If you want to buy a car and pay more than $57,000 for it, the government’s luxury car tax is set to rise next week from 25 to 30%. Malcolm Turnbull says that this will raise the price of all cars. I don’t think so. When it comes down to it, most luxury cars are imported. Indeed, because of the exchange rate rise, there surely is a ton of pressure downward on the prices of those cars. So car buyers may not even notice this (except if they anticipated a ‘but for the tax increase’ price). But in any case, it shouldn’t effect the price of other cars and only the differential price between luxury and non-luxury vehicles. Competition will keep the non-luxury car prices down.

Indeed, even in the luxury car market, dealers will face a dilemma. With the Aussie dollar high, they might be more tempted to price the lower end luxury cars below the threshold. In this case, more cars might fall out of the taxed bracket.