Quote of the Week
Normal is getting dressed in clothes that you buy for work and driving through traffic in a car that you are still paying for – in order to get to the job you need to pay for the clothes and the car, and the house you leave vacant all day so you can afford to live in it. —Ellen Goodman
We must be the only investment adviser out there looking for the market to pull back.
Last week we started to see the market pull back as more bad news hit the market.
No income from the mining tax, GST is being looked at again as it is not producing enough tax any more. Budget cuts to single parents and lost super about to end up in government hands four years earlier. It is clear that our economy is not surging ahead as promised or advised.
The GST is key for me this week; the low earning by the government from GST is a clear indication that Australians have cut their spending. In fact Australian are no longer spending more than they earn as they did pre-GFC and on average are now saving around 10% of disposable income.
To reward them the Government is looking to find ways to increase tax revenue and the GST is on the list to either be increased or be charged across a broader range of products.
Tax revenue has fallen to 20% of GDP from an average of 23.5% of GDP. A large part of this is due to Australian choosing to save instead of spending it.
The RBA meets on Tuesday to consider another rate cut to bring the cash rate down from 3.25% to 3.00%. Economists are 50/50 on the rate cut.
What is clear is that this rate cut will provide very little boost to the economy as the banks are unable to pass it all on and those with home loans will use the saving to pay down debt instead of spending it.
What we need is for the exchange rate to drop to increase our exports and bring more money into Australia. This will assist our manufactures and provide a better result for our economy.
Interest rate cuts seem to now be a political marketing tool more than economic one.