IT WILL take more than another interest rate cut today to get the Australian economy out of first gear.
Investors have the jitters, with the Australian Stock Exchange’s All Ordinaries closing just above 4000 points.
At the height of the boom in 2007, the sharemarket was nudging 6000 points.
The good old days have well and truly been assigned to history.
Another $24 billion was wiped off share values yesterday, and the Australian dollar, which had maintained its spectacular run above parity, slipped to a seven-month low to close below 97US cents.
Sparking the sell-off was poor job growth figures out of the US and the ongoing woes that have crippled Europe.
There are also growing worries about the outlook in China, with the economic powerhouse showing signs it is cooling.
It seems we are in for another rough ride.
The federal Treasurer remained positive yesterday, replaying his well-rehearsed message that the Australian economy’s underlying strength would be a defence against ongoing trouble overseas.
But the Australian economy is influenced by what happens elsewhere.
That was evidenced by the movement in our sharemarket yesterday, as investors took another pounding.
While it is important for the Treasurer to be optimistic, the markets are not agreeing with his sentiments.
Strong demand for Australian commodities remains our economic lifeboat.
But if the Chinese economy is slowing, any downturn there is likely to be felt with significant force here.
The Reserve Bank of Australia has a record of cautious decision-making.
It does not make decisions on official interest rates without measured consideration of the domestic economic influences.
But will another reduction of 50 basis points actually stimulate spending?
The stormclouds elsewhere have spooked many Australians, who have determined now is the time to save, not spend.
Job security is another big issue.
The Reserve Bank is also not getting the full benefit of its decisions to reduce official interest rates, because the banks have adopted a policy of passing on only some of the falls.
Their argument of money being hard to source from foreign markets will again be echoed if another cut is forthcoming.
And that statement, in itself, is hardly encouraging to consumers.