Business profits fall in third quarter, government promises carbon price for 2011: Economy Roundup

Corporate gross operating profits fell by a seasonally adjusted 1.5% during the third quarter of the year to $US66.8 billion, according to the latest figures from the Australian Bureau of Statistics.

The figures come after a Reuters poll indicated economists expected profits to rise by 4%.

The figures also show the seasonally adjusted estimate for inventories fell by 0.8%, while goods and services fell 0.7% and wholesale trade sales of goods and services dropped by 1.2%. The figures also show the value of stocks dropped to $145.1 billion during the quarter.

Westpac points out the figures are “mixed”, but “the income side appears to be pointing to modest growth”.

The figures show wage incomes grew by 2.1% for the quarter and by 7.2% for the year.

“On the income side, key is that Australia is enjoying a sizeable boost to national income from a sharp rise in the terms of trade as iron ore & coal prices rebounded sharply. The terms of trade is forecast to rise by about 5% in Q3, lifting annual growth to almost 30% – to be at the highest level in 60 years,” Westpac said.

“On the expenditure side, inventories disappointed & will subtract an estimate 0.3ppts from Q3 growth. The expenditure partials point to downside risks to our GDP forecast. It may be that there are further (possibly offsetting) surprises tomorrow in the net exports & public demand data.”

Meanwhile, Prime Minister Julia Gillard has said the Government will make a final decision on a carbon price in 2011, in a speech to the Council for the Economic Development of Australia.

“Expert papers are already being released publicly and discussed in the committee,” she said in the speech. “I promise you, no responsible decision maker will be able to say next year that they need more time or more information on climate change,” she said.

“In 2011 there will be nowhere to hide,” Gillard said, adding that 2011 will be “defined less by politics and more by government”.

“Australians do not face a federal election next year or the year after. Australians do not want their government to campaign. Australians want their government.”

But Mark Dreyfus, the parliamentary secretary for climate change, has raised questions over that timetable.

“If we can achieve an agreement with the parliament, however it is composed, then we will be able to put a price on carbon in this term but I’m not going to put a precise timetable on it,” he told Sky News.

Metcash has welcomed a decision from the Australian Competition and Consumer Commission not to chase an injunction that would stop the company from proceeding with a takeover of Franklins. The case will now be heard in the Federal Court.

“We clearly have different views to the ACCC regarding the Australian grocery market and what will ultimately be in the best interests of all consumers,” chief executive officer Andrew Reitzer said in a statement.

“We consider that it will be in all parties’ interests for these issues to be authoritatively determined by the Federal Court as soon as possible.”

AMP has signed documents with AXA Asia Pacific Holdings and parent AXA SA to begin the planned takeover of the company.

“The independent directors continue to unanimously recommend the Proposal, in the absence of a superior proposal and subject to the opinion of an independent expert,” AXA APH chairman Rick Allert said in a statement today.

Shares lower over debt fears in Europe

The Australian sharemarket has opened lower this morning following a volatile weekend in Europe where investors remain concerned over the Irish bailout plan confirmed by the EU.

The benchmark S&P/ASX200 index was down 29 points or 0.65% to 4568.6 at 12.15 AEST, while the Australian dollar opened lower at US96c.

ANZ shares lost 0.3% to $22.45 as NAB lost 0.4% to $23.14. Westpac dropped 0.2% to $21.11 as AMP fell 0.8% to $5.07.

According to a Fairfax report, Peter Lowy has slammed US tax authorities for dealing with documents relating to an investigation into his finances, saying they are “truly disorganised and inadequate”.

The report states that the IRS is arguing the release of information may affect future coordination between itself and its Australian and British equivalents, but a Californian court has said these claims are “woefully insufficient”.

EU approves Irish bailout

The European Union has approved a bailout for Ireland that will allow the country to save its major banks and avoid a financial meltdown – but EU ministers are still waiting to see how markets react.

“This agreement is necessary for our country and our people. The final agreed programme represents the best available deal for Ireland,” Irish prime minister Brian Cowen said over the weekend.

But the reaction hasn’t been as good as some would have hoped.

“I don’t think this is going to be a silver bullet. I think there are still going to be some question marks on Portugal and Spain,” Nomura chief economist Peter Westaway told Reuters. Southwest Securities managing director of corporate syndicate Mark Grant also said that “it is almost impossible now to stop the contagion”.