. That's what competition does.

And if you think it is going to harm our home base manufacturers - Nope. They are also trying to move offshore and get into a global market. Commodores rebadged as Chevys and sold in the Middle East, just one example.

JP – If local Aus cars are great, then they should be able to compete. Not just on our shores but in EU, North America and Asia as well. If they’re getting beaten, maybe it’s because they are still short of the mark. Aus cars might be made for longevity, but in every survey I read, they always got a flogging for safety and security. Easiest car to break into is an Aus car. Ask any 15 year old. Aus cars only improved safety features when they got hurt by the imports. Don’t get me wrong. I’d love to see lots of Aus cars’ cruising the autobahn or east west USA. Imagine landing in Milan and the Avis rental car sign has a picture of an Aus car instead of a VW. Hooray! Imagine if our auto makers were the envy of the soy latte iPod twats. Beauty!

When you make a great product, it creates new markets and changes existing ones. Proof – zeds all over the world.

As for high rego, insurances and safety inspection costs in other countries. Well we will soon see that in Aus. It’s just bulls*%t from slack governments raising revenue under the guise of road safety, de-congesting traffic and reducing emissions. (Safety, Infrastructure, Environment). Reality is those governments (including ours) are not prepared to fix the issues, so it is easier to slog the consumer. “Let’s push some big costs onto the consumer so he is forced to slow down, because we are to slack to catch up”.

What we need to be a little careful of is raw material costs. As a big supplier of iron ore, aluminum, coal (energy) uranium (energy) gas (energy) and other raw materials, we directly affect prices for all the things we import into the country. Since most of our products are made offshore, from Aus raw materials, we pay the 'value added' margin. All costs roll down to the consumer. So if we keep pushing at this end, we pay at the other. It might just be that our greed changes the import market, so that we can keep buying cars! Think of it like this - If we double the price of the raw material, how much are we prepared to pay for a Nissan, Samsung, iPod, BMW, Westinghouse, or whatever? If prices were to soar upwards, would that break open the import doors? (Hung by our own rope).

 

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I think its rather shocking how car prices in Australia have remained so high for so long and nothing has been done about it.

 

European car manufacturers are offering sometimes up to twice the range of cars to the European market than to the Australian market.

 

Peugeot for example offer one sedan to Australia, the 407.  It has two trim levels and one engine size.

 

Peugeot offer 4 engine sizes and 3 trim levels just on this one model alone, to the UK market.  Peugeot also offer a heap of other models to the UK market that Australia is not privy to.

 

Citroen and the other European car manufacturers do the same thing.  The Australian car market only gets a small percentage of what foreign manufacturers put out there.  Which, could explain the pricing in itself.  By offering us less range we are paying more for limited choice.

 

Ford offer substantially more models to the UK market than they do to the Australian Market.  If Ford were to do the same in Australia, maybe, just maybe the Falcon wouldn't be as competitive any more.

 

Same with Holden. 

 

Many people choose a falcon or commodore simply because it was their family car whilst growing up or because it has this "Australian Icon" label attached to it.

 

the reality is, that the Australian Car market is way behind the rest of the world, not only on pricing, but technology.  We are only starting to see technology come into our domestic cars now that have been available on European cars for quite a few years now.

 

Does that mean that due to the pricing of cars in Australia that we are driving inferior cars, in a sense of technology based vehicles?  possibly so.

 

Given that we are on par with the U.S. dollar at present, why are car prices not changing?

 

The new Porsche 911 Carerra GTS costs $112,000 in the U.S.  $122,500 in the UK and $270,000 in Australia.

 

Why are we paying over twice as much as the U.S. and UK for this car?

 

I recall an article in a local paper about the cost of Used cars, and the Federal chamber of automotive industries spokesman, a Mr James Goodwin, stated that prices of used cars were fair because cars here lasted longer because of the less congested roads and the warmer climate.

 

Not so sure that is an adequate reason to charge, in some cases, double what the car is worth in the European market?

 

Until prices come down, through whatever means, we will not see much new European cars on our roads.

