During October, business borrowing actually expanded by a healthy 1.1 per cent — to be 13.2 per cent for the 12-month period.
However, business debt and credit cards are considered more risky than home loans. Therefore, banks will raise their risk premium in these two areas; and not lower those lending rates, as much as the RBA’s official rate cuts.
That said, Australian banks are in good shape. Home owners are paying their mortgages and company collapses have been few.
h3. By comparison …
On the other hand, US consumers (who account for 70% of economic activity) will remain under pressure for some time. This is causing concern for all forms of consumer debt, including credit cards and car loans.
And it will put further pressure on the ailing US banking sector.
Back in Australia: Households are now benefiting from the May tax cuts and falling petrol prices. Plus, the lower Australian dollar has been a real boost to our manufacturing, farming and services sectors.
h3. Room to move …
Furthermore, the Australian government and RBA are better placed to stimulate a slowing economy than the US.
And that is because of its ballooning deficit from the Iraq War — as well as massive tax cuts and the huge corporate rescue packages already handed out.
Across Australia, all governments are poised to embark upon major infrastructure spending to boost employment. And at the same time, direct and indirect tax cuts for households and business will take effect — along with the pre-Christmas welfare payments.
h3. It all comes down to Confidence!
If people feel more secure, they’ll start spending again. And in the words of Glen Mumford of The Age:
“Governments can provide the fuel but … they can do little to light the fire.”
However, the shrewd ones among my clients can see the underlying fundamentals in Australia (particularly Melbourne and Adelaide) are strong.
And, therefore, they are already snapping up solid properties — where Vendors may (for some personal reason) be forced to accept a lesser price.
Therefore, as I mentioned in a couple of earlier postings … just let me know if you’d like to become one of those, who grab a strategic advantage going into 2009.