interest rates - rba bias, page-5

bbm,

From personal and anecdotal evidence alone I detected a slow down in property investment. Maybe this is not borne out with Australia wide figures.

Our family unit, other family and friends have all allowed the second half of 2003 go by with no further property investment.

This had nothing to do with dark warnings from the RBA but rather that the returns were too low thereby making the investment too onerous from a cashflow perspective.

What I'm saying is the system was regulating itself without the use of a sledgehammer like interest rate rises (I stress this is from personal experience which may not be representative on a national level).

When you say spending is too high I'm a bit confused. I thought that spending was the blood flow that the economy needs to create jobs. I remember only a few years ago the Howard government trying to encourage spending.

Will raising rates slow spending or will it shift spending to the (now) cheaper imports? It's been my experience that Australians are not savers or even investors when compared to the rest of the world.

I think spending will just shift to the things which were previously unattainable (foreign cars, clothing, furniture etc).

Again, I'm not an economist but I would have thought that balance of trade would be of paramount importance. Shouldn't we avoid being a debtor nation as much as possible?

I guess I'm a simple man and see things from a personal view but anything which promotes us to buy other countries products seems to be bad thing.

- Z