RBA says emergency over and rates will rise: Economy Roundup

Reserve Bank of Australia governor Glenn Stevens has said more increases to the official interest rate will be needed as the economy improves. In a statement to the House of Representatives standing committee on economics, Stevens said the size of the downturn was “considerably smaller” than expected.

“This is of course a very good outcome. But it also means that there is less scope for robust demand growth without inflation starting to rise again down the track,” he said. “Monetary policy must therefore be careful not to overstay a very expansionary setting.”

Stevens answered several questions at the hearing, saying that interest rates were now closer to normal settings, and that “I don’t think we’re in emergency anymore”.

“We are located in the part of the world that is seeing the most growth. And in terms of fiscal sustainability, Australia’s position is, by any measure, very strong indeed.”

Meanwhile, the balance on goods and services resulted in a deficit of a seasonally adjusted $2.25 billion during December 2009, according to the latest figures from the Australian Bureau of Statistics.

In exports, goods and services credits rose by a seasonally adjusted $675 million to $19.767 billion, with non-rural goods rising 5% to $571 million. The coal, coke and briquettes component rose 10%, with the metals component up 25% and the other mineral fuels component up by 13% to $174 million.

In imports, goods and services debits rose by a seasonally adjusted 6% to $1.2 billion to $22 billion, while intermediate and other merchandise goods rose by 11% with the fuels and lubricants component up 26% to $535 million. Services debits rose by 1% to $42 million.

Sharemarket opens flat despite Wall Street leads

The Australian sharemarket has opened flat today, despite higher results on Wall Street and mixed leads from commodity markets.

The benchmark S&P/ASX200 index rose 15 points or 0.34% to 4670.6 at 12.00 AEST, while the Australian dollar lost some ground to US89c.

ANZ shares gained 0.4% to $22.14, while Commonwealth Bank shares rose 0.4% to $53.23. Westpac gained 0.4% to $25.50, while NAB shares lost 1.8% to $25.49 after the lender announced an increase in cash earnings to $1.1 billion in the three months ending December 31.

The bank said bad and doubtful debts totalled about $739 million, down by $202 million from the September quarter, with the bank’s Tier 1 ratio increasing to 9%.

“This was achieved despite subdued credit growth, heightened competitive pressures and a continued upward trend in average funding costs,” chief executive Cameron Clyne said in a statement to the Australian Securities Exchange (ASX).

“Bad and doubtful debt charges have fallen and are not expected to return to the peak experienced in the third quarter of the 2009 financial year. However, given the fragile global recovery and uncertain regulatory environment, a conservative approach to capital and liquidity management remains appropriate.”

Surfwear brand Billabong has recorded a 15.4% declined in half-year net profit to $69.7 million for the six months ending December 31, and said it is cautious about the economic recovery. Revenue also declined by 10.8% to $723.6 million, down from $810.9 million.

“The company is reaffirming its previously advised full-year guidance of 5% NPAT growth compared to the prior corresponding period in constant currency terms and excluding the prior corresponding period’s impairment charge, or 10% constant currency growth when including the prior corresponding period’s impairment charge,” chief executive Derek O’Neill said in a statement.

“In North America there were some signs of improvement in the company’s own retail operations, but business remained relatively challenging at the wholesale account level,” he said.

ACCC asks for more time on Rio, BHP venture

The Australian Competition and Consumer Commission has said it wants more time to review the proposed venture between mining giants Rio Tinto and BHP Billiton.

The ACCC kicked off its review of the joint venture in December, and was previously scheduled to release its decision on February 24. However, it has since said it needs more information from both companies before it releases any opinion.

Some industry analysts have warned against the merger, saying the entity will control the iron ore market totally.

Macquarie Countrywide Trust has recorded a profit of $64.8 million for the six months ending December 31, a marked improvement from the $714.1 million loss it recorded the previous year.

“Financial year 2010 core earnings are forecast to be approximately 6.5 cents per unit, with distributions for the full year to June 30, 2010 to reflect a payout ratio in the range of 75% to 85%,” MCT said in a statement.

Overseas, Wall Street investors were shocked by the Federal Reserve’s announcement it had lifted the discount cash rate to 0.75%.

However, confidence was given a boost due to improved corporate results and positive readings from a private index of manufacturing performance. The Dow Jones Industrial Average gained 83.66 points or 0.66% to 10,392.90.