Australia 01 (May 08 - Jan 11)

[iam802]

Australia, New Zealand Dollars Fall on Worsening Global Outlook

http://www.bloomberg.com/apps/news?pid= ... refer=home

Jan. 13 (Bloomberg) -- The Australian and New Zealand dollars fell against the yen for a fourth day and weakened versus the U.S. currency, as a deepening global slowdown and a decline in commodity prices tempered demand for higher-yielding assets.

New Zealand’s dollar dropped to the lowest level versus the U.S. dollar in almost four weeks after Standard & Poor’s revised the nation’s AA+ foreign-currency credit rating outlook to negative from stable. Australia’s dollar touched the lowest level in more than three weeks against the yen as gold, the country’s third-most valuable export, dropped the most in 1 1/2 months.

“Renewed concern about the global outlook has seen investors sell growth-sensitive currencies in favor of the relative safety of the U.S. dollar,” said Danica Hampton, currency strategist at Bank of New Zealand Ltd. in Wellington. “The new year’s optimism has well and truly worn off.”

Australia’s dollar declined 1.5 percent to 67.62 U.S. cents as of 1:34 p.m. in Sydney from 68.65 cents late in Asia yesterday. It reached 67.44 cents, the lowest level in more than three weeks. The currency fell 2.2 percent to 60.49 yen from 61.80 yen after touching 60.32 yen, the weakest since Dec. 17.

New Zealand’s dollar fell to 56.46 U.S. cents from 57.93 cents late in Asia yesterday. It reached 56.27 cents, the lowest since Dec. 17, The currency dropped to 50.49 yen from 52.14 yen. It touched 50.36 yen, the weakest in more than three weeks.

Australian government bonds extended a rally, pushing down the yield on 10-year notes to the lowest since at least 1969, and money market rates rose. The MSCI Asia Pacific Index of regional shares slumped 2.8 percent, the biggest loss since Dec. 12. New Zealand and Australian shares also declined.

‘Come Under Pressure’

New Zealand’s long-term foreign-currency credit rating, which is one level below the highest investment grade, may be cut if the nation’s current-account deficit and overseas debt begin to curb growth and investment, S&P said as it affirmed the rating. The outlook on the AAA local-currency debt remains stable, it said.

“It’s not going to be easy for New Zealand,” said Adam Carr, a senior economist at ICAP Australia Ltd. in Sydney. “The currency will come under pressure.”

The New Zealand dollar also fell as the New Zealand Institute of Economic Research said today in Wellington that a net 64 percent of companies surveyed last quarter expected the economy would worsen over the next six months.

“There is enough in this survey to encourage a rate cut of at least 100 basis points” this month, Sue Trinh, senior currency strategist in Sydney at RBC Capital Markets, wrote in a research note today. The survey is “bearish the New Zealand dollar,” she said.

Australia Ratings

The Reserve Bank of New Zealand will lower its benchmark interest rate by at least a half-percentage point to 4.50 percent at its Jan. 29 meeting, according to a Bloomberg News survey of economists. A basis point is 0.01 percentage point.

The Bloomberg UBS Constant Maturity Index of 26 raw materials dropped 4.4 percent yesterday, the most since Dec. 5, while the price of gold fell 3.9 percent, the largest decline since Dec. 1.

Commodities including coal, iron ore, gold and oil account for 60 percent of Australia’s export revenue. New Zealand relies on raw materials including milk and timber for 70 percent of its overseas shipments.

Australia’s foreign-currency credit rating of AAA, the highest investment grade, was affirmed by S&P today. The company also said the outlook on the rating is stable.

Implied Volatility

Implied volatility on one-month Australian dollar options against the yen rose to 34.68 percent from 33.79 percent late in Asia yesterday, indicating a greater risk of exchange-rate fluctuations that can erode profit on so-called carry trades.

In a carry trade, investors get funds in a country with low borrowing costs and invest in one with higher interest rates, earning the spread between the two. The risk is that currency market moves erase those profits. Benchmark interest rates are 4.25 percent in Australia compared with 0.1 percent in Japan and as low as zero in the U.S.

Financing costs in Australia rose. The difference between the rate Australian banks charge each other for three-month loans and the overnight swap rate climbed to 57.5 basis points from 55.3 basis points yesterday. The gauge, a measure of cash scarcity, averaged 11 basis points in the five years before the credit crunch started in August 2007.

