Inflation moved RBA to act on rates, minutes show: Midday Roundup

A “modest easing” was considered appropriate at this month’s Reserve Bank meeting, its minutes reveal, following lower-than-expected inflation data and growing risks of global economic turmoil.

Releasing its policy minutes after cutting the official cash rate by 25 basis points to 4.5% this month, the central bank noted expectations within financial markets that a cut was on the cards.

“The information on inflation over the past two months suggested that there was less inflationary pressure in the economy than had been expected earlier in the year,” the RBA said.

“Information on economic activity suggested that the pace of growth in demand and output outside the resources and related sectors was a little lower than had been expected earlier in the year.

“A more neutral setting would, on this view, be compatible with achieving sustainable growth and inflation consistent with the target over the period ahead.

“On balance, members concluded that it was appropriate for there to be a modest easing in the stance of monetary policy. “

Small business expectations fall to two-year low: ACCI survey

Small business expectations have fallen to a two-year low, according to the quarterly ACCI Small Business survey of almost 1,700 small businesses across Australia.

The survey, which assessed conditions and confidence during the September quarter, found that small business conditions fell by 1.1 points to 41, its lowest level since the March 2009 quarter.

“General small business trading conditions and confidence continued to deteriorate over the September quarter amid the deteriorating European debt crisis and the weakness in consumer sentiment and demand,” ACCI said.

“All the actual and expectation indications for small businesses have fallen below their five-year averages over the quarter.”

Commonwealth announces first-quarter results, warns margins under pressure

Commonwealth Bank has announced its first quarter results delivered cash earnings of $1.75 billion, up from $1.6 billion in the previous corresponding quarter, but warned its margins are beginning to come under pressure.

Chief executive Ralph Norris warned operating conditions are still fragile and that consumer confidence is still being reflected in the lower demand for credit.

“As we indicated at our full year results announcement in August, operating conditions remain challenging,” Norris said in a statement.

“The global economic recovery remains fragile, highlighted by ongoing sovereign debt concerns in the Eurozone and an uncertain growth outlook in the US.”

“While the Australian economy continues to perform relatively well, consumer and business confidence remains fragile, most noticeably reflected in subdued system credit growth.”

The bank’s underlying net interest margin declined in the September quarter due to the bank holding on to more liquid assets, the bank said in a statement, while higher competition and rises in the cost of wholesale funding have put pressure on margins.

Markets open lower on Europe fears

The local sharemarket has opened lower this morning after weak leads from overseas due to fears the European debt crisis may worsen and continue to spread. Investors have become nervous after Spanish borrowing costs increased.

The benchmark S&P/ASX200 index was down 13.7 points or 0.3% to 4290.9 at 12.00 AEST, while the Australian dollar fell to $US1.01c.

AMP shares have risen 0.69% to $4.39, while Commonwealth Bank shares have fallen 1.44% to $49.14, after the bank released its annual results. ANZ shares rose 0.19% to $20.70, as Westpac fell 0.29% to $20.89.

In the United States, the Dow Jones Industrial Average fell 74 points or 0.6% to 12,079.

New vehicle sales rise in October

The number of new vehicles sold in October rose by a seasonally adjusted 1.1%, according to the latest figures from the Australian Bureau of Statistics, delivering a fifth consecutive month of increases.

The figures show sales rose to 88,182 when compared with the previous corresponding month.