Finance Matters generally shares information from varying ‘finance’ platforms, such as:
- ATO
- Insurance
- Banking
- General Business policies and procedures
- Accounting and timing of lodgements, etc.
- Health and Safety
Today, we are changing things up and introducing a contribution by MitchCap Finance, (CEO) Paul Mitchell. Notwithstanding the recent interest rate reductions, which are welcomed by all, Paul writes on his learnings about interest rates and where to obtain information and or monitor necessary information that may assist you and your business with its financial decisions.
MitchCap is the preferred finance partner of the Boating Industry Associations (BIA Ltd and BIAV), and can be contacted at paul@mitchcap.com.au
Ten years ago, after a hectic few days at the Miami Boat Show with customers my key learning was that our American friends love the Australian boating industry, their interest in our market goes far beyond a winter production hedge. It’s deep.
3 Days of questioning on trends, rates and demand also left me in little doubt, I was anything but an economist. So, when it came time to retreat to the W Hotel, I picked up the only economics-related book available in the bookshop: Japanisation by William Pesek and headed to the sunlounges. One key theme of the book was Japan’s interest rates movement to zero and the difficulty Japan faced in reversing that trend once economic structures are reset to rely on it. I surmised – though I’m sure Pesek wouldn’t have agreed, that if Western rates ever approached zero, they likely wouldn’t go back up.
Could I have been more wrong? Absolutely. And yes, it cost me.
In short, my message to our members is this: no one can predict rate movements with certainty. But there are skilled forecasters you can follow to gain a balanced view. My favourite – better than most and worth a follow, is Christopher Joye from Coolabah Capital. You can find him on LinkedIn; he writes for the AFR and other outlets. He’s comfortable being contrarian to the banks, which is helpful. One may even insinuate that banks might be a little conflicted, given that over 60% of their profits come from mortgages.
There’s a clear, albeit imperfect, correlation between Aussie boat sales and interest rates, more so than in similar nations. In the US, only 5% of mortgages are variable; in Australia, it’s 80%. That’s a compelling stat, but we need to look deeper into the Australian psyche and our obsession with reflecting personal wealth through the value placed of our suburban castles.
This is why the first rate cut back in May didn’t move the needle. In modern history, it was the first time the majority applied the cut to principal rather than spending – almost un-Australian, and dare I say, more Japanese! Geo-politics, Trump, trade, and war overshadowed the cut. We call this “The Sunrise Effect” … if it doesn’t rate on morning television, it isn’t going to rate. Usually, a 0.25% rate cut is prime fodder for Barr and Shirvo, and we’d see a 6% increase in residential prices and feel wealthier, spend more.
In August, rates dropped again to the mid-threes. MitchCap has forecast two more cuts in 2026. We’ve already seen boat sales stock turns improve for our dealers. Recent lows of 1.5 times per annum have risen to approximately 2. An additional cut near boating season would be beneficial for those in the business of selling.
Until then, manage stock, follow economists, and keep Sunrise on in the background.
Paul Mitchell
Mitchell is founder and CEO of the preferred finance partner of the BIA, MitchCap.
