Oil touched new record highs of $US140 a barrel overnight after the emergency shutdown of an oil platform in the North Sea.
While the oil price has now eased slightly to around $US135, some analysts believe that the Saudi Arabian Government’s decision to increase production to the highest level in almost 20 years will do little to dampen the price of oil, which has soared 40% this year. Oil producers simply cannot meet soaring global demand for oil.
New data from the Australian Bureau of Statistics shows housing starts fell 3.3% in the March quarter, with private dwelling commencements dropping 6%. This follows a revised increase of 5.7% in the December quarter for private dwelling starts.
The weak housing data will be another thing for the RBA board to consider as it continues to watch the economy closely for signs of increasing inflationary pressures. Also out this morning were the minutes from the Reserve Bank of Australia’s June board meeting, where the board decided to leave interest rates on hold due to flat retail sales, poor consumer and business sentiment and the credit markets.
The minutes provide a valuable insight into the challenge facing board members – while there are a number of signs the economy is slowing, inflation remains high and the labour market is tight. An interest rate could be just around the corner. “Should demand not slow as expected or should expectations of high ongoing inflation begin to affect wage- and price-setting behaviour, the outlook, and the stance of policy, would need to be reviewed,” the minutes state.
The Australian sharemarket slipped yet again this morning, with investors nervous about the impact of the economic impact of higher oil prices on the banks and big retailers. The benchmark S&P/ASX200 index fell 38.7 points to 5333 at 11:30am EST.
The biggest news from the market came from manufacturer Crane Group, which flagged 90 staff redundancies after a restructure of its plumbing and electrical distribution business in Australia and New Zealand.