ABC Learning centres to be purchased by not-for-profits: Economy Roundup

The receiver of ABC Learning has said the firm’s unsold centres are expected to be sold to a syndicate of not-for-profit groups.

Receiver Chris Honey has said the GoodStart syndicate is the preferred purchaser. The consortium includes Mission Australia, the Benevolent Society, Social Ventures Australia and the Brotherhood of St Laurence.

“After reviewing strong offers from high quality bidders I am pleased to announce we have entered into an exclusivity period for the sale of the ABC business to the GoodStart syndicate,” Honey said in a statement.

“A key consideration in assessing bids was to achieve a good commercial outcome which also preserved the interests of ABC families and staff.”

There are about 705 centres to be included in the sale, which is expected to be completed in the first few months of 2010. While Honey said there is still some work to be done, the group has a “strong and viable” future.

Some 705 viable childcare centres are involved in the expected sale due to be completed in early in 2010, following the successful exchange of contracts before Christmas.

“I would like to thank the ABC Learning management team, staff and parents for their patience and support throughout the receivership and the sale process,” he said.

“The existing ABC Learning management team has been critical in turning the business around while keeping the best interests of ABC staff and families at the centre of everything they did.”

Meanwhile, the total value of dwelling commitments has declined by a seasonally adjusted 1.4% to $23 billion, according to the latest figures from the Australian Bureau of Statistics.

The figures show owner occupied housing commitment value dropped by 1.7%, while the value of investment housing fixed loans fell by a seasonally adjusted 0.6%.

The number of dwelling commitments for owner occupied housing dropped 1.4%, while the number of commitments for construction of new dwellings actually increased by 9.2% to 8016. Commitments for the purchase of new dwellings fell 3.9%, with number of commitments for the purchase of established dwellings falling 2.8%.

Shares fall after weak US leads

The Australian sharemarket has opened lower today after a disappointing result on Wall Street, where investors were hit with news of credit downgrades and some weak financial results.

The benchmark S&P/ASX200 index was down 55 points or 1.19% to 4615.2 at 12.05 AEST, while the Australian dollar also took a dive, opening lower at US90c.

ANZ shares lost 2% to $21.50, while Commonwealth Bank shares fell 1.2% to $52.45. NAB lost 1.1% to $27.57, as Westpac fell 1.7% to $23.44.

TSWP, a joint venture between Transfield Services and WorleyParsons, has now won a seven-year $76 million contract with Shell. Including a three-year extension period, the contract will begin on 1 January 2010.

Chairman of oil and gas group Santos, Stephen Gerlach, will resign from his role with deputy Peter Coates to take his place, the company announced today.

“Under Stephen’s leadership, the Board has overseen the transformation of Santos from a Cooper Basin-focused domestic business to one on the cusp of becoming a major energy supplier to Australia and Asia,” Coates said in a statement.

As reported in The Australian, Lend Lease will now launch a $400 million private equity fund to invest in some “distressed” assets.

The company has reportedly signed on a number of investors, including some European pension funds, with the proposed launch confirmed by chief investment officer Robert Hattersley. The new fund is expected to purchase shopping centres and offices for up to $100 million.

Reserve Bank of Australian governor Glenn Stevens has said in a speech the bailouts of financial institutions are a “moral hazard” in the financial system.

Stevens also said the global financial system is recovering well, but there are still challenges, and noted the “neutral” level for Australian interest rates may be higher than once thought. Additionally, he addressed the difficulty of tackling the problems which caused the financial crisis in the first place.

“Realistically, the task is to reconfigure regulatory frameworks to lower the probability, and the cost, of future crises while assisting recovery from the recent one,” Stevens said. “That is every bit as difficult a challenge as getting through the immediate crisis itself.”

Expert warns recovery to be sluggish

Additionally, a finance expert has warned the Australian economy will continue to struggle to recover despite any predictions of growth.

Treasury director of the Domestic Macroeconomic Group David Gruen said in a speech to the Australian Business Economists conference in Sydney that the number of hours worked by Australians could actually be disguising a higher unemployment rate.

“So, it seems to me, even with these optimistic forecasts of aggregate growth, we’re still looking at some amount of slack in the economy for 18 months or so. The reason I say that is because we’ve just gone through a year in which the economy grew by 0.6%”

“Even if we were to go to above trend growth through 2010, there’ll still be slack in the economy for a good 18 months or so, if not longer.”

In Europe, the steel industry has once again opposed a planned joint venture between BHP Billiton and Rio Tinto, urging EU regulators to stop the deal from going forward. Control of pricing in the industry has been listed as the biggest concern.

“The joint venture… will unavoidably lead to market concentration and an increase in pricing power of the combined company which is unacceptable in competition terms,” lobby group Eurofer director general Gordon Moffat said in a statement.

Obama calls for more benefits for unemployed

In the US, president Barack Obama has called for an extension to unemployment and health insurance benefits, in a major speech designed to boost his falling reputation among the out-of-work.

He also said some extra money not used in last year’s $US700 billion bailout program could be used to pay down the country’s deficit, which now stands at over $US1 trillion. He also said reducing the unemployment rate, which now stands at just over 10%, could help pay down the deficit.

“There are those who claim we have to choose between paying down our deficits on the one hand, and investing in job creation and economic growth on the other. But this is a false choice,” Obama said.

But the speech did nothing to settle investors’ fears on Wall Street, where the Dow Jones Industrial Average fell 104.14 points or 1% to 10,285.97.