Good news?

The good news for the Aussie dollar as it heads for parity with its US cousins, with a 14% rise against the US dollar since the election of the Gillard Government, may be bad news for home owners on Cup Day.

We now have a two speed domestic economy riding on the Chinese economic boom in a two speed international export market. There is still a very real risk that the Japanese disease of stagflation will spread to Europe and the United ‘States as countries cut health and services.

Julia Gillard and Wayne Swann face an increasingly turbulent international context for their efforts to bring the budget back into surplus while still paying out delayed stimulus dollars to recalcitrant states that are still to finish building delayed building projects.

Under these conditions there is every reason to believe that the RBA will want to dampen down lending to small and medium enterprises seeking to take advantage of lower import costs and keep inflationary pressures under stricter control.

Smart companies will need to identify the key success factors for their business in terms of the geographies of their suppliers (reducing their import costs) and the location of their customers (reductions in export income with an appreciating dollar). In the period up to Christmas, customers will be out and about and looking for quality products and services that have been on their delayed consumption list while they paid down household debt.

One in three Australian consumers now consider that they are better off than a year ago and the nation has seen the strongest growth in employment in 30 years. Home owners appreciated the decision of Glenn Stevens to again hold off a rise in mortgage rates and the banks were caught out in their rush to maintain profitability (and hopefully customer satisfaction) so that they can continue to pay their executives many multiples of the remuneration.

Gary Morgan says, “Consumer Confidence has risen 1.5pts to 122.9 as increasing numbers of Australians say now is a ‘good time to buy’ major household items (59%, up 3%). This is the highest mark for this indicator since mid-January 2010 and is more good news for retailers after the RBA left interest rates on hold at 4.5% instead of increasing them again earlier this week. Australians are also more confident about economic conditions in Australia as a whole with 40% (up 2%) of Australians expecting both ‘good times’ financially for the country over the next 12 months and also ‘continuous good times’ during the expenditures in order to respond to debt and deficit concerns. next five years or so.”

Taken together, this all means that the good news of a rising dollar, falling unemployment and a great season for Aussie farmers will provide opportunities to build order books, raise prices for quality merchandise and encourage longer term planning for offshore development.

Whatever you bet on the cup, it is a better than even chance that interest rates will rise on the first Tuesday in November, shortly after the conservatives forces in the UK cut welfare benefits and the Tea Party in the US gives Obama’s control of both houses a severe haircut.

For more Futurist blogs, click here.

Dr Colin Benjamin is an entrepreneurship and strategic thinking consultant at Marshall Place Associates which offers a range of strategic thinking tools that open up a universe of new possibilities for individuals and organisations committed to applying the processes of innovation, creativity and entrepreneurship.

Email dr.colinbenjamin@marshallplace.com.au
Contact: CEO Dr Jane Shelton, Phone +61 3 9640 0099