Business

Tight budget may not be best approach right now

IF you are a borrower you probably breathed a sigh of relief last Tuesday.

Governor of the Reserve Bank Glenn Stevens announced that the official interest rate would remain at 2.50%.

You've got two months at least as the RBA's next meeting is February 3.

In delivering his news, Stevens signalled - I think - that the next announcement will be more of the same, likely a further cut and definitely not an increase.

His concern is that significant declines in commodity prices mean "a lower exchange rate is likely to be needed to achieve balanced growth."

Consider this: In just a year iron ore prices have fallen an incredible 48%, coking coal 39% and Brent Oil (North Sea benchmarking) 34% - and that will impact on LNG prices going forward as those are immutably linked to the Brent Oil barrel price.

Last Tuesday, the dollar measured against the US dollar had dropped from around parity a year ago to US85.16 cents, about 15%.

That's the "exchange rate" that troubles Glenn Stevens.

As the vast majority of manufactured goods and processed foods are imported, it's obvious that this is a disaster waiting for a curtain call.

Even before the end of the commodities export boom, the balance of trade numbers were a worry - Australia was spending more on imports than it was earning from exports.

So what's the risk to Australia if the situation doesn't change? Put simply, the R word - recession.

And how can Australia dodge the bullet? As Stevens intimates, encourage a dive in the exchange rate.

So how do we encourage a dive in the exchange rate?

Stevens has in his kit bag monetary policy tools, primarily the control of interest rates.

Abbot and Hockey have in their kit bag, fiscal policy tools - the control of revenue and expenditure throughout the economy starting with the Federal Government.

If fiscal policy and monetary policy are pulling in opposite directions, then nothing Stevens can do or say will work.

I fear that to be the situation. As Australia's avoidance of recession during the Global Financial Crisis demonstrated, a Keynesian approach is what is needed - stimulatory spending by government.

That notion is obviously an anathema to the Abbot-Hockey show because it means borrowing to spend, the continuation of an unbalanced budget.

Forgetting for a moment the Senate's rejection of the more dreadful parts of Hockey's May Budget, the biggest problem facing the coalition right now is that the fall in export revenues will mean a fall in taxation receipts - one side of the balancing effort in strife anyway.

To persist with cutting expenditure to track the inevitable fall in the tax take is wrought with problems that Stevens, with limited room to move in using interest rates to stimulate the economy, won't be able to solve.

At 20% of GDP, the bottom line is that our national debt is a lot better than most of the developed world.

A pity we don't have politicians with the calibre of Glenn Stevens to lead us through.

"Don't let Santa down, go out there and spend for Christmas," thus spake Saint Joe Hockey as his solution to a problem he obviously lacks the wit to appreciate. On imported goods?

Bob Lamont is director of Corporate Accountants situated in Gladstone. He can be contacted on boblamont 1947@gmail.com.

Topics:  bob lamont economy gladstone business opinion



Date nights under $50

ACCORDING to The Bachelor falling in love involves helicopter rides, private jets, shopping trips, and we mustn’t forget the hot tubs.

Brisbane's arts and culture events centre stage

You loved the film, now you're about to love the musical. Don't miss The Bodyguard The Musical in Brisbane this July.

THE arts and culture events you don't want to miss.

Homewares stores to fulfil your Instagram dreams

No Caption

You too can become an Insta-star with these fab stores.

Top 10 Brisbane experiences to cross off your bucket list

Do yourself a favour and get amongst the food truck scene. Eat Street is a great place to start.

A GOOD bucket list doesn’t have to span continents or cost millions.

Six mega sporting events you need to be at this year

Don't miss all the action trackside this season.

IF THERE is one thing Brisbane does damn well, it’s play host.

Six reasons to get to Brisbane this Autumn

The Brisbane Powerhouse has free comedy on Friday nights.

AUTUMN has to be up there with one of the best seasons of the year.

The best things to do in Brisbane are FREE. Yes, FREE

Mt Coot-tha is a seriously gorgeous way to start your day.

HEADING to the big smoke doesn’t have to come with a big price tag.

What would you do, go for a local company or cheaper quote?

Paulette and Owen Lindley with their crew in just one of the grounds they maintain on a volunteer basis.

Debate over going local or going cheaper

Man airlifted after leg crushed in tractor incident

A 58-year-old male was airlifted yesterday after a light machinery accident at Kroombit Tops National Park.

A 58-year-old man was airlifted after a machinery accident

Teen, 19 threatens to call cops when dad gets physical with girlfriend

Generic stock photo domestic violence.  Photo Contributed

A GLADSTONE man has been told to leave a 7-year toxic relationship

Local Partners

Better phone service for Gladstone's regional towns

Telstra: "This technology is delivering big benefits to these rural and regional communities”


Win a $1000

GROCERY GIFT CARD!
Learn More

What to expect at Birds of Tokyo's Ipswich gig

The band will perform at the Racehorse Hotel on Friday.

BAND member Glen Sarangapany talks music, pub grub and doing shoeys

What public holidays are left in 2017

Ipswich residents will get the day off tomorrow for the show.

IPSWICH residents will get tomorrow off for the show

Caitlyn comes home to launch debut album

Gympie's Caitlyn Shadbolt will launch here debut album Songs On My Sleeve at an exclusive all-ages concert in Gympie on Friday, May 26.

Win tickets to Caitlyn's album launch

Rebel Wilson says she didn’t have to lie to make it

I’M not glamorous, but that doesn’t make me a liar: that’s the message from Rebel Wilson on her second day in the witness box.

All bets on Judah to win battle to become the Voice

Judah Kelly from The Voice.

Judah Kelly is the clear favourite to win the competition.

Kim Kardashian slammed over Manchester tribute

Kim Kardashian's tribute to Manchester didn't go down well

Top Gun 2 movie is happening, Tom Cruise confirms

Tom Cruise in a scene from the movie Top Gun.

TOM Cruise delights fans with announcement on Sunrise.

The first Baywatch movie reviews are in

From left, Jon Bass, Alex Daddario, Zac Efron, Dwayne Johnson, Kelly Rohrbach, and Ilfenesh Hadera in a scene from the movie Baywatch.

Critics were less than impressed.

Boyfriend loses it over sex lie

Stacey Louise’s sex lie destroys her relationship.

SEVEN Year Switch’s Stacey told a fib about her sex life.

Why Crowe’s thankful for those ‘bulls**t’ rumours

Russell Crowe and Terri Irwin in 2007.

Crowe and Terri Irwin have been dodging dating rumours for years now

How Toowoomba house prices compare in Australia

For sale sign in front of home.

Here's what $700,000 will buy you in Toowoomba, Brisbane and Sydney

One of Maryborough's most historic homes is still for sale

FULL OF HISTORY: Trisha Moulds is owner of the historic Tinana state known as Rosehill. The beautiful home is currently for sale.

It has been the scene of both joy and tragedies over the years.

New tool reveals which areas are most 'vulnerable' for renters

An aerial shot of Agnes Water main beach. According to new information, people renting in the region are more vulnerable than those in Gladstone suburbs.

Big differences between living in Gladstone and outer areas

The face of the Sunshine Coast's overpriced rental crisis

Alyx Wilson had to rent a $385 unit in Currimundi because the market was too competitive for cheaper rental housing. She is now renting a room from friends who own a house in Currimundi, and says its much more affordable.

Young people feel the strain in competitive, expensive rental market

Ready to SELL your property?

Post Your Ad Here!