This week represents the last chance this year for Reserve Bank Governor Glenn Stevens to give us all a break. Retailers and real estate agents are urging the RBA to deliver a Christmas plum pudding.
The nation needs a shot of confidence and a surge of customers letting the moths out of their wallets.
It would not require more than a .25 rate cut to get the Eastern states cash registers going “CA-CHING”. Gary Morgan says: “Consumer confidence is clearly stronger (now at 115 points) than a year ago (109.7) heading into the important Christmas retailing period with 58% (up 1%) of Australians that say now is a ‘good time to buy’ major household items.”
Australians are more positive about their personal finances over the next 12 months with 40% (up 3%) saying they expect their family to be ‘better off’ financially, while only 16% (down 4%) expect to be ‘worse off’ financially. Over the next five years, 35% of Australians (up 4%) expect Australia’s economy to have ‘good times’ economically, while just 21% (down 2%) expect ‘bad times’.
Australians are slightly more confident about Australia’s economy over the next 12 months, with 30% (up 1%) of Australians expecting ‘good times’ economically, compared to 31% (unchanged) that expect ‘bad times’.
Now 32% (up 1%) of Australians say their family is ‘better off’ financially compared to a year ago, while 33% (up 2%) say their family is ‘worse off’ financially.
The US fiscal cliff
However, this is not likely to get people going shopping while the world is sitting on the edge of banker’s board room chair, waiting for US President Barack Obama and House Speaker John Boehner to make a decision about that “fiscal cliff”.
Boehner recently expressed optimism that a deal will eventually be reached.
“We all know that we’ve had this spending crisis coming at us like a freight train and it has to be dealt with. In order to try to come to an agreement, Republicans are willing to put revenue on the table, but it’s time for the president and Democrats to get serious about the spending problem that our country has,” Boehner says.
“I’m optimistic that we can continue to work together to avert this crisis, and sooner rather than later.”
The European debt crisis
However, Europe’s debt crisis remains a far bigger threat to the world’s economy than the fiscal cliff, according to the Organisation for Economic Co-operation and Development (OECD).
In its latest report, the economic think-tank says an escalation in the ongoing European debt crisis could drag Europe into a deep recession in the next two years and the US along with it.
Yet a series of reports from the Congressional Budget Office and the White House have emphasised the threat the fiscal cliff poses, while Europe’s woes seem to have dropped off Washington’s agenda
The market expects a rate cut
A poll by mortgage broker Loan Market Paul Smith asked, “What action do you think the RBA is going to take at its December meeting?” finding 72% of respondents expected a cut. Of the 907 online respondents, 69% are tipping the RBA to lower the official rate by 25 basis points.
“It’s becoming clearer that the previous rate cut in October and the consecutive cuts in May and June aren’t lifting the struggling sectors of the economy and haven’t been enough to combat the high Australian dollar and slowing inflation rate,” Smith says.
What Glenn Stevens needs to do
Stevens could give small business a break by taking Australia’s cash rate to an all-time low of 2.75%, while indicating that there will be no more cuts until Parliament resumes next year, at which point Treasurer Wayne Swan will indicate he will get his surplus and Shadow Treasurer Joe Hockey will tell us how he will encourage small business expansion.
Dr Colin Benjamin is an entrepreneurship and strategic thinking consultant at Marshall Place Associates, which offers a range of strategic thinking tools that open up a universe of new possibilities for individuals and organisations committed to applying the processes of innovation, creativity and entrepreneurship. Colin is also a member of the global Association of Professional Futurists.