Australians are traditionally seen as being laid back and
easy going – an image most Australians do nothing to discourage.
So it comes of something of a shock
to read that Australian base interest rates have just been put up to 3.5% - compare that with Britain’s
0.5% or America’s 0.25%.
Indeed, it is interesting to note that, among developed
nations at least, monetary policy in general tends to be more disciplined in
relatively small economies.
The relatively small developed economies also tend to be
better at fiscal discipline: despite the publicity given to the ignominious
exception of Iceland, smaller governments borrow less.
This may be because in smaller economies it is harder to
hide the impact of lax economic policies on individual businesses and households.
This may be something to bear in mind when making location
In any case, at low levels – below say 5% - there is little
to suggest that the difference in a couple of points in base rates has much
impact on business borrowing either way. If anything, lower rates are likely to
reduce money available for lending to business.
Australia’s higher rate may, however, have an impact on
consumer borrowing. If so the Australians’ desire to prevent inflation is
Yet, before we all follow the advice of the old Paul Hogan
adverts and rush off Down Under in search of the business equivalent of the
“extra shrimp on the barbie”, a word of caution is necessary...
Many of the small economies whose tight monetary and fiscal
policies are attractive to most entrepreneurs are also noted for tight
regulatory policies, which most of us would find less attractive.
Indeed, should you bump into Hogan himself somewhere in the
Outback, remember that it might be insensitive to mention the words “Australian