DIRE warnings from the World Bank about a possible crippling second wave of the global financial crisis seem likely to reinforce the trend among Australians to batten down their budgetary hatches.
Ever since the first wave hit in 2008, many households and businesses have concentrated on reducing debt and saving cash buffers against further shocks.
The World Bank has warned that global economic growth will be slower than previously forecast and suggested that, with governments scrambling to refinance debt and fund budget deficits in a nervous investment environment, the cost of money is likely to rise.
Ratings agency Standard and Poors has downgraded the credit outlook for a number of European governments, arguing that those countries’ apparent reliance on economic austerity measures risks putting Europe into a downward spiral of falling employment and falling tax revenues.
If the alternative is borrowing money to provide economic stimulus, however, it’s easy to see why few countries are willing to take that path. Most have already borrowed as much as they dare and won’t want to add to their mountains of debt when funding costs seem set to rise.
In Australia, private banks are anxiously stockpiling cash in preparation for possible hard times ahead and while the government is talking up the prospect of more cuts in official interest rates, the banks are warning that such cuts may not be passed on to borrowers.
The nervousness of consumers at least partly explains the subdued demand that is costing jobs in the retail and manufacturing sectors. Employment fell in Australia in December, with part-time jobs apparently bearing the brunt. In NSW the jobless rate rose to 5.6 per cent, with the state government blaming global conditions for the bad news.
On the eve of meetings in London, foreign minister Kevin Rudd echoed the warnings of the World Bank, noting that Europe’s unresolved problems were eroding global growth prospects.
The ‘‘continued drift in the Euro zone’’ was ‘‘affecting the supply of credit, constraining business investment’’ and ‘‘potentially affecting interest rates in Australia’’.
Those are the major concerns and until the issues are addressed, caution will continue to rule the day.
Shark attack horror
SHARK attacks always prompt a special kind of horror. The element of volition on the part of the predator, perhaps, sets injuries caused by sharks apart from those caused by far more common misadventures such as car accidents or street brawls.
But these days more and more people are inclined to urge a considered view when attacks such as the one off Redhead beach this week occasionally occur.
Sharks, they argue, are a known hazard of the sea and, far from actively seeking out humans, their attacks tend to be incidental.
That’s no consolation at all to those who are attacked, but it is worth considering when the inevitable calls for the tit for tat destruction of sharks are made.
Email a friend