Business confidence increases, Shares up for 11th straight day: Economy roundup

Businesses are gaining some optimism, with confidence now reaching levels similar to before the global financial crisis, the new NAB Quarterly Business Survey shows.

The survey jumped 20 points to -4 in the June quarter from -24 in the first quarter, while business conditions were up 11 points in the second quarter due to better trading and profit results. But NAB said the celebrations may not last for long.

“Overall the survey implies a return to moderate growth in the second quarter – but is likely to be temporary,” NAB’s chief economist Alan Oster said.

“New data in this survey points to a significant jump in both near and longer run business expectations. But while the fear of Armageddon in first quarter results has eased, current expectations for the next 12 months are the lowest since mid-1991 and imply further deterioration in business outcomes and capital spending over the next year.”

Shares rise again

The Australian share market opened flat today despite positive results overnight in the US, where new housing data gave investors optimism about economic recovery. It marks the 11th consecutive day of rises on the market.

The benchmark S&P/ASX200 index was up 23.7 points or 0.57% to 4162.8 at 12.00 AEST. The Australian dollar, however, has experienced better results after reaching a 10-month high of US82c.

ANZ shares gained 1.1% to $17.27, while Commonwealth Bank shares have lost 0.1% to $40.13. Westpac gained 1.2% to $20.46, as NAB gained 1.7% to $22.82.

On Wall Street, US stocks rose late in the day after investors moved into financial shares, while the Dow Jones US home construction index jumped 4.3% as new sales reached an eight-year high, suggesting an imminent recovery in the property sector.

The Dow Jones Industrial Average jumped 15.27 points or 0.17%% to 9108.51.

Centro downgrades property portfolios

Back home, property group Centro has said the value of its Australian and US portfolios has dropped by $2.62 billion in the second half of the financial year.

Its Australian managed property portfolio was at $7.69 billion at 30 June, down from $8.17 billion at the end of December. Additionally, its US managed property portfolio was $US10.08 billion at the end of the 2008-09, down from $US11.81 billion at the end of December.

Australian regulators have said the major banks are paying the lowest rates in the world in order to access the Federal Government’s guarantee for funding.

The Reserve Bank of Australia and the Australian Prudential Regulation Authority have said in a joint submission to a Senate review into wholesale funding guarantees, that similar rated banks around the world are paying much higher fees.

“Given the changes that have taken place elsewhere, the pricing of the Australian guarantee now looks relatively low for AA-rated banks,” the RBA and APRA said in their submission.

ANZ chief economist Saul Eslake has stepped down from his position, with head of Australian economics Warren Hogan to take his place as interim acting chief economist.

“After 14 years as chief economist at ANZ he has established an international reputation for his analysis, insight and uncompromising advice on the economy and economic policy,” ANZ chief executive Mike Smith said.

“Uniquely, Saul’s views are not only sought in the boardrooms of some of the regions largest companies but by the man of the street and government officials and ministers alike. I want to extend my personal thanks to him for his contribution and to wish him every success for the future.”

Rudd says health reforms will cost

Meanwhile, Prime Minister Kevin Rudd has said any reforms to the health system “won’t come inexpensively”.

Rudd is considering the Government’s options regarding the recent report from the National Health and Hospitals Reforms Commission, which recommends a range of options including federal takeover of some of the states’ health responsibilities.

Rudd’s comments come after a report in News Ltd newspapers that the reforms could cost an extra $1,000 to an average income earner’s tax bill, with total reforms possibly costing up to an extra $5.7 billion per year.

“I’m just being very blunt with people: if we want to reform and improve the system, it won’t come inexpensively,” Rudd told the Nine Network. “I fully accept that’s not cheap, I accept that.”

“What I’m also trying to say to the Australian public [is] if we’re going to fundamentally change our health and hospital system and prepare for the next 20 years with an ageing population… then we’ve got to make sure it’s properly funded as well.”