RBA rate cuts an ineffective stimulus

“Figures from the Big Four banks show that fewer than 5 per cent of mortgage borrowers have opted to reduce repayments as interest rates continue to slide.” (As reported on News.com.au here or  here)

What that means is that the massive rate cuts from the Reserve Bank of Australia over the past four months have been an ineffective stimulus on the Australian economy.

I believe this is happening because our nation’s “leaders” are fear-mongering. They are talking up the bad news too much without sufficient balancing positive leadership. Their jaw boning is counter-productive to their financial stimulus.

The big problem is that talk is free and stimulus is costing the country billions. 

The consequences could include (according to my fuzzy crystal ball):

  • Sudden reflation of the bubble as confidence returns and people start spending like the old days using their new stash of cash savings
  • Equally rapid interest rate rises 
  • A debt noose around our nation’s necks that hampers our international competitiveness and growth
  • A depression as the fear mongering becomes a self-fulfilling prophecy

To clarify I don’t mean all of the above. It could go either way in the short term.

One thing I am clear on is that fear breeds fear and what we need is true leadership, not a cash shower.

If you’re feeling scared ask yourself if the facts of your personal situation have really changed? Or is it just your perspective?

Maybe you are unnecessarily too scared. Maybe you don’t really have much to be afraid of and instead could be showing personal leadership to those around you.