More Sites

‘Booze barometer’ confirms RBA’s decision to cut rates

Reported by Bruce Jackson, The Motley Fool.
Thursday, May 3, 2012
Oprah's favourite things 2014The media billionaire's list of her favourite things this year has arrived.

We’re drinking less, but likely because we can’t afford a tipple rather than some collective health kick.

Apparent consumption of alcohol decreased by 1.1% in 2010-11 to 182.0 million litres, according to figures released today by the Australian Bureau of Statistics (ABS).

This was the first decrease recorded since 2001-02, and was due to decreases in the volume of pure alcohol from beer (down 3.4%) and wine (down 0.6%).

Whilst it may be good news for the health of Australians, it may not be such good news for the likes of booze retailers Woolworths (ASX: WOW) and Wesfarmers (ASX: WES) and wine-maker Treasury Wines Estate (ASX: TWE), although it must be noted the effects on the profits of those companies will be minimal.

Does the “booze barometer” confirm The Reserve Bank of Australia’s decision to slash interest rates by a half of one percent was correct?

Booze is a classic discretionary-spend item. But because of its addictive qualities, it’s also one of the last things a struggling household will cut from its budget.

Many people are doing it tough out there in suburbia, saddled with massive mortgages, and faced with higher energy costs, amongst other things. Some some, cutting back on booze would have been the final straw.

The RBA’s belated but decisive interest rate cut was absolutely necessary, and Bank of Queensland (ASX: BOQ), Commonwealth Bank of Australia (ASX: CBA) and National Australia Bank (ASX: NAB) have already moved to cut mortgage rates. Westpac (ASX: WBC) and ANZ (ASX: ANZ) will follow shortly.

The effects of the interest rate cuts won’t flow through to the economy for a number of months, but its definitely a move in the right direction.

In the Australian Financial Review, former federal opposition leader John Hewson says the RBA should continue slashing interest rates so they are in line with other developed economies, saying it would be better if the cash rate was as low as 2%.

It’s not going to happen, certainly under Glenn Steven’s watch. A better result would be for interest rates in the rest of the deveoped world to move up towards ours — a meeting in the middle, if you like.

But…I wouldn’t hold your breath.

Cheers!

If you’re looking in the market for some high yielding ASX shares, look no further than “Secure Your Future with 3 Rock-Solid Dividend Stocks”. In this free report, we’ve put together our best ideas for investors who are looking for solid companies with high dividends and good growth potential. Click here now to find out the names of our three favourite income ideas. But hurry – the report is free for only a limited time.

For more Foolish reading, check out these stories we published yesterday:

The Motley Fool‘s purpose is to help the world invest, better.  Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. Bruce Jackson has an interest in all the companies mentioned in this article except Bank of Queensland. This article contains general investment advice only (under AFSL 400691).

22/12/2014 13:46Sydney, Australia. 22 December,2014
advertisement