RBA Should Consider Rethinking Their Strategy

Many Australian retailers are bracing themselves for a slow start in 2010 after a potentially successful Christmas season reported the Australian last week. With an easing in job losses consumers are more confident that the worst is over but many businesses and consumers have no plans for spending.

Thanks to the GFC many companies have reduced their stock over the last year which means we are still seeing very low sales figures right now. Car importers are sitting on 18,000 car imports opposed to 80,000 the year before. This is due to the reduction of stock by car dealers in response to the global crisis.

Therefore some say that prominent Sydney car dealers are reporting zero sales of new vehicles in recent week. The same scenario is seen across many Australian industries.

With the RBA intent on pushing interest rates up from 3.25 per cent to 4.5 per cent, things could soon get out of hand and spiral right down into the dark recesses of a second ‘recession’ wave.

Both Woolwoorths’ Michael Luscombe and Wesfarmers’ Richard Goyder said earlier this year that business should talk up the economy to avoid Australia following the rest of the Western world into recession.

The big banks reported extensively about a lack of credit card spending with a virtual zero growth in the industry. At this time of year it would be normal to see growth figures of about 10 per cent.

There is much talk about cautionary moves in order to stay afloat in the economy and if the Reserve Bank hikes up their rates once again this could lead to massive problems for many Australian consumers and businesses.

Source: The Australian

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