The Australian dollar flirted with six-year lows on Friday as booming car sales and worse-than-expected retail figures offered a mixed message for the strength of the Australian economy.
The dollar was trading at US75.88¢ on Friday afternoon after bottoming out at US75.67¢ around midday - just above the six-year low of US75.32¢ on April 2.
Vehicle sales in June were up 6.4 per cent up on May and up 3.3 per cent year-on-year, with 125,850 vehicles sold, according to new figures from the Federal Chamber of Automotive Industries.
The strong result has sparked industry talk that new car sales will overtake the record mark of 1.13 million vehicles set in 2013.
New car sales rose by 12 per cent in NSW and by 4 per cent in Victoria. Business car purchases were up 10.5 per cent on the previous year.
The Abbott government seized on the figures as evidence its second budget, which contained a $20,000 instant asset write-off for small businesses, had given the economy a boost.
Small Business Minister Bruce Billson, who is currently the Acting Treasurer, said the figures were "very encouraging".
"There was clearly an uplift of activity in the second half of the year," Mr Billson said.
Even though many of the purchased vehicles would have been imported, Mr Billson said the automotive sector is "still an important contributor to economic activity in the marketplace".
The instant asset write-off would have been used for smaller, affordable professional vehicles such as "zippy vans for catering", he said.
Holden's executive director of sales Peter Keley said: "The market's been very flaky this year overall, but June sales are strong."
The Hyundai i30, which has been aggressively priced at $19,990 drive away, was the top selling car in June with 5521 sales.
Retail sales grew by 0.3 per cent in May, according to the Australian Bureau of Statistics, below expectations for a 0.5 per cent rise.
"It was fairly disappointing figures and they've sparked speculation about a rate cut at next month's Reserve Bank meeting," ThinkForex markets analyst Matt Simpson said.
JP Morgan economist Stephen Walters said: "Australian consumer spending failed to bounce back in May, despite what should have been support from the Reserve Bank's early month rate cut and the mid-month federal budget, which included measures aimed at lifting investment by small businesses."
Commsec economist Craig James was more positive, noting retail sales were up 4.7 per cent over the year.
"And the data shows that the larger retailers are doing well with sales up 5.3 per cent over the year," he said.
Retail Council Chief Executive Anna McPhee said the figures showed a "positive and immediate response" to the May budget and lower interest rates.
"However sustainable momentum will be needed before retailers can have real confidence that the sector can look forward to returning to long-term annual average growth of 6 per cent," she said.
