New home sales rise 9.5% during January, Rates tipped to rise tomorrow: Economy Roundup

New home sales increased by 9.5% during January in a sign investors and upgraders could be entering the market in enough numbers to offset the withdrawal of the first home owners stimulus, the Housing Industry Association has said.

According to the HIA’s latest New Home Sales report, private sector detached house sales rose by 10.1% during January, with multi-unit sales recording a second consecutive increase of 4.1% following 14.5% in December.

“If we were to get a sustained improvement in new home sales over the first half of 2010 then that would suggest a second round new housing recovery is achievable, driven by private demand from upgrade buyers and investors,” HIA economist Harley Dale said in a statement.

“The January new home sales result is a promising start in this regard. However, it is vital to see evidence of a second round recovery emerge in coming months in what remains a very challenging period for residential construction.”

Dale also said the withdrawal of stimulus, rising interest rates and “considerable supply side obstacles to boosting new housing stock” all pose threats to the market.

Inflation data hints at rate rise

Meanwhile, inflation grew only by 0.1% during February, according to a private index, following a higher than expected jump of 0.8% in January.

The annual rate of inflation slowed to 1.9% from 2.6%, well within the Reserve Bank of Australia’s 2-3% target band. The most significant changes to the rate were price rises for food, alcohol and tobacco, books, newspapers and magazines.

Price declines were recorded for holiday travel and accommodation, along with automotive fuel and audio, visual and computing equipment. Annette Beacher, senior strategist at TD Securities, said in a statement the report suggests inflation isn’t running up too fast.

“Recent monthly inflation reports were sending signals that inflationary pressures were building up ahead of steam, hence this benign report suggests that runaway inflation isn’t entrenched, yet,” Annette Beacher, senior strategist at TD Securities, said.

Beacher also echoed the current market sentiment with regards to tomorrow’s meeting RBA meeting, where the board is expected to raise rates after last month’s pause.

“As the unemployment rate continues to shrink and spare capacity is all but absorbed, the RBA Board tomorrow can comfortably recommend another 25 basis point rate rise to 4.0%.”

Australian manufacturing activity expanded at its fastest rate in two years during February with a particularly strong recovery in housing and the resources sector, the latest AIG-Pricewaterhouse Coopers performance of manufacturing index reveals.

The index rose by 2.8 points to 53.8 in February, well above the 50-point level separating expansion from contraction.

Australian Industry Group chief executive Heather Ridout said the result was an “encouraging outcome for the manufacturing sector”, even though employment has remained “lacklustre”.

“While there is a lot of ground lost over the past two years still to be recovered, overall, conditions do appear to be improving… The combination of rising new orders and production augers well for the industry in coming months.”

Shares rise after solid reporting season

The Australian sharemarket has opened slightly higher today following a solid reporting season and positive results across world markets last week.

The benchmark S&P/ASX200 index was up 36 points or 0.8% to 4674.7 at 12.00 AEST, while the Australian dollar increased to US89c.

Commonwealth Bank shares lost 0.4% to $53.68, as NAB shares gained 0.3% to $25.51. ANZ rose 1.3% to $23.45 while Westpac rose 0.9% to $26.37, as it announced it has begun operating as a single authorised deposit-taking institution.

The bank said in a statement it comes after the lender acquired St George in 2008, making Westpac the second-largest Australian bank. The move will allow Westpac to assume all assets and liabilities of St George.

In the resources industry, Woodside Petroleum has now said it is paying workers appropriate wages despite the latest industrial relations disputes.
The move comes after a strike from workers regarding their accommodation, which upset investors nervous about the progress of the Pluto liquefied natural gas project.

Chief executive Don Voelte told Sunday Business the company has paid out wages it feels are appropriate.

“These are pretty tough conditions up there,” Voelte said. “You listen to the workers and they say we’re away from our families, it’s blasted hot up there in the summer time… Some people like to call it [the wages] generous. I would like to call it appropriate.”

Meanwhile, energy retailer AGL has said it plans to build the $800 million Macarthur wind farm in a venture with New Zealand company Meridian Energy.

“A key consideration of AGL’s board in approving the transaction will be certainty around the final form of the legislation to give effect to the Federal Government’s announced changes to the RET scheme,” the company also said in a statement.

ACCC says scam losses near $70 million

The Australian Competition and Consumer Commission has said scam losses during the past year have nearly reached $70 million.

In its Targeting Scams report, deputy chair Peter Kell said the number of scams reported to the ACCC makes up a large proportion of those operating, but there are still more to be found.

“Scams continue to make up a large proportion of total complaints that the ACCC receives and more than 20,000 scam reports were made to the ACCC in 2009 – a 16% increase compared with 2008.”

“Realistically, this figure is likely to be the tip of the iceberg – given people can be embarrassed about reporting that they have fallen victim to scams and lost money in the process.”