In the past few months, the economy has been front and centre - in a capitalist society it comes with the territory.
Discussion about the economy was in overdrive during the recent federal election campaign. As the slogan Bill Clinton used in the 1992 Presidential campaign went, "It's the economy, stupid".
Some people really enjoy discussing the economy, and what makes it tick. I am one of these people, and I really enjoyed my Economics subject when I studied Commerce. I do understand, though, that most people are ambivalent to this subject.
Rural areas have pretty much always run their own race, and have not relied on the prevailing general economic conditions.
Sometimes I think the agricultural economy is completely separate to the general economy. Of course this isn't actually the case; they are joined at the hip.
But, there are differences in the way the agricultural sector behaves compared with the general economy in response to economic news.
The recent Reserve Bank of Australia rate cut is an example. This is not fantastic news for the Australian economy generally, and signals that the RBA thinks growth is slowing and some stimulus is needed. Whether this works or not remains to be seen.
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While I am not an expert on currency, the normal reaction to a rate cut is that the Australian dollar falls. As Australia exports a lot of agricultural goods, this benefits agricultural exporters.
Another positive is the fall in interest rates. It is best to check with your bank to find out when they are passing on any rate cuts, and how much is being passed on. They are unlikely to pass on all of it.
On the other hand, of course, imports - machinery, fertiliser and chemicals - are more expensive. This is quite a simplistic analysis, but it is generally what happens.
The RBA will most likely cut the cash rate further this year, which will accentuate the dollar's fall. The RBA is also saying the economy is not at full employment yet, and there is what they call 'spare capacity' in the economy.
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From what I can gather in the rural economy, there is a shortage of people to fill the available positions. This is very apparent, particularly for sectors that require seasonal labour. In the area of labour, the agricultural and general economies diverge.
I am not so sure the retail spending reports that come out regularly are that relevant to rural communities either. Retail spending in rural towns seems to depend on the performance of the rural economy, and that can vary from district to district, depending on the season and commodity prices.
Rural areas have pretty much always run their own race, and have not relied on the prevailing general economic conditions.
For example, advances in technology and improved varieties are all industry-driven and not government-driven.
The signals of when things are good or bad don't come from the government - agribusinesses can work this out for themselves.
The agricultural sector has always operated independently. Most agribusiness owners I know prefer to make their own luck, and do not rely on anyone else to do this for them.
- Details: bagshawagriconsulting.com.au
