The Reserve Bank is due to announce whether it will move on interest rates at 2.30pm this afternoon. The jury is out as to whether it will slash rates by a further 50 basis points or leave them on hold.
Certainly there’s arguments for either outcomes. Some are saying that we should take a wait and see approach as to whether the current round of stimulus programs will have the desired effect before resorting to further stimulatory action by the RBA.
On the other hand, the official unemployment figures are due out this Thursday and by all accounts the prognosis is not good. Job ads fell 8.5 per cent last month, taking the annual decline to 45 per cent. This marks the 10th consecutive fall.
Everyone now accepts that the forecast of 7 per cent unemployment for next year is too low and we should be adjusting forecasts to 8%.
The Government is also due to lay down it’s Budget in May, which is expected to include large rounds of cuts, including cuts to “middle class welfare” as we have been warned. What does seem pretty clear is that this budget will have to be a mix of tough cuts and more targeted stimulus.
While there may be “green shoots” emerging in China, it seems that we’re still heading for worse economic times ahead – particularly in terms of unemployment.
The Opposition has accused the Government of spending money irresponsibly without measuring or evaluating the effects of such stimulatory measures.
The Government argues that the ground is moving so quickly, that it’s almost responding to challenges on a monthly if not weekly basis.
Failure to respond appropriately could have disastrous consequences for Australian businesses and the economy while over-spending also carries with it its own set of ramifications.
This week will be an interesting week in politics..
Disclaimer: The author of this post once lived in a rented flat.