Jon Moodie

Affordability and household debt

IN A review of various economic indicators, including household wealth and spending power, interest rates and the influence of property prices and wages, Mr Moodie told GoAutoNews Premium that a bright spot for car dealers in the economic outlook was more people getting into work.

“While average wages per employee haven’t seen much growth for the past six years, we’ve seen some improvement in overall household income growth, driven by jobs growth,” Mr Moodie said.

“In other words, the economy’s improving despite stagnant wages growth because the benefits of increased employment are spread more evenly across the economy.”

Household income, while not super strong, was looking better as inflation remained quite low. He said there were no major cost-of-living pressures that you could point to outside of higher utilities prices.

“That said, there’s no doubt Australia’s household net debt is high. But with interest rates set to remain where they are in the near future – and jobs growth expected to remain strong – we don’t expect to see any immediate change to the state of overall household finances.”

Interest rates and property market

Mr Moodie said that interest rates were key influencers of consumer confidence, as they impact on people’s ability to borrow.

“When rates do eventually rise, it will likely be very gradual so the cost of credit should remain more or less where it is.”

According to Mr Moodie, that means vehicle purchase should remain appealing, thanks to continuing low interest rates and strong competition from car manufacturers.

Referring to Australian property prices and their impact on consumer confidence, Mr Moodie said: “I think you can make a case that, once the dust settles on property values, people will realise that the property market is flattening out, not capitulating.

“While we’ve seen a decline in growth in places like Sydney, prices are still up 70 to 80 per cent over the past five years, so the steep increase in housing equity for a lot of people remains significant.”

Aussie dollar

“Given all cars are now imported, any decline in the Aussie dollar means we have to spend more of our dollars to land them in Australia.

“The Australian dollar has been relatively stable for the past three years. Most expect the currency to remain in the 70 to 80 cent band against the US dollar over the next couple of years.

“The economic conditions and consumer confidence that produced healthy dealership sales in recent years remain in place – and are even slowly improving.”

Change and opportunity ahead for Aussie dealerships: CLICK HERE