Australian financial system strong, RBA says: Midday Roundup

The Reserve Bank of Australia has said in its biannual financial stability report the banking system is strong and will be able to cope with new regulatory requirements imposed through the Basel III rules.

“Australian banks are well placed to meet the new capital standards, particularly given the significant bolstering of their capital positions in recent years,” the RBA said in the report.

“This shift towards deposit funding has enabled banks to further reduce their reliance on short-term wholesale debt. As a result, their liquidity positions have improved further.”

However, the RBA did note that households are still remaining cautious, which will mean growth rates seen before the GFC may not appear again.

“They are continuing to consolidate their finances, saving at a much higher rate in recent years and slowing the pace of debt accumulation.”

“They nonetheless continue to exhibit a more cautious approach to their borrowing than prior to the (global financial) crisis, with business deleveraging significantly and households reducing the growth in their debt outstanding to a rate more in line with income growth.”

The RBA also touched on the housing market, saying the moderation in demand for housing finance led to some cooling of prices in 2010.

“Nationwide housing prices rose 6% over the year, compared with 11% in 2009 and were fairly flat in the second half of 2009.”

The RBA also said the ratio of dwelling prices to household income was “broadly stable in 2010”.

Qantas to lift airfares as oil costs rose

Airline giant Qantas has warned it will raise airfares as its oil costs continue to rise.

The company said in a statement this morning that fares for domestic and trans-Tasman flights will rise by up to $10 for one-way flights as of March 31. Chief executive Alan Joyce said in a statement the higher fuel prices were a “major concern” for the aviation industry.

“Airlines have a range of options available to them to manage this significant cost… however, the situation today is very different to the last fuel crisis, when the global economic was strong.”

“This time, the world is still emerging from the Global Economic Crisis, and demand is still recovering.”

Australian stocks higher on weak US data

The Australian sharemarket has opened higher today following poor data released from the US revealing the housing recovery is slowing down.

The benchmark S&P/ASX200 index was up by 44 points or 0.96% to 4697.1 at 12.05 AEST, while the Australian dollar was also given a boost to $US1.01.

ANZ shares rose 0.47% to $23.19 as AMP also gained 0.94% to $5.36. NAB rose 0.61% to $24.90, while Westpac gained 1% to $23.26.

On Wall Street, the Commerce Department revealed sales of new single-family homes plummeted by 16.9% to a seasonally adjusted 250,000 annual rate – the lowest point since records began in 1963.

The result prompted fears the housing recovery is not proceeding as expected, fuelling more concerns the overall economic recovery is slowing.

However, the Dow Jones Industrial Average gained 67.39 points or 0.56% to 12,086.82.

ASX defends Singapore merger logic

ASX has said it continues to see the logic in a merger with the Singapore stock exchange, saying that it also needs to be a part of the global merger trend.

“The ASX Board maintains a strong belief in the need to participate in global exchange consolidation and in the business logic of the announced combination with Singapore,” the company said in a letter to shareholders, according to Reuters.

“The recent merger announcements by the London and Toronto exchanges as well as by NYSE Euronext and Deutsche Borse, underscore the dynamic forces driving developments among global exchanges.”