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October 6th 2009
Rate rise will cost jobs locally

At its meeting today, the Reserve Bank Board decided to raise the cash rate by 25 basis points, to 3.25 per cent from their lowest-ever point, amid signs of a strong National economic recovery. However, according to a north Queensland based economist, Mr Colin Dwyer, Townsville and much of North Queensland are on a different economic setting to the national one. As North Queensland tries to manage its way out of recession, multiple interest rate rises will create more job losses and underemployment in North Queensland.

The official cash rate had plunged to a 49-year low of 3 per cent, a setting that RBA Governor Glenn Stevens has called an "emergency rate".

There's growing economic evidence that the national emergency is over. Last week's better-than-expected retail sales figures from the ABS and yesterday, ANZ job advertisements rose 4.4 per cent in September. Also, house prices nationally have risen.

DS Economics principal Economist Colin Dwyer said, “However, Townsville and much of North Queensland are on a different economic setting to the national one. North Queensland including Townsville and Cairns has experienced patchy job advert conditions. Median house prices have fallen rather than risen in line with national experience. Business and consumer confidence, while stable, has not bounced back to pre GFC levels."

Commenting before the Reserve Bank's announcement, Colin Dwyer said, "If not today then the case for a rate rise will firm for November and it won’t stop there.

"Rising interest rates will be devastating for our Northern economies, as we manage our way out of recession. It will reduce business investment, reduce consumer and business confidence, reduce retail spending, postpone home purchases and lead to job losses and underemployment. This is a concern for every household in North Queensland.

"I expect the RBA to execute a series of rate rises over the coming months. A cumulative 2.0% rise, which is expected by 2011, will hurt a significant number of North Queenslanders.” he said.

To add your comment,
or read those of others, see below

Rate rise will cost jobs locally
Chris C
October 5th 2009
Colin was of course the LNP (read National Party) candidate for Thuringowa at the last state election.

To call the rate rise "devastating" is way over the top and tells me that he's angling for another go at winning a leather seat for the conservatives.

Perhaps you'd like to ask him for his assessment of Howard's 10 rate rises in a row????
Wendy Tubman
October 6th 2009
So if 'Townsville and much of North Queensland are on a different economic setting to the national one', as the principal economist (who are the non-principal economists?) of DS Economics Colin Dwyer says, what does he suggest? Differential interest rates? Running the country on the basis of what happens in the far north east corner? And an increase in the historically low interest rate will not be, as Colin states, '...a concern for every household in North Queensland' - self-funded retirees will welcome it.
Chris C
October 6th 2009
Wendy - he also advocates for a State of North Qld!

Principal Enconomist is like me calling myself Magaging Consultant - DS Economics is a one person show!
George Hirst
October 7th 2009
For the record Colin Dwyer informs me, "It is inaccurate to say that I am an advocate for a separate state". He was also a candidate in the last State election for the LNP in Mundingburra, not Thuringowa.

George Hirst (Ed.)
Chris C
October 7th 2009
Colin – sorry about the inaccurate reference to the seat you contested.

As for it being inaccurate to say that you’re an advocate for a separate state, I’d argue that, your previous calls for a North Queensland Fund and for the north to receive a share of state expenditures commensurate with the region’s contribution to the State’s output, are tantamount to separatism.

The point of my original comment was to point out that (like all of us) your public analysis of the impact of the rate rise was coloured by your world-view, your politics and your motives.

By the way, I don’t think that the rate rise will have any marked or unique impact on the region – far less than the health of the world economy, potential changes in the exchange rate, or for that matter commodity or sugar prices are likely to have over the coming year

See ya at the cricket on Saturday
Colin Dwyer
October 8th 2009
I can't see how advocating a population or economic contribution fair share of capital spending (not Budget spending)makes me a separtist. Benchmarking is one of the many things that economists do. There's no logic to your statement so stop wasting everyones time.

There is no economic evidence or theory that supports your claim that cumulative and significant rises in interest rates will not have a marked impact on the regions economy.

What do you think? Send us your comments.

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