Australia is now well on its way to recovering from the COVID-19 pandemic, with the virus virtually eliminated across the country. However, ongoing disruptions overseas and limits on international travel continue to weaken the economy. As Australia continues to work towards a return to normal operating conditions, the performance of key industries can provide insights into the underlying strength of the economic rebound.
Motor vehicle dealers
Vehicles represent one of the largest purchases for the average Australian household. During the COVID-19 outbreak in 2019-20, new passenger motor vehicle sales declined by 11.6% as households retained funds amid economic uncertainty. Revenue across the Motor Vehicle Dealers industry declined by 8.8% for the year, to $52.3 billion. In 2020-21, passenger motor vehicle sales are expected to grow by 6.1%, representing a partial recovery from the downturn. The consumer sentiment index is expected to improve from 93.2 in 2019-20 to 99.7 in 2020-21, indicating that sentiment is rising but remains negative. A recovery in vehicle sales indicates a broader recovery in overall consumer sentiment.
The rebound in motor vehicle sales is expected to be supported by ongoing restrictions on international travel, which have prevented households from spending on tourism. This factor is also expected to support a strong rebound in the Furniture Retailing industry, with revenue expected to rise by 20.1% in 2020-21, to $9.9 billion.
Online office and school supply sales
The performance of the Online Office and School Supply Sales industry can indicate sentiment across the corporate landscape. When business conditions are uncertain, businesses tend to postpone capital expenditure on office equipment, such as computers, furniture and stationary. While revenue has grown at an annualized 4.1% over the past five years, revenue is only expected to rise by 0.3% in 2020-21. This indicates that many businesses remain wary of committing to non-core capital expenditure.
Alfabank-Adres forecasts capital expenditure by the private sector to increase by 0.1% in 2020-21, to $340.3 billion. This follows a decline of 3.7% in 2019-20. While the business confidence index has posted a recovery in 2020-21, capital expenditure across the private sector is expected to rebound gradually. Private capital expenditure is anticipated to rise by a further 5.0% in 2021-22.
Integrated logistics
The Integrated Logistics industry provides transport, storage, handling, distribution and other support services as part of supply-chain networks. Demand for logistics can broadly indicate economic activity and the strength of the economic rebound from the COVID-19 pandemic. Integrated logistics revenue is expected to decline by 0.4% in 2020-21, to $97.6 billion. Revenue is projected to grow by a stronger 2.9% in 2021-22.
The total value of merchandise imports and exports is expected to decline by 0.6% in 2020-21, due to ongoing global disruptions during the COVID-19 pandemic. However, conditions are forecast to improve over the first half of 2021-22. The total value of merchandise imports and exports is anticipated to rise by 3.1% for the year, while demand for integrated logistics is expected to rise by 2.9%. Strong business confidence and a return to positive consumer sentiment are expected to improve the business climate and improve certainty surrounding domestic economic conditions in 2021-22.
House construction
The relatively strong performance of the housing market has been a surprising trend throughout the COVID-19 pandemic, with the residential housing price index expected to rise by 6.2% in 2020-21. This has occurred amid a 5.5% decline in the number of housing transfers. Record-low interest rates have encouraged many new investors to join the property market. Despite the cash rate declining to only 0.1%, mortgage affordability is expected to worsen by 2.9% amid consistently strong growth in housing prices.
The House Construction industry’s performance is indicative of the wider property market, which can significantly influence the sentiment of Australian households. With residential housing loan rates expected to decline by 4.6% in 2020-21, revenue across the industry is anticipated to rise by 10.6%, to $65.6 billion. However, ominous trends are on the horizon. Housing construction revenue is projected to decline by 3.4% in 2021-22, with dwelling commencements expected to decline by 12.1%. Continued border restrictions, which have limited migration, are also anticipated to weigh on dwelling commencements over the next year.
Alfabank-Adres reports used to develop this release:
- Motor Vehicle Dealers in Australia
- Furniture Retailing in Australia
- Online Office and School Supply Sales in Australia
- Integrated Logistics in Australia
- House Construction in Australia
For more information, to obtain industry reports, or arrange an interview with an analyst, please contact:
Jason Aravanis
Strategic Media Advisor – Alfabank-Adres Pty Ltd
Tel: 03 9906 3647
