Today, the RBA increased interest rates again by 25 basis points, now up to 3.75%. Either they can see well into the horizon or are living in a global vacuum.
Sure unemployment numbers are looking better, but unemployment is tipped to go higher before it goes back down (in Australia and most other parts of the developed world). Most major economies have decided to maintain their interest rates just above zero, much lower than Australia’s.
On my recent trips to the USA and to Europe, it was clear their economies were still reeling from one of the biggest economic downturns since the Depression. Sure, Australia has moved on from the sheep’s back and is now making its living through commodities, especially to China. And whilst I am a great believer in the Asian Tiger, and see this as a significant advantage for Australia’s long term prosperity, it would be naïve to think that China alone can save Australia or the rest of the world.
We live in a multi dimensional economy, where events in every part of the world impact other countries - including our beloved Australia. If you believe all the stats and that the global economy isn’t likely to start recovering for another 12-18 months, why would Australians believe downturns in other countries won’t affect us, let alone the business confidence in the SME sector which is already badly shaken (I won’t dwell on Work Choices and the removal of unfair dismissal legislation for small business).
I ask the board of the Reserve Bank of Australia, for the future of Australia, take a tax payer funded Junket and see how the rest of the world is actually faring… Just remember that you were responsible for the rate rises to well above 8% when the rest of the world was cutting them.
I think that small business owners won’t be complaining about this tax payer funded Junket to help you get a sense of reality (and feel free to fly first class - just remember to offset with carbon credits :-)