Feeling confused about the state of the economy? Don’t know what all these negative reports add up to?
You are not alone. The Westpac-Melbourne Institute Consumer Sentiment Index dropped to its lowest point in two years and the monthly NAB business confidence index fell from six to zero. They are telling us what we are already suspecting: that people do not feel comfortable with what they are being told and – perhaps more accurately – what they are not being told.
The property market is flat, interest rates have seen seven rises in a row, the cost of living is rising (yet inflation is apparently under control), electricity prices are sky-rocketing a long way ahead of wage rises and Australians are pulling back from spending, choosing to save their cash and wait… but for what?
How we are navigating through the jungle of interest rates and inflation, prices and taxes, is something I want to get to the bottom of. There’s so much information in the media right now, but it’s not amounting to a coherent picture. There doesn’t seem to be any clear way to proceed, which is why people are confused and lacking confidence.
I’d like to clarify some of the issues in our economy so I suggest you send me your questions, telling me what you’re confused about and what doesn’t make sense.
For instance, what is the real story behind the sovereign debt crises in Europe? Do you know how one or two countries defaulting on their debt obligations will affect you?
How about property and the housing market? Do you worry about getting a loan or getting a decent return on your home?
And the rising cost of living? Do you know what’s driving it? Where it comes from and how bad it will get?
And most confusing of all: if the Reserve Bank continues to raise interest rates on the basis of rising wages, what if you don’t know anyone who has rising wages?
What if wages are only rising in the mining industry? How long can the RBA continue to raise interest rates to head-off wages-driven inflation?
The Reserve Bank can only raise, reduce or hold interest rates in order to control inflation. However, it can’t aim its interest rates at an industry or region causing inflation.
But enough of what I think. I invite you to email me with your own concerns. I’ll look into them and find some answers. It’s time we investigated what is really happening with this economy.
Mark Bouris is the Executive Chairman of Yellow Brick Road, a financial services company offering home loans, financial planning, accounting & tax and insurance. Email Mark on mark.neos@ybr.com.au with any queries you may have or check www.ybr.com.au for your nearest branch.