The Euro debt in the Eurozone will impact on all people and businesses around the world. It is a Global problem that will impact hard on all credit users in 2012. Already the affect is happening in Australia and yet we are considered to be one of the world’s safest currencies due largely to a resources boom in our mining industry and the growing strength of China.

Australia is running on a two speed economy. Any business associated with the Mining industry is doing well while manufacturing and small businesses are getting desperate. Retailers are hoping for good Christmas sales but already the “Sale” signs are appearing in shop windows in many shopping centres and shops where before they normally wait for the biggest sale period of the year that commences on Boxing Day.

Small Business Retailers

Retail shops located in Shopping centres and main street shopping areas, have relied on post-Christmas Sales to increase their profitably  and to keep a stagnant cash flow going during the rest of the year when quieter periods of trade affect many retailers.

Consumers are wary this year and even with a lowering of the interest rate by the Reserve Bank of Australia, consumers are now very leery of what the four big Australian Banks may do early next year as the Euro Debt crises kicks in further.

Many of these small retail boutique-style shops have high overheads and shelves full of non-consignment stock.  If the shop owner has not taken the goods on a consignment basis and is able to return what hasn’t been sold, then they are more likely to suffer worse than a shop owner who only sells stock on consignment and can return what hasn’t sold.

These non-consignment retailers are the small businesses most likely to suffer the effect of the Euro debt Crises first as their borrowings from the bank are high and if the expected and hoped for Christmas Sales figures are below what is needed, they may have to borrow more and this will be done at world market rate for inter-bank lending rates.

The Banks Have signalled their intentions Based on Bank Exchange Rates in 2012

For the first time in many months, the four big Australian banks did not immediately change their interest rates shortly after the Reserve Bank of Australia announced the cut in interest rate percentage points. Many smaller credit societies and smaller financial institutions announced their lowered interest rates within hours but the big four banks played a ‘game’ of Mexican stand-off to see which one of them would move first on interest rates and take the good or bad publicity, for their decision.

Once the first Bank announced they would be passing on the full interest rate cut to their customers, then within 24 hours the other three announced their intention to do likewise.

Yet these Australian banks deny that there is any collusion? These actions tell the Australian public differently. When one bank can announce profits of $1.65 BILLION in a 12 week period, we obviously have a different problem in our banking industry to the Euro Debt crises.

Those problems aside, Westpac, one of the big four banks in Australia, announced yesterday that in future, they reserve the right to move on interest rates at any point in time due to the fact that the cost of borrowing money internationally has been raised considerably as more countries and banks around the world compete for available funds. It now seems to be that any available funds will be going to the highest bidder.

If any bank wishes to stay in Business, then they will need to be able to pay as the highest bid.

And the banks need shareholders to buy their stock so they will be looking to be the one that will pay their shareholders the biggest dividend and return on their investment.

When any Bank makes announcements that say they can and will base their interest rate costs on something as volatile as the current international bank exchange rates, it’s time to understand the impact of the Euro debt crises on all credit users around the world.