Australian two-year government bonds rose for a fifth day, the longest stretch since October. The yield fell by as much as 14 basis points to 2.62 percent, the lowest since Dec. 15. The 10-year yield reached 3.95 percent, near the lowest since 1969 when Bloomberg began compiling the data.

Bond Yields

“We are heading toward an extremely low-yield world for government bonds,” said Peter Jolly, head of market research at NabCapital in Sydney, the investment banking unit of Australia’s largest lender. “Although yields are very low relative to Australia’s history, they remain some of the highest in the world. We’ve seen some foreign buying of Australia’s yields.”

The two-year yield may fall to 2.5 percent and the 10-year yield may decline to 3.9 percent by the end of this quarter, Jolly forecast.

New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, declined to 4.05 percent from 4.23 percent late in Asia yesterday.

[winston]

The Australian economy, once considered a relatively save haven, is headed for a steep downturn in 2009, in part because of slower-than-expected growth in China, a leading forecaster said Monday.

In a starkly worded quarterly outlook report, the Australian research firm Access Economics warned that the mining-led economy "will unwind scarily fast" in 2009, sending the Australian dollar and interest rates crashing.

"This is not just a recession," the report said. "This is the sharpest deceleration Australia's economy has ever seen."

The report predicted that the central bank would be forced to cut interest rates to 2.5 percent, from 4.25 percent, to stimulate growth.
– New York Times

[iam802]

Babcock shareholders to be wiped out

http://business.smh.com.au/business/bab ... -7o6q.html

Babcock & Brown says there would be nothing left for shareholders after its lenders take their cut under a plan the debt-laden investment company is discussing with its bankers.

"The board believes that in the current market environment and based on continuing discussions with the banking syndicate there will be no value for equity holders under the revised business plan balance sheet restructure,'' the Sydney-based company said in a statement.

..........

[millionairemind]

Australia consumer prices mark quarterly deflation
Data may spark fresh rate cut, other measures
By Chris Oliver, MarketWatch
Last update: 12:09 a.m. EST Jan. 28, 2009

HONG KONG (MarketWatch) -- Australia's consumer prices dipped into deflation for the first time in two years in the recently ended quarter, a development that's likely to be scrutinized carefully at the Reserve Bank of Australia's monetary policy board meeting next week.
Consumer prices fell 0.3% in the fourth quarter, reversing a 1.2% rise in the third, as prices for gasoline, automobiles, prescription drugs and loans declined, the Australian Bureau of Statistics said Wednesday.

On an annual basis, prices rose 3.7% from the year-earlier period, moderating from a 5% annual rise in the July-September quarter. Analysts had forecast 0.4% on-quarter deflation and 3.6% on-year inflation.
The decline was the sharpest in any quarter since July-September 1997.

Analysts said softer consumer price-data could provide the leeway the central bank needs to cut interest rates further. Markets were reportedly expecting a cut of as much as 1 percentage point when the policy board convenes next Tuesday.
"It looks like they are headed for their first recession in 18 years. They are clearly feeling the drag from lower global export demand," said David Cohen, director of Asian forecasting at Action Economics in Singapore.

Cohen said the Reserve Bank will probably cut interest rates by 1 percentage point next week to help dampen a likely contraction in the economy that began in the fourth quarter. Australia's economy expanded 0.1% in the third quarter from the second.
The Australian dollar eased to $0.6656 mid-afternoon in Sydney from $0.6720 in overnight trade.

Australia's base lending rate currently stands at 3.25%. A cut of up to 1 percentage point would see the rate fall to its lowest level since the mid-1960s.

Costs related to transportation fell the most, led by a more than 18% decline in gasoline and a 2.4% slide in automobile prices. Costs related to food, housing, alcohol and tobacco all recorded gains.

Economic indicators released Wednesday suggested the economy may be already in, or just at the threshold, of falling into recession.
Westpac Banking Corp.'s leading activity index declined at an annualized rate of 2.2% in November.
Economists said the slew of weaker data could draw further action to spur the economy, including a second round of stimulus measures.
Australian Treasurer Wayne Swan said Wednesday he expects to see further downward revisions to the global growth forecast, as the data for industrialized nations reveal an increasingly grim picture.

