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Brace yourself

Brace yourself for the interest rate rise we don’t have to have next week. The time, quite ironically, is now right for all talk and no action.
What is needed is the country’s new leader to assume the role of another Rudd, who ‘lead’ the country — Dad Rudd.
But if the Reserve Bank follows the script most of my writing buddies are penning in their newspaper columns and raise rates for the 12th time, I can fully understand. Though it won’t make it right.
My gut feel tells me we have had enough interest rate rises and now is the time for Glenn Stevens, the Reserve Bank boss, to simply warn all potential borrowers that he is ready to raise again.
Economically, the case still builds that the past interest rates are not having a massively negative impact.
Business investment rebounded in the December quarter and the outlook remains strong. And CommSec says our average wealth rose $65K to $418K last year.
Also wages rose 1.1 per cent in the December quarter to rise by 4.2 per cent over 2008. And unemployment is at a 33-year low of 4.1 per cent.
Against this the rate hikes have hit consumer confidence and business optimism. The latest Sensis business survey found small business perceptions on the strength of the economy have slumped.
“The last time we saw a drop of this magnitude was in May 2005, when small businesses experienced a sharp downturn in trading conditions after a period of strong growth,” a Sensis spokesperson said.
The number crunchers say the rate rises have hit dwelling construction and the share market slump has to be hurting the high fliers.
I love anecdotal evidence and a mate of mine nicknamed ‘Sir Lunchalot’ complains he’s increasingly eating alone nowadays in flash restaurants. That’s the combined hit of interest rates and weak share prices.
And then there’s my wife, who will look at real estate windows in any country of the world. Even she has been spooked by the last interest rate rise and the tough talk from the Big Bank’s boss — Stevens.
The time has come for more tough talk and caring counselling.
The Reserve Bank needs again to remind us that more rises are possible.
From our new PM, it’s time for Dad Rudd to sit us all down and explain that his tax cut promises will cause more inflation. This will mean more interest rate rises, a substantial downturn and more unemployment than is necessary.

It’s time for Dad Rudd to set the right standard for his national family and make us understand that some promises need to be broken or at least delayed. 

Published on: Saturday, March 01, 2008

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