RBA says medium-term outlook demand rate hike, NAB predicts business pickup in 2011: Economy Roundup

The Reserve Bank of Australia has said it raised the official interest rate earlier this month due to stronger commodity prices and a solid outlook for business investment due to lower global risks, in the latest minutes of its monthly meeting.

The RBA said rates were increased for the first time in six months to 4.75% in what it called a “modest tightening” due to the medium-term outlook for the economy.

“Members considered that the arguments were finely balanced. However, with the flow of information over the past month generally suggesting that the medium-term economic outlook remained one of strengthening economic activity and gradually rising inflation, the Board judged that the balance of risks had shifted to the point where a modest tightening of monetary policy was prudent,” it said in a statement.

While the RBA did anticipate that banks would lift variable mortgage rates, the board said that “this tendency would not be lessened by delaying a change in the cash rate”.

“Lending rates had been rising relative to the cash rate since the global financial crisis, and the Board had taken this into account in setting the cash rate. It would continue to take account of any changes in margins in its decisions in the period ahead.”

However, the RBA also said that it will continue to take into account any changes in margins, given lending rates “had been rising relative to the cash rate since the global financial crisis”.

National Australia Bank executive finance director Mark Joiner has said in the company’s annual review that there are good signs that business credit demand will pick up in the second half of 2011.

“Credit spreads have moderated from the same period in 2009, but still remain well above pre-crisis levels,” Joiner said in the review, while banking group executive Joseph Healy said credit growth will move back into play later this financial year.

“The credit environment remains unclear, reflecting economic and political uncertainty, although there are emerging signs of sustained improvement,” Healy said.

“Business credit demand is expected to remain subdued in the short term and improve in the second half of 2011.”

Joiner also added that while NAB had grown its deposit base, it will continue to focus on issuing longer dated debt.

“Looking ahead, we will continue to focus on the development of the Australian franchise, keeping our balance sheet strong, investing in our people, and managing our efficiency and cost agenda in a disciplined way.”

Shares flat after solid Wall Street lead

The Australian sharemarket has opened slightly higher this morning, following a solid night on Wall Street where investors were given a boost in confidence due to higher retail sales.

The benchmark S&P/ASX200 index was down 0.4 points or 0.01% to 4688.5 at 12.00 AEST, while the Australian dollar remained steady at US98c.

Commonwealth Bank shares gained 0.7% to $49.19, as NAB shares lost 0.1% to $26.64. ANZ rose 1.4% to $23.40, while AMP shares lost 0.2% to $5.44.

Gaming machine marker Aristocrat Leisure is now being sued by US company International Game Technology, according to AAP, which has said it filed a patent infringement suit against the company in relation to its gaming devices.

“The lawsuit comes after failed attempts to resolve the IP disputes between Aristocrat and IGT,” IGT reportedly said in a statement.

IGT has said that it “asserts that Aristocrat has wilfully infringed and continues to infringe two patents directed to fundamental capabilities for authentication of gaming software”.

Suncorp-Metway has off-loaded wealth management group Tyndall Investments to Japanese fund manager Nikko Asset Management for $128.5 million.

In a statement, the company said the total potential value of the package was up to $128.5 million, including an upfront payment of $80 million in cash and a $30 million option payment in three years’ time.

“This delivers a strong financial return to Suncorp shareholders, particularly in the context of the flexible arrangements struck with Nikko AM for the management of Suncorp’s funds,” Suncorp Life chief executive Geoff Summerhayes said in a statement.

“This transaction continues the simplification of the life business which will see us focus on life insurance, complemented by superannuation and investments.

Executives leave Oz Minerals

Two executives have said they will leave mining group OZ Minerals at the end of the year, and their roles will not be replaced.

The company said that executive general manager Mick Wilkes will move to OceanaGold Corporation as chief executive, while current executive general manager of products John Nitschke will also be leaving the company.

“With this solid foundation in place, we can have a flatter management structure that reflects the current single-mine nature of the company,” OZ Minerals managing director and chief executive officer Terry Burgess said in a statement.

Meanwhile, overseas, the American stock market has gained some ground after official data showed retail sales grew higher than expected during October, with sales up 1.2%. The Dow Jones Industrial Average grew 77.58 points or 0.69% to 11,270.16.