Small Loans Easy Money News

Wed, 2 May 2007
Interest rates on hold: reprieve for homeowners
In a boon for the nation's mortgage belt, the Reserve Bank decided at its quarterly meeting on May 1 to leave the official cash rate unchanged at 6.25 per cent. The Reserve Bank's decision followed the publication of a much lower than expected March-quarter consumer price index, which showed inflation rose just 0.1 per cent for the quarter and 2.4 per cent for the year. This was well within the Reserve Bank’s target of 2-3 per cent. In a rare show of consensus, many economic forecasters are now predicting a further easing in inflation and most believe interest rates will stay on hold for the rest of 2007, particularly given the impending federal elections.

Tue, 05 January 2010
Debt no problem till credit tap turned off
In the aftermath of the financial crisis that rocked the globe, Australians have taken spending to a new height, plunging the nation into record levels of debt.

New Reserve Bank figures show Australian debt, at $1.2 trillion, has surpassed American levels for the first time.

The figures show household debt - the combination of personal and mortgage debt - is equivalent to Australia's GDP, which drops every adult in an average of $74,000 debt.

The executive director of the Australian Financial Counselling and Credit Reform Association, Fiona Guthrie, says thousands of people are in serious financial difficulty.

"Some are losing their homes, having cars and households goods repossessed or facing bankruptcy," she said.

"The numbers are here to prove this: record bankruptcies, record mortgage stress and record waiting lists in financial counselling agencies."

Debt adviser Dominique Grubisa says most people go into the red because the sheer availability of credit, especially in the lead-up to the financial crisis, allows people to spend well beyond their means.

"Most people get into debt when it's easy and everyone's throwing money at you, when credit is on tap," she said.

Ms Grubisa says people tend not to worry about debt levels until their lives hit a snag, such as a job loss.

"When times are good, nobody worries about it ... you can always just get another credit card to pay off the existing one," she said.

"But it's like you're playing musical chairs and then the music stops."

One consumer contacted by the ABC had almost $25,000 in personal debt and was worried about meeting repayments.

"I have no income at the moment, which means I'm pretty worried," she said.

Credit cards proved too tempting for another consumer, who revealed she had "about $11,000" in credit card debt.

"I racked up $17,000 in one year when I was 23," she said.

"It used to stress the sh*t out of me, but it's under control now."

But credit cards and personal loans are not solely responsible for the nation's debt.

Cath Smith, the head of the Victorian Council of Social Service, says high mortgage repayments are to blame for the bulk of the debt.

She says even households renting are often under severe financial strain.

"We've got a million Australians living in housing stress ... their rents have gone up to such a ridiculous amount," she said.

One consumer contacted by the ABC revealed they were in "a couple, maybe a few, hundreds of thousands of debt" after buying a house.

"It is a house of cards," he said.

"I have grown used to, and addicted to, debt. But I am not worried."

Cutting down debt

So how do we go about reigning in that debt?

Common debt reduction strategies include making a weekly budget, consolidating loans, keeping a diary of expenditure and attending financial counselling.

Creative strategies advise the cutting up or freezing of credit cards, selling unused items online and cutting out the daily latte.

Ms Guthrie says the most important thing is for people in financial difficulty to get help early.

"The longer we put off dealing with debt, the harder it is to get it back in control," she said.

"What worries us is that people in financial difficulty will turn to high cost pay day lenders or debt advice companies that charge a fee, rather than seek out a trained financial counsellor, who will act in their best interest.

"Many consumers in financial difficulty don't know that they can contact their bank and ask to speak to someone in the hardship team, rather than collections.

"Banks will consider reduced repayments and may waive interest or fees, or even part of the debt.

Ms Grubisa says many people forget they also have legal options.

"People have many legal tools available to them to help them cope with debt," she said.

"There is a uniform Consumer Credit Code that is the same in each state.

"Under the code, a credit tribunal has the power to help ... to freeze debts, enter into arrangements or change the contract by cutting out interests and charges."

Ms Grubisa says people should not hesitate to journey down the legal alley.

"A lot of people have the mind set that legal options are all in the creditor's favour, but there are actually a lot of laws designed to help the consumer," she said.

Fri, 08 January 2010
Print Email Share Add to My Stories WTO chief says world recovery not guaranteed in 2010
The world economy may not emerge out of crisis in 2010 due to "bubbles" created by the huge injections of money used to keep the financial system operating, World Trade Organisation (WTO) chief Pascal Lamy said Friday.

"You have to be realistic, it is not guaranteed," the WTO director general said on French radio when asked whether the world economy would recover in 2010.

"There is no doubt we have reached the bottom of the pool, but the speed at which we are coming up again is not clear.

"In flooding the economic and financial system with public money we have also created bubbles which will have to be absorbed."

Governments around the world have spent trillions of dollars over the past 18 months avoiding the collapse of the financial system and then trying to claw away from recession.

The WTO chief highlighted the dynamism of the emerging economic powers - China, Brazil, India and South Africa - in avoiding the worst of the crisis.

"These are the more dynamic, better run, less indebted countries," Mr Lamy said.

"These are the countries which are from a certain point of view better run than the western economies."

Fri, 08 January 2010
WTO chief says world recovery not guaranteed in 2010
The world economy may not emerge out of crisis in 2010 due to "bubbles" created by the huge injections of money used to keep the financial system operating, World Trade Organisation (WTO) chief Pascal Lamy said Friday.

"You have to be realistic, it is not guaranteed," the WTO director general said on French radio when asked whether the world economy would recover in 2010.

"There is no doubt we have reached the bottom of the pool, but the speed at which we are coming up again is not clear.

"In flooding the economic and financial system with public money we have also created bubbles which will have to be absorbed."

Governments around the world have spent trillions of dollars over the past 18 months avoiding the collapse of the financial system and then trying to claw away from recession.

The WTO chief highlighted the dynamism of the emerging economic powers - China, Brazil, India and South Africa - in avoiding the worst of the crisis.

"These are the more dynamic, better run, less indebted countries," Mr Lamy said.

"These are the countries which are from a certain point of view better run than the western economies."

Wed, 13 January 2010
Beware of financial leeches
INSTEAD of sucking your blood, financial leeches suck your cash and can suck the life out of your relationship with them.

They might be a mate who always disappears when it’s his shout at the pub, the adult child who keeps coming back to mum and dad for money long after they’ve started their own family, or the cousin who comes to stay for a few days and it turns into many freeloading months.

Dealing with financial leeches can be tricky, but it is important to remove them as quickly as you can. There might be some initial pain, but the alternative can be much worse.

