ALMOST every day now the media carries a new story of some people being laid off from their job - the auto industry, banks, the closing of the Mortein plant, and so on.
You get the distinct impression that unemployment is seriously on the rise and that the situation may turn out to be much worse in the course of this year than is being admitted.
Although our political leaders regularly express “concern”, they seem to do little about it. Indeed, they stand by while the Reserve Bank continues to keep interest rates far too high and the banks roam free to gouge consumers, and especially small businesses.
What is even more worrying is that the government/policy authorities have left themselves very little room to respond if our economic circumstances turn out to be worse than predicted.
The government and the Opposition have a manic obsession to restore the budget to surplus as fast as possible.
The banks are threatening to tie their lending rates to their cost of funds, irrespective of where the Reserve Bank sets the official cash rate.
So, even if the Reserve Bank actually reduces the official cash rate, the banks may not pass it on in full.
Indeed, they may even increase their lending rates if their cost of funds, heavily tied to developments in global financial markets, increases.
The political and media focus is mostly on what the banks do with their variable home mortgage rates.
You will have noticed that they haven’t been keen to lower their credit card, personal loan and business lending rates - in some cases they have already increased the latter.
High interest rates are a particular problem, not only because of their direct, restraining effect on spending by consumers and businesses, but also because they work to increase the value of our dollar, choking off those industries that rely on exports.
So, our economy is now pretty much a “sitting duck” to adverse economic developments overseas, where the “downside risks” are very real.
Europe is most unlikely to sort out its debt/banking crisis smoothly, if at all, as it slides into a deep recession.
Chinese growth is slowing.
The US will not address its very significant economic problems in the course of this Presidential election year.
And so on.
Any one of these could unfold badly for our economy and, just when the government might need to stimulate, as it did in response to the GFC a couple of years ago, it has very little capacity to do so.
This is grossly irresponsible economic management.
This is where the economic debate should be focused in this country, not on the mindless political contest to determine which side can produce the biggest budget surplus, the quickest.
The price of this political “game playing”, rather than problem solving, will be more unemployment.
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