House prices jump 20% in 12 months, ABS figures show: Economy Roundup

New figures from the Australian Bureau of Statistics reveal the weighted average of housing prices in Australia’s eight capital cities grew by 20% over the 12 months to March 2010.

The figures also reveal the price index for established houses for the weight average of the eight capital cities increased by 4.8% during the March quarter.

The biggest increase was in Melbourne, with an annual increase of 27.7% and a quarterly increase of 6.7%, with Sydney not far behind with a 21% annual increase and jump of 5.3% during the quarter. Growth in these two cities was due to established homes, the ABS said.

Additionally, prices during the quarter grew in Perth by 3.5%, Brisbane by 2%, Adelaide by 2.7%, Canberra by 5.4%, Hobart by 4.2% and Darwin by 3.6%.

Annually, prices grew in Perth by 15%, Hobart by 14.1%, Brisbane by 12.1% and Adelaide by 10.8%.

The figures, combined with new inflation data from TD Securities-Melbourne Institute, have raised the chances of an interest rate rise at tomorrow’s Reserve Bank of Australia meeting.

TD-MI said its gauge of consumer price inflation rose by 0.4% in April, following a 0.5% increase in March.

“This report reveals that price pressures remain to the upside heading into the second quarter, a worrying development given the already outsized lift in prices in the first quarter,” TD Securities senior strategist Annette Beacher said in a statement.

“We remain of the view that the RBA’s projections for underlying inflation to decelerate to 2.5% by mid-year are rather optimistic, as the Australian economy will be bumping against speed limits sooner rather than later,” she added.

Miners hit back at 40% super profits tax

Meanwhile, mining giants BHP Billiton and Rio Tinto have responded with disappointment regarding the Government’s intentions to slug resource companies with a 40% super profits tax in order to fund new tax reform.

Shares in BHP fell by 3.9% to $38.13, while Rio shares fell 5.6% to $68.01 early this morning, just hours after the Government announced its new plans. Fortescue Metals also saw its share price fall 4.36% to $4.38.

BHP chief executive Marius Kloppers said in a statement the proposal will hurt the industry and stifle competitiveness.

“If implemented, these proposals seriously threaten Australia’s competitiveness, jeopardise future investments and will adversely impact the future wealth and standard of living of all Australians,” he said.

While he said that the implementation of the tax is still awhile away, “this significant new tax will have the effect of making investments in Australia much less attractive”.

Rio Tinto managing director Australia David Peever said the company was concerned at the “arbitrary way” in which the tax was set at 40%.

However, treasurer Wayne Swan has said the new tax plan will actually help the industry due to the nature of its implementation – which is still two years away.

“Some companies will pay a bit more of that there is no doubt, because they have been given very generous treatment over recent years because of the failures of the royalty regime,” Swan told ABC Radio. “But overall this will grow the mining industry because it is a predictable tax and it is an efficient tax.”

The Australian sharemarket opened lower today as investors reacted to the Government’s response to the Henry Tax Review, with pessimism seeping in regarding a 40% tax on miners to be introduced in 2012.

The benchmark S&P/ASX200 index was down 25 points or 0.53% to 4781.8 at 12.15 AEST, while the Australian dollar also down by nearly 1% to US92c.

ANZ shares have increased 1.6% to $24.59, as Commonwealth Bank shares rose by 0.4% to $58.72. Westpac gained 0.9% to $27.45 as NAB lost 0.2% to $27.93.

Australian manufacturing activity reached its fastest pace in almost eight years during April, the new Australian Industry Group-PricewaterhouseCoopers performance of manufacturing index has revealed.

The index jumped 9.3 points to 59.8, well above the 50-point level separating contraction and expansion, in the highest reading since May 2002.

The measure of output rose by 15.3 points to 64 in April, while the index of new orders grew by 7.3 points to 59.5 – the highest reading since November 2007. The measure of employment rose by 7.3 points to 55.2.

Orica records $55 million loss

Orica has recorded a 75% half-year net profit loss to $55 million, but has still said it will go ahead with plans to spin off the DuluxGroup pain and garden products group.

Sales revenue fell 19% to $3.2 billion.

Orica managing director Graeme Liebelt said net profit should be higher in 2010 than in 2009, and that the latest result is due to tight controls on cash and margins.

“We knew the first half would be tough compared with 2009 and that has proven to be the case, with year-on-year softness in volumes,” Liebelt said in the statement.

“We see a very strong outlook in long-term demand for our products driven by increased mining and development volumes, linked to the continuing urbanisation and industrialisation of China, India and other rapidly developing countries.

Air New Zealand and Virgin Blue have said they are now seeking regulatory approval for an alliance that would help the two companies dominate their ground in the competitive region.

“Our alliance is about working closely together to give customers cheaper fares, increased frequency and better connections, while delivering improved returns,” Air New Zealand chief executive Rob Fyfe said in a statement.

Overseas, European finance ministers have managed to secure a $US147 bailout plan for Greece, currently stricken with debt problems, after the country has put its support behind the plan.

In exchange, Greek prime minister George Papandreou has said there will be more spending cuts and tax increases in order to secure the nation’s finances. A summit will be held this Friday to launch the plan.

“These sacrifices will give us breathing space and the time we need to make great changes,” Papandreou told reporters. “I want to tell Greeks very honestly that we have a big trial ahead of us.”