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Matthew Smith has been a business and financial journalist for more than a decade. He previously worked with the Financial Times Group, reporting from New York on company buyouts and refinancing in the wake of the Global Financial Crisis. He started his career reporting on the funds management industry in Sydney.

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Economy prospers when people move

Published 12 October 2012 14:26, Updated 15 October 2012 04:49

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Mike O’Hagan says you can tell a lot about the health of the economy by how many people are moving house.

When people are worried about the future, they stay put. When people are positive about their prospects, they are more inclined to move from house to house, or apartment to apartment.

He’s not talking about whether people are buying or renting, it’s just whether they are moving or not. O’Hagan calls it the “economic moving indicator”.

And O’Hagan should have a fair idea about whether moving is indeed a leading indicator for the general health of the economy; he started MiniMovers about 25 years ago, a company that specialises in short moves, usually within the same suburb or a neighbouring suburb. For an hourly rate you get a truck and a couple of guys to do all the heavy lifting.

Moving feeds the economy, he says. When someone moves houses, the carpet man sells carpet, the bug man kills pests, and the locksmith makes keys. The problem is, he says, in order to get people comfortable enough to start moving, the economy has to be ticking along. But in order for the economy to be ticking along, people need to be spending. For O’Hagan, it’s the classic chicken and egg conundrum.

O’Hagan believes it’s the same problem the Reserve Bank of Australia is trying to solve. By dropping interest rates, the RBA is hoping people will be more willing to spend money. With a lower cash rate, people are getting a lower return on their savings, so they might be more inclined to seek out an alternative investment, say, in the sharemarket, or, God forbid a new property. Any of these things could help kick-start the Australian economy or spur economic growth.

But O’Hagan doesn’t think it will work, in the short term at least. He believes the recent 25 basis point rate cut will make people feel more uncertain and more likely to want to stay put – he’s predicting a slow-down in moving in the next couple of months.

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