Interest rates on the increase? | IR News

Interest rates on the increase?

Posted Date: 04/04/2012

By Peter James Ryan

It appears when it comes to the RBA mandated Cash Rate, many bank economists and media commentators sound increasingly like they were trained by Centrebet rather than in how monetary policy works and comprehension of the data that supports RBA movements.

Indeed many of them have become lobbyists for a point of view rather than analysts of the data.

The undeniable facts of the matter are that Australia is in a golden era – again – relative to our international competitors. We have full employment for our model. Household income is at a record level and continues to grow. Consumption is up by more than seven per cent – retail (both store and non-store combined) up by 2.5 per cent to a record high in aggregate dollars taken at the tills (rolling MAT & same month this year basis).

Despite the negativity of media and politics we are in a pretty good place.

All of the real numbers (as opposed to predictions) are positive, so the pressure is not on an interest decrease but an interest rate increase. This is a good thing for capital inflows to Australia.

The RBA is careful and considered.

Something the doomsayers and monetary policy lobbyists are not. The RBA considers the actual numbers and the full context of all aspects of the economy, the likely scenarios that may arise and the knock-on effects of any move they make. They are also aware that the monetary policy instrument that is the Cash Rate is becoming an increasingly less meaningful tool in practical application, but a more powerful tool in propaganda terms.

Their movements create headlines and influence business and political sentiment.

Consumer sentiment is meaningless in retail as people spend money regardless – as has been amply proven over the past decade. But business and political sentiment are critical as they affect decision-making. Decision-making that changes competitive context and often delivers self-fulfilling prophecy.

Retailers that focus on the things they can affect are the ones that adapt and prosper in an ever-changing market context. The retailers that are pre-occupied with using the RBA Cash Rate, exchange rates, consumer sentiment, the Zeitgeist and tea leaves as excuses for why their business failures are not their fault are deluding themselves and nobody else.

Australia is the place to be right now. But the world we compete in has changed and will always change. You may not be able to affect the context – regardless of what the social media comment strings may lead you to believe – but you can effect how you react to that context.

As Charles Darwin is quoted as saying – “It is not strongest of the species that survives, nor the most intelligent that survives. It is the one who is most adaptable to change.”

Keywords: interest rates, retail sales

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