Miners are among the few who'll benefit from a pick-up dogged by rising interest rates.

HARDLY a day seems to pass without more economic fortune coming our way.

Here we are brimming with confidence, creating new jobs and on the cusp of the mother of all mining booms.

So why hasn't the sharemarket caught up with the news? Even the Reserve Bank can barely contain its excitement over the way the economy is picking up, yet the sharemarket couldn't give a toss.

Sure it wasn't all that impressed with the half-year profit results, which showed more slashing than selling. But that's water under the bridge. Most brokers and fund managers are convinced it's about to take off, some forecasting it might even reach 6000 by Christmas - a potential 20 per cent gain.

Try telling that to Wall Street, which is the biggest influence on our market.
I'm not convinced either. Strange as it sounds, the early part of the recovery might be harder to cope with than the downturn.

How can that be?

Because there's a shortage of housing at the very time the pressure is on the banks to lend for the investment boom. The more of one the less there'll have to be of the other, since both need money and manpower.
And somebody is going to be squeezed in the middle. That would be you and me.

In fact, it's already happening; rising interest rates have started to bite.
We're getting fussier, only buying when there's a decent sale on, which can't be good for retailer margins.

Unfortunately, being confident about the future won't translate into more spending, and so higher profits, when everybody knows interest rates are going up.

Although unemployment fell well short of what economists had feared, thanks to a cutback in hours, the downturn still left behind a dearth of full-time jobs, unless you want to move to WA.

Remember there'll be no more cash splashes, the budget will have to be frugal and indeed the stimulus from government spending will be only half of last year's. And mortgage rates will rise a few more times.

One bright spot is that pay rises are back on the agenda, not that that'll boost share prices.

Oh yes, there's another round of tax cuts due on July 1, the last we'll see for a long time.

The 30 per cent tax threshold will kick in $2000 higher at $37,000 and the old 38 per cent rate becomes 37 per cent.

The low-income tax offset will also rise $150, though promise you won't spend it all at once. The sharemarket also has to cope with a rising dollar, as offshore speculators chase our higher returns.

That doesn't seem to worry our big miners much, since what they lose on the currency they gain on commodity prices. Besides, it's all about volume and how much China needs. Just keep digging, guys.

But it sure hurts other exporters, tourism and anybody up against imports.
So with stocks hurt by rising interest rates and the dollar, there goes half the market.

Mind you the other half - banks and service industries - will be laughing.