THERE is little point in the Reserve Bank of Australia cutting interest rates on Tuesday and a move could drive business and consumer confidence even lower. 

QUT financial economist Dr David Willis said the RBA would likely resist a second cut in consecutive months but tipped a rate cut further in the year.

In its February meeting, the RBA cut the cash rate by 25 basis points to 2.25 per cent after they had been on hold for 18 months.

"The quarter of a per cent cut could be described as a surprise and wishful thinking from the RBA about the effect such a cut would have on any investment decisions and consumer consumption," Dr Willis said.

"There is little point in the RBA using what is left in its monetary arsenal at this time."

Dr Willis said with interest rates at record lows, cutting them further risked damaging the housing part of the economy.

"On one side, the side the RBA hope for, companies see low interest rates as an opportunity to invest in new infrastructure and consumers cheer lower mortgage payments and, buoyed also by cheaper petrol, start spending and stoking the economy," he said

"However the other side, which seems to be playing out, is that the RBA is seen to be very worried about the wider economy and low wage growth, high unemployment and low consumer and business confidence.

"So rather than boosting confidence, another rate cut could cause business to be more pessimistic, stop spending and amass cash in the event of a recession. Meanwhile consumers are worried about unemployment so use any savings to pay down debt.

"Cutting rates further now will only have a very marginal effect in the medium term and may drive confidence even lower."

Dr Willis said the "only bright spot" for the RBA was the property market and rate cuts could also put this in jeopardy.

"The RBA is starting to place a lot of risk into the housing market and if this develops into a housing bubble, then, when interest rates rise again, it could mean a bust taking the entire economy with it.

"Therefore I think the RBA will do the responsible thing for this cycle and keep rates on hold, as a cut gives no appreciable gain for the economy as a whole."

But Dr Willis said the RBA would probably be forced to cut rates again later in the year.

"Government is presently looking to cut the budget, not spend, and the economy is already in adjustment from the end of the mining boom," he said.

"So the RBA will have little choice but to use everything at its disposal to try to stimulate the economy later in the year, even though it knows there will be only marginal or no effect on the real economy and it risks inflating a housing bubble."

www.qut.edu.au

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BREAKING down trade barriers and improving opportunities for Australian industry and business will be on the agenda when two treaties are examined today.

The Treaties Committee will investigate the World Trade Organization (WTO) Agreement on Trade Facilitation, which aims to help Australian businesses better connect to the global economy by removing red tape and simplifying customs procedures.

The agreement was adopted by the 159 Members of the WTO in December 2013. It is the first major agreement concluded since the establishment of the WTO in 1995 and is seen as a significant milestone in the development of a multilateral trading system.

A number of administrative requirements have hindered businesses from taking full advantage of the ASEAN-Australia-New Zealand Free Trade Area (AANZFTA), Australia’s largest existing free trade agreement. The committee will investigate the First Protocol to Amend AANZFTA designed to make it simpler to complete the paperwork required to do business in the two countries.

Committee Chair Wyatt Roy MP says these two treaties will open up opportunities for Australian businesses and industry.

“It is not just tariff barriers that inhibit businesses from looking for global marketing opportunities. Often red tape and complicated customs processes prove too difficult to negotiate,” Mr Roy said.

The committee will also examine a treaty on mutual legal assistance on criminal matters with Viet Nam which will pave the way for Australia and Viet Nam to exchange information and evidence for investigating and prosecuting serious crimes.

Public Hearing: Monday 2 March, Committee Room 2R1, Parliament House, Canberra

11.10am 

World Trade Organization (WTO) Protocol Amending the Marrakesh Agreement Establishing the World Trade Organization

WTO Agreement on Trade Facilitation

11.50am

First Protocol to Amend the Agreement Establishing the ASEAN-Australia-New Zealand Free Trade Area (AANZFTA)

12.30pm

Treaty on Mutual Legal Assistance in Criminal Matters between Australia and the Socialist Republic of Viet Nam

1.00pm

Close

The hearings will be broadcast through: www.aph.gov.au/live

Copies of the treaties and submissions received can be found at: http://www.aph.gov.au/Parliamentary_Business/Committees/Joint/Treaties

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THE Australian Retailers Association (ARA) Executive Director Russell Zimmerman today welcomed the NSW Government’s commitment to sort out the ridiculous trading laws in NSW.

ARA Executive Director Russell Zimmerman said that NSW retailers have been suffering for too long and gives full support to the government to take action.

“NSW has been a laughing stock within the retail sector for too long now due to the unreasonable trading laws that restrain small businesses to open outside a few areas on Boxing Day.

“I have heard retailers right across NSW expressing their concerns on how they miss out on one of the busiest trading days of the year because of these antiquated laws,” Mr Zimmerman said.

ARA members have said that there is no sense in opening their store as a small retailer because shopping centres remain closed as a result of larger retailers not trading. The ARA has seen an overwhelming number of both small and large retail businesses who are affected by the ban.

“Both Mr Constance and Mr Baird should be commended for this move to deal with the ridiculous trading laws and we look forward to the upper house’s support in making these changes following the election,” Mr Zimmerman said.

Since 1903, the Australian Retailers Association (ARA) has been the peak industry body representing Australia’s $265 billion retail sector, which employs over 1.2 million people. The ARA ensures retail success by informing, protecting, advocating, educating and saving money for its 5,000 independent and national retail members throughout Australia.

Visit www.retail.org.au or call 1300 368 041.

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THE Australian Retailers Association (ARA) Executive Director Russell Zimmerman paid tribute to outgoing Myer CEO Bernie Brookes following the announcement of his retirement today.

“I have had the privilege of working alongside Bernie and Myer throughout my time leading the retail industry’s peak body. Bernie has always been a strong team player in the retail industry and has dedicated much of his time to benefit the retail sector within his role,” Mr Zimmerman said.

“Bernie is an outstanding individual at both a professional and personal level and I thank him for his commitments."

The ARA also congratulated incoming Myer CEO Richard Umbers who has had a long relationship with the ARA dealing with key industry issues.

“Richard Umbers has already been an outstanding leader within the retail sector and I look forward to working closely with him and Myer to deliver the exciting opportunities our sector can bring,” Mr Zimmerman said.

Since 1903, the Australian Retailers Association (ARA) has been the peak industry body representing Australia’s $265 billion retail sector, which employs over 1.2 million people. The ARA ensures retail success by informing, protecting, advocating, educating and saving money for its 5,000 independent and national retail members throughout Australia.

Visit www.retail.org.au or call 1300 368 041.

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