WHEN it comes to car sales, the Reserve Bank’s efforts to dampen demand through successive interest rate rises has clearly failed.

Every single month over the past year, sales records have been broken, leading to an unprecedented million new cars hitting the roads in 2007.

Yesterday the Motor Traders Association and the Federal Chamber of Automotive Industries joined the chorus of organisations, including the Retailers Association of Australia, saying the Reserve Bank’s interest rate strategy is misguided.

Critics argue the rises are failing to dampen inflation, instead hurting cash-strapped middle-income earners with large mortgages while leaving the rich spending more than ever.

Figures just released show 82,270 new vehicle sales in January, up 6.9per cent on the previous January. More than 3290 new cars are now being sold every day, more than 200 more a day than at the same time last year. The latest increases followed on from an exceptionally strong December, which saw sales increase 11.9 per cent on the previous December.

And this came at a time of rate rises that were meant to be dampening consumer demand.

The luxury end of the market is doing particularly well. Sports car sales have increased by 23.4 per cent.

Petrol-guzzling four-wheel-drives have also seen dramatic sales increases, demonstrating the lack of concern among certain consumers over ever-increasing petrol prices. The luxury segment of the 4WD market increased by 27.9 per cent last year.

Motor Traders Association chief executive James McCall said the Reserve Bank’s rate strategy had failed to dampen demand for new cars. “There’s still plenty of money about,” he said. “Increases in interest rates are not going to cure inflation — and the little bloke with a big mortgage is being crucified.

“Another 1 per cent interest rate rise will throw tens of thousands of people on to the streets, it’s already starting to happen. But there are plenty of people with money who think nothing of spending $50,000 or more on a motor car; and often they’re paying cash.

“Sales are up substantially for more expensive motor vehicles. The big spenders are spending like crazy and interest rate rises are having no impact on them. We have never seen trading volumes so high.”

Yesterday, Federal Chamber of Automotive Industries chief executive Andrew McKellar said rate increases were hitting manufacturing and degrading thecountry’s economic base.

“The Reserve Bank’s strategy is only reinforcing the competitive challenges for every sector except resources,” he said. “We can’t afford to lose critical parts of our economic infrastructure because of that.

“They are trying to choke off stronger domestic demand, but it is a blunt instrument, effectively raising borrowing and debt servicing costs. It is very difficult to get the equation right without driving the economy into deep recession, with disastrous consequences.”