Tuesday, June 23, 2009

Swan delivers... stimulus of sorts

Wayne Swan has delivered for the the Ipswich car dealership at the centre of UteGate, but not in the way that's been alleged.

As the Treasurer insisted to Parliament yesterday that his lobbying efforts on behalf of the ute dealer were not out of the ordinary and had come to naught, the Bureau of Statistics reported that ute sales exploded during the month of May, with the number of orders for new utes, buses and trucks up an extraordinary 11.3 per cent - the biggest monthly jump in almost a decade.

In his May 12 budget Mr Swan bumped up the tax deduction for small businesses buying updated equipment from 30 per cent to 50 per cent and gave them until just December this year to finish their shopping.

The tight deadline and the generous deduction appears to have made the measure as effective in supporting car dealers as bonus payments and First Home Owners Boost were in supporting retailers and home builders...

NSW recorded the biggest boot in ute, bus and truck sales in the nation, with orders up 28 per cent in the month, accompanied by a 17 per cent boost in orders of four-wheel drives and a 13 per cent boost in sales of passenger cars.

"There's been a rush of mum-and-dad businesses to buy new cars before the December 31 deadline," says TD Securities economist Annette Beacher.

"Yet again government fiscal policy is behind another upbeat monthly result, and we expect more good car sales in June and July."

Vehicle sales of all types were up 5.4 per cent nationwide in May - the biggest monthly jump in almost half a decade, although still down more than 12 per cent over the year.

"The problem isn't affordability but consumer conservatism," said CommSec economist Savanth Sebastian. "Car prices have been generally flat while wages have been climbing."

"Our estimates suggest that car affordability is at its best levels since the mid-1970s. It now takes a worker on the average wage just 31 weeks of earnings to buy a Ford Falcon sedan. Just 5 years ago it would have taken an extra 6 weeks."

In separately-released news petrol prices have climbed to their highest in eight months. The Australian Institute of Petroleum says the average Sydney price climbed a further 1.8 cents last week to 124.7 cents per litre.

"The really bad news is that the Singapore oil price jumped by almost 37 per cent last month and this is yet to be reflected fully in pump prices," said Mr Sebastian. "CommSec expects pump prices to jump by a further 5 cents a litre in the next fortnight."

Published in today's Age


carbonsink said...

Its tradies buying utes to build houses for first home buyers! Its just layer upon layer of protection for that most sacred sector of the Australian economy: Housing.

I'm a software developer that exports to the world. Do you think anyone in govt wants to help me out? Hell no! I just have to endure a currency that swings 30-40% every six months with the price of coal and iron ore.

Honestly, all we do in this country is dig stuff up and build houses. Nothing else.

Anonymous said...

We also seems to take a lot of holidays to NZ!


Andos said...

Why don't you move to the US then, Carbonsink, if you hate this country so much?

carbonsink said...

I don't want Australia to become a quarry for Asia. Is that wrong? I'd like to see a little more economic diversity here apart from digging stuff up and building houses.

The laissez faire crowd would have everything shut down here overnight except mining, because that's where we have a comparative advantage. Great. So what happens when demand plummets for our dirt? We get an export income shock, and the currency goes on a rollercoaster ride, which makes life damn near impossible for all the other exporters (what's left of them). Soon there will be nothing else to fall back on. We are rapidly becoming a one-track economy. Google "dutch disease".

As for housing its become the sacred cow of the Australian economy. Lets see, we have the First Home Owners Grant, no CGT on the family home, negative gearing for investment properties, a 50% CGT concession, the govt is throwing money at dodgy school projects to keep the builders busy, mortgage rates cut by 4%, and now cheap utes for tradies. It never ends.

Imagine if they put that money into cleantech? Instead they have to cut solar programs overnight because they've reached their cap. For housing there is no cap. It will be protected at all costs.

As for moving to the US, I'd much rather move to NZ or Europe.

Pete (not Peter Martin) said...

Andos...it's not the country that is hated - it's the governance of the country.

Since when was housing an economy driving investment anyway? Western countries have gone loopy.

Greego said...

"The laissez faire crowd would have everything shut down here overnight except mining, because that's where we have a comparative advantage. Great"

Is that irony? Do you know what laissez faire means? Who would shut what down?

carbonsink said...

Do you know what laissez faire means? Who would shut what down?

Yes, they would remove all government support for everything. Anything that couldn't survive without assistance (e.g. manufacturing, agriculture, tourism) would collapse. We would rapidly become a resources-only economy, because that's what we do better than anyone else.

Look that's fine, but it does leave us terribly exposed to the mood swings of the commodities markets. Diversification is good for economies like its good for investing.

At least the laissez faire crowd would remove a lot of the props for housing.

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