INTEREST RATES OUTLOOK
NO CHANGE TO OFFICIAL
INTEREST RATES
The Reserve Bank of Australia has not changed official interest
rates at its monthly meeting yesterday which was the first policy
meeting of the Board this year. The basic remains untouched at
5.25 percent for the 14th consecutive month.
HIGHER AND HIGHER
Forecaster BIS Schrapnel is insisting interest rates will begin
to move up this year with the biggest immediate impact being on
house prices. Senior property analyst Angie Zigomanis blames creeping
inflation as the driver, which will force the RBA into action.
HOUSE PRICES MAY REVERSE
The Real Estate Institute of Australia has conceded that house
prices may fall up to 5 percent during 2005 with rising interest
rates as the major problem. This follows a recent 4-year boom
where the national average lifted 16 percent in 2001, 18 percent
in 2002, 19 percent in 2003 and 10 percent in 2004.
BUSINESS
NEWS
INFLATION RISE REACTION
Despite sensationalist news coverage of the latest CPI rise last
week, the Government insists that although 2.6% shows an increase
on the previous 4 quarters, it is within Treasury estimates. The
lack of a wages breakout is cited as the main reason for continued
business confidence.
NO JOB SECURITY
2004 finished the year with a bad employment record for local
CEOs. Australia now leads the western world in the early sacking
of business leaders with the average term now being only five
years, two less than the global average. One in seven fail to
last. The Business Council of Australia blames short-term demands
by shareholders and the small local market. The single highest
turnover is in the area of financial fund managers.
LAWS TIGHTEN ON BUSINESS
The Federal Government has announced it will increase penalties
for price fixing to maximums of a $10 million fine and 5 years
prison. This comes on top of the recent action by ASIC which handed
out a lifetime ban to a Melbourne insurance agent who failed to
disclose fraud convictions.
I.T. HELD BACK
The I.T. industry reports that demand for computing staff has
returned to a heavy demand. But key execs within the sector say
the fast moving nature of I.T. is now resulting in a lack of people
with up-to-date skills. So the I.T. training business continues
to enjoy rapid growth.
BUSINESS OUTLOOK
TIME THE CORRECTION
After a sustained bull run on the stock markets for much of 2004,
the biggest game to get right this year will be to pick the timing
of what many are now confident will be a stock market correction.
Currently there are no pointers on the horizon and most of the
forecasters are sticking to generalisations.
MERGERS MOVE AWAY
An investment bankers’ survey into future trends on corporate
mergers has found 68% of those questioned will mainly be looking
off-shore with Asia as the biggest target. Nearly half said the
current climate was a bull market with three quarters claiming
they are now actively looking for opportunities.
SUPER TO GET SERIOUS
Of all the issues the Federal Government will be attempting to
tackle this year, the subject of lack of superannuation is well
up there with the priorities. Driving this is the fact that within
a few years the baby boom generation will begin to retire in large
numbers.
Whereas their lack of super provision is well
known, research shows the next group along the line (50 to 55
year olds) also have relatively little put away and with up to
15 years of work ahead they will be seriously encouraged to invest
more. New and large tax benefits are expected to be offered.
BIGGEST THIS YEAR
The stand-alone huge business event set for 2005 could be the
Federal Government's sale of its remaining interest in Telstra.
The privatisation could be a $30 billion affair with the outcome
impacting the share price of previous Telstra sell-offs, which
have been languishing for some years. How the whole affair will
be politically managed will be very interesting.
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