"Given that there has been a further slowing in global growth, we have got to evaluate that," Swan was quoted in news reports as saying Wednesday.
Swan did not make reference to what measures the government would consider, but on earlier occasions had alluded to bringing forward income-tax cuts to spur growth and help halt surging job losses. End of Story

[iam802]

Code red: hospitals in crisis

http://www.smh.com.au/news/national/cod ... 32079.html

SENIOR doctors at Dubbo Base Hospital are threatening to quit after running out of morphine and watching patients in the intensive care unit swelter in 37 degree heat for five days because pharmaceutical companies and maintenance contractors had not been paid.

The Greater Western Area Health Service, which covers 108 hospitals, owes more than $23 million to creditors, forcing many to stop supplying food and medical equipment.

NSW Health says it intends reducing this debt to $10 million by the end of tomorrow, but admits the state's area health services will still owe $117.5 million in unpaid bills.

But the situation is likely to deteriorate. The Government confirmed last night that a PricewaterhouseCoopers report last month showed this year's health budget would blow out by $900 million by March unless urgent action was taken.

The report said a $600 million blowout was expected on top of a $300 million shortfall announced in September.

Visiting medical officers at Dubbo will decide this weekend whether to withdraw their services, a move that could force up to 150,000 people to seek specialist treatment in Sydney, putting extra strain on an already overworked hospital system.

"It is dangerous here and we are losing the will to continue," a surgeon, Dean Fisher, told the Herald yesterday.

He said most specialists at the hospital had not been paid in six weeks and operating theatre staff were still regularly without basic supplies such as gloves.

"As of Monday we have no urologist and cardiac patients are already sent to Sydney because there is one cardiologist who flies in once a month. Eight clinicians, including surgeons, psychiatrists, physicians, anaesthetists and locums, are flown in every month at huge cost to the health service because nobody wants to work here."

The Medical Staff Council, run by 15 Dubbo doctors, passed a unanimous vote of no confidence in the hospital's management three months ago but Dr Fisher said "nothing had changed".

"Nobody is ever held accountable for this mess."

The chief executive of the area health service, Claire Blizard, conceded yesterday she was ashamed to walk Dubbo's streets, knowing many small businesses were owed thousands.

"I am embarrassed by it, but I am very confident we will get over the hump. Some people ask us to pay them within seven days. The reality is we just can't do that but we are trying to pay the smaller businesses because they have a very different cash flow problem to the larger creditors."

Dr Blizard said finance staff were being taught to prioritise bills for vital services.

After a damning report by the Auditor-General in 2006, the then health minister John Hatzistergos, insisted area health service chief executives would be held accountable for unpaid bills.

But since then, the situation has worsened and the Herald has heard numerous complaints. The owners of a Dubbo meat company, owed $30,000 for four months, say they rang the creditor hotline repeatedly but were only paid after media exposed their plight. And a Goulburn greengrocer stopped taking orders when overdue bills reached $30,000.

The Director-General of NSW Health, Debora Picone, said the health service had made improvements since it was ordered in June to pay its creditors, but spiralling costs and recruitment problems had made it difficult to get debts under control. "I don't expect the area health service to turn things around overnight but they have already reduced the number of creditors by 50 per cent and we are headed in the right direction."

Ms Picone said the health service had reduced its administrators by 17 per cent and increased frontline staff by up to 29 per cent in the past year.

But Dr Fisher questioned the figures. "Where are these extra doctors and nurses? I haven't seen them. All the doctors and nurses here are exhausted from double shifts and being on call. And if we quit, who suffers? Joe in the street, that's who."

[kennynah]

the kangerooland gahmen cannot step in to give assistance to this desperate hospital ?

[iam802]

Rudd's $42 billion 'nation building' plan

http://www.smh.com.au/news/national/new ... 87648.html

STIMULUS PACKAGE AT A GLANCE

· $14.7b for schools - $200,000 each
· $6.6b for 20,000 new homes
· $3.9b to insulate 2.7m homes
· $890m for road repairs and infrastructure
· $2.7b small business tax break
· $12.7b for cash bonuses of up to $950

[iam802]

Surprise jobs jump

http://business.smh.com.au/business/sur ... -85cg.html

Update Employers took on an additional 33,700 full-time employees in January, the most in six months, spurring hopes the economy may yet avoid a recession.

All up, the economy added 1200 jobs last month as firms cut part-time jobs. Even so, the result was much better than the overall 18,000 job losses economists had tipped.

''Employment is more doggedly resilient than expected,'' said HSBC chief economist John Edwards in a statement.

