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Feature Articles

 From 2012, we now list our articles in our Blog. Read the latest here

01/02/2011

Floods, Confidence and Business

Currently, the Australian economy is experiencing slower growth, apart from those regions that have exposure to the mining and resource sector. The memory of the global financial crises, economic uncertainty in Europe, domestic interest rate increases, floods and now turmoil in the Middle East have all combined to put fear and concern in the minds of consumers and business. This caution has resulted in the household savings rate in Australia reaching its highest level since 1987. Consumers and business are holding onto their cash and paying off debt at a record rate.

The Australian Prudential Regulation Authority and the Reserve Bank have recently outlined that household deposits with the big four banks (CBA, Westpac, ANZ and NAB) are increasing by 8% and term deposits are growing by a massive 20%.
 
Australian households are also turning their backs on credit cards, by reducing debt levels by more than 10% on the prior year and cutting the number of cards they own.
 
Consumers have undertaken a major change of attitude towards debt and spending following events in the global and domestic economy over the past two years.
 
Businesses are also currently holding onto cash and strengthening their balance sheets. The global financial crisis and subsequent domestic problems have been a substantial wake-up call for many companies.
 
Business sector investment and expenditure continues to be slow  in all sectors apart from mining and resources. Businesses are realising excessive debt is not good and they are now taking a more realistic view of their financial position.
 
In the longer term these changes will largely improve the economic conditions in Australia. However, in the short term the economy will continue to be lethargic.
 
Consumer and business confidence will improve as the economic recovery gains traction, which we anticipate will occur from mid 2011.
 

Ross MacMillan holds a Bachelor of Commerce (Accounting, Finance and Systems) from the University of NSW, he is a member of the Institute of Chartered Accountants, member of the Securities & Derivatives Industry Association and a Fellow of the Financial Services Institute of Australia.

For more information on this article, call the team at Nine2three today on 1300 923 000, email  ross@nine2three.com.au or visit www.nine2three.com.au 

Important Note: These articles have been prepared for general circulation and are circulated for general informational purposes only; these articles should not be regarded as business or investment advice. The articles represent the views of the writers and are subject to change without notice. Additionally, while every care has been taken in the preparation of the articles no representation or warranty as to accuracy or completeness of any statement is given. An individual or organisation should, before any business or investment decision is made, consider the appropriateness of the information in this document, and seek professional advice, having regard to objectives, situation and needs. This document is solely for the use of the party to whom it is provided.

 

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