The economy: hang on and remain calm says expert

By: Chris Smith


Last week has seen our market drop collectively over the week about 15 percent, dropping 8 percent on the Friday

Last week has seen our market drop collectively over the week about 15 percent, dropping 8 percent on the Friday alone, the biggest one day drop since 1987.

Since then and as a result of the government guaranteeing not only our savings in Australian Banks but also the borrowing ability of the banks, the market has started to claw back that lost ground.

With the world economies being battered by the Sub Prime crisis and the resulting fallout of that, we can expect our share market and economy to be in for a bit of a roller coaster ride for probably a minimum of six months maybe longer says Graeme McDonald, Commercial Finance Manager from Capital Corp Finance and Leasing.

"It’s interesting how quickly the government and reserve bank have changed its view of the economy," he says.

McDonald says he is worried at the Government over reacting to the crisis without waiting for the full effects of the recent Reserve Bank of Australia’s 1 percent interest rate cut could potentially kick start high inflation.

"The Reserve Bank should know that it will take at least 6 months for the full effect of the rate reductions to flow through; my own mortgage provider is yet to advise me if they are passing on the last rate reduction and if they do, how much," he says.

He says the global crisis has naturally slowed down economies around the world.

"The result of this, we now have the reverse effect and one that is driven by a fear of recession and depression, global slow down, softening demand for our mineral resources and yes the USA’s inability, through lack of financial regulation, to manage their own back yard," he says.

"So as you can see, while many newspaper headlines are sprouting joy and happiness and that everything will be ok now, the same ones by the way only days before where predicting the end of the world.

McDonald says this is a time of caution.

"We are still some way from seeing the end of this and unless the governments start focusing their attention on areas that can produce sustained growth for the economy, we are living in a dream world," he says,

"So the message for now, is to hang on and remain calm, there are plenty of ups and downs to come yet.

"If you are concerned, remember to seek advice from someone who is qualified to help, your accountant, solicitor, and the like, the worst advice you can get is from a mate."

You can also follow our updates by liking us on Facebook