Prospects for growth ?

Letter in FM

Nazmeera Moola’s article, “Economic Viewpoint”( FM 21/10/11) refers. Nazmeera postulates that one of the factors that may lift the economy out of recession is a revival in consumer spending, premised on above inflation wage increases. A pinch of salt may be in order here. Worldwide the financial crisis has taught consumers a lesson about debt that they ( and the banks that are always fighting the last war) will not easily forget. In the US, the phrase commonly used to describe the impact on consumers is the “new normal”, where recovery can no longer been driven solely by consumption expenditures, as past recoveries were in the Reagan/Clinton eras. Banks are reluctant to lend, and consumers to stop paying off debt. In fact, there is no longer much of a gap between middle class incomes and expenditures, especially in South Africa. Here the law abiding middle class, black and white, is paying double for everything- double for schooling, double for security, double for monopolistic electricity tariffs, double for health care. Administered prices range from ACSA’s 160% plus tariff increases( which will devastate the budget travel "sho't left" domestic tourism campaign) to municipal rates and tariffs increases at twice the inflation rate- in addition to a stagnant property market. That is why there are no savings. There is nothing left to save. There is and no prospect of tax decreases, and the interest rate declines have probably bottomed out. That is why economic growth in 2012 will come in at 2.7% or so, as opposed to the 3,5% plus predicted by government at the beginning of the year . As for jobs under such circumstances, forget it. For that we need 6-8% growth, and this government cannot produce that.