Here are a few tips.

Talk to them. Confrontation may not be your forte, but often bringing your concerns to their attention will force them into action. If talking about the problem destroys the relationship, perhaps the relationship is much weaker than you may have thought.

Suggest ways that they can help themselves and be clear that you can no longer be there. If you set a deadline for change, make sure you stick to it.

Another, more subtle, way of cutting off a financial leech includes making their parasitic life as uncomfortable as you can: “Oh, we’ve run out of milk, have we? I bought the last lot”.

Embarrassing them into action can be a powerful – if crafty – tactic, but it won’t work with everyone.

If you have bitten by a financial leech, remember that you are not alone. There are many different ways to deal with them, but the key to overcoming the problem will always be communication



Mon, 18 January 2010
JPMorgan reports huge profit rise
JPMorgan Chase has opened the earnings season for banks a hefty jump in profits, highlighting renewed health in a sector under intense scrutiny for its pay practices. The New York-based financial giant, the second largest bank in the US by assets, quadrupled its fourth quarter net earnings to $US3.27 billion ($3 billion) and doubled its profits for the full year to $US11.7 billion. The results reflect new vigour in the industry after more than a year of crisis, but were expected to fuel public resentment over hefty profits and compensation in a sector bailed out by the government. Much of the US economy continues to struggle and unemployment remains high. JPMorgan's chairman and chief executive, Jamie Dimon, said in a statement he is "gratified" by the results but laments that they "fell short of both an adequate return on capital and the firm's earnings potential." "While we are seeing some stability in delinquencies, consumer credit costs remain high, and weak employment and home prices persist. Accordingly, we remain cautious," he said. The profit for the quarter amounted to 74 cents a shares, better than the 62 cents expected by analysts.

Mon, 25 January 2010
Mortgage funds still struggling
THE embattled mortgage fund industry, which holds about $25 billion of frozen investor funds, will be forced to restructure following the financial crisis if it is to attract investors, according to analysts.

Fourteen months after the federal government guaranteed bank deposits, which sparked a run on mortgage funds, the sector has shrunk as existing investors capitalise on limited withdrawal windows while new investors shun the sector, reports The Australian.

Ratings agency Morningstar spokesman Phillip Greg said mortgage fund managers would need to better educate investors about the nature of funds.

Many investors were angered to discover their funds were "illiquid'' when they rushed to withdraw funds amid the financial downturn.

"A number of providers are looking to change the way they handle the mismatch between people who want to be able to get money out immediately and those who are willing to enter into fixed-term investments,'' Mr Greg said.

He said the fallout from the mortgage fund freeze meant funds would probably be forced to draw a clearer distinction between funds that were liquid and those that were not.

Currently, most funds were largely illiquid but offered redemption facilities that were forced to be withdrawn when markets soured.

Highlighting the pressure on the sector to reinvent itself, one of the nation's biggest mortgage fund managers, Colonial First State, has said the size of its funds under management has slumped to $2.5 billion, down from $3.3bn at the time the government bank deposit guarantee was introduced.

That softening is believed to be echoed across the sector.

Zenith Investment Partners senior investment analyst Dug Higgins said it would take three to five years for investor sentiment to recover in the sector.

"People have had a fairly bearish experience and that tends to prompt them to stay out of the market for a while,'' Mr Higgins said.

"Some people will gradually come back to the sector, while some will never return.''

Colonial was this week forced to revoke an earlier partial redemption offer to investors in its $850 million mortgage income fund after a $20m loan it had made became a potential bad debt.

Tue, 02 February 2010
RBA to lift interest rates
The Reserve Bank is expected to lift interest rates for the fourth time in five months when it meets today.

There is consensus among economists that the RBA will increase the cash rate by 25 basis points to 4 per cent.

Another increase today would be unprecedented but economists say it needs to be put in context, as rates were slashed in a similar fashion from late 2008.

Analysts say recent strong economic data is likely to encourage the central bank to stand firm, despite renewed global market concerns.

National Australia Bank chief economist Alan Oster says rates are likely to remain on hold for a while after today's expected increase.

"I think really the Reserve Bank doesn't want to be known as the central bank that killed an unkillable economy," he said.

"I think they'll want to sit back and watch for a while. So really what the Reserve Bank is doing is, in a measured way, it's trying to get rates back to something closer to normal."

Fri, 05 February 2010
RBA flags further rate rises
The Reserve Bank expects it will need to impose another three increases in the official interest rate by the end of this year to reduce inflation as the Australian economy strengthens.

The RBA has increased its forecast for economic growth in Australia, expecting a faster pace over the next two years.

Underlying inflation is forecast to moderate despite the growth, but only once the central bank lifts the cash rate - the interest rate lever used to set monetary policy - in line with current market expectations.

This implies that the Reserve Bank will impose at least another three interest rate rises of 25 basis points, pushing the cash rate up to 4.5 per cent by the end of the year.

In its latest quarterly statement on monetary policy, the RBA increased its forecast for Gross Domestic Product (GDP) over the year to June 2010 from 2.25 per cent to 2.5 per cent, and over the year to June 2011 from 3.25 to 3.5 per cent.

The RBA's inflation forecasts have also been tweaked. It has revised up its underlying inflation forecast over the year to December from 2.25 per cent to 2.5 per cent.

But this is well below the current underlying inflation rate of about 3.25 per cent and the forecast puts both headline and underlying inflation within the RBA's target range.

It says it is possible, however, that the stronger-than-expected performance of the economy over the past few quarters is largely accounted for by bringing forward spending, in which case economic growth will be softer this year as the effects of fiscal and monetary stimulus fade.

But the RBA appears to think it more likely that firmer labour markets, with rising household incomes and wealth, will encourage spending and consumption.

The central bank's monetary policy statement says an improved outlook for the resources sector with higher commodity prices is also likely to bolster economic growth and this is "clearly not due to temporary policy factors".

But the Reserve Bank is more cautious about the outlook for the international economy.

Although it says the outlook for the global economy is much better than feared in the early part of last year - with global growth forecasts revised up to 4 per cent in the next two years - it highlights a series of risks.

Among them is the the durability of the recent economic recovery in the major advanced economies.

"In many of these countries current growth rates are being boosted by the dynamics of the inventory cycle and temporary fiscal measures," the Reserve Bank noted.

"For a sustained recovery to take hold, a substantially stronger pick-up in private demand than has been evident to date will be required.

"Many of these countries also face very significant fiscal challenges that will need to be addressed over time and have bank systems that are still experiencing credit losses from the weak economic conditions."

