BP agrees to $US20 billion compensation fund: Economy Roundup

Oil giant BP has agreed to spend over $US20 billion in assisting the clean-up effort in the Gulf of Mexico, after some of the company’s executives met with US president Barack Obama.

The funds will be distributed over four years, and will assist the Government in cleaning up the hundreds of thousands of barrels spread over the Gulf, along with delivering compensation to citizens in the affected areas.

The fund was announced by Obama, after spending four hours of talks with executives. Chairman Carl-Henric Svanberg delivered a public apology at a press conference.

“I do thank you for the patience that you have during this difficult time,” he said. “I hear comments sometimes that large oil companies are greedy companies who don’t care. But that is not the case in BP. We care about the small people.”

Additionally, chief executive Tony Hayward is set to appear before a US congressional hearing where he is expected to come up against harsh scrutiny regarding the company’s actions leading up to the spill.

“This is a complex accident, caused by an unprecedented combination of failures,” Hayward will reportedly say in his testimony. “A number of companies are involved, including BP, and it is simply too early to understand the cause.”

“It is clear that our industry needs to significantly improve our ability to quickly address deep-sea accidents of this type and magnitude.” The testimony will be delivered to the House Energy and Commerce subcommittee.

Meanwhile, new figures from the Melbourne Institute reveal household savings improved during the June quarter, although credit cards overtook mortgages as the main form of debt for the first time in over four years.

The Melbourne Institute household financial conditions index rose 17.2% to 33.7 in June, up from 28.8 in March.

“Credit card debt overtook mortgage debt as the main form of household debt in June, 36.6 per cent compared to 33.9%,” Melbourne Institute research fellow Edda Claus said in a statement. “This is the first time since November 2006 that households nominate credit card, and not mortgage debt, as their main form of debt.”

“About 48.8% of Australian households saved part of their income in June 2010, up from 46.2% in March,” the report said.

Shares flat after similar Wall Street lead

The Australian sharemarket has opened flat today, following similar leads from Wall Street where investors were disappointed over news that housing starts were lower than expected, prompting fears of a longer recovery process.

The benchmark S&P/ASX200 index was down 12 points or 0.28% to 4546.4 at 12.00 AEST, while the Australian dollar has lost some ground to US85, after reaching US86c overnight.

ANZ shares lost 0.2% to $23.14, while Commonwealth Bank shares also fell 0.3% to $52.81. NAB lost 0.7% to $24.93 as Westpac declined 0.7% to $23.36.

Meanwhile, Leighton Asia has won a $1.1 billion contracted to expand new work at an
Indonesian coal mean and clean-up work at BHP Billiton steelworks in Australia.

“Our operation in Indonesia has been an outstanding performer for the past few years, and we expect to continue to perform strongly in both mining and infrastructure,” Leighton Asia managing director Hamish Tyrwhitt said in a statement.

Additionally, subsidiary Thiess Services has won a $405 million contract extension for remediation works on river sediments at the BHP Hunter River project site.

Meanwhile, Liberal backbencher and former Coalition leader, Malcolm Turnbull, has told Business Spectator that the Government’s proposed resources super profits tax is a “reckless exercise”.

“The ETS, while it was very complex, had been through a green paper, a white paper, a whole series of consultations and there was a high degree of industry support for it as well as community support,” he said.

“On the other hand, with the mining tax that’s come right out of left field, nobody understands it, it’s based on … this whole idea of the Commonwealth put, which is essentially a theoretical construct with no relevance to the real world of financing mining projects.”

Additionally, others have continued to point in the perceived flaws in the RSPT, with The Australian reporting that Morgan Stanley analyst Craig Campbell said development at the BHP Olympic Dam project could be hurt if the tax goes ahead.

“Under the RSPT as proposed, the project has no economic value, in our view,” Campbell said in a research note.

“Our modeling of this project shows that the resources super profits tax reduces the net present value of the project to an extent that it becomes negative.”

The note comes after Fortescue Metals and Xstrata have already forecast proposed delays in certain projects due to the extensive tax.

Financial Services Institute to introduce new credential

The Financial Services Institute of Australasia will introduce a Financial Services Professional credential in order to improve professionalism in the industry.

“What this credential is going to do is drive very powerful social norms, and will bring forward a credential that mum and dad investors and employers and regulators can have confidence in,” Finsia chief executive Martin Fahy told AAP.

“Professional conduct is a learned behaviour. And you learn from doing. And the really important part is who you learn from.”

Overseas, the US Securities and Exchange Commission has finished its probe of American International Group, which was set up to determine the events leading to the onset of the financial crisis.

The inquiries have been some of the most high-profile for years. A number of companies, including investment giant Goldman Sachs, have appeared before the commission.

However, sentiment on Wall Street was dampened as news broke that housing starts were lower-than expected. The Dow Jones Industrial Average gained just 4.69 points or 0.05% to 10,409.6.