Consumers shun cars as economy leans on government spending


But analysts believe the economy is faltering.

New car sales in February tumbled to their lowest level in seven years. There were 87,102 new vehicles sold across the country last month, a 9.3 per cent drop on the same month in 2018.

Through the first two months of 2019, the nation’s car lovers bought 169,096 new vehicles, an 8.4 per cent drop on the start of last year.

Federal Chamber of Automotive Industries chief executive Tony Weber linked the drop in car sales to the troubles facing the national property market.

“Given the current challenging economic conditions, including a downturn in the housing market,
the automotive industry is not surprised by the slower start to the year,” he said.

The biggest fall was in Victoria, where sales were 11.7 per cent down while in NSW they fell by 11 per cent and Western Australia 8.3 per cent.

Loading

The same three states have suffered the largest falls in property prices over the past 12 months.

The December quarter national accounts to be released on Wednesday are expected to be aided by a 0.3 percentage point lift from general government spending.

Government spending will be necessary to keep the quarterly GDP result positive. Separate figures from the bureau suggest international trade will strip 0.2 percentage points from growth.

UBS economist George Tharenou said a “boom” in public spending would save the country from posting a negative result, adding that the RBA would eventually find the economy needed a cut in interest rates.

Economists from the Commonwealth and ANZ banks revised down their forecasts for growth through the December quarter to 0.2 per cent. That would be the worst quarterly performance since the economy contracted by 0.1 per cent in September 2016.

Some believe the the national accounts will show the country has entered a “per capita” recession, with GDP per person likely to post its second consecutive contraction.

Indeed economist Callam Pickering said the RBA may need to cut interest rates as soon as May, in the middle of the election campaign, unless the economy turned.

“It has become clear that the Australian economy has not adjusted as smoothly as the RBA may have anticipated. At the risk of falling behind the curve, the RBA may be forced to cut rates to a new record low,” he said.

The economy is set to be a key feature of the election with Mr Morrison ramping up his rhetoric attack on Labor.

Scott Morrison has warned a change of government at the coming federal election will hit the economyCredit:Fairfax Media

Pressed at a business summit in Sydney whether he believed Labor would take Australia into its first recession since 1991, Mr Morrison chose his words carefully.

“I’m saying the economy will be weaker under Labor – that’s exactly what I’m saying, because they’re going to put $200 billion worth of taxes and take Australia’s industrial relations system back to the times when we had recessions in this country,” Mr Morrison said.

But shadow treasurer Chris Bowen dismissed the claims, saying the economy was slowing on the government’s watch.

“If we do win the election we will inherit an economy in which people’s living standards are going backwards, we’ve seeing the biggest fall in living standards in 30 years, with wages growth at record lows, with increased cost of living and an economy where economic growth is decelerating with lacklustre economic growth,” he said.

Shane is a senior economics correspondent for The Age and The Sydney Morning Herald.

Most Viewed in Politics

Loading



Politics

Related posts

Make a comment