In the next week or so we are likely to have the interest rate rise that the RBA thinks we have to have, at a time when other countries are holding onto their stimulus packages and keeping rates unchanged.
In Australia, the big end of town is sending out lobbyists like a plague of long surviving cockroaches to campaign against a resource rent tax, against Conroy’s broadband roll out and against Wong’s plans for a limited cap and trade carbon emission scheme.
It is time that the job creating businesses hired a few lobbyists to tell Australia that they are about to suffer Lindsay Tanner’s determined effort to rein in his cabinet colleagues desire to splurge in an election year, and Kevin Rudd’s determination to reclaim his title as the fiscal fiend.
As consumer confidence continues to rise and eight out of 10 Davos business tyros indicate increasing levels of business confidence, the world’s bankers tell us that we are on the brink of inflationary expansion.
We are likely to see China cut back on commodities as it hauls in a surplus of commercial property investments and all central banks begin to cut back on capital distribution to emerging companies in favour of line extensions to existing manufacturers.
Smart companies need to become extremely cautious about financial institutions encouraging them to grow their business by expanding customer’s use of credit cards. It is not enough for the central bankers to be printing money like it has gone out of fashion, now the major banks want to push the boundaries of money supply to generate turnover in the never-never market.
Dun & Bradstreet have been campaigning for credit reform for a long period of time and are concerned that young families are shifting to see the card (with its hidden interest rate costs) replacing savings and cash.
Australia had suffered from a credit reporting system that was outdated, lacked innovation and poorly served Australian lenders and consumers. Behind much of this were credit reporting laws which provided an incomplete picture of a borrowers true risk profile.
This ‘negative’ credit reporting system was increasingly unique around the world and was failing to respond to the evolution of the Australian consumer credit market. That market had a growing need for a credit reporting system that was innovative and could play a critical role in enhancing responsible lending practices in Australia.
Already there are moves to raise the threshold for bankruptcy provisions to head off this risk to small business owners who are using credit facilities to overcome their forward order requirements, and homeowners who are walking away from the big banks by just not paying when the bill arrives.
The expansion of inappropriate credit card use looks great at first sight when new customers come in to the store, but this is likely to be the next bubble to burst in the second half of this year.
As the flush of funds from the stimulus packages dries up around the world and fiscal requirements reduce national growth to claw back deficits, households are likely to overdose on credit cards and then default at a much higher rate.
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Dr Colin Benjamin is an entrepreneurship and strategic thinking sonsultant at Marshall Place Associates which offers a range of strategic thinking tools that open up a universe of new possibilities for individuals and organisations committed to applying the processes of innovation, creativity and entrepreneurship.
Email dr.colinbenjamin@marshallplace.com.au
Contact: CEO Dr Jane Shelton, Phone +61 3 9640 0099
Smart Company is the leading online publication in Australia for free news, information and resources catering to Australia’s entrepreneurs, small and medium business owners and business managers.
