Business spending falls in first quarter: Economy Roundup

Capital spending by Australian companies fell during the first quarter of the year despite market expectations of an increase, according to the latest figures from the Australian Bureau of Statistics.

Figures show expenditure dropped by a seasonally adjusted 0.2% during the March quarter to $2.7034 billion, although that figure is still higher than in the March quarter of 2009.

The figures show capital expenditure on buildings and structures grew by 6.7% to $13.57 billion, while spending on equipment, plant and machinery dropped by 6% to $14.1 billion.

The decline comes after a rise of 5.5% in capital expenditure during the December quarter to $27.74 billion.

Meanwhile, retail giant Wesfarmers said in an investor presentation that it believes its Coles supermarkets division is making good progress in its turnaround plan.

The company also said it expects to achieve a rate of 100 new Coles stores per year by the end of the 2011 financial year.

However, it also warned about pressure on margins for its Target chain, and the effect overseas retailers may have on competition. Kmart is also experiencing some troubles, it said.

James Hardie Industries SE has said it expects challenges in the US housing market to continue, but expects the Asia-Pacific region to improve during the 2011 financial year.

The company recorded a net operating loss of $US84.9 million for the 12 months to March 31, following a profit of $US136.3 million during the 2009 financial year.

“Analysts remain confident that the US housing market will continue to improve in fiscal year 2011. However, severe challenges remain, including constrained credit conditions that are restricting the availability of finance for prospective buyers and developers, a weak employment market, and a continuing supply of foreclosed homes,” the company said in a statement to the ASX.

“Asia Pacific markets… are likely to be somewhat better in fiscal year 2011 than in fiscal year 2010.”

Shares open flat after Wall Street decline

The Australian sharemarket has opened flat today, despite the Dow Jones Industrial Average dropping below the 10,000-point psychological barrier due to sustained fears of a growing debt crisis in Europe.

The benchmark S&P/ASX200 index was down 0.02% or 0.9 points to 4306.2 at 12.15 AEST, while the Australian dollar also recorded a slight decline to US82c.

Commonwealth Bank shares dropped 1.4% to $50.08, while NAB shares lost 0.1% to $23.62. ANZ lost 1.3% to $21.59 as Westpac declined 0.1% to 21.95.

Virgin Blue recorded a 0.5% increase in domestic passenger numbers during April, with international numbers increasing by 18.7%.

New figures from the company show that while domestic numbers are still down 2.9% for the year, international numbers are up by 32.5% compared to the same period last year.

Domestic traffic increased by 1.3%, with international traffic jumping 60.4%. On-time performance dropped by 0.1 points to 87.2%.

Ken Henry, who led the Government’s comprehensive tax review, has said the top rate a company would pay under the proposed resources super profits tax is 56.8%.

Henry told a Senate committee today that this would be the maximum rate, and for a company not earning super profits, that tax rate would be 28%.

“Most taxpayers obviously don’t have an infinite rates of return, so no tax payer we would suspect would actually pay the 56.8%,” he said.

“I don’t think anybody is seriously talking about there being a strong case for slowing the growth of the resources sector,” he said. “Certainly it is not the purpose of the resources super profits tax to slow the growth of the mining sector.”

The comments come as Prime Minister Kevin Rudd has told The Age newspaper that the superannuation industry should get behind the mining tax.

However, these comments come as reports suggest Labor may be prepared to negotiate some elements of its proposed rent tax, with the offer to change the definition of a “super profit” to 11-12% from the currently proposed 6%.

The change reportedly comes after the Government spent a significant amount of time discussion the proposed tax with concerned miners.

IMF says bailout should go towards Greek economy

Overseas, the International Monetary Fund has said part of a rescue package to be used as a bailout for debt-laden Greece should be used to encourage economic growth.

“Because without growth prospect in the euro zone and European countries it will be difficult to get out of the crisis,” managing director Dominique Strauss-Kahn told reporters.

In the United States, securities regulators have proposed improvement market surveillance by tracking stock orders in real time.

“It is shocking that the SEC does not have its own direct access to market data,” SEC Commissioner Luis Aguilar said at a meeting. “Most Americans assume that the SEC already has these tools and is constantly monitoring the market.”

On Wall Street, stocks fell despite news tech giant Apple had taken over Microsoft as the world’s biggest tech company in market capitalisation. The Dow Jones Industrial Average fell 69.30 points or 0.69% to 9,974.45.