Household finances deteriorate during March quarter: Economy Roundup

Australian household finances have continued to deteriorate during the three months to March, with four interest rate rises from the Reserve Bank of Australia increasing pressure on families, according to the latest figures from the Melbourne Institute Household Financial Conditions index.

The index fell by 16.6% to 28.8 points in March from 34.5 during December. It is the first time in four quarters the index has dropped, with low interest rates and stimulus from the Federal Government aiding families over the 12 months.

The survey found people drawing from their savings rose in the March quarter to 12.3% from 9%, while those saving “as a precaution” dropped to 46.2% from 48.4%.

The percentage of households who said they were “running into debt” remained at about 5%, with holiday/travel ranked as the top motivation for saving in 55% of households, up from 50.4% in the December quarter.

”Despite some deterioration in financial conditions, it looks like Australian households are reverting to more typical savings behaviour,” Melbourne Institute research fellow Michael Chua said in a statement.

The Federal Government has said China should allow Australian diplomats to access the trial of four Rio Tinto staff charged with commercial spying.

A spokesperson for the Department of Foreign Affairs and Trade has told AAP and Reuters that some of the hearings will be closed. “At the request of one of the parties and in accordance with Chinese law and procedure, the court has decided that the sessions dealing with the infringement of commercial secrets should be closed,” the spokesperson said.

The case involves four Rio Tinto employees, including Australian citizen Stern Hu, who have been held in Chinese custody for months due to allegations they were illegally obtaining secret information.

Meanwhile, as reported by the Australian Financial Review, Federal treasurer Wayne Swan has moved to play down expectations the May Budget will reveal an improvement in Government revenues.

The publication has reported that Swan said in a closed-off meeting that forecasts by the banks of a recovery in the deficit were “cloud cuckoo land”.

The Government has forecast a return to surplus in 2015/16, but Macquarie released figures this week in which it said the surplus could return by 2011/12.

Shares flat despite good Wall Street lead

The Australian sharemarket has opened flat today despite Wall Street closing to a 17-month high due to positive inflation figures.

The benchmark S&P/ASX200 index was down one point or 0.03% to 4851.6 at 12.15 AEST, while the Australian dollar has continued its rise to US92c after data indicated a higher-than-expected drop in US prices.

Commonwealth Bank shares rose by 0.7% to $56.56, while ANZ shares gained 1% to $24.86. NAB rose 0.2% to $26.88 as Westpac lost 0.3% to $27.25.

Sigma Pharmaceuticals has said it will be unable to pay a second half divided due to the impact of adjustments it has made to company profits.

Instead, the company said it now expects reductions in cashflows due to market pressures, specifically within its generics business.

“The reduction in the expected cashflows combined with changes in Sigma’s estimated cost of capital are likely to result in a material reduction in the carrying amount of goodwill on Sigma’s balance sheet,” the company said in a statement to the ASX.

“These adjustments relate in particular to items such as inventory provisioning and writedowns, redundancy provisioning and licence carrying values… Most of these adjustments are non-cash items.”

BHP chairman Don Argus confirms market volatility in shareholder address

Outgoing BHP Billiton chairman Don Argus has said in a letter to shareholders that the company has continued to remain cautions, but that it is prepared to face uncertain conditions in the market.

“We do remain cautious about the state of the global economy and note the recent International Monetary Fund (IMF) report which highlighted the gap in growth between developed and developing economies,” he said, also taking the chance to attack the Government on new plans to tax miners.

“Governments play a key role in spurring productivity, encouraging investment and fostering international competitiveness,” he said. “It is imperative that the impact of any policy and tax changes of governments around the world on sectors of economies should be well understood and do not hinder investment and the capacity of economies to grow.

Overseas, OPEC minister have reportedly said they will not change output targets this year with demand set to increase over the next 12 months.

“Good demand, reliable supply, beautiful prices – we are very happy,” Saudi Arabian Oil Minister Ali al-Naimi said just before the meeting. He also said oil demand during the second half this year should grow by about one million barrels per day.

In the US, stocks have risen to a 17-month high due to better-than-expected inflation results, supporting the optimism caused by yesterday’s Federal Reserve decision to keep interest rates low for some time. The Dow Jones Industrial Average gained 47.69 points or 0.45% to 10,733.67.