Bali blasts to hit Australian consumer confidence
Bali blasts to hit Australian consumer confidence
Phil Smith, Reuters, Sydney
The weekend bomb attacks on the Indonesian holiday island resort of Bali that killed nearly 200 people, many of them Australian, are likely to have a knock-on but fairly short-term impact on the Australian economy.
Kuta, where the attacks ripped through nightclubs filled with young Australians, is seen as a de facto Australian resort so consumer confidence and spending patterns could take a hit in a country unused to such horror on its doorstep, analysts said on Monday.
Australians have sat spellbound as local media showed images of charred bodies and badly burned victims after what was the worst strike against civilians since the September 11 hijacked aircraft attacks on New York and Washington.
"For Australian markets and the Australian economy, the bombings will have an unfavorable but probably temporary effect on consumer confidence," said HSBC chief economist John Edwards.
The government has said 15 of its nationals were confirmed dead and about 220 unaccounted for. The nationalities of many of the 183 bodies recovered from the blast scene have yet to be determined.
The major economic point about the bombings is that it will likely stay the Reserve Bank of Australia's (RBA) hand when it meets to decide on rate policy in November.
"Whatever chance there was of a November Reserve Bank of Australia rate rise has probably been reduced to zero," HSBC's Edwards said.
The RBA has left the key 4.75 percent cash rate unchanged since June as global uncertainty saw world markets fretting over the pace of growth. The cash rate is still a long way short of what is seen as neutral policy around 5.5 percent.
In isolation, the events in Bali will not have a lasting or major economic impact in Australia, but taken in the context of what is seen as an escalation of violent attacks worldwide the bombing could be more significant.
"There has been an escalation of this kind of activity and that adds to uncertainty to the general macro backdrop," said Deutsche Bank senior economist Tony Meer.
He was referring to the recent shooting of a U.S. Marine in Kuwait, a suspected attack on a French supertanker in the Gulf of Aden and a suspected terror cell that was broken up in Italy.
"You should not overplay the broader implications of it (the Bali bombing) but putting it in context, it is a continuation of the global uncertainty," Meer added.
Jitters over a U.S. strike on Iraq if it fails to disarm has caused major world markets to tumble in recent months.
In the medium term, if Australians are encouraged to spend holidays at home rather than abroad the impact of the Bali bombings could perversely be positive as domestic holiday expenditure provides an offset.
On top of this, interest rates may be kept lower than perhaps they would have been and there may be more spending by the Australian government on security.
Nevertheless a near-term knick to confidence is unavoidable.
Analysts said October's Westpac-Melbourne Institute consumer sentiment survey index on Wednesday will no doubt show a sharp downturn as it was conducted over the weekend of the bombings.
The index rose 2.7 percent in September to 108.5 from 105.6 in August following a cumulative 6.5 percent fall over the past two months.