Coupled with mounting concerns about government debt in southern European countries such as Greece, Spain and Portugal, these global risks may make the RBA board cautious about lifting rates too quickly.

Australia's unemployment has probably peaked at 5.75 per cent, according to the RBA.

But it says it is more likely that the recovery in the labour market in coming months will take the form of an increase in work hours rather than further big falls in the unemployment rate.



Mon, 15 February 2010
Bendigo Bank profit doubles, shares surge
The Bendigo and Adelaide Bank says it is cautiously optimistic about its future financial performance.

The regional lender has announced that its first-half net profit doubled to $104 million for the six months to December.

It says it plans on paying an interim dividend of 28 cents a share.

The bank's managing director, Mike Hirst, says the strong result can be attributed to its low-risk balance sheet and resilience through the global financial downturn.

"We are cautiously optimistic about what the future holds," he told investors.

"We have been able to restructure the business to make sure that it is sustainable, our point of difference continues to support that sustainability, so we think that in the near term the sorts of results we've produced today are certainly repeatable."

Bendigo and Adelaide Bank shares rose 4.2 per cent to $10.32 by 12:17pm (AEDT).



Fri, 26 February 2010
Business investment surge highlights economic recovery
There has been a much bigger than expected rise in the value of business investments in Australia over the December quarter.

Over the final three months of last year, total capital expenditure increased by 5.5 per cent compared to the September quarter, to $24.74 billion in seasonally adjusted terms.

Most economists had been expecting a rise of only 1.5 per cent.

Figures from the Australian Bureau of Statistics show the strong result has been driven by a 12.4 per cent surge in spending on equipment, plant and machinery to more than $15 billion.

The senior economist at Macquarie Group, Brian Redican says the Federal Government's tax break for small business drove a big rise in commercial vehicle sales during the quarter.

"Firms really did upgrade their forecasts for spending in the current financial year and a lot of that is in plant, equipment and machinery which does include motor vehicles," he said.

"So that both explains the strength of spending at the end of 2009 and the overall resilience of investment spending in the current financial year."

Mr Redican says the surprisingly strong data increases the chance of an interest rate rise at next Tuesday's Reserve Bank board meeting.

"I think the clear implication for policy makers is that Australian growth will remain very strong over the next couple of years and that should give policy makers a lot of confidence in the resilience of the economy," he said.

"And it really does mean that we don't need those lower interest rates as much as we did in the past.

"So basically it'll make policy makers more confident to keep on raising interest rates."

On an annual basis, total capital expenditure is down 2.3 per cent in seasonally-adjusted terms from the December quarter of 2008.



Fri, 05 March 2010
US Treasury official says the too-big-to-fail guarantee does not exist
THERE is no US government guarantee to protect the largest financial firms, a Treasury Department official said, as a congressional watchdog criticised the $US45 billion ($50bn) in government aid provided to Citigroup.

Herbert Allison, who oversees the Treasury's $US700bn financial-rescue plan, disagreed with members of a congressional oversight panel that some financial firms benefit from the assumption that the government would step in to prevent their failure.

"There is no too-big-to-fail guarantee on the part of the US government," Mr Allison said.

Elizabeth Warren, who chairs the five-member Congressional Oversight Panel, said it was clear that financial markets do assume the guarantee exists, pointing to a recent ratings-company report that specifically noted the government's role in backing Citigroup.

"The market clearly perceives that there is a too-big-to-fail guarantee," Ms Warren said. "That gives Citi an advantage in raising capital. ... That is very valuable to Citi."

Start of sidebar. Skip to end of sidebar.

End of sidebar. Return to start of sidebar.

Panel members locked horns with Mr Allison over his reluctance to answer some questions, primarily regarding the health of Citigroup when the government injected capital into the bank in late 2008.

Panel member Damon Silvers, pressing Mr Allison on whether the bank was at risk of failure at the height of the financial crisis, said it was "extraordinary that it is not possible to have a straightforward conversation."

"I do not understand why it is that the United States government cannot admit what everyone in the world knows, which is that in that week that Citigroup was a failing institution," Mr Silvers said.

Mr Allison did acknowledge that many banks, including Citigroup, "were on the brink of failure had the system had not been underpinned" by government actions.

The US government currently holds a $US25bn stake in Citigroup after the bank partially repaid the taxpayer assistance last year.

Mr Allison said the Treasury intended to dispose of its current investment in the bank "as rapidly" as possible over the next year.

Pressed by the panel, he also said the US government had no plans to invest any more money in the bank.

Citigroup chief executive Vikram Pandit, also appearing before the panel, said the bank owed a "large debt of gratitude" to taxpayers for aiding the firm.

"Taxpayers still hold 27 per cent of our common stock, and we look forward to helping them make money on that investment," Mr Pandit said.

Mr Pandit echoed Mr Allison, saying the bank has no plans to request more government funds.

When asked whether the bank or any of its businesses are currently insolvent, he said "no."

He said the company is currently "well capitalised" and would pass the government-ordered stress tests if they were run again today.

Mr Pandit also embraced some of the Obama administration's top regulatory overhaul proposals, including new protections for consumers and limits on banks' ability to engage in proprietary trading.

"Banks should not be speculating with banks' capital," Mr Pandit said, reiterating that such trading is not a big part of Citigroup's business.



Wed, 10 March 2010
Single-person homes may replace Aussie dream
A new report says the Australian dream of owning a three-bedroom house on a quarter-acre block is a thing of the past and that smaller homes for singletons must be built.

A housing supply report to be released officially next month predicts the number of single-person homes will account for one third of Australia's housing supply within 20 years.

A few key findings were revealed today at an urban developers' conference in Sydney.

The report says not enough homes are being built in Australia to cope with population and lifestyle changes.

According to the National Housing Council (NHC), there will be a dramatic rise in the number of homes from 8.5 million to just under 12 million by 2029.

More people will choose to live in the city, with Sydney, Perth, Melbourne and Brisbane the preferred capitals.

NHC chairman Dr Owen Donald says the number of single-person households will almost equal the number of family homes.

"These days the younger people are partnering later and those partnerships are not lasting as long, so there are more single people in the population," he said.

Dr Donald says the types of homes being built now will not be viable in the future and developers will need to innovate, otherwise there will be a housing price blow-out.

"The people that we worry about of course are those on lower incomes," he said.



Thu, 18 March 2010
RBA to hold interest rates steady in April - economists
THE central bank is likely to keep interest rates on hold in April due to uncertainty surrounding the most recent housing lending figures, economists say.

