Tuesday, 3 February 2009

RBA Slashes Rates, Rudd Attempts to Stimulate

The RBA cut interest rates by a full percentage point to 3.25% at its board meeting today. The official cash rate is now at it's lowest level since 1964.

The accompanying statement didn't say much, not that it ever does, citing all the obvious events of the last quarter including a significant deterioration in global economic conditions and falling inflation.

The statement also made mention of the Government's fiscal stimulus package. It appears that if you know how to to install insulation you'll have a job for the next few years. Also you can expect to see a lot more of those fellas on the road holding lollipop signs as 10 of his mates stand around watching 1 bloke dig a hole.

Also the construction industry will get a boost from the upgrade of schools and a new community housing project. There are some small tax breaks for small businesses but of course they need to spend money to get a rebate.

Spend $2000 on a computer and you can get $600 bucks back. But then again, if you are a struggling small business why not keep your old computer and save yourself $1400?

If you thought that didn't sound too bad, this might change your mind. $12.7 billion or 30% of the whole package will go in handouts to low income earners and families. The government just can't fight the urge to be the redistributor of income in chief.

As Ross Gittins said in the smh today, at least there is no denial about the current economic predicament, the government and the RBA are taking action, but they can do little more than cushion the blow of a global recession.