Channel reserved over rates

Channel reserved over rates

The Reserve Bank of Australia (RBA) may have attempted to stimulate the economy through last week's official interest rate cuts, but the channel remains unsure as to whether it will get any roll-on effect.

Last Wednesday, the RBA announced it would be acting in the money market to reduce the cash rate by 50 basis points to 5.75 per cent.

A statement from RBA governor Ian Macfarlane said the Board judged the balance of risks to the outlook over the next year had changed sufficiently to warrant a shift in the stance of monetary policy. "With a weaker external environment in prospect and inflation contained, policy settings more supportive of domestic demand are now prudent."

Yet while many in the channel were generally positive about the move, many seemed unsure as to how greatly their businesses will be impacted.

According to Geoff Croshaw, solutions manager at integrator Senteq, the Reserve Bank announcement is a "step in the right direction", adding that the market as a whole is looking at a clearer run this year, after Y2K, GST and the Olympics, and that this decision will help that.

"From our perspective, it's good for the customers because it will probably allow them to release projects they've been holding," Croshaw said. "However, we may not see the effect of that for six months or so. One would hope there is an amount of sustainable solidity in those numbers which may then give us that impact in six months time."

John Grant, chief executive officer at integrator Data#3, said he thinks this is probably the first of a number of moves in this area. "Certainly [it's] welcomed by anyone who's in the business of providing capital equipment to customers."

The opinion that everything helps in the current economic climate is one also expressed by Jon Shein, managing director of integration company Com Tech Communications. But Shein added that major corporates will also be looking at the slowdown in the US and what is happening there. Shein cites the old adage "when the US sneezes, the rest of the world catches a cold".

According to Paul Mansell, Lexmark's consumer product manager: "The interest rate cut will give consumers more money in their pockets. I think it will cut out a bit of the uncertainty and encourage more spending."

But not everyone thinks the Reserve Bank's announcement will necessarily affect the channel.

Graham Dodson, national sales manager at solutions provider SecureNet, didn't think the Reserve Bank announcement would have a great impact. "Most of our clients are major corporations and government where interest rates don't have that great an effect on the equipment we provide."

Andrew Munro, general manager of sales and marketing at systems integrator Praxa, believed things would start to pick up a little bit, but he didn't believe there would be a big impact initially from the Reserve Bank's decision.

And Gary Starr, director of channels at Nortel Networks, claimed the interest rate cut would have little effect on the vendor and its partners. "At a macro level it might help a little," Starr said. "With lower interest rates on mortgages, the idea is that people will have a little more money to spend. But everything we do is on a business level [rather than on a consumer level] so it's really not going to affect us at all."

However, there should be some winners. Gavin Duffy, equity strategist at Commonwealth Research, believed that in the IT sector, well-established businesses would benefit. "[They] will pay less on their funding packages," he said.

Richard Noone and Georgina Swan contributed to this story.

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