Strong economy still needs local support

Many of us who are a bit older are looking forward to an overseas holiday at Christmas with a bundle of strong Aussie dollars. I hear the snow bunnies in the eastern suburbs are keen on the snowfields of Japan and, increasingly, China.

In Japan, they are celebrating the centenary of the introduction of skiing by an Austrian army major: the aptly named Theodor von Lerch.

Just a hop across the Sea of Japan (also known as the East Sea) lies China, our other great trading partner, where many now believe the first people took to the slopes 5000 years before the Scandinavians. It's around here, on the ski fields along the legendary silk road in the prefecture of Altai, that Genghis Khan might have passed on his way to world domination.

Skiing would have been pretty tough in those days, without diesel-powered ski lifts. The trip downhill would probably have been about as quick as today quicker with Genghis behind you, but the way back to the top would have been an all-day slog.

It is a bit like the way we respond to the Reserve Bank's decisions on interest rates. After the last interest rate rise in November last year, we saw all our retail clients and the economy generally head downhill pretty fast.

And now with the Melbourne Cup day interest rate cut, it's back to the slopes, sturdy stocks in hand, as the long haul up the mountain starts again. As far as we can see, there's been almost no movement in the economy. As one of our clients said, we've seen a cautious store-on-store improvement in sales compared with a reasonably strong sales week in the previous year.

On the other hand, for the great many of us who are responsible for the record level of bank savings, an interest rate cut means a little less cash growth. So, sadly, this move is more likely to have a negative effect in the short term, although the hope is it will turn positive in the future, particularly if it is followed up with further rate cuts.

There is an argument that the lag between interest rate cuts and their effect on retail spending is about 18 months. I hope this time frame can be shortened because there is no reason to hold our economy back. It would make a lot of sense for us to fully understand and accept that we have a once-in-a-century boom.

By any standard, we have a very strong economy. The fact is while we have been included in the G20, we come in at number seven, just inside the G8.

Instead of snow skiing, why not stay at home this summer? Enjoy our great country and support the local economy.