Australian Industry Group calls for $12 boost to minimum wage: Economy Roundup

The Australian Industry Group has called for Fair Work to take a cautious approach in adjusting the minimum wage, saying the ability of businesses to hire could be affected.

“Fair Work Australia needs to take a cautious approach this year in adjusting minimum wages. While the economic recovery is underway and conditions are much improved on where they were at the time of the last minimum wage case, conditions are patchy and being too ambitious would risk the jobs of the very people that the wage review is intended to help,” chief executive Heather Ridout said in a statement.

“The underemployment rate remains high (7.6%) with 872,600 people looking to work more. Profitability across large sectors of the economy is weak while the future is far from certain.”

The AIG has called for an increase of $12 to $555.78, and that award minimum wages should be increased by the same amount. In contrast, the Australian National Retailer’s Association, representing Woolworths, Coles, McDonald’s and David Jones, has called for a much smaller increase of just $10.

“The new modern award system will add considerable costs to retailers,” a submission to Fair Work Australia has stated. “ANRA estimates that, even allowing for transitional arrangements, changes to Sunday penalty rates on permanent employees alone will cost the sector around $19 million on July 1.”

“Consequently, we are urging Fair Work Australia to delay the introduction of the new Federal minimum wage until October 1, 2010. This delay will minimise the potential double hit on employers of a rise in the minimum wage and the impact of the introduction of the new modern awards wage rate.”

Arrow Energy in trading halt

Arrow Energy has now entered a trading halt pending an update from the company regarding the $3.3 billion takeover offer from Royal Dutch Shell and PetroChina.

The developments come after speculation the companies are closing in on a new deal with Arrow, with speculation of an increased bid.

As reported in the Australian Financial Review, the companies are now set to announce a deal which could be worth more than the $4.45 per share offered earlier this month.

Meanwhile, the Australian Securities and Exchange Commission has moved on to the next phase of its investigation into the collapse of Storm Financial Group. The regulator has said it will now enter discussions with individuals and entities that had been subject to investigations to determine if a commercial resolution can be reached.

“ASIC considers a commercial resolution, if it can be achieved, will be preferable to protracted litigation,” ASIC said in statement.

“However, in the event that during this period a commercial resolution is not or cannot be reached with particular individuals or entities ASIC will make decisions on compensation actions it will then launch in relation to those individuals and entities for the benefit of investors.”

Additionally, ASIC said it will now be setting up a website so Storm investors can keep track of the investigation, with the regulator saying it will keep Slater & Gordon, which represents many of the investors, informed of proceedings.

“ASIC suggests that, among other things, a Storm investor obtains legal advice about whether any agreement reached between a Storm investor and CBA will allow the Storm investor to participate in, or have the benefit of, any compensation arrangements (which any ASIC action may secure),” the regulator said.

The Australian Government has been disappointed by US President Barack Obama’s decision to cancel his Asia-Pacific trip and instead focus on having crucial health care legislation passed through Congress.

President Obama was set to visit Australia late next week, but he will instead work with Congressional leaders to see his health care reform bill passed. It is understood he will instead visit later this year.
White House press secretary Robert Gibbs said that while international discussions are “critical to America’s security and economic progress… health insurance reform is of paramount importance.”

Shares flat despite Wall Street rise

The Australian sharemarket has opened flat today despite Wall Street socks closing higher for an eighth consecutive trading session.

The benchmark S&P/ASX200 index was up six points or 0.13% to 4869.2 at 12.00 AEST, while the Australian dollar has also continued its climb to US92c following rumours the US Federal Reserve would increase the discounted interest rate.

ANZ shares rose by 0.3% to $24.95, while Commonwealth Bank shares lost 0.2% to $56.49. Westpac lost 0.5% to $27.17, while NAB gained 0.2% to $26.81.

Bendigo and Adelaide Bank has quashed allegations that securitisation markets have recovered to a point where competition will increase.

Chief executive Mike Hirst told AAP, in response to comments from the Reserve Bank of Australia, that residential mortgage back securities are not yet at a place where they can support a fully competitive sector.

“There is a long way to go before you could say it will be a source of funding that would provide the non-majors (banks) with the amount of funding they need to be really competitive,” Hirst told AAP.

Meanwhile, Metcash is set to cut the number of Campbells Cash & Carry warehouses and merge the entire division into the Campbells Wholesale unit. The company will close 20 of the warehouses because they are no longer viable, with the cost estimate at $10.8 million.

“This is a global trend where unbranded convenience stores no longer are able to compete with modern organised formats like 7 Eleven,” Metcash said today.

Sigma woes

Meanwhile, Sigma Pharmaceuticals has admitted it will have to write down the value of its assets, breaching agreements with lenders, and putting it in a position where it cannot pay a final dividend.

The company said in an update to the ASX that market pressures in its generic drugs business has led to a downfall in its cashflow forecasts.

“As a consequence of these developments, while the extent of the impact has not been finalised, it appears unlikely the company will be in a position to pay a dividend in respect of the second half of the financial year ended January 31, 2010,” Sigma said, adding it is in talks with lenders regarding covenant breaches.

“While the covenants will require revision and renegotiation, which will take time, Sigma believes the discussions are both positive and constructive,” Sigma said.

Government expects response from China on Rio trial

Foreign minister Stephen Smith has told ABC Radio that he expects a response from China regarding the request for access to a closed trial of four Rio Tinto executives. He said a response is expected today, with the Government hoping to have officials present for the whole duration of the trial.

“I’ll then make a judgement about what further representations, if any, are appropriate,” he said. “I’ve made it clear publicly and privately that I was disappointed with that decision (for a closed hearing) and asked for it to be reconsidered.”

Consolidated Minerals has won its battle against JP Morgan Chase & Co regarding a fee dispute, with the Supreme Court of New South Wales ruling against the US bank’s efforts to recover $50.8 million. The dispute comes after the bank alleged fees were unpaid regarding advice provided for a takeover.

“The $20 million paid to JP Morgan by CSM in February 2008 was more than that to which they were entitled for services provided by the bank in regards to the successful public takeover of CSM by Palmary Enterprises (Australia) Pty Ltd in January 2008,” the company said in response.

Overseas, confidence in the US economy has risen after new data from the Labor Department revealed claims for state unemployment benefits fell by 5,000 to 457,000 last week. Additionally, the Consumer Price Index remained unchanged in February.

The confidence continued on Wall Street, where the Dow Jones Industrial Average closed up 45.5 points or 0.42% to 10,779.17, boosted by Boeing stocks.