Retailers urge ACCC to stop Woolworths hardware deal, Shares move higher: Economy Roundup

A number of independent hardware retailers are urging the Australian Competition and Consumer Commission to block Woolworths’ move into the hardware industry, saying it will cause their businesses to close.

The Retailers’ Association national executive director Scott Driscoll told the Australian that the 5,000 companies it represents are worried about the potential move.

“We don’t see any benefits to further consolidation… Woolies and Coles seem to want to dominate everything,” he said.

“This move is just another example of why we have problems in all areas of retail. We’re seeing competition being driven out at the expense of consumers and independent operators, all for the greater glory of the bottomline of Woolworths and Coles.”

Additionally, Mitre 10 chief executive Mark Burrowes said, “We are concerned about the potential erosion of competition that the Woolworths-Lowe’s takeover of Danks may have”.

The comments come after the ACCC called for submissions last week regarding the proposed takeover of hardware distributor Danks by Woolworths and US hardware chain Lowe’s. It said there are concerns about how the move would affect the industry, as Woolworths and Bunnings would be the two dominant players in the market.

The comments come as Woolworths announced its first quarter results today, indicating a 4.2% rise in sales for the quarter ending 30 September. But the results sent shares down 4%, with prices down just 0.6% to $30.33 at noon.

While the results were worse than expected, chief executive Michael Luscombe said in a statement that it was a good start to the year.

“These solid results demonstrate the sustainable business model that the Woolworths Limited group represents as we cycle over the anniversary of a particularly turbulent period.”

RBA says recovery reason for rate rise

Meanwhile, the board of the Reserve Bank of Australia raised the official interest rate two weeks ago due to the information available that suggested “domestic and global economies were continuing to improve”, according to its latest minutes.

The board said conditions in the domestic economy had been stronger than expected, and measures of both household and business confidence were recovering.

“The impact of public-sector spending on infrastructure was starting to become apparent. Absent further setbacks, GDP growth could be close to trend through 2010. Inflation was likely to decline in the near-term but probably not fall as far as earlier expected.”

The board also noted that the risks in waiting for an interest rate rise had increased, with inflation “significantly higher than earlier thought”. It noted that expansionary policies could result in imbalances in the economy, which would be detrimental to growth, and concluded overall that risks to the economy had subsided.

“This meant that the balance of risks was now such that the current very expansionary setting of policy was no longer necessary, and possibly imprudent. The Board therefore decided in favour of raising the cash rate.”

According to new figures from the Australian Bureau of Statistics, merchandise imports grew by 14% to $17.6 billion during September, compared to $15.5 billion during August.

Shares open higher after good results on Wall Street

The Australian sharemarket has opened higher today after Wall Street stocks closed higher due to better-than-expected corporate results, including Apple which saw record sales of MacBooks and iPhones.

The benchmark S&P/ASX200 index was up 66.8 points or 1.39% to 4859.6 at 12.00 AEST. The Australian dollar moved higher to US92c, its highest opening point in over one year.

Commonwealth Bank shares increased by 1.6% to $55.39, while NAB rose 2.3% to $31.58. ANZ gained 1.1% to $24, as Westpac also gained 2.1% to $26.84.

Hearing implant maker Cochlear has said its outlook for the 2009-10 is positive despite any apprehensions about the state of the global economy.

“Although the world economy may still be characterised by uncertainty, in the financial year 2010, the outlook for Cochlear’s business is positive,” chairman Tommie Bergman said at the company’s AGM.

“With the release of a comprehensive range of exciting new products, Cochlear is well positioned to continue with its history of growth and market leadership.

Overseas, Wall Street stocks rose on higher corporate results from Apple and Gannet. The Dow Jones Industrial Average gained 96.28 points or 0.96% to 10,092.19.

The results came as Federal Reserve chairman Ben Bernanke said that the large US budget deficit could spark more economic imbalances and hinder a recovery.

“To achieve more balanced and durable economic growth and to reduce the risks of financial instability, we must avoid ever-increasing and unsustainable imbalances in trade and capital flows,” Bernanke said.