Minutes from the March Reserve Bank board meeting reveal that central bankers decided to increase the cash rate to 4 per cent in early March in response to two months of data suggesting the economy might be growing at or close to trend.

But board members expressed concern that the fallout from the Greek financial crisis might have implications for the Australian economy, the minutes of the RBA's March 2 board meeting say.

"I certainly don't think there's any indication in these minutes that they'll move in April," ICAP senior economist Adam Carr said.

"Given the sharp drop in home lending I almost certainly think they won't move in April."

Australian housing finance commitments for owner-occupied housing fell 7.9 per cent in January, seasonally adjusted, to 51,056, the Australian Bureau of Statistics (ABS) said last week.

Start of sidebar. Skip to end of sidebar.

Related CoverageRBA: Concern over Greece End of sidebar. Return to start of sidebar.

Economists had expected the number of owner-occupier housing finance commitments to have risen by 2.0 per cent in January.

Mr Carr said at its last meeting the RBA noted that home lending had only slowed a little.

"That was prior to the home lending data and as we've subsequently seen there's been a very sharp drop and I think that will be enough to spook them and certainly it should spook everyone."

He said the home lending data, to the extent that it is accurate, suggested a slower pace of monetary tightening is required.

"Certainly the RBA can sit back for a month to see what's going on."

He said the rest of the RBA minutes were "bullish" on domestic growth, with question marks still hanging over the US and the UK.

"But they don't think the issues, particularly the fiscal issues in Europe, warrant a pausing at this stage because they're of the opinion that we're not going to see a marked slowing of global growth as a result of those issues."



Thu, 18 March 2010
RBA to hold interest rates steady in April - economists
THE central bank is likely to keep interest rates on hold in April due to uncertainty surrounding the most recent housing lending figures, economists say.

Minutes from the March Reserve Bank board meeting reveal that central bankers decided to increase the cash rate to 4 per cent in early March in response to two months of data suggesting the economy might be growing at or close to trend.

But board members expressed concern that the fallout from the Greek financial crisis might have implications for the Australian economy, the minutes of the RBA's March 2 board meeting say.

"I certainly don't think there's any indication in these minutes that they'll move in April," ICAP senior economist Adam Carr said.

"Given the sharp drop in home lending I almost certainly think they won't move in April."

Australian housing finance commitments for owner-occupied housing fell 7.9 per cent in January, seasonally adjusted, to 51,056, the Australian Bureau of Statistics (ABS) said last week.

Start of sidebar. Skip to end of sidebar.

Related CoverageRBA: Concern over Greece End of sidebar. Return to start of sidebar.

Economists had expected the number of owner-occupier housing finance commitments to have risen by 2.0 per cent in January.

Mr Carr said at its last meeting the RBA noted that home lending had only slowed a little.

"That was prior to the home lending data and as we've subsequently seen there's been a very sharp drop and I think that will be enough to spook them and certainly it should spook everyone."

He said the home lending data, to the extent that it is accurate, suggested a slower pace of monetary tightening is required.

"Certainly the RBA can sit back for a month to see what's going on."

He said the rest of the RBA minutes were "bullish" on domestic growth, with question marks still hanging over the US and the UK.

"But they don't think the issues, particularly the fiscal issues in Europe, warrant a pausing at this stage because they're of the opinion that we're not going to see a marked slowing of global growth as a result of those issues."



Tue, 23 March 2010
Westpac to charge interest on credit card fees and interest charges
WESTPAC customers are about to be slugged interest on their interest.

The bank - which is already making about $18 million a day in profit - has written to hundreds of thousands of credit card holders that from June "interest will also apply to interest charges and fees on your credit-card account".

In applying the new charges, the nation's second-largest financial institution seems to have learnt nothing from a recent roasting it received for lifting rates well beyond the Reserve Bank.

"I think interest on interest is sneaky," Choice spokesman Christopher Zinn said last night.

But Westpac defended the move, saying it only had a tiny effect on balances.

A spokeswoman said that a customer with an average balance - about $3600 - would only pay an extra 67c a month in interest. Such a customer already paid about $72 a month in interest.

Start of sidebar. Skip to end of sidebar.

Related CoverageFees: Shoppers turn to Woolies End of sidebar. Return to start of sidebar.

The move applies to all Westpac cards.

The spokeswoman said half of the bank's customer base would be unaffected because they pay their balance in full each month.

Westpac's action bucks a trend towards better-value banking that has seen the removal of some of the worst and most rapacious lenders' fees and charges.

But Westpac's spokeswoman defended the hike: "We are only bringing our approach into line with industry practice.

"It's not a huge difference and it's no different to how any of the other banks do it."

In the more competitive UK bank market and in Canada, lenders do not charge interest on interest. A spokeswoman for NAB said while it did charge interest on interest, it did not charge interest on fees, as Westpac will.

Mr Zinn said: "This is one of those things that makes it very hard to compare cards and know what the interest rate is. The headline rate is not really meaningful because there are different ways of calculating interest."

Last month, Westpac chief executive Gail Kelly revealed the bank's profits were soaring.

It made $1.6 billion for the three months to December - or $17.5 million a day - and a third more than it was making a year ago.

News of Westpac's astounding surge in profitability triggered a share price rally that has since added 16 per cent, or about $11 billion, to the company's value.

The profit surge has been icing on the cake for Westpac, as it had already been named as the world's most profitable bank by the Boston Consulting Group.

Westpac was the only major financial services company to generate a return on equity of more than 20 per cent.

Australians are paying interest on about $33.8 billion of credit card debt at the moment, according to the RBA.

That's up $1.9 billion on May last year.



Tue, 23 March 2010



Tue, 23 March 2010
Westpac to charge interest on credit card fees and interest charges
WESTPAC customers are about to be slugged interest on their interest.

The bank - which is already making about $18 million a day in profit - has written to hundreds of thousands of credit card holders that from June "interest will also apply to interest charges and fees on your credit-card account".

In applying the new charges, the nation's second-largest financial institution seems to have learnt nothing from a recent roasting it received for lifting rates well beyond the Reserve Bank.

"I think interest on interest is sneaky," Choice spokesman Christopher Zinn said last night.

But Westpac defended the move, saying it only had a tiny effect on balances.

A spokeswoman said that a customer with an average balance - about $3600 - would only pay an extra 67c a month in interest. Such a customer already paid about $72 a month in interest.

Start of sidebar. Skip to end of sidebar.

Related CoverageFees: Shoppers turn to Woolies End of sidebar. Return to start of sidebar.

The move applies to all Westpac cards.

The spokeswoman said half of the bank's customer base would be unaffected because they pay their balance in full each month.

