Economists expect RBA to keep rates on hold in April: Economy Roundup

Economists expect the RBA to keep rates on hold in April following the release of the minutes of the Bank’s March meeting.

While the minutes painted an upbeat picture of the Australian economy, uncertainty in global markets and concerns about house lending are likely to stay the RBA’s hand.

“I certainly don’t think there’s any indication in these minutes that they’ll move in April,” ICAP senior economist Adam Carr told AAP.

The RBA board said that overall, recent data across the globe has shown the pace of expansion is recovering, especially in Asia. While data from the US has been mixed, and recovery in Europe remains weak, there has been continuing evidence of strength in bank lending and asset markets in China.

Domestically, the board has said economic conditions have remained strong with business conditions at “fairly high levels”.

“A significant amount of data had become available since the previous meeting, including two months of data on both retail sales and building approvals, an additional month of data on employment, and various pieces of information feeding into the December quarter national accounts. Overall, this data has tended to be quite firm.”

“In Australia, company profits for the second half of 2009 had been up strongly in headline terms relative to the corresponding period in 2008, owing to fewer asset write-downs. Underlying profits, however, had fallen by about 7%. Profits of resources companies had fallen by nearly 30%, but these had been mostly offset by rises in the financial sector.”

Overall, the board found that economic conditions in major western economics remain soft, but Asian growth is emerging and that domestically, “most economic indicators continued to point to a strengthening in economic activity”.

“Data suggested that the labour market had continued to firm, consumption spending had held up reasonably well overall and a pick-up in dwelling activity was under way. Indications were that the mining sector would, on balance, provide a significant boost to the Australian economy over a number of years.”

“Members noted that the staff forecasts showed that economic activity would grow at around trend rates over the next couple of years. Indeed, some recent indicators suggested that growth might already have been running at or close to trend for a few months.”

Shares higher despite flat Wall Street

The Australian sharemarket has opened slightly higher today, following a weak lead on Wall Street and poor performances from commodities markets overnight.

The benchmark S&P/ASX200 index was up 10 points or 0.21% to 4794.2 at 12.15 AEST, while the Australian dollar has opened slightly lower to US91c.

ANZ shares have gained 0.6% to $24.16, while Commonwealth Bank shares have gained 0.4% to $55.85. Westpac has risen 0.8% to $26.85, as NAB has gained 0.1% to $26.85.

Shares in Seven Network Holdings have been placed in a trading halt following an incident this morning involving a judge reading out part of its scheme arrangement with WesTrac aloud this morning in court.

“During the court hearing the judge read out parts of the scheme booklet including valuation ranges determined by the independent expert appointed by Seven in respect of the transaction,” Seven said in a statement.

“We consider this information is materially price sensitive to Seven shares and TELYS3, which should not be permitted to trade until the market has the benefit of all the information in the scheme booklets.”

As reported by The Age, mining giant Rio Tinto is currently in discussions with Chinalco in order to develop the Simandou iron ore project in Guinea at a cost of $13.1 billion.

A deal between the two companies would mark a significant improvement in relations after a deal between the two failed last year. The report has cited Rio Tinto as pointing to comments from chief executive Tom Albanese regarding possible deals.

A report in the Australian Financial Review has claimed investors with cash in frozen property funds will be able to apply for redemptions due to a new ruling from the Australian Securities and Investment Commission.

ASIC has said that fund managers will be able to make rolling withdrawal offers to unit holders in regards to unlisted property trusts. It is expected about 250,000 investors are involved in either mortgage or property funds, many of which are frozen.

LNG extends heads of agreement

Liquefied Natural Gas has extended heads of agreement with Arrow Energy regarding the sale of the Fisherman’s Landing project in Gladstone in order for the company to consider alternative partners.

Both companies have extended the HOA until June 30, with amended provisions, and the arrangement is now non-exclusive with the possibility of termination by either party at one day’s notice.

LNG has said it can “freely explore all gas supply opportunities and project structure options with other parties”.

Overseas, Wall Street stocks remained flat with worries over tightened credit in China negating improvements in industrial production. The Dow Jones Industrial Average gained 17.46 points, or 0.16%, to 10,642.15.