Inflation gauge “reality check” suggests inflation running at 3.5%: Economy Roundup

A private gauge of inflation forecasts a rate increase of 0.5% in May to an annual pace of 3.5%, well outside the Reserve Bank of Australia’s target band of 2-3%.

The TD Securities-Melbourne Institute said today its gauge of consumer price inflation rose 0.5% after a 0.4% increase in April, with the gauge now at its highest annual rate since October 2008.

“This contemporaneous inflation report is a welcome reality check to the current fear-mongering in the financial markets and media,” TD senior strategist Annette Beacher said in a statement.

“While there is a need to be aware of ongoing negative offshore headwinds, clearly domestic price pressures must steady the RBA’s hand for now.”

The biggest contributors to the change in the inflation gauge were price increases in tobacco, caused by the 25% tax introduced by the Government, along with increases for automotive fuel and financial services.

The were price falls recorded for fruit and vegetables, holiday travel and accommodation, along with sport and other recreation prices.

The data comes as the Reserve Bank of Australia prepares to meet tomorrow to decide whether another interest rate rise is necessary. Analysts predict a pause due to the impacts previous rate rises have had on consumer confidence.

The Takeovers Panel has declined to conduct any proceedings over CP2’s application to prevent a Transurban rights issue, saying the firm’s proposed capital raising did not make up a “frustrating action”.

“The proposals did not constitute genuine potential offers such as to make the rights issue a frustrating action and, even if they did, the actions of the Transurban board did not constitute a frustrating action,” it said in a statement.

“Accordingly it considered that there was no reasonable prospect that it would declare the circumstances unacceptable.”

The Federal Opposition will push for a Senate estimates hearing to ask the Government about its $38 million advertising campaign promoting the super profits tax.

The Government is facing criticism due to its act of giving itself an exemption from limiting the use of taxpayer-funded advertising for some political purposes.

“But this is a campaign directly aimed at… a particular sector of Australian society,” Senate leader Eric Abetz told ABC Radio.

Shares flat after poor week for Wall Street

The Australian sharemarket has opened flat today, taking its lead from Wall Street last Friday where stocks dropped 1% to end the Dow’s worst month in a year.

The benchmark S&P/ASX200 index was down 19 points or 0.43% to 4438.3 at 12.10 AEST, while the Australian dollar also fell to $US84c.

ANZ shares dropped 0.4% to $22.44, as Commonwealth Bank shares lost 1.6% to $51.27. Westpac lost 1.1% to $23.14 as AMP lost 0.9% to $5.60.

Boral chairman Ken Moss has retired from his position and will be replaced by Wesfarmers chairman Bob Every from tomorrow, June 1.

“He has provided wise counsel during the past decade to his fellow non-executive directors as well as to Boral’s executives, and Boral has benefited greatly from his leadership,” Every said in a statement. “I wish Ken all the very best for the future.”

Meanwhile, Westpac has reached an agreement with a union to raise pay by at least 2% in 2010 and by 4% in 2011.

The Finance Sector Union covers 26,000 at Westpac Bank, but does not cover employees working at ST George or Bank SA. The agreement will be put to an employee vote.

Meanwhile, chief executive of Rio Tinto, Tom Albanese, told Sky News yesterday the company will soon release its own “verified numbers” in order to battle against the Government’s proposed super profits tax.

“We continue to pay a lot of taxes, we continue to pay a lot of royalties,” he said, adding that the company would release “audited, externally assured… very precise… numbers (that) will show that we pay our fair share of taxes and royalties.”

“These are all now at risk for what is not just a change in the tax rate, this is half of our balance sheet at risk because we have someone now coming in to say: ‘I want to be your silent partner, I want 40% of your pre-tax profits and largely written-off assets’.”

Lihir Gold makes downgrade for African mine

Lihir Gold has downgraded its ore reserves and mineral resources at the Bonikro mine in Cota D’Iovoire, with the company saying depletion and an increase in the gold price assumption were factors in the decision.

“This is a good outcome for the Bonikro operation and underpins its value prior to the completion of the expansion feasibility, and we expect the current drilling program to further enhance the resource base by year end,” Lihir chief executive Graeme Hunt said in a statement.

Healthscope has reportedly received two more takeover offers valuing the company at over $1.8 billion.

The company said in a statement it will use the same criteria it used to address the initial proposal received last week, and said it could take several weeks to evaluate the offer.

“The due diligence process may or may not result in an offer for the company or a recommendation by the board,” the company said.

“If it does not, the board believes that Healthscope has a very attractive independent future, and that the company is well positioned to continue to deliver strong growth.”