Westpac's action bucks a trend towards better-value banking that has seen the removal of some of the worst and most rapacious lenders' fees and charges.

But Westpac's spokeswoman defended the hike: "We are only bringing our approach into line with industry practice.

"It's not a huge difference and it's no different to how any of the other banks do it."

In the more competitive UK bank market and in Canada, lenders do not charge interest on interest. A spokeswoman for NAB said while it did charge interest on interest, it did not charge interest on fees, as Westpac will.

Mr Zinn said: "This is one of those things that makes it very hard to compare cards and know what the interest rate is. The headline rate is not really meaningful because there are different ways of calculating interest."

Last month, Westpac chief executive Gail Kelly revealed the bank's profits were soaring.

It made $1.6 billion for the three months to December - or $17.5 million a day - and a third more than it was making a year ago.

News of Westpac's astounding surge in profitability triggered a share price rally that has since added 16 per cent, or about $11 billion, to the company's value.

The profit surge has been icing on the cake for Westpac, as it had already been named as the world's most profitable bank by the Boston Consulting Group.

Westpac was the only major financial services company to generate a return on equity of more than 20 per cent.

Australians are paying interest on about $33.8 billion of credit card debt at the moment, according to the RBA.

That's up $1.9 billion on May last year.



Mon, 29 March 2010
Rates to rise, property speculation a 'mistake'
The governor of the Reserve Bank has warned against borrowing too much to buy property, saying interest rates are likely to keep rising this year.

In his first television interview as RBA governor, Glenn Stevens told Australians that investing in bricks and mortar was no longer an easy road to prosperity.

Mr Stevens normally talks to a select group of people, known politely as pointy heads - bankers, economists, politicians, journalists and a grab bag of interest groups.

However, today he found a new audience, telling Channel Seven's Sunrise program that he is just a regular bloke doing his job.

"I'm Sydney's most boring person, really," Mr Stevens said.

"Did you aspire to be Reserve Bank governor?" asked Sunrise host David Koch.

"I joined here after I finished my degree 30 years ago and I thought, well I'll be here for a few years and then I'll go on and do something else," he replied.

"And 30 years later I'm still here."

Mr Stevens's first television interview was aimed squarely at a mass audience and designed to demystify the often complex decisions made in the Reserve Bank board room.

Koch was guided through the process of rate decisions, as Mr Stevens reassured viewers that the RBA's thinking was not simply rubber stamped by the board.

"Does it get pretty feisty around here when you're discussing, particularly whether to move interest rates, or do they generally take your advice?" Koch asked.

"Feisty isn't the word I'd use to describe the discussion. It's very well-mannered, but it's certainly intense. They're not here to be a rubber stamp. They're here to test their arguments and to make sure we're on the right track," he said.

Rate rise warning

However, Mr Stevens had a clear message for anyone in middle Australia with a mortgage, especially those who borrowed to the hilt when rates were at their emergency lows.

"I think it would be not doing anybody any favours to have a prolonged period of very low rates and then hammer them unexpectedly," he said.

"The banks that are lending them the money should be, and I'm sure are, testing the potential borrower: can you handle some rise in interest rates?"

Mr Stevens also signalled that a potential bubble in residential property prices might force rates higher, warning that the traditional investment of bricks and mortar might now be a dangerous course.

"I think it is a mistake to assume that a risk-less, guaranteed way to prosperity is just to be leveraged up into property," he said.

"It isn't going to be that easy and I think if we think about property prices as parents, and you're a parent, as am I. I've got kids that within not too many more years are going to want somewhere of their own to live and you wonder, how is that going to be afforded?"

Mr Stevens's highly targeted comments are a first for a Reserve Bank governor, according to Macquarie Group's interest rate strategist Rory Robertson.

"I certainly can't remember a Reserve Bank governor in Australia going on breakfast TV, essentially advertising higher interest rates," he said.

Mr Robertson says the switch to a commercial television audience is the latest in wider communication by the Reserve Bank, coming after the release of board minutes and statements on rate decisions even when they are left on hold.

"Governor Stevens has really ramped up the communications process since he became governor a couple of years ago. I think that he's grown into his job and he now, when you see him in public forums both giving speeches and in the question-and-answer sessions, I think he has great presence and is very authoritative in his answers," he said.

"So I think he would be confident that he can deal with anything thrown at him in any forum these days. I think that's one of the reasons he's comfortable enough going on breakfast TV."

Mr Robertson says this may be part of a greater effort to improve the Reserve Bank's communication now that interest rate movements are so closely watched.

"I think it is interesting that the Reserve Bank in public speeches over the past week by the governor, by an assistant governor and also in its financial stability review, all those pieces of information were consistent with the Reserve Bank essentially marketing the need for higher rates," he said.

"So I'll be surprised if we don't see the Reserve Bank go another step next month."

An RBA spokesman says today's interview was granted as part of the central bank's 50th anniversary events and that future interviews, while rare, will be considered on a case-by-case basis.



Tue, 06 April 2010
RBA lifts rates again
The Reserve Bank has followed up on its governor's warning to homeowners, by lifting official interest rates by 0.25 percentage points.

The move takes the official cash rate target to 4.25 per cent, and will move most major banks' standard variable mortgage rates above 7 per cent, provided they pass on the full increase.

The Commonwealth Bank was the first of the major banks to make a move, lifting its standard variable rate on mortgages by 25 basis points to 7.11 per cent.

RBA governor Glenn Stevens said while lenders had generally raised rates a little more than the cash rate, interest rates to most borrowers had been somewhat lower than average.

"The board judges that with growth likely to be around trend and inflation close to target over the coming year, it is appropriate for interest rates to be closer to average," Mr Stevens said in a statement.

"Today's decision is a further step in that process."

Mr Stevens said credit for housing had been expanding at a solid pace.

"New loan approvals for housing have moderated over recent months as interest rates have risen and the impact of large grants to first-home buyers has tailed off," he said.

"Nonetheless, at this point the market for established dwellings is still characterised by considerable buoyancy, with prices continuing to increase in the early part of 2010."

The 25-basis point rise in interest rates, if passed on in full by the banks, will add about $48 a month to a $300,000 mortgage on a 25-year term.

The National Australia Bank had already committed, before the Reserve Bank's meeting, to raising its standard variable mortgage rate by no more than the Reserve Bank's change.

If it passes on the full Reserve Bank increase, its standard variable mortgage rate will rise from 6.74 to 6.99 per cent per annum.

Treasurer Wayne Swan said the rate rise while tough on homeowners, was a consequence of a strengthening economy.