 

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You guys are lucky, the import tax of a new car is 180% here, think about that !!........ >:(

 

Chris

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A few things to think about;

 

The Luxury Car Import Tax in Aust applies from ~$57,466.00 and is 33%  (Note: there are differences for Fuel Efficient Cars  - Whatever that is).  http://www.ato.gov.au/content/downloads/Bus13288n3394072010.pdf  And this doesn't include GST which I assume applies on top of the Luxury Car Tax.  This is why most cars in most other countries are significantly cheaper. 

 

The average annual salary in 1972 was approx $4,700!! (Average weekly wage * 52 weeks  http://www.ausstats.abs.gov.au/ausstats/free.nsf/0/1DED1C423EF40AD9CA25751600102E95/$File/63020_JUN1972.pdf )  A new 240Z was priced in Oz at  ~$5,200.00  http://www.drive.com.au/buy/market_value/details.aspx?nvic=WIG&make=DATSUN&model=240Z&variantseries=SPORTS:&year=1972&body=2D%20COUPE&pg=1  Which means it was more than a year’s salary, in fact 1.1 times average annual salary.  Current annual salary is ~$67,000 http://www.abs.gov.au/ausstats/abs@.nsf/mf/6302.0  and a new 370Z sells for ~$68,000 RRP.  Meaning, if you take out the increases in luxury car import tax over the years, car prices from the manufactures have actually come down relative to annual incomes.  In other words, cars are cheaper than they were, except the government is taking a bigger slice of the pie (how unusual...)

 

NOTE: I realise this is simplistic view, but the general principles are correct.  Especially when you consider the gains in efficiency the car manufacturers have achieved in the last 40 years.

 

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Guys

All this talk above import tariffs etc ... just misses the mark.  This topic has been raised in forums for eons.  If you want to get rid of the Ozzie rip off in car prices you have to get the 1989 Act of Parliament (and it regulations and regular "tightening" amendments which have taken place as late as Nov 2010), you have to get a large public groundswell to force the Australian Government to change its laws administered by the Dept of Infrastructure, which create monopoly importers and is decidedly anti-competitive (strange when we espouse "free trade" on the world stage at Gatt etc).

 

In Short ... duty on imported cards is 10% then GST is 10% - unless you fall into the Luxury Car Tax rate of 33% (I think it still is) - but the figure set in about 1990 has never been indexed so instead of being now about $200,00 it is still about $60,000.  And of course IF the cards were priced here at UK/USA/Japan competitive prices many quality cars would still not reach the threshold.

 

We all hear Charlie Harper on Two and Half men complaint about his $80,000 Mercedes (about $200,000 here) and many of us have had personal experience, or that or friends of relatives overseas, who have purchased vehicle at half or less than they sell for in Australia.  My own examples are - a cousin in UK just purchased a brand new RH drive Mercedes E350Cdi for 36,000 pounds (=A$55,000), the same LH drive vehicle in USA sells for US$49,000 (say A$50,000) and the Australian price is A$142,000.  Even in NZ the price is NZ$140,00 which on currency conversion is 25% cheaper than Australia. 250% higher!!!!

 

Other examples are Nissan GT-R base model - LH drive US$84,000, RH drive in UK 54,000 pounds, but in Australia is A$160,000. 250% higher!!!

 

Again, in the lower end, BMC 129Coupe - in UK 19,000 pounds (= A$30,000), in the US $29,000 (= A$29,000), but go to buy one in Australia and the price is A$62,000.  210% higher!!!.  And on and on ......

 

The problem here is that in almost every car brand and model, the Australia Government has allowed the manufacturer or master importer EXCLUSIVE IMPORTING RIGHTS.  And so NO ONE - i.e NO ONE, not even a private person wishing to bring in one vehicle, can import that vehicle unless -

(a) you have lived overseas for 12 months and have owned the vehicle for 12 months, and have lived in the country where it is garaged for 46 weeks of that time; OR

(b) you find a make and model which has NEVER been imported in Australia nor has been on the import approval list for the manufacturer/master dealer; and then either -

(i) apply to have that vehicle make and model added to the SEV schedule (takes time and money and it must meet Aust design Rules but they will not require a vehicle to crash test) [sEV = Sports Enthuisist Vehicle); OR

(ii) Apply for a Low Volume Import licence allowing you to import max 100 vehicles pa - but licence is expensive and so is the process to meet ADR (funny that our rules/standards would be "so high" that Benz and others cannot automatically meet it, yet Great Wall can meet it.  Mmmm!)

