Car sales down 6.9 per cent as tax rebate bubble bursts

AS foreshadowed by raw figures from the Federal Chamber of Automotive Industries, new vehicle sales fell 6.9 per cent in July in seasonally adjusted terms.

This followed a 14.5 per cent rise over the previous three months as business owners throttled the Federal Government’s tax rebate.

Sales of other vehicles such as light trucks and heavy commercial vehicles, jumped 31.6 per cent between April and June, falling back 25.7 per cent in July.

The figures cloud what would otherwise have been a pivotal piece of information on the Australian consumer. Vehicle sales are a critical bellwether figure of consumer demand – as a large and discretionary purchase, cars are typically the most cyclical component of consumer spending.

Senior economist at Westpac Matthew Hassan, says the demand usually falls sharply and early on in a downturn, as fears over job loss prompt consumers to delay or cancel car buying plans.

“Conversely, sales typically post a solid rebound early on in the recovery as buyers that had delayed put buying on hold and avoided retrenchment or major financial losses feel confident enough to go ahead with their purchase,” he says.

“A range of metrics — most importantly, consumer sentiment and unemployment expectations — suggest we are on the cusp of this initial rebound. We suspect consumer spending on vehicles has also firmed in recent months but this is impossible to confirm as the sales data is not split into business and consumer sales.”

Sales of passenger vehicles and SUVs also powered through April-May-June (+10.6 per cent over the three months) and had less of a pull-back in July (–0.7 per cent) but business buying would also clearly have been a factor in these segments.

State statistics showed that vehicle sales were down 10.4 per cent in WA (flat for the last 4 months); down 7.7 per cent in Queensland (up 9.2 per cent over the last four months); down 6.5 per cent in Vic (up 7.9 per cent over the last four months) and down 5.2 per cent in NSW (up 7.2 per cent over the last four months).

Combined sales of passenger vehicles and SUVs rose in every state except WA.