"Rates are still at relatively, historically low levels," Mr Swan said.

"The Government understands how tough it can be for someone who is a first homeowner.

"We will do everything to ensure that our fiscal settings are right, but what we see today are the consequences of a strengthening economy.

"A strengthening economy is a good thing for the country, but unfortunately with a strong economy we do see rates moving to a more normal level."

Mr Swan also warned the banks not to increase their interest rates beyond the amount decided upon by the Reserve Bank.

"If any bank did that it would be arrogant in the extreme and not be justified," he said

Thu, 15 April 2010
Bank of Qld's first-half profit almost doubles
The Bank of Queensland has reported a net after-tax profit of $90.9 million for the six months to the end of February this year.

The result represents a 96 per cent increase from its profit of $46.3 million for the same period a year ago.

The regional lender says it is in a far stronger position now that it was in when the global financial crisis hit.

Its normalised cash profit after tax, or the profit made before impairment charges and one-off or exceptional items are taken into account, came in at $97.2 million, which was a rise of 15 per cent.

Total operating income for the six-month period rose to $342.9 million from $304 million a year ago.

The bank will pay a fully-franked interim dividend of 26 cents per share, which is the same as the dividend provided a year ago.

Investors have welcomed the result and at 12.00pm AEST, shares in Bank of Queensland were up 11 cents or 0.9 per cent to $12.16.



Tue, 27 April 2010
Rate rises tipped as resources boom
A new economic forecast has predicted a return to higher inflation and interest rates and expects the Australian economy to be largely supported by the resource-rich states.

The business outlook by economic forecaster Access Economics suggests Australia is heading back to the same economic position as mid-2008, with the recovery riding on the back of increased demand for key commodities.

Resource-rich areas such as Western Australia, Queensland and the Northern Territory will benefit, partly because their customers are in emerging nations, which have returned to growth much faster than the developed world.

But the forecast suggests it will take time for the sector to catch up with demand.

Access Economics director Chris Richardson says the boom will return Australia to a two-speed economy.

"The big price increases for coal and iron ore won in the last month or two do mean that Australian incomes are about to surge in a way that we haven't seen since 2007," he said.

"In fact, in many ways towards the end of this year and 2011 will be very familiar. It will be deja vu all over again.

"As particular commodity prices - coal and iron ore - take off again, that pushes the exchange rate.

"It will drive interest rates up further and perhaps they will go beyond the normal that people have been expecting."

Mr Richardson also tips unemployment will fall below 5 per cent.

NSW recovering

The Access Economics report says the New South Wales economy is showing signs of a genuine recovery but may not be entirely out of the woods.

It points to growth in housing activity, retail spending and a strengthening jobs market, but warns rising interest rates and a weak commercial construction sector could cause economic headwinds.

New South Wales Treasurer Eric Roozendaal says he is confident of sustained growth.

"All the strong indicators - retail sales, construction activity, housing sector, new cars - we are seeing all the green shoots of recovery that we've talked about," he said.

"I believe New South Wales will lead the nation through the recovery stage post the global financial crisis."



Thu, 06 May 2010
Mortgage stress rising along with rates
There are fears the Reserve Bank's rapid succession of interest rate rises will lead to more young Australians being crippled by mortgage stress.

Yesterday the Reserve Bank (RBA) moved rates up 0.25 percentage points to 4.5 per cent - the sixth increase in eight months.

The rises come on the back of record low interest rates during the global financial crisis.

Aussie Home Loans chief John Symond says many people have been unprepared for the recent spate of rate rises.

"That's the unfortunate downside in borrowing money, particularly at a cycle where we were having interest rates at historic lows and now very rapidly interest rates have been increased by the Reserve Bank," he said.

"Six increases in the past seven meetings is very rapid and it's probably faster than the RBA or banks expected interest rates to rise and it certainly caught a lot of borrowers unawares.

"There's a lot of pain out there at the moment and the conception of the consumers is that these rates - if they go up further and they probably will - we could end up in trouble."

Mr Symond is certain borrowers will start to default on their mortgages.

"I've got no doubt because credit was pretty free and easy. A lot of those borrowers had not put in a lot of deposit so they are exposed to a lot of borrowings and they're now feeling the pinch in having to find an extra $100 a week out of their pay packet," he said.

"That's a lot for an average family when food prices have been going up, petrol prices have been going up.

"Historically when interest rates go up you have more people struggling, more people defaulting and more people being forced to sell their homes."

'Over-exaggeration'

But the Mortgage and Finance Association of Australia's chief executive, Phil Naylor, says most buyers should be prepared for the rises.

"It might impact on people who are operating very much at the margin, but our research shows that 80 per cent of respondents in our last survey said they are easily making their repayments on their home loans and that was compared to only 67 per cent a year ago," he said.

"It's probably a bit of an over-exaggeration to say that there are large numbers out there suffering from mortgage stress, but the potential is that if interest rates do continue to rise, those figures may not be as rosy down the line."

He says most lenders would have been more responsible in recent years when giving out home loans.

"If [borrowers] did take a loan out in the last two years, lenders in the last two years have been much tighter about their lending criteria," he said.

"I'm pretty certain that all major lenders and other lenders as well would have put in a factor of at least 1.5 to 2 per cent as a buffer so that in other words they wouldn't have lent them money two years ago if they thought the borrower couldn't continue to service the loan if rates were 1.5 to 2 per cent higher."

'Too fast, too soon'

But Mr Symond says he thinks RBA governor Glenn Stevens pushed rates up too fast too soon.

"The Reserve Bank governor consistently says gradual increases are necessary, but that gradual was thrown out the window and they've consistently upped them. Six increases out of seven meetings isn't my definition of gradual," he said.

Mr Symond says hopefully the RBA will put the brakes on further increases in the coming months.

But he says more rate rises are inevitable.

"They are now going to become very hawkish and concentrate on inflation and if our inflation numbers trend up, interest rates will continue to trend up and hopefully we'll have a couple of months without further increases, but you should factor in at least another two or three 25 basis point increases later this year," he said.

Meanwhile, both Mr Symond and Mr Naylor say borrowers who are worried about defaulting on their mortgage should speak to their lenders.

"Those people who feel they are really getting close to getting into trouble, don't wait to get into trouble," Mr Symond said.

"Put your hand up, contact your lender. The last thing the bank or any lender wants to do is see a customer default and at worst lose their home.

"The sooner you can go in and talk with the lender, explain the circumstances, the better the chance to reconfigure the loan, to renegotiate, to give you the best chance to make sure you get through this."



