Tag Archives: Interest Rates

Fall in Interest Rate Rise in Gym mat pricing

The AUD and Interest Rates Effect on Gym Mat Pricing

With Australia’s unemployment rate remaining at 5.2%, even though jobs growth was solid, one can expect the RBA to continue to look at the state of the economy and the need to stimulate it. The participation rate rose confirming that a lot of slack remains in the labour market which means wages growth should remain subdued for the time being. With this the RBA minutes revealed they will “continue to monitor developments in the labour market closely and adjust monetary policy if needed”. What this means that the chances of another rate cut could be on the cards.

Obviously the Federal Government is comfortable with the current economic situation otherwise they would be injecting more stimulus into the economy. Either that or they have run out of ideas. Either way we can’t expect to see any action by this government or reaction to what the RBA is saying. What that means is that all that we can expect is that any response to economic decline will need to come from the RBA, and all the RBA can really do is reduce interest rates.

Should the RBA chose to reduce interest rates there will be a number of effect. These effects are as per below:

  1. We can expect the AUD to fall against the USD. This is what has been happening ever since the RBA first started to drop interest rates. Also the rise in the Fed Reserve Rate in the US has further exacerbated the effect. Obviously when the AUD falls it leads to imported inflation as a large portion of what Aussies consume is imported. The same can be said for gym mats which are an imported product. Gym mats are everything from:
  • Jigsaw Mats
  • EVA mats
  • Tatami Mats
  • MMA Mats
  • Yoga Mats

2. It would be hoped that a fall in interest rate will stimulate the economy. When consumers have access to cheap credit it is hoped that they will borrow money and purchase things such as cars and other items. This then is meant to lead to inflation which is necessary to help the economy. One would expect that this inflationary effect would also touch products such as gym mats and thereby causing their price to rise.

3. Business expansion is the final frontier of rising interest rate. As well as encouraging consumers to consume more products such as gym mats, it is hoped that increase consumption and cheap credit will also encouraged businesses to invest more. This investment is meant to spur employment as companies general require more equipment and workers when they expand. So for example if an MMA club decides to setup a new school due to more demand for their services than they will require gym mats such as MMA mats and jigsaw mats for their premises.

So you see the effects of a rise in interest rates are immediate. How effective they are in the long term remains to be seen. Whether they can be effective without reciprocal government stimulus is also another question.

US Dollar and gym mats and jigsaw mats

US Fed Raises Interest Rates

After much deliberation and as expected the US Fed raised interest rates by 0.25% last night. It is only the second time in 10 years that the Federal Reserve has raised interest rate. They also indicated that they would raise interest rates three more times in 2017.

AUD vs USD fell 1.8% to a two week low. The reaction was well anticipated with markets pricing in a more than 90% chance of a hike by the US Fed for more than a month now. The AUD has recovers a bit this morning and we expect it to recover further once profit taking has ceased with iron ore which dropped by 5% overnight.

What all of this means for the price of EVA mats is anyones guess. We anticipate Ezy Mats to remain the cheapest supplier of interlocking jigsaw mats due to our large turnover and superior supply chain. The effect on the general economy maybe:

  • Pressure on Australia to raise interest rates
  • Capital flight from other countries 
  • Higher borrowing cost for banks and governments
  • Falling stock markets 
  • Pressure on housing and asset pricing in US and elsewhere (including Australia)
  • Better deposit rates

If you have any questions regarding any issues do to with the purchase of EVA jigsaw mats don’t hesitate to call us.