Government to unveil banking reform package, Westpac profit jumps 84%: Economy roundup

The Federal Government is preparing to unveil a package of banking reforms, which reportedly include a number of the Coalition’s own ideas, to keep interest rates under control.

The reform package comes as public pressure is building on the banks, which have been accused of gouging customers as they reveal multi-billion dollar profits while increasing rates. The banks are arguing funding costs are pushing rates up.

Treasurer Wayne Swan said today the package, which is set to be announced next month, will be designed to increase competition and thus place downward pressure on rates.

“We’ve been working very closely with our regulators, putting together further reform,” Swan told the ABC. “It will put pressure on the major banks to behave in a better way.”

“The Commonwealth Bank doesn’t want people to know that their net interest margins are back at pre-crisis levels and their bad debts are falling. There’s simply no justification for this behaviour.”

Greens leader Bob Brown has weighed into the debate, saying there needs to be a review of how interest rates are set, while the Coalition has also urged the Government to use opposition treasury spokesman Joe Hockey’s nine-point plan.

The pressure on the banks is also building with Westpac announcing a cash profit of $5.88 billion for the year to 30 September, with net profit also up by 84.2%.

Chief executive Gail Kelly says the next year is going to be a challenge, but the bank is well positioned for growth.

“Beyond the immediate challenges, the medium-term outlook is very positive,” Kelly said in a statement. “The significant programs of change we have underway across the group are positioning us to be highly competitive in the coming environment.”

Kelly also said that she expects economic activity to improve as business investment rises.

According to the Australian Bureau of Statistics, building approvals fell by a seasonally adjusted 6.6% during September. Private sector houses fell 2.2%, while “other” dwellings fell by 15.7%.

The total value of building approvals fell by a seasonally adjusted 3.2% in September, with the value of new residential building dropping by 5.4%.

Shares flat after weak Wall Street leads

The Australian share market has opened flat this morning, following a fairly weak result from Wall Street, although stocks have risen over the morning.

The benchmark S&P/ASX200 index was up 20 points or 0.44% to 4722.3 at 12.15 AEST, while the Australian dollar, which reached parity once again overnight due to the rate hike, has settled at US99c.

AMP shares increased by 1.5% to $5.39, while Commonwealth Bank shares have lost 0.6% to $49.89. Westpac shares have gained 0.8% to $23.49 as ANZ lost 0.3% to $24.96.

Westfield is set to raise $3.5 billion by spinning off half of its holdings into a new property trust, the company has said.

The new trust, named Westfield Retail Trust, will become a 50% joint venture partner in the company’s operations in Australia and New Zealand. The company plans to undertake a $3.5 billion offering to investors.

“The proposal will be effected through a pro-rata distribution of units in the new trust to Westfield Group security holders equating to a capital distribution of $7.3 billion,” the company said in a statement.

CSR has recorded a first-half net profit after tax of $18.4 million, with the company improving from a net loss of $233 million in the previous corresponding period.

“I am pleased that our businesses continue to respond and make steady progress in what remains a challenging environment,” managing director Jeremy Sutcliffe said in a statement.

“Social housing and multi-residential dwellings will continue to account for an increased proportion of total (housing starts) where usage of CSR products is generally lower,” the company said in a statement.

According to Fairfax Media, Moody’s has warned that Telstra could experience a credit rating downgrade as the company prepares to sell off its infrastructure to the National Broadband Network.

In a research note the company has said Telstra must find new ways to promote new products and internet services to replace the loss of its network.

Canada still deciding on BHP’s Potash bid

The Canadian Government has said it has made no decision regarding BHP Billiton’s bid for Potash Corp, even though the National Post has reported authorities are willing to give the green light.

A source has told Reuters that the Canadian Government will announce its decision overnight, although industry minister Tony Clement has told the service in a statement that no decision has been made.

“I am currently reviewing the facts of the case. As of yet no decision has been made, and no decision or recommendation has been communicated to the investor,” he said.

In New York, stocks rose but investors remained nervous ahead of nationwide elections that could change the face of Congress and spark the beginning of a new, Republican-dominated legislative agenda – although many investors would welcome this. The Dow Jones Industrial Average was up by 64.10 points or 0.58% to 11,188.72.