Leading indicator shows economy is roaring out of recession: Economy Roundup

A leading index of future economic activity has recorded its fastest recovery since the 1970s recession, indicating a recovery in the domestic economy is expected to continue into early 2010.

The Westpac-Melbourne Institute leading index, which predicts the likely pace of economic activity three to nine months in the future, has increased to 5.8% in September.

“This represents an extraordinary pace of recovery in the growth rate of the leading index,” Westpac chief economist Bill Evans said in a statement. “That is the fastest turnaround in the growth rate of the leading index since the economy bounced out of recession in the mid-1970’s.”

“We expect growth to pick up from 1.75% in 2009 to 4% in 2010. That compares with the Reserve Bank’s more conservative forecast of 3.25% in 2010 and a similar forecast from the Australian Government,” Evans said.

Evans said the main factors boosting the economy were industrial production in the US, productivity, share prices, housing approvals and labour market conditions.

Meanwhile, Reserve Bank of Australia assistant governor Guy Debelle has said the central bank is observing recovery in the mortgage securitisation market.

“The message that Australian RMBS have been, and continue to be, a strongly performing asset needs to be continually reinforced,” Debelle said in a speech today. “This message probably doesn’t need to be delivered to the portfolio managers.”

“It needs to be delivered to the superannuation trustees whose views may be affected by continual media exposure to the US experience that securitised assets are excessively risky.”

Shares higher due to Wall Street gains

The Australian sharemarket has opened over 1% higher today, after more good results on Wall Street where investors were encouraged by results from two components of the Dow, despite lower-than-expected holiday sales targets from Target and Home Depot.

The benchmark S&P/ASX200 index was up 47.8 points or 1.01% to 4777.2 at 12.00 AEST, while the Australian dollar lost some ground to US92c.

Commonwealth Bank shares gained 0.7% to $53.00, while ANZ also gained 0.4% to $21.88. NAB rose 0.8% to $28.72, as AMP lifted 1.4% to $6.39.

It was also announced yesterday that NAB had bought Hong Kong-based wealth manager Calibre Asset Management for an unspecified amount.

It is expected the purchase will see NAB increase its offerings in the region, where it already provides services for overseas property portfolios, term deposits and foreign currency deals. It comes after the bank has spent over $1 billion increasing its wealth management, insurance and mortgage business portfolio.

AWB reports $250 million loss

Grain exporter AWB has recorded a net loss of $250.8 million for the 2009 financial year, but forecasts a full-year 2010 profit of between $95-115 million.

“In a year where the financial and climatic environment remained particularly challenging, the performance of AWB was mixed, affected by the availability and cost of credit, lower input margins, a rising Australian dollar, decreasing commodity prices, weak demand for fertiliser and adverse seasonal conditions on the east coast of Australia,” managing director Gordon Davis said.

Meanwhile, Clive Peeters director Rick Hart has retired from his position, with managing director Greg Smith announcing former chief Ron Pamenter as general manager of the Rick Hart Group.

“Rick decided it was in the best interests of the company for him not to seek re-election as a director for another two years, and believes now is a good time for him to move on and explore other business opportunities,” Smith said.

In Canberra, debate has begun over the Federal Government’s proposed emissions trading scheme, but Liberal senator Ian MacDonald has called the scheme “a shambles”.

“It’s going to be one of the most difficult debates to prosecute because the bill before the chamber today is exactly the same bill that the Senate voted down three months ago,” he told Parliament today.

“What we are debating today is a piece of flawed legislation that the Senate has already expressed its views on.”

The Government and opposition are currently negotiating over what parts of the bills should be included in the final legislation. The Government has already conceded some ground to the opposition, exempting the agriculture industry from the scheme.

On Wall Street, stocks rose to new 13-month highs, but the gains were only minimal as retailers Target and Home Depot announced lower than expected sales targets for the Christmas period. The Dow Jones Industrial Average gained 30.46 points or 0.29% to 10,437.42.