Australian vehicle sales to ease as demand fades and inventories restock
Global passenger vehicle production was heavily impacted by the pandemic. Major manufacturers’ forecasts for demand were lowered substantially at the onset of the pandemic, while supply chain disruptions continued to force manufacturers to scale back production. While these headwinds impacted vehicle production, robust fiscal stimulus, supportive monetary policy, and a pivot towards goods consumption all drove a large increase in demand for new vehicles. For the most part, supply struggled to keep up with demand, leading to a shortage of inventory and a large upswing in used car prices.
This research report expands on the following points:
- New vehicle sales were a relatively bright spot in a slowing Australian economy over the first half of 2023. Both household spending and machinery & equipment investment were buoyed by vehicle purchases in the past two quarters.
- However, we do not expect this resilience to last much longer, and we expect Q2 was the high watermark for vehicle sales. Discretionary consumption will remain under pressure from tighter monetary policy settings, and a good deal of pent-up demand has now been realised. On the investment front, the expiry of the instant asset write-off at the end of FY23 will see a pull-back in demand from businesses.
- The implications for GDP growth are limited. Passenger vehicles are wholly imported, meaning any addition to GDP from spending by households or businesses will be broadly offset through higher imports. Nevertheless, the outlook for imports is a little stronger than these other components, with retailers likely still looking to improve their inventory position.
Australian population growth masking weaker consumption trends
Lead Economist, Ben Udy speaks on recent consumption data with ABC Australia.Find Out More
Strong print for the Australian labour market: what’s next?
Sean Langcake from Oxford Economics Australia addresses the key facets of Australia's economic landscape. Sean commends the country's labour market, noting that it continues to defy economic gravity.Find Out More
Global Key Themes 2024 – Few opportunities in a gloomy landscape
Global GDP growth and inflation will slow in 2024 and central banks will begin to pivot in H2 – at least that seems to be the broad agreement among markets, policymakers, and forecasters. For the most part, we concur and have identified three key themes that will be key to the precise path that economies and financial markets take next year.Find Out More