A Question Of Confidence

Newcastle Herald

Monday November 3, 2008

LEADER

WHILE many people in line for cash bonuses from the Federal Government next month insist they will use the money to pay bills or reduce debt, Hunter businesses are hoping they'll change their minds and spend.

Predictions of recession can become self-fulfilling. If people fear tough times lie ahead and cut spending, the reduced demand is quickly translated into reduced cash-flow in businesses and, ultimately, job cuts. News of lay-offs reinforces the fears, leading to still greater caution, even less spending and even more job cuts.

To be fair to the Government and the Reserve Bank of Australia, they have done a reasonable job of limiting the damage. The Government has not shied from admitting the nation is on the brink of recession a confession that has certainly underscored people's fears. But it is better in such circumstances to be honest and take steps to ameliorate the problem, rather than to deny it and risk losing credibility.

On the positive side, interest rates have fallen and may fall further. By good fortune the interest rate cuts have also coincided with falling petrol prices and this combination has provided genuine budgetary relief to many households.

The slump in the value of the Australian dollar has not yet been translated into higher import prices so most consumers are, theoretically, in a position to spend more if they feel confident enough to do so.

Many have been choosing instead to rein in debt and build buffers against possible tough times ahead. But it is possible that, in the absence of any further major shocks in the world finance system, these households will recover their confidence and, having spent some months strengthening their balance sheets, will re-emerge to take advantage of the bargains being offered by troubled businesses.

The Government must be hoping this will be the case and that consumers will feel comfortable enough by the time their cash bonuses arrive to spend the money rather than hoard it.

Hard-pressed businesses, struggling to shift higher-priced merchandise, will be hoping for the same thing.

Liquor in Maitland

LICENSED premises in Maitland are to be congratulated for taking the initiative on contentious alcohol issues. Presumably they have learned from the experiences of their Newcastle counterparts.

Maitland Liquor Accord members have moved to implement voluntary 2am curfews, well before being required to do so, and are serving drinks in plastic cups after 9pm. All premises in Maitland would be advised to seriously consider voluntarily adopting the accord's proposed code of practice, which embodies a range of measures designed to limit irresponsible drinking and the antisocial behaviour it produces. If they don't, they run the risk of exposing all premises in the area to imposed conditions which they may find less suitable to their businesses than the measures outlined in the voluntary code.

© 2008 Newcastle Herald

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