Tue, 11 May 2010
Markets soar on Europe rescue package news
Share markets across the world have staged extraordinary bounces in reaction to Europe and the International Monetary Fund's package to stop an unfolding sovereign debt crisis.

Fear appears to have taken a back seat and Spain's key index the IBEX 35 climbed a record 14 per cent.

France's CAC 40 increased 10 per cent and Germany's DAX 30 rose by 5.3 per cent.

London's FTSE 100 rose 5.2 per cent to 5,387.

The demand for Greek, Spanish and Portuguese bonds also soared.

In New York industrial stocks have surged, as have US-listed European banks.

Spain's Banco Santander closed 23 per cent higher.

The Dow rose almost 4 per cent, or 405 points, to 10,785 in its biggest one-day gain since March last year.

The S&P 500 added 49 points to 1,160, while the NASDAQ was up 109 points at 2,374.

Yesterday on the local market shares closed 2.7 per cent higher on the benchmark ASX 200.

In local futures trade the Share Price Index 200 is up 53 points at 4,663.

The Australian dollar is about steady on last night's close at 90.28 US cents.

The price of US Treasury bonds and gold has fallen as investors rediscover their fondness for risk and no longer feel the need to put their money in safe havens.

Spot gold was worth $US1,203.60 an ounce, while West Texas Crude oil was higher as traders bet that global economic growth is on track.

A barrel is fetching $US77.24.



Tue, 25 May 2010
RBA predicted to hold back on more rates rises
An economic forecasting agency says it is highly unlikely the Reserve Bank will keep raising interest rates so aggressively, despite the threat of higher inflation.

The latest economic outlook bulletin by BIS Shrapnel shows inflationary pressures are coming from supply constraints across a range of goods and services, as well as the volatile Australian dollar.

BIS says inflation has persistently been above 3 per cent for house prices, rents and costs linked to health, education, utilities and urban transport.

That is above the Reserve Bank's inflation target range of 2 to 3 per cent.

BIS Shrapnel senior economist Rachael Logie says supply constraints, particularly in the housing sector, mean it could be some time before those inflationary pressures ease.

"When you add in the housing rents, house purchase costs and utilities, these account for around 17.8 per cent currently of the CPI [Consumer Price Index]," she said.

"Pressures here are very much related to housing supply. As you know the housing market is undersupplied and we have quite a large, pent-up demand for housing, and until we see a large response come through, they will remain quite strong."

But she says the Reserve Bank will be reluctant to put too much pressure on households by continuing to increase rates.

"Demand is actually quite weak, household spending is quite weak and private sector investment is quite weak," Ms Logie said.

"So it may just have to be happy with having inflation at the top end of its band and so in effect, until we really start to see those demand pressures come through, we don't expect to see the RBA be really aggressive on interest rates in the future."

Tue, 01 June 2010
Rates on hold, 'appropriate' for now
By online business reporter Michael JandaThe Reserve Bank has ended its latest run of three straight rises, deciding to keep interest rates on hold in June.

That leaves the official cash rate at 4.5 per cent, and mortgage interest rates at what the RBA describes as about average levels of between 7.24 per cent and 7.51 per cent per annum at the major banks - unless they raise rates independently of the Reserve.

The decision was predicted by all 22 financial institution economists surveyed by Bloomberg, after the RBA gave a clear message at last month's meeting that mortgage rates were back at average levels.

In his statement accompanying the decision, RBA governor Glenn Stevens seems satisfied with the bank's work so far, and disinclined to move the cash rate up in the next couple of months.

"As a result of actions at previous meetings, interest rates to borrowers are around their average levels of the past decade, which is a significant adjustment from the very expansionary settings reached a year ago," he said.

"Taking all the available information into account, the Board views this setting of monetary policy as appropriate for the near term."

Some of that available information includes a steep slide in consumer confidence after the last rate rise in May, and a slump in building approvals in figures released earlier in the day.

Sun, 06 June 2010
Claims minimum wage rise doesn't add up By Lindy Kerin
The Federal Opposition says the industrial umpire got its maths wrong when it handed down its minimum wage decision earlier this week.

Fair Work Australia has granted Australia's lowest paid workers a wage increase of $26 a week, bringing the minimum weekly wage to almost $570.

But Federal Opposition workplace relations spokesman Eric Abetz says there appears to be a 22-cent-a-week discrepancy in the hourly and weekly rates.

"The $26 a week wage rise was granted, which has been translated to 69 cents per hour," he said.

"You multiply out 69 cents by 38 hours and you get an increase of $26.22 cents.

"This is quite a minimal discrepancy, but of course it does cause a problem when you're trying to reset your payroll as a business."

The Opposition says there are 1.4 million people on the minimum wage, so the additional 22 cents translates to a major blowout of millions of dollars.

Employer groups are concerned this could leave them open to legal challenges for breaching the minimum wage order.

Senator Abetz is calling on the Workplace Relations Minister Julia Gillard to intervene and resolve the discrepancy.

"Ms Gillard as the Minister ought to be making an application to have this clarified for all those business people that are getting ready to change their payroll systems," he said.

"What it shows is that this new system that Ms Gillard has created is causing even further confusion within the community, especially the small business community.

"They're the ones that suffer when there's this sort of uncertainty."

The wage rise takes effect on July 1.

Restaurant and Catering Australia's CEO, John Hart, says the discrepancy is a major problem in his sector where many workers are paid an hourly rate.

"We will have to publish rates based on the ... weekly rate and try to get information out as best we can," he said.

"The reality though is that if we get it wrong and the Fair Work ombudsman disagrees with an employer's interpretation, that employer can be subject to a fine of up to $33,000 per occasion.

"They will fine on the basis of a discrepancy of that sort of level, so we need to be very careful."

Ms Gillard says a response could not be provided before AM went to air on Saturday morning.

Fair Work Australia did not return any of AM's calls before it went to air.

Sat, 12 June 2010
Banking StoryBanks net $5bn from consumers in fees for businesses and households
CONSUMERS paid $5 billion in bank fees last year after being charged more for switching their loans from fixed to variable rates to take advantage of interest rates being cut in the wake of the global financial crisis.

The Reserve Bank revealed yesterday banks earned $12.7bn in total fees last year, up 9 per cent, primarily driven by growth in residential mortgages and business lending charges, reports The Australian.

The RBA data showed mortgages remain one of the most lucrative sources of revenue for the banks.

The fees earned on home loans grew by 17 per cent to $1.23bn, while credit card charges rose by 8 per cent to $1.43bn. There was a 14 per cent rise in personal lending fees, worth $552 million.

