INTEREST
RATES OUTLOOK
RBA HOLDS AT 5.5%
The board of the Reserve Bank of Australia has held firm with
the basic cash interest rate remaining at 5.5 percent for the
fifth month. They made no comment on the economy.
AUSTRALIAN ECONOMY SNAPSHOT
The words Soft Landing are now becoming widely used by most economic
commentators when describing the current state of the Australian
economy.
There are various factors supporting the strength of the economy.
These include last month’s lowering of the trade deficit
together with the strongest overall upturn in retail sales this
year, the state of the share market which continues to soar to
new records and the employment figures are impressive. The last
official statistics show the number of new jobs created was in
growth for the tenth straight month. Unemployment has leveled
out at just over 5 percent.
On the other side of the ledger, the Australian Industry Group
has reported manufacturing output is currently on a four year
low. The report cited the lack of demand and high prices together
with continued competition from cheap imports as the reasons for
its factory members’ businesses experiencing this downturn.
It also claimed no improvement is expected before the final quarter.
A recent ANZ report, which singled out house prices for attention,
says most house markets (including NSW) had probably bottomed,
but the effects of strong migration, a positive outlook for the
world economy, low interest rates which are likely to be on hold
for the remainder of 2005, and low unemployment are likely to
keep it simmering. Broad economic fundamentals remain supportive
to the property markets, the bank insists. It also observes that
Australia’s long economic boom, now in its 14th year, would
continue albeit at a slower pace. The Westpac-Melbourne Institute's
findings endorse much the same sentiments.
However, the LJ Hooker group is insisting the current partial
boom in farm property prices is about to end and the subsequent
effects could include a negative on overall farm investments.
They say only the coastal fringe properties will avoid this, as
they will continue to be in demand from city people’s seachange
requirements.
BUSINESS NEWS
SILLY SEASON AGAIN
Hang onto your hats and prepare for the annual corporate profit-reporting
season, which is about to unleash itself again. With many observers
predicting various excellent results, the stock exchange index
could get another boost for the present record run.
REGS FORCE RECOUNT
One of the biggest catches of the new accounting rules is the
Foster’s Group. The Melbourne-based giant has been forced
to cut its stated net assets by over a billion dollars and increase
the bottom line.
This has meant its profit, to the end of 31 December 2004, has
been raised by $26 million to $783 million.
MOST EVER PROFIT
To no surprise, the world’s biggest oil company Exxon-Mobil,
has just announced the biggest annual profit of any business ever.
Management cited the high price of crude and the lack of refining
capacity for the increasing prices and greater returns. Today’s
crude oil price was firming at $US62 a barrel.
TELSTRA LINKED TO RATES
In a most unusual pronouncement, Federal Treasurer Costello has
warned that interest rates could rise on the current Telstra sale
issue. He was warning against the Government bowing to National
Party demands for a multi-billion fund to be set aside for rural
telephony services in the event of a Telstra sell-off.
