New vehicle sales up 3.7% in Oct | Northern Rivers Investing | Investor News for Northern Rivers, Australia

A surge in motorvehicle sales in October could help convince the Reserve Bank ofAustralia (RBA) to lift interest rates for the third straight month inDecember.

Australian new motor vehicle sales rose by 3.7 percent, seasonally adjusted, to 81,122 units in October, from 78,243units in September, the Australian Bureau of Statistics (ABS) said onMonday.

The October figure was 15 per cent above the series' six year low of 70,518 units in March.

CommSececonomist Savanth Sebastian said the data could be the first in aseries of positive indicators the RBA will use to make its Decemberinterest rate decision.

"The RBA, for December, have highlightedthe decision will be data dependent," he said, referring to the minutesof the RBA's November board meeting in which the bank said the pace offuture interest rate rises remained "an open question."

"They've never raised rates three months in a row before and if there's a month when its likely to happen December would be it.

"Ithink they'd be well aware the car industry has turned the corner - carsales are improving, confidence is improving - it just gives themconfidence the economy is on the mend."

In October, the RBA lifted the cash interest rate from a 49-year-low of three per cent to 3.25 per cent.

It then raised the rate by a further 25 basis points in November to 3.5 per cent.

Ifit lifts rate again after the RBA's December 1 board meeting, it willbe the first time it has hiked rates three months in a row since itbegan announcing rate decisions in January 1990.

Mr Sebastian said the motor vehicle series showed a strong improvement across the board.

Salesof passenger vehicles were at a seasonally adjusted 46,892 in October,its highest since September 2008 when 47,031 were sold.

The othervehicles category - which records vehicles commonly used by businesses- hit 18,199 in the month, its highest since June this year when 20,146 units were sold.

National Australia Bank (NAB) economistDavid de Garis said the data showed businesses had stepped up tocapitalise on the Federal Government's investment allowance which runsout at the end of December.

The scheme allows small businesses toclaim a 50 per cent tax deduction on "depreciating assets" like trucksand vans before December 31 this year.

"These data point tobusinesses on another buying spree into the end of the calendar yearwhen the 50 per cent investment allowance runs out," Mr de Garis saidin a research note.

"Sales in the September quarter have not beena drag on growth but been flat overall and will make some contributionto business investment and consumption in quarter four."

Otherkey economic data due to be released ahead of the RBA's December boardmeeting include ABS September quarter construction work done onNovember 25, ABS September quarter private new capital expenditure onNovember 26 and the TD Securities-Melbourne Institute monthly inflationgauge and ABS September quarter business indicators on November 30.