Manufacturing activity contracts, shares up despite weak Wall Street lead: Economy Roundup

Australian manufacturing activity contracted during September for the first time this year as more companies struggle under the higher value of the Australian dollar.

The Australian Industry Group-PriceWaterhouseCoopers Performance of Manufacturing Index fell by 4.4 points in September to 47.3, well below the 50-point level separating expansion from contraction.

The survey’s respondents said the higher cost of materials, weak demand and political uncertainty were the major influences on the industry.

“The contraction comes after a six-month period of falling growth rates and a steady build-up of inventories,” AIG chief executive Heather Ridout said in a statement.

“The strength of the Australian dollar in particular, led by large rises in minerals prices, is challenging the competitive position of the sector in both the domestic and export markets,” she added.

Ridout also said private sector demand is not yet strong enough to take back the reigns from public stimulus, with wage pressures also hurting companies.

“This combination of factors underlines the vulnerability of manufacturers to interest rate rises,” she said.

However, manufacturing activity in China has increased with the China Federation of Logistics and Purchasing index rising 2.1 points to 53.8. The Federation found that of the eleven categories included in the index, nine recorded a rise.

Former David Jones chief executive Mark McInnes sent text messages to publicist Kristy Fraser-Kirk begging her not to go ahead with a court battle based on a sexual harassment complaint.

“I am really pleading with you to save my life from ruin please,” he said in one of the messages, the court has heard.

“My job, my livelihood, my relationship, please if there is any way I could talk to you before you go through with this tomorrow, I would really like to,” he said in a voice mail.

Justice Geoffrey Flick has set a hearing date for December 20.

Australian sharemarket higher on Wall Street gains

The Australian sharemarket has opened slightly higher today following a good lead from Wall Street overnight with investors given a boost in confidence with the release of solid economic data.

The benchmark S&P/ASX200 index was up 12 points or 0.27% to 4595.6 at 12.10 AEST, while the Australian dollar reached another 26-month high overnight gaining to US97.32c.

Westpac shares lost 0.1% to $23.22 as ANZ also lost 0.2% to $23.64. NAB gained 0.4% to $25.45 as AMP rose 0.8% to $5.15.

An American economist predicts the Australian property market is overheated and higher interest rates will result in major corrections.

Dean Baker, co-director of the Centre for Economic and Policy Research, told Fairfax today that interest rates will cause prices to fall.

“I have noticed the run-up in Australian house prices and it sure looks like a bubble to me,” Baker said, adding that “it is not the fundamentals of supply and demand in the housing market that are driving prices”.

Instead, he says, the most prominent sign of a bubble is that rental prices have not increased in line with housing price growth.

New data from RP Data and Rismark indicate the market is beginning to respond to higher interest rates with prices dropping 0.2% during August.

The Australian Financial Review has reported the Australian Crime Commission has said in court that money owned to investors in the 1986 film Crocodile Dundee was diverted into a secret company controlled by producers including Paul Hogan and John Cornell.

However, defence lawyer Andrew Robinson told the publication that the claims were “unprincipled, unfair and wrong”.

Operators of the Brisbane Clem7 tunnel could wind up within a year, with RiverCity Motorway Group telling the ASX it has had to keep its cash reserves set until September 2011 but beyond that continued success will depend on traffic flows.

“As a result of the lower traffic volumes and yet to be finalised arrangements with its banks, the RiverCity Motorway Group final financial report has been prepared on the basis that an orderly winding-up of the group could occur sometime after September 2011,” the statement said..

“The ability for the group to continue beyond this period will depend on future traffic levels, toll pricing and/or suitable arrangements with its banks.”

Wall Street falls despite solid economic news

American International Group and the US Government have agreed on a new plan that will speed up the amount of bailout money to be paid back, but the new plan also carries some financial risk.

The plan will involve the Federal Reserve of New York being paid back in full, ending its relationship with AIG. Then only the Treasury Department will be involved, the organisations said yesterday.

Meanwhile, treasury secretary Timothy Geithner has told a forum sponsored by the Atlantic magazine that the US financial bailout will cost under $US50 billion.

“The people who voted for that – Republicans and Democrats – deserve a lot of credit because that was a deeply difficult political decision for them … and the returns on that program have been overwhelmingly positive for the economy and for the American people,” he said.

Wall Street stocks fell after data was released showing jobless claims fell during the past week, with manufacturing in the mid-west also growing faster than expected. The Dow Jones Industrial Average fell 47.23 points or 0.44% to 10,788.05.