This paper by Charlie Nelson, director foreseechange, assembles evidence from a range of sources concerning the impact of interest rate changes on consumer spending in Australia. It concludes that there is a "perverse" reaction to interest rates, as well as the expected negatively correlated reaction. Furthermore, the relative size of the perverse reaction is likely to increase rapidly in the future.
The implications for future monetary policy in Australia and other countries is discussed.
Download in acrobat (.pdf) format (342k)
Download in Word (.doc) format (120k)