A warning shot

The next three weeks represent a warning shot to everyone who sees the retail plight of David Jones and the surge in Apple as the boundary riders on consumer response to the global debt crises.

Ben Bernanke has been trying to walk the tightrope between providing assurances that the US economy is growing and hinting that he might print another QE3 launch of treasury buybacks because he can’t lower interest rates into negative territory.

The really bad news is that the stand-off over the US debt crisis could see the rising Australian dollar create chaos for home owners and consumers as investors take gold and silver prices through the roof and convince the Chinese to launch the Yuan as the preferred currency for all commodities trades.

Already Moody’s has placed the Obama administration on notice that it may have a massive increase in its cost of funds in less than 20 days.

US Treasury Secretary Timothy Geithner is contemplating quitting his position and Obama walked out on “just say no” House Republican leader Eric Cantor when a US$4 trillion debt reduction deal was turned down.

According to a study by ratings agency Standard and Poor’s if US debt is downgraded from AAA to AA status it will cost investors who own US treasury bonds as much as $US100 billion.

That would trigger a shift to alternative reserve currencies and another surge in investment in the Australian currency market.

Several debt-rating agencies outside the US have already downgraded US debt to AA status, citing high public debts, inadequate fiscal measures and weaker growth prospects.

All that means smart companies will appreciate that their customers are going to be very wary of making significant purchase decisions in the next month. 

There is a wary, wait-and-see approach to Australian Consumer Confidence that remains above the crucial 100 Plimsoll line.

Gary Morgan reports that Roy Morgan Consumer Confidence index gained 2.8 points to 110.5 on the weekend Julia Gillard announced details of the proposed carbon tax and the raise in the tax threshold that will see a million consumers avoid the task of filling in a tax return in coming years. It was the biggest gain since early April 2011 .

Morgan says the RBA decision last week to leave interest rates unchanged at 4.75% appears to have had a favourable impact on Australian views of personal financial situations with 36% (up 2%) of Australians expecting their family to be better off financially this time next year and 28% (up 1%) of Australians saying their family is better off financially than at this time last year.

Next week’s Roy Morgan Consumer Confidence will be able to directly measure how Australians react to the carbon tax announcement and particularly whether this week’s gains in confidence about personal financial situations can be sustained.

Smart companies will see that consumers will also become smarter and will spend more time with their families until we hit the spring season, with a real interest in heading for Bali and overseas holidays while the nation decides how to manage the climate change debate between unspecified direct action and constrained carbon taxes.

This is the time for sound planning for a good summer season for businesses which have maintained high customer service standards and have managed inventory and operating costs.

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Dr Colin Benjamin is an entrepreneurship and strategic thinking consultant 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. Colin is also a member of the global Association of Professional Futurists.