Business News

Pace of interest rate rises over-the-top

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by Peter Switzer

The country’s most important bean counters, sorry, chief financial officers, are surveyed by Deloitte and here were the interesting findings:

Two-thirds of Australian CFOs predict a slow and stable recovery
28 per cent predict a quicker ‘V’ shaped recovery
65 per cent of CFOs are finding credit easier to access
93 per cent expect lending terms and price of credit to remain stable or improve.

Slow and stable recovery

Now, did you pick the stand out observation that makes the Reserve Bank’s interest rate policy look over-the-top?

That’s right, the first observation by the people who actually know how their businesses are travelling – the top accountants – said, let me repeat: they predict a slow and stable recovery.

Slow recovery. Not fast or even normal but slow and it has to raise questions over the pace of the interest rate rises.

It’s a good report but not a gangbusters report on the Oz economy.

Half of the CFOs surveyed said that their company revenues for the first three months of 2010 were in line with expectations, while a further 27 per cent experienced stronger than expected revenue growth.

Deloitte chief operating officer, Keith Skinner summed up the report.

“The majority of CFOs are predicting economic recovery, the only difference in views is on the rate at which it will occur,” he said. “Two-thirds are predicting that recovery will be slow but there is a more optimistic 28 per cent who are expecting a speedier ‘V’ shaped rebound with sustained growth.”

Slow down

So two-thirds of the experts who know how their businesses are doing and how their customers are doing, think the recovery will be slow, which is not normal. This builds the case for interest rates not to be normal but more importantly they don’t need to be driven to normal levels at such an abnormal pace! I rest my case. Well, no I don’t. You know I will keep going after the Reserve Bank until it stops raising interest rates and then becomes more measured.

Remember, I don’t take issue with the fact the Big Bank is raising rates, I am just going over-the-top at the Bank going over-the-top with the pace of the interest rate rises.

For advice you can trust, contact Switzer Financial Services.

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

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Published on: Friday, April 23, 2010