Residential construction to stall in 2011: Economy Roundup

Residential construction will stall in 2011, according to new figures published by the Housing Industry Association.

The firm’s National Outlook Report shows that first stage new home building recovery will stall during 2011, exacerbating the already critical housing shortage.

“It is not too late to turn the situation around through policies targeted at new home building combined with more rapid progress in reducing structural supply side barriers,” chief economist Harley Dale said in a statement.

“The empirical data, observations on the ground, and the slow progress in reducing supply side obstacles all currently point to the first increase in housing starts in eight years in 2010 reverting back to a decline in starts in 2011.”

The report shoes starts are forecast to increase by 20% in 2010 to 165,940, after which they will fall by 3% during 2011.

“Australia needs to build over 190,000 dwellings in 2010 alone to meet underlying demand and over the next ten years we need to build 420,000 dwellings more than we built over the last decade,” Dale said.

“A failure to build sufficient homes is placing huge pressure on rental markets and is making it very difficult for younger Australians who aspire to home ownership to achieve that goal. If the current recovery peters out as soon as the positive impact from past stimulus has gone, then the pressure on renters and the wider entry level market will intensify further.”

In Toronto, the G20 has agreed to give banks more time to adopt to global regulations, and have pledged to halve deficits by 2013.

The Financial Stability Board said that a delay is better than the original time allowed.

“We’ll make sure that this new regulation and the pace of implementation is not going to cause either market disruption or hamper the recovery in any way,” FSB Chairman Mario Draghi told reporters.

Various world leaders, including deputy prime minister Wayne Swan, also said that their would cut a path to reduce deficits.

“Our challenges are as diverse as our nations,” US President Barack Obama said in a statement. “But together we represent some 85 per cent of the global economy, and we have forged a coordinated response to the worst global economic crisis of our time.”

IMF head Dominique Strauss-Kahn said over 45 hours were put into drafting the final communiqué, representing how seriously world leaders are tackling the issue of financial reform and recovery.

Share market opens flat after weak overseas trading

The Australian sharemarket has opened flat following weak trading from overseas, where investors grew nervous regarding talk of a short selling ban in Europe.

The benchmark S&P/ASX200 index was down 36 points or 0.83% to 4376.2 at 12.20 AEST, while the Australian dollar was up slightly higher at US87c.

AMP shares fell 1.1% to $5.37, while Commonwealth Bank shares gained 0.4% to $50.20. NAB shares lost 0.5% to $23.68 as Westpac fell 0.6% to $2161.

Meanwhile, WorleyParsons has won an engineering contract from Vale to provide services for the Brazilian company’s 90 million tonne S11D processing facility.

“We are looking forward to the successful delivery of this important mega project to help Vale realize its business goals,” chief executive John Grill said in a statement.

As reported by The Australian, Bright Food Group apparently wants Foster’s to break its wine business instead of demerge it from the beer division.

It is understood that Bright Food is interested in the Rosemount brand located in the Hunter Valley. The Chinese group is also after CSR’s sugar business.

Elders head Malcolm Jackman has told Sky Business that he did not mislead shareholders ahead of the company’s profit downgrade.

“It’s not simply misleading and I’d deny that we are misleading people on the way through,” Jackman said. “In reality a lot of our plans are actually working.”

The company is facing legal action from shareholders, who are investigating a possible class action. The profit downgrade sent shares down 56%.

“As you can see the volumes, the margins, costs, cash etcetera are actually delivering and the supply chain’s working much more efficiently in the business as well,” Jackman said, adding that problems are related to third-quarter results.

“We expected and from the data that we were seeing, we expected to get much larger volumes out of the business during this period and it just hasn’t materialised.”

Telstra praises NBN deal

Telstra chief executive David Thodey says the $11 billion agreement with the NBN Co. is a “very encouraging milestone”.

“The reason we’ve been cautious and been non-binding is that there’s so much work to be done and we’ve got to go through the ACCC and look at the legislation… so in reality it couldn’t be more than that,” Thodey said on Inside Business.

Thodey has said recently the company will be looking to create new revenue streams, which could include some acquisitions, as its copper networks are shut down.

In the United States, investors nervously await employment data this week, which will provide a good indication of how economic recovery is performing. However, it is expected that non-farm payrolls will drop 110,000 jobs.

According to a poll of economists published by Reuters, the unemployment rate is expected to grow from 9.7% to 9.8%.