Unemployment tipped to peak at 6.8%, New gas find off WA: Economy Roundup

Australia’s unemployment rate will reach 6.8% by June next year before falling, while the economy will revert to “trend growth” in early 2011, according to a new Access Economics report.

The report also warns the Government about “sugar-coating” the damage a long-term budget deficit could have on the country.

Economist Chris Richardson said in the latest Business Outlook report that Australia “didn’t dodge a bullet, we outran it”, in regards to the economy’s performance.

“We sailed through the worst of the global crisis on a sea of stimulus – both our own and China’s,” he told AAP.

He said that the flexibility of the job market and the amount of part-time work available helped steer the country through the downturn, with a peak of 6.8% expected – lower than the 8.5% predicted by the Government in the May budget.

But Richardson warned the Federal Government will likely “underestimate” the future deficit forecasts in the organisation’s upcoming third intergenerational report.

The report predicts a deficit of 5.7% of GDP by 2046/47, much larger than the 3.5% predicted in the previous report.

“But soon somebody needs to start telling it like it is and taking some hard budgetary decisions,” Richardson said.

New gas find

US oil company Chevron has discovered a massive reserve of gas off the WA coast, which is set to support its plans for the $43 billion Gorgon liquefied natural gas project

The company, which is a 47.75% owner of the upcoming project, announced yesterday it had successfully located a gas reserve inside the permit area where the project is set to take place.

“The success of our drilling program will provide additional natural gas to underpin the Gorgon and Wheatstone projects,” Chevron Australia managing director Roy Krzywosinski said in a statement.

Tabcorp targets growth

Meanwhile, gaming group Tabcorp has announced first quarter revenue growth of 4.4% but says it will remain focused on long-term investment plans.

Tabcorp chief executive Elmer Funke Kupper said in a statement that challenging conditions will remain, as the revenue growth did not necessarily convert into profit.

“In the first quarter of the financial year, our revenues grew by 4.4%, with all three divisions contributing to growth. The higher revenue growth did not translate fully into higher earnings, one of the main reasons for this was the introduction of new product fees that affected our wagering business.”

“These new product fees, commonly referred to as ‘race fields fees’, cost Tabcorp $20 million in the 2009 financial year.”

Shares slide

The Australian sharemarket has opened lower today after negative leads from the US last week, with the larger financial stocks dragging the market down.

The benchmark S&P/ASX200 index was down 49.4 points or 1.02% to 4787 at 12.00 AEST. The Australian dollar also opened marginally lower to US91c following investor demand for the US dollar after poor profit results on Wall Street.

ANZ shares lost 3.1% to $23.80, while Commonwealth Bank fell 1.8% to $54.30. NAB lost 2.4% to $30.83 as Westpac declined 2.1% to $26.40.

Woolworths hardware plans face challenge

The proposed takeover of hardware chain Danks by Supermarket chain Woolworths, through joint venture company Carboxy, is facing problems after the Australian Competition and Consumer Commission flagged several issues with the deal last week.

As reported in The Age, Danks is set to hold a boarding meeting in order to discuss the problems the ACCC has specified and could even release a statement today. Woolworths hope to compete with Bunnings through the venture.

The ACCC has said it has issues with how the attempt could threaten the level of competition in the market.

Toll Holdings chief executive Paul Little has told ABC’s Inside Business that the company is still searching for acquisitions in order to grow the company.

“I think you’ll see we’re very ambitious to grow that business. It currently has turnovers around about $1 billion and we believe it needs to be scaleable up round the $3 billion-mark,” he said. “That would put us pretty close to being at the top 10 of global forwarding service providers.”

Meanwhile, RBS telecommunications analyst Ian Martin also spoke to Inside Business about the negotiations between the Government and Telstra regarding the proposed split of the company’s wholesale and retail services.

Martin said that while the current legislation is inadequate, Telstra still holds most of the bargaining power.

“But I think you need to see the legislation as part of the bargaining process,” he said. “Most of the bargaining power remains with Telstra because they have got a going concern. They’ve got the customers, they’ve got the traffic,” he said.