Increased first home owners grant may end, IMF predicts severe recession: Economy roundup

Prime Minister Kevin Rudd said that the increased first-home owner grant may not be extended beyond the 30 June deadline.

“The first home owner’s boost, as you know, we have indicated that will conclude within a very fixed and finite time frame,” he said this morning. 

“It’s had strong useful results so far, but I have got to say all good things must come to an end.”

The grant was increased from $7000 to $14,000 for existing homes and from $14,000 to $21,000 for new homes.

IMF tips terrible recession

More bad news from the International Monetary Fund, which has announced that it has reduced growth forecasts for major countries and has urged governments to take action to speed recovery.

In its latest World Economic Outlook report, the IMF said that the global economy will contract by 1.3% this year, which would make the crisis the largest post-war recession.

It has said that the Australian economy is expected to contract by 1.4% this year, with unemployment to rise to 7.8% during 2010 – but still under the 9.3% number given to a number of advanced nations.

While global growth is expected at 1.9% next year, the IMF says recovery depends on measures introduced by governments to shore up the troubled financial system.

“The longer this goes on, the longer and the deeper will be the recession,” IMF chief economist Olivier Blanchard said in a news conference.

Federal Treasurer Wayne Swan has reacted to the report, saying it spells bad news for next month’s budget.

“The IMF’s bleak assessment does present the most challenging backdrop to an Australian budget in living memory,” Swan said. “It paints a bleak outlook for the economy and certainly a very tough backdrop for the forthcoming budget.

“I think [the report] gives you a measure of the magnitude of this very sharp global contraction.”

Shares gain ground

Meanwhile, the Australian sharemarket has opened higher today despite a dip on Wall Street. The benchmark S&P/ASX200 index was up 37.3.points or 1.02% to 3705.5 at AEST 12.15. The dollar remained steady at US70 cents.

Commonwealth Bank shares have dropped 0.2% to $36.41, as NAB gained 1.5% to $21.41. Westpac jumped 0.7% to $20.12, while AMP lost 0.6% to $5.21.

The country’s largest wholesale fuel supplier Caltax says the remaining year will be challenging, but the company remains optimistic.

“Global economic factors are expected to make 2009 a challenging year for most of the Australian business community,” Caltex chair Elizabeth Bryan told the company’s annual general meeting today.

“At Caltex, because of our good start to the year, we remain cautiously optimistic,” Bryan said, saying lower fuel prices and the Australian dollar have helped the company.

The company reported $97 million in profit for the first quarter, up from $87 million last year. Shares in the company jumped 2.66% to $9.64 after the announcements.

Job advertising and employment services group SEEK has launched a $100 million capital raising, saying it will pay $14.5 million for the remaining half of Think Education Group and pay down debts.

Lion Nathan takeover

Overseas, Japanese brewery Kirin Holdings has launched a takeover bid for Lion Nathan, in a deal worth $2.4 billion. Lion Nathan has requested a trading halt after it began talks with the Japanese company, with shares last trading at $8.31.

“This confidential approach relates to an indicative, non-binding, conditional and confidential proposal for Kirin to acquire all the outstanding shares in LNN (Lion Nathan) not currently owned by Kirin,” Lion Nathan said in a statement on Thursday.

“LNN intends to establish an independent board committee to clarify and confirm the details of the proposal on behalf of LNN’s minority shareholders,” Lion Nathan said.

Lion Nathan, which owns beer brands such as Tooheys and XXXX, recently failed in a $4.9 billion bid to purchase Coca-Cola Amatil. Kirin currently holds a 46.13% share in the company.

Overseas, Wall Street dropped on new fears about the viability of the banking sector. The Dow Jones industrial Average dropped 82.99 points, or 1.04%, to 7886.57.

Meanwhile, MySpace co-founder Chris DeWolfe will not renew his contract with NewsCorp and will step down as chief executive, NewsCorp said in a statement.

The company said that while DeWolfe will continue to serve on the board of MySpace China as a strategic adviser, the decision to leave was reached “by mutual agreement”.