INTEREST RATES OUTLOOK

RBA HOLDS AT 5.5%
The board of the Reserve Bank of Australia has held firm with the basic cash interest rate remaining at 5.5 percent for the seventh month. They made no comment in today’s statement on the economy.

NATIONAL ECONOMY SNAPSHOT

PICKING PETROL PUNISHMENT
Now that the hysteria has settled and various research projects have been completed, an overall picture has started to emerge on the outcomes of the effects of petrol price rises. All analysts agree there has to be negatives on the economy with many business sectors predicting difficulties as the average family now pays around $12 extra weekly. The lower income families have altered their grocery and car travel spending hitting the supermarket and travel industries. But with only a few retailers saying they are beginning to feel the squeeze, nearly every aspect of the transport sector insists the cost hikes will be passed on.

So far, the increased prices have not had an effect on the official inflation figures but that could soon alter with food makers now announcing price rises. Most observers agree that if inflation exceeds the RBA’s comfort zone of 4 percent then a rate rise could be inevitable.

On the general state of the economy, the various surveys, key sales figures and research about the overall position all paint a rosy picture. These include:

The Westpac-Melbourne Institute’s quarterly survey points to strong exports and the current business investment boom as underpinning a strong position. The RBA says business borrowings are now running at the highest pace for 17 years. JP Morgan’s Senior Analyst is quick to endorse the findings of the latest International Monetary Fund's report which gave the Australian economy a very positive mark. He says the overall position of full employment and sustained low interest rates is sound. The booming share market continues its bull run with the All Ords having consolidated itself at over 4600. But many fund managers believe it is now over-valued. As for spending, new car sales continue to break all records with the latest figures (apart from 4WDs) looking very impressive. Retail spending figures are also still very strong.

On the negative side, the Bureau of Statistics latest quarterly employer survey says job vacancies have fallen by nearly 4 percent and BIS Shrapnel insists the joint effects of continued petrol increases and skills shortages will force inflation to exceed 4 percent. This will force an increase in interest rates by around one percent next year. Certainly the last survey by the Australian Industry Group indicates a continued decline in local manufacturing which is impacting on jobs growth.

But a favourite economic barometer - house prices - is about to be tested with the influx of property now coming onto the market in time for the spring sales season.

BUSINESS NEWS

NOW REALLY IS THE TIME TO BUY
As new car sales continue to break records, the number of used cars on the market has rocketed forcing down prices. Industry sources say the best buys are larger 4WDs because of petrol guzzling. The trade is stacked high with stock it can’t shift.

20 & OUT
When announcing record profits recently, the Coles management confirmed that the Myer side of the business looks like being sold next year. Coincidentally, this will mark the 20th anniversary of acquiring the department stores business, with the last ten being an unhappy relationship.

MORE & MORE MILLIONAIRES
In case you missed it, the recently released Merrill Lynch’s World Wealth Report claims the number of millionaires in Australia has risen from 117,000 to 134,000 in 12 months. It is calculated on wealth without the family home or collectables, art, cars, etc. Also, the Bureau of Statistics figures show private wealth surged to an all-time high recently at $5.4 trillion, up 10 percent on last year.

BROKERING EVERYTHING
A US-based international finance company has announced it hopes to broker Michael Jackson’s debts thought to be around $275 million. The company is now looking for investors.

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