Your Ad Here

Sunday, April 18, 2010

Plate buyback would give struggling taxi industry a licence to thrive

Perhaps the community is on a roll after sending John Thorpe and his Australian Hotels Association packing. Miranda Devine's article on the cab industry was inspirational ("Now for the next cab off the rank", November 8).

Like liquor licences, the investment value of a taxi plate is the underlying problem with the taxi industry. Prices have risen from $50,000 in the 1980s to the $300,000 level today. Why is this so?

The answer is supply and demand. There is a limit on the number of licences issued and demand exceeds supply. The public are the losers from this and the winners are the owners of the plates. Excessive regulation of the taxi industry is at the heart of the problem. Allow the free market to operate and you would have an industry in which drivers are better paid and supply and demand are in equilibrium.

If taxi licences/plates were freely available and at low cost, many more operators would be able to enter the market. If plates were, say, $500 instead of $300,000, you would reduce taxi overheads by a huge margin and fares could be less than half what they are now, with cabbies making twice as much.

The value of a taxi plate was some ancient idea intended to allow taxidrivers to invest in their own superannuation. In a lottery-like system, cabbies once "won" a plate after a certain number of years of service, or they could purchase a place in the market. Having received the free plate, they could operate a cab more profitably. It also gave a cabbie a "franchise" to sell at the end of a career.

The idea long ago became perverted, with the result that most plates are held by non-taxidriver investors looking for capital gains.

To fix the system we would need a plate buyback. It would cost a fortune to fix the mess made by bureaucrats. New plates should then be made freely available to those who operate suitable vehicles and have the appropriate licences. We might have an initial oversupply of cabs, but that would not be a problem because a parked cab would cost $30,000 and not the current $330,000 (plate and car).

Let's get the taxi lobbyists out of the equation and the market would soon sort itself out.

No comments:

Post a Comment