''It will contribute to the case for the RBA to pause (in its rate cuts) in March. If the numbers hold up well enough there is a considerable chance that the current 3.25% cash rate may be the low,'' he said.

The overall net jobs gain was held back by the loss of 32,600 part-time positions last month, raising the unemployment rate to 4.8% from 4.5% in December. The jobless rate is now at its highest since June 2006.

The improvement in full-time employment marks a turnaround of more than 81,000 such positions in just one month, after the economy shed 47,700 full-time jobs in December.

......

[winston]

Update: Australia govt passes A$42b stimulus

CANBERRA - Australian parliament passed a A$42 billion (US$27.4 billion) economic stimulus package on Friday after a last-minute political deal rescued the government's plan to head off the country's first recession in two decades.

[iam802]

RBA very confident , hor?

===

Australia set to dodge recession: RBA

http://business.watoday.com.au/business ... -7zhj.html

Chris Zappone
February 6, 2009


The Reserve Bank has slashed its growth and inflation forecasts, but predicts Australia will avoid a recession, while warning the jobless rate will rise significantly as the nation suffers fallout from the global financial crisis.

The central bank says its round of cash interest rate cuts since September - which this week cut the rate to a 45-year low of 3.25% - and a further large fiscal stimulus proposed by the Federal Government should help cushion the economy.

The RBA sees GDP growth remaining positive, albeit at just 0.25% for the year to June 30, before ticking up to an annual pace of 0.5% by the end of 2009 and quickening further to 1.25% by the June quarter of 2010, according to its quarterly monetary policy statement released today.

The bank's estimate that the economy can dodge a recession is a ''little surprising,'' Nomura International economist Stephen Roberts said. ''My view would be that we're not going to escape without one or two negative quarters.''

The Federal Government earlier this week halved its growth forecast for this fiscal year to 1%, and 0.75% next year. Prime Minister Kevin Rudd is also attempting to win Senate support for a four-year $42 billion stimulus plan to prevent the economy sinking into recession.

The Australian dollar initially eased back after the RBA's statement, recently buying 64.86 US cents, from about 65 US cents prior to the release. Australian shares also pared gains, trading about 0.7% higher for the day, down from earlier gains of as much as 1.2%.

Job cuts to come

The RBA flagged more lay offs in the coming year, echoing comments by the Government and private forecasters.

"Despite the significant stimulus already provided by monetary and fiscal policy, the unemployment rate is forecast to increase materially over the next year or so," the RBA said, without specifying an estimate.

In its mini-budget released this week, the Government forecast the jobless rate climbing to 7% by the middle of 2010.

The RBA's revised GDP growth estimates compare to those given in November, when it expected GDP to expand 1.5% over the year ending June, 1.75% by the end of 2009 and 2% by the middle of 2010.

The country still faces a "very difficult'' environment with a severe global economic downturn and a sharp fall in commodity prices weighing on business investment intentions and consumer confidence, said the RBA.

Even so, Australia has several factors likely to help insulate the country from the worst effects of the crisis, the RBA said: ''Monetary and fiscal policies are providing substantial stimulus to demand and activity. The Australian financial system remains in better shape than many of its international counterparts, and as a result the monetary transmission process has been working more effectively here than elsewhere.

The central bank gave few direct cues to the outlook for interest rates, however the tone of its statement implies that while further cuts are on the cards, it may wait to see the impact of the reductions already made and the government's stimulus packages, before moving again.

The government released a $10.4 billion stimulus package last October and this week announced plans for a further $42 billion injection in the form of handouts to low- and middle-income earners and infrastructure projects.

Stalling

The new outlook for non-farm GDP growth is for nil growth in the year ended June, compared to a forecast of 1% previously.

The RBA also projected GDP growth of 1% for the December quarter of 2008, still well above estimates by some analysts who have predicted that Australia is already in a recession.

The fourth-quarter national accounts numbers won't be released until early March.

For inflation, the RBA sees prices pressures falling more rapidly than it previously estimated.

The annualised consumer price index (CPI) is expected to fall to 1.75% in the June quarter, from a previous forecast of 3%, and back within the central bank's two to three per cent target band.

Inflation is then forecast to pick up to 2.5% in the December quarter and 2.75% in the June quarter of 2010.
In the meantime, the RBA expects the labour market will suffer.

"With job vacancies and hiring intentions falling and short term economic prospects subdued, more significant rises in unemployment are likely in the period ahead,'' it said.