Create a free account, or log in

Reserve Bank flags more interest rate rises: Economy Roundup

The Reserve Bank of Australia board believes economic conditions are considerably better than expected earlier in the year, but it will continue to monitor business and consumer confidence, the minutes of its last meeting reveal. The board said in its Melbourne Cup Day meeting that evidence of a global recovery has begun to emerge, with […]
Patrick Stafford
Patrick Stafford

The Reserve Bank of Australia board believes economic conditions are considerably better than expected earlier in the year, but it will continue to monitor business and consumer confidence, the minutes of its last meeting reveal.

The board said in its Melbourne Cup Day meeting that evidence of a global recovery has begun to emerge, with financial markets also recording better conditions.

“There had been a relatively limited amount of new data on real activity in the economy; the September labour force data had provided further evidence that the downturn in the labour market had been more moderate than expected earlier in the year. Looking ahead, the outlook was for the growth rate of output to rise gradually to a pace close to trend in 2010.”

Overall, it said, conditions remained higher than expected when the board reduced the official interest rate to 3%, and expects to raise rates over the next year, but says it is unsure about the rate of those rises.

“Looking ahead, members expected that if economic conditions evolved as expected, further gradual adjustment in the cash rate would most likely be appropriate over time, though the pace of the adjustment remained an open question.”

Shares open higher after good news on Wall Street

Meanwhile, the Australian sharemarket has opened nearly 1% higher today due to good results in the US, where stocks have reached a 13-month high after remarks about interest rates were made by Fed chief Ben Bernanke.

The benchmark S&P/ASX200 index was up 11.8 points or 0.25% to 4767 at 11.45 AEST. The Australian dollar has also gained some ground to US93c.

ANZ shares lost 1.3% to $21.90, with Commonwealth Bank shares also dropping 0.4% to $53.74. Westpac lost 1.3% to $24.97, as NAB fell 0.1% to $28.47, as it announced it will launch legal action against the ATO over a $479 million tax bill.

The bill was given following deductions the bank made between 2000 and 2003 in order to reduce its tax bill. It follows previous action taken against the ATO by NAB last year, and in 2005, for unrelated matters.

Goodman Australia Industrial Fund has announced it will raise $320 million in new equity through a distribution reinvestment plan and a rights issue, raising the fund’s gearing to 33%.

“These further capital initiatives are the final steps in GAIF’s capital management plan following the significant refinance of its bank debt platform announced as part of the Group’s capital management initiatives in August 2009,” chief executive and chairman Greg Goodman said in a statement.

Emissions trading scheme legislation moves to Senate

In Canberra, the Federal Government’s emissions trading scheme legislation is set to be debated in the Senate, but opposition chief negotiator Ian Macfarlane has said the outcome is likely to be a positive one.

“I remain confident that we’ll get an outcome that I can take to the party room, and that the party room can consider,” Macfarlane told reporters. “On that basis, I’d be optimistic that the party room would support it,” he said.

The comments come after the Federal Government conceded ground to the opposition by exempting the agriculture industry from the scheme.

Meanwhile, a fifth extension has been granted by the NSW Supreme Court in a damages case brought against Publishing & Broadcasting regarding the collapse of One.Tel, The Age has reported.

But the $230 million case is unlikely to be granted another extension, with a hearing involving ASIC against the company’s former managing director Jodee Rich and finance director Mark Silbermann expected tomorrow.

In the US, stocks rose to a 13-month high due to comments from Fed chief Ben Bernanke and news that retail sales had performed better than expected.
Bernanke said the Federal Reserve is continuing to monitor the decline of the US dollar, and said rates are likely to remain low now for “an extended period”.

“We are attentive to implications of changes in the value of the dollar and will continue to formulate policy to guard against risks to our dual mandate to foster both maximum employment and price stability,” he said.

The comments come as the Commerce Department revealed retail sales grew by 1.4% during October, following a 2.3% decline in September. The news sent the Dow Jones Industrial Average up 136.49 points or 1.33% to 10,406.96 – a 13 month high.