The RBA said home loan fee growth was driven by the banks charging customers more for moving their mortgage or switching from a fixed rate to standard variable rates.

Start of sidebar. Skip to end of sidebar.

Related Coverage.Stress: Banks pass test Firms hit hard by rising bank fees

Adelaide Now, 1 day ago

Banks slam Rudd for 'gouging' claim

Herald Sun, 1 day ago

Banks use crunch to push fees up 13%

Daily Telegraph, 1 day ago

Fee spree helps banks give retail relief

The Australian, 1 day ago

Ban the big gouge, say small guys

Herald Sun, 1 day ago..End of sidebar. Return to start of sidebar.

"The increase in housing fee income was driven by establishment and early exit fees, with the available information suggesting that break fees on fixed-rate loans accounted for a significant proportion of the overall growth in fees," the RBA said.

"A number of bank customers chose to refinance their fixed rate housing loans with variable rate loans, given the significant fall in the cash rate during the banks' 2009 financial year."

The analysis showed that the rate of growth in household fees had slowed to 3 per cent, after growing at 8 per cent for two years. There was also a $120m reduction in the value of ATM fees as customers used the machines less.

The major banks have started to cut fees on retail customer deposit accounts in a bid to gain market share from their rivals.

It has been estimated the fee reductions put in place by the four leading banks could save Australian customers up to $550m a year.

However, the move will be funded by banks charging business customers higher fees.

Australian Bankers Association chief executive Steven Munchenberg defended the higher fees and said the bulk of the charges were directed at businesses, which were using banks more often.

A separate ABA report published yesterday showed household fees of $5.03bn, which equated to $11.50 a week for the average customer.

"I would argue that people get a range of services for the $11.50, that's the provision of ATMs, branches, which is good value when you compare other utilities like your phone bill," Mr Munchenberg said.



Fri, 18 June 2010
Finance body to strengthen ethical standards
There are moves to revamp ethical and professional standards within Australia's financial services industry.

Financial planners will now have to conform with new industry-wide credentials as part of moves to revamp ethical standards.

It comes after a number of high-profile corporate collapses, including Storm Financial and Opes Prime.

Martin Fahy from the Financial Services Institute of Australasia says the new professional credential will vouch for an individual's experience, technical knowledge and ethical conduct.

"Having strong credentials in one part of the industry is not sufficient. So in the past what we've been able to do is to drive very good industry outcomes based on the general upturn in economic activity," he said.

"As we go forward and have $5 trillion in superannuation savings, mums and dads need to tap into fiduciary-based advice where the adviser in question is acting in their best interest."

The institute says it will sanction members who breach the industry's new ethical standards.

Mr Fahy says members who engage in dishonest or unethical behaviour will face serious consequences.

"Typically we're looking at sanctions that are appropriate for the level of misconduct. In cases where the regulators, be it APRA or ASIC, withdraw licences, then we would be looking at expelling people from membership," he said.

"For more minor offences you may be condoning conduct, you may be admonishing or taking disciplinary action where you suspend membership where it's appropriate."



Fri, 25 June 2010
Mining super tax hope lifts prices


Mining super tax hope lifts prices

* Louise Brannelly

* From: The Courier-Mail

* June 24, 2010 11:32PM

* Increase Text Size

* Decrease Text Size

* Print

* Email

* Share

o Add to Digg

o Add to del.icio.us

o Add to Facebook

o Add to Kwoff

o Add to Myspace

o Add to Newsvine

o What are these?

RESOURCE stocks and the Australian dollar have received a boost as the toxic relationship between big miners and the Federal Government showed signs of improving.

Prime Minister Julia Gillard told her first news conference as parliamentary leader she would throw the doors open to the mining sector and negotiate over the controversial resource super profits tax.

The market interpreted this as a sign the Government would water down the controversial tax.

Among the big miners, Rio Tinto rallied $1.19, or 1.69 per cent to $71.73, BHP Billiton 51c, or 1.3 per cent, to $39.65, Macarthur Coal 74c, or 6.4 per cent, to $12.34 and Fortescue Metals 11c, or 2.5 per cent, to $4.54.

"It's a very dramatic development," said Stephen Halmarick from Colonial First State Global Asset Management.

"The markets will be looking to her to move quite quickly to stabilise the debate and come to a resolution."

Start of sidebar. Skip to end of sidebar.

End of sidebar. Return to start of sidebar.

The Australian dollar was trading at US87.43c last night, up US0.40c, after getting an initial boost following reports of a change in the Labor Party's leadership.

"The (Aussie dollar's) high was the initial reaction to the news that the ex-PM had resigned and after that it came down again," said Lee Wai Tuck, a senior currency analyst with financial markets research group 4Cast.

IG Markets strategist Ben Potter said the general feeling in the market was that Ms Gillard would adopt a more flexible and consultative approach with miners.

"She went to great lengths to reiterate this point in her acceptance speech," he said.

"Many brokers have suggested current mining stock valuations were attractive, even with the RSPT in its current form.

"Now that it looks more likely to be watered down under the new PM, this could easily be the catalyst for a significant rerating of the sector. We could even see the return of some offshore investments."

EL&C Baillieu Stockbroking director Richard Morrow said investors initially responded positively to the new Labor leadership but there was a bit of late profit taking among mining stocks.

"There was an initial knee-jerk uplift in the market in the resources sector right at the start of play and then everyone held their breath until the new Prime Minister made her first statements," Mr Morrow said.

"The noises that are coming out of that sector and both Ms Gillard and her deputy (Wayne Swan) are very encouraging for the mining companies.

"It involves both parties with an act of good faith in cancelling their public slanging match."

The broader sharemarket closed marginally weaker as financial and property stocks responded to a tightening of their wholesale funding costs and continuing negative news from the US housing market.

The benchmark S&P/ASX 200 Index lost 6.4 points to 4479.7.

Wealth Within senior analyst Janine Cox said negative offshore leads would continue to have most effect on the domestic bourse.

Also boosting the Aussie dollar was news the US central bank said interest rates would remain low until next year to stimulate the US economy.

Fri, 25 June 2010
Mining super tax hope lifts prices * Louise Brannelly * From
RESOURCE stocks and the Australian dollar have received a boost as the toxic relationship between big miners and the Federal Government showed signs of improving.

Prime Minister Julia Gillard told her first news conference as parliamentary leader she would throw the doors open to the mining sector and negotiate over the controversial resource super profits tax.

The market interpreted this as a sign the Government would water down the controversial tax.

Among the big miners, Rio Tinto rallied $1.19, or