Building approvals up 9.3% in October, Shares lower on European worries: Economy Roundup

Building approvals jumped by a seasonally adjusted 9.3% during October, breaking six consecutive months of declines, according to the latest figures from the Australian Bureau of Statistics.  The figures show that private sector housing approvals rose by 1.5%, following four months of declines, while approvals for “other” dwelling rose by a whopping 23.6% after a fall of 14.8% in September.

The seasonally adjusted estimate for the total value of all building approvals rose by 4.1%, while the value of new residential buildings rose 8.2% and alterations and additions up 7.9%.

The ABS also released data showing the current account deficit jumped by 45% during the September quarter to $7.8 billion, following a deficit of $5.4 billion in the previous quarter.

The surplus on the balance of goods and services dropped by 12% of $797 million to $5.7 billion.

The Reserve Bank of Australia has said it identifies problems with a government guarantee for residential mortgage backed securities, according to a speech given by assistant governor Guy Debelle.

Debelle said the current system of investing in individual issues is preferred. He cites figures showing only $3.2 billion out of $18 billion in issuance has not had the support of the Federal Government.

“It can be easily tailored to help specific types of institutions; it can be phased out easily; the likelihood that the government loses money on its investment is very small; and there is no ongoing contingent liability to the government from providing the support,” Debelle said.

Addressing calls for a move to support all RMBS, Debelle said the plan could run into some problems.

“If instead a government guarantee of RMBS were provided, it would be difficult to phase out, creating a commitment that could generate a large contingent liability for the government,” he said.

Meanwhile, oil giant Woodside Petroleum has delayed its Pluto natural gas project by half a year and lifting expected costs due to a number of issues. The company now expects the plan to cost $14 billion, representing a 6.9% increase.

“The change in schedule is driven by the failure of the project’s flare tower contractor to take into account the specified wind loading requirement of the flare towers,” Woodside said in a statement to the ASX. “After consideration of several remedial options the flare towers are being replaced.

“A temporary flare tower will be used to assist during commissioning.”

Shares open lower on global volatility

The Australian sharemarket has opened lower this morning following a night of volatile trading, during which investors remained concerned over debt problems in Europe and ongoing tensions in Korea.

The benchmark S&P/ASX200 index was down 27 points or 0.59% to 4591.4 at 12.10 AEST, while the Australian dollar opened slightly lower to US96.5.

Commonwealth Bank shares lost 0.5% to $48.34 as NAB lost 0.2% to $23.49. Westpac fell 0.2% to $21.51 as AMP dropped 0.4% to $5.07.

Nufarm has now signed a $900 million syndicated bank facility, asking Rababank to finalise some long term debt facilities.

“Nufarm considers that this is an appropriate level of funding to meet the current and future growth needs of the business,” the company said in a statement. It is set to hold its annual general meeting in two days.

“We are simplifying our banking arrangements to a smaller group of relationship banks through which we can establish a more efficient long term banking structure.”

“With this new facility in place and the appointment of Rabobank, we can now focus on managing our global business and rebuilding returns to shareholders,” chief executive Doug Rathbone said in a statement.

As reported by the AFR, Qantas and Australia Post will set up a new holding company to go ahead with some new structural chances at joint venture firms Star Track Express and Australian Air Express.

“By shifting the structure around we can get more focus in each business, and it leaves distinct retail and wholesale operations rather than collapsing them all together,” chief financial officer Gareth Evans said.

US and South Korea to discuss trade agreements

Officials from the United States and South Korea will meet this week to discuss potential trade agreements.

“We don’t necessarily expect to complete an agreement this week. Our objective is to use these discussions to advance the negotiations,” a spokeswoman for the US Trade Representative’s office told Reuters.

The negotiations come after a group of nations at the APEC summit in Japan agreed to pursue new free trade agreements, including Australia.

The discussions also come as South Korea and the United States hold war exercises – a move that North Korea has interpreted as an act of aggression.

On Wall Street, investors still remained nervous over volatility in Europe. The Dow Jones Industrial Average fell 39.51 points or 0.36% to 11,052.49.