Investment allowance drives car sales

Federal Government’s temporary business investment allowance pushes up car sales, proving recent stimulus measures are working

The Federal Government’s temporary business investment allowance is leveraging car sales, proving recent stimulus measures are working.

According to the Australian Chamber of Commerce and Industry (ACCI), May motor vehicle sales were up 5.4 percent on May. There was also an 11.3 percent surge in commercial vehicle sales.

ACCI Acting Chief Executive Greg Evans says the business tax break for new plant and equipment purchases is helping to foster investment.

"The specific elements of the Government’s stimulus package have also contributed to an improvement in confidence amongst retailers as well as spurring an upswing in housing activity," he says.

In a further sign of the positive impact of the Government’s various stimulus packages, the Australian Retailers Index published by the Australian Retailers Association reveals a 24 percent jump in confidence among SME retailers over the June quarter.

In addition, the First Home Owners Boost scheme prompted a 7.2 percent increase in private sector housing approvals in April.

"The continued rollout of stimulus arrangements, which will deal first with social infrastructure and then economic infrastructure, will also be important in sustaining economic activity in a tough period ahead," Evans says.

"We also expect the permanent tax cuts from 1 July and the stimulatory benefit of interest rates reductions will assist the business outlook. ACCI maintains the views that amidst generally weak domestic conditions another official rate reduction is well justified."

Evans says this will provide an important boost to small business, especially where conditions have continued to decline owing to weaker overall demand.

"We do, however, remain concerned in relation to the business investment outlook and continued deterioration in labour market conditions," he says.

The Organisation for Economic Cooperation and Development has warned unexpected growth of 0.4 percent in the March quarter will not be sustainable.

"Against this background, ACCI urges the Government to consider extending the cut-off date for the 30 percent investment allowance for larger businesses from 30 June to 31 December 2009 to further stimulate private sector investment," Evans says.

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