Ten offers directorships to Packer and Murdoch, inflation pressures rising: Economy roundup

Ten Network Holdings has offered directorships to James Packer and Lachlan Murdoch, saying it will discuss the appointment of a new chairman with the pair.

The statement is a response to market speculation regarding Ten, which has been the target of a share raid by Packer over the past month. He now owns 18% of the network, with speculation mounting he expects to make some significant changes to the company, specifically around its programming.

“The company looks forward to reaching an agreement with Messrs Packer and Murdoch that is consistent with appropriate corporate governance and competition law requirements, ongoing Board stability, and which is in the interests of all of Ten Holdings’ shareholders,” the company said in a statement.

If the offer is taken up, Ten’s board will be comprised of 10 directors.

Ten also said the board has agreed to a plan to transition Nick Falloon’s current executive chairman role into a non-executive one.

Inflation edging up

A private inflation gauge rose by 0.3% in October on a monthly basis, and rose by 3.8% over the past year, due to rises in automotive fuel, fruit and vegetables and insurance services.

The TD Securities Melbourne Institute Monthly Inflation Gauge also reveals that as the gauge has moved from a 0.1% rise in September and 0.2% rise in August, the low-point for inflation may have already passed.

“Our TD-MI monthly Inflation Gauge gave the correct signal that inflationary pressures remained contained into the third quarter of this year,” TD securities senior strategist Annette Beacher said in a statement.

“However, this pick-up in price pressure in October hints that inflation in the September quarter could prove to be the low point for this cycle.”

The price increases were offset by falls in prices for audio, visual and computing equipment, non-alcoholic drinks and other alcohol beverages.

The data comes as the Reserve Bank of Australia prepares to meet tomorrow, when it will decide whether an interest rate rise is justified or not. Recent official inflation data has given economists reason to suspect rates will stay on hold, and Beacher agrees.

“The RBA is clearly poised to lift the cash rate from the currently neutral stance of 4.5%, with recent speeches and the October RBA board meeting minutes suggesting another upward adjustment in the coming months.”

“However, as the benign September quarter inflation report failed to provide a smoking gun, we expect the RBA board to sit tight at 4.5% on Tuesday.”

House prices increase 0.1% during September quarter

Meanwhile, house prices remained flat during the September quarter, according to the Australian Bureau of Statistics, which reveals prices increased by only 0.1%.

The data reveals Melbourne prices increased by 2.7% during the quarter, followed by an increase of 0.4% in Perth and 0.3% in Darwin. However, decreases were recorded in Sydney, where prices fell by 0.9%, in Brisbane, where prices dropped 2.1%, Adelaide by 1.4%, Hobart by 1.4% and Canberra by 0.4%.

However, the yearly results were much more optimistic, with the ABS revealing prices increased by 11.5% in the year to 30 September.

Over the year, prices rose in Melbourne by 18.8%, in Sydney by 11%, Canberra by 11%, Darwin by 9.8%, Perth by 9.4%, Adelaide by 5.3%, Hobart by 4.2% and Brisbane by 3%.

The Australian share market has opened higher this morning, following a solid lead from Wall Street where investors are expecting the Federal Reserve to deliver some much-needed assistance for the troubled American economy.

The benchmark S&P/ASX200 index was up 39 points or 0.84% to 4700.6 at 12.20 AEST, while the Australian dollar moved up slightly higher to US98c.

ANZ shares have gained 0.6% to $24.96, while Commonwealth Bank shares rose 1.7% to $49.74. Westpac rose 1.9% to $23.12 as AMP rose 0.6% to $5.37.

Meanwhile, manufacturing activity contracted but at a slower pace during October, as the industry comes under pressure from the Australian dollar, according to the latest Australian Industry Group-PricewaterhouseCoopers Performance of Manufacturing Index.

The index rose by 2.2 points to 49.4 in October, still under the 50-point level separating expansion from contraction.

“While not confined to the west, skills shortages are particularly acute among Weste Australian manufacturers,” Australian Industry Group chief executive Heather Ridout said in a statement.

“The industry also remains wary of the impact of interest rate rises at a time when strong competitive pressures are ensuring that inflationary pressures remain moderate.”

Pacific Brands offloads businesses

Pacific Brands has offloaded its Dunlop Farms and Sleepmaker businesses to manufacturer Sleepyhead Australia in a $55 million transaction, with the company to also purchase the carpet underlay business Wonderlay.

“Dunlop Foams and Sleepmaker are not part of Pacific Brands’ long-term strategic focus and the price and terms agreed are commercially attractive,” the company said in a statement.

Overseas, economists were disappointed with official data in the US showing GDP increased by just 2% over the year, with many saying the growth is not enough to bring down the unemployment rate, which remains over 9%.

“The economy is recovering, but recovering at an anaemic pace, and this certainly will help the Fed in its deliberations on Tuesday,” Hugh Johnson Advisors chief investment officer Hugh Johnson told Reuters.

However, some economists say a lift in consumer spending during the third quarter will keep pushing GDP growth higher.