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If you use ute sales as a marker of small business investment in Australia, you get the impression small business is terrified. Sales of light commercial vehicles collapsed in October 2019, down 11 per cent compared with October 2018.

At the start of the 2019, sales were much the same as last year. Some months a bit higher, some a bit lower. Around the middle of this year something changed. Sales of light commercial vehicles – which is mostly utes but includes vans and small buses – began to get worse and worse. In October, the fall was a whopping 11 per cent.

As the next graph shows, the “ute index” is in the red, with nearly 10,000 fewer light commercial vehicles sold compared with 2018.

Utes are sold to households as well as businesses, obviously, but a big majority of sales are to businesses, which makes sense – they are traditionally a tradies car and a lot of tradies register their vehicle as a business asset. The tax rules around depreciation got even more generous in April, so that should, if anything, have increased ute sales. Instead we see the opposite, which is a flashing warning sign to the Australian economy.

What the ute index shows is the vulnerability of trades work in Australia at the moment as well as any business that depends on tradies as clients. Cranes are slowly coming down off the horizon as the building boom dries up. If the number of building approvals is any hint of the future, it could be some time before the industry picks up again. The next graph shows building approvals for both houses and high-rises have fallen sharply.

The RBA has sounded a sharp warning about the future of construction jobs. Meanwhile, there is not much willingness from the Government to build extra infrastructure that could soak up the willing workers because they are determined to deliver a budget surplus.

The ute index shows Australians understand what is happening here perfectly. And nobody wants to be stuck paying off a shiny new ute if there’s no work.

NOT JUST UTES

The fall in sales of commercial vehicles is not isolated. All vehicle sales are down in 2019. The market has declined 8 per cent for a range of reasons.

When it comes to personal vehicles, one partial explanation for the fall in sales might be electric vehicles. Some people are starting to wonder if their next car might be an EV. They call this the “Osborne effect”, and you see it a lot in consumer electronics where people hold off on buying a new TV or phone because they know a good new one is coming out soon.

If you want an EV, you might start stretching out the life of your current car so when a good battery-powered car comes out you’re ready to buy. That would cause a temporary fall in car sales, but it does not properly explain the fall in the sale of utes and other commercial vehicles.

Any electric ute in this country is a long way off. Yes, Tesla is launching a “CyberTruck” in two weeks, but when that company launches a product it doesn’t always mean very much. They have in the last few years “launched” a semi-trailer truck, a small SUV and a sports car, none of which exist yet to buy. And Toyota is promising to “electrify” some Hilux models by 2025, but that just means a hybrid.

The fall in the ute index seems to be mostly an economic phenomenon. We can expect the average age of Australia’s ute fleet to get older and older until something turns the nation’s economy around.

Jason Murphy is an economist @jasemurphy. He is the author of the new book Incentivology.