 

See, the upshot of this is that Mercedes, Honda, Audi, etc etc etc just have to request their vehicles put on the their Import Licence, provide documentation such as to meet ADR, an if requested provide one vehicle (minimal cost to them) for a destructive crash test, and agree to import a minimum of 3000 vehicles pa and hey presto! they get a "single import licence" which means NO ONE else can import that vehicle whatsoever.  Then they have it made - they can name their price because they is no way even one vehicle from another market - NEW or USED i.e manufactured since 1989 - can get into Australia or get onto the market at a price below theirs (or in the case of the USED vehicles below they inflated used car prices here - inflated because the new prices are 250% inflated also - so it flows through.

 

The history of this fiasco .....  originally in the mid 1980s the Labor Government adopted a reducing protection (i.e. Import duties) on motor vehicles - Called the Button Plan - conceived and managed by Senator John Button - to force GMH and Ford to get more efficient and more competitive.  The duty was to be slowly reduced over 10 years from 60% I think it was - to 5%.  When it got down to about 15% the "big boys" here threatened to pull out of Australia and put 30,000 workers and another 30,000 subcontractor workers out od a job and on the dole.  The Government relented and the duty drop stopped eventually at 10%.  Later a clamp down by the Government on the "fat cats" buying European instead of Australia "luxury?" models brought in a 33% Luxury car tax at around $60,000.  You could get quite a nice Porche for a little over that at that time.  Of course it didn't stop the well-off from buying BMWs instead Caprices and LTDs.  And of course that figure was NEVER indexed so just became a another tax-grab by the Australian Government. 

 

Then in 1989, still under threat of Ford and GMH walking out, a new idea was born - restrict import of overseas vehicles to just one corporation, who could then price their products to Australians at much higher prices (with fat profits) having regard to the high prices for locally manufactured vehicles and the fact that vehicles sold by them into other markets (at fair prices) could never come in and "compete" here with their inflated products. 

 

SWEET DEAL FOR ALL - Except the Australia consumer who again has has wallet ripped from his pocket.  Trouble is this time the "rip off margins are being made by the overseas manufacturers (as well as Ford and GMH to some extent) and a huge slab of our family (and business) budget (as in the case of exhorbidant fuel prices) is being shipped to overseas balance sheets and bank account.  I hate to say it but high import duties together with a "free" import market would mean the "rip off' money stayed in Australia with our Government.

 

Financial Impact on Australia ...  we all know that the family vehicle is the 2nd biggest purchase we make (and it is repeated every 4-5 years on average) and whilst not every imported make and model is 250% higher than in most other 1st world countries, on avergae we are paying A$20,000 more than we need to for the average motor vehicle because of the "single import licence" scam - protected by government.  Think about this -  1 million vehicles are sold in Australia every year ( more would be if prices we "normal" and then we could also get "young people out of "death-traps" and help to reduce the road toll). That means every years we as Australian individuals and businesses are paying $20 billion dollars more than we need to. And this has been going on for 22 years - is that over $400 billion we have wasted in lining the pockets of overseas "pirates"?  But looking forward - If we took that for just two years that $40 billion could pay $1million to each of the auto workers and say 1/2 of the subcontractors who could not be employed in other than supplying the motor industry with components, and just as happened with uncompetitive textile clotheing footware, furnitur etc etc manufacturing, scrap the local car manufacturing as they did in the UK where prices are about on par with US prices.  THEN FROM 2013 WE COULD BE PAYING THE SAME PRICES AS THE USA, IK ETC. OR NEAR ENOUGH.

 

So, what do you other forum members think about this situation and the solutions?  Stop complaining about this and band together with friends and family to lobby your fedceral member on this important and expensive problem that we Aussies just cannot afford to let go on.

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Sorry Guys for the bold text - so much - I only intended a few odd sentences in BOLD but have slipped up.  Again my apologies as I was not intending to yell at you.  this subject is too importna to be ignored for lousy format. :-)

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Sorry Guys for the bold text - so much - I only intended a few odd sentences in BOLD but have slipped up.  Again my apologies as I was not intending to yell at you.  this subject is too importna to be ignored for lousy format. :-)

You were only yelling when in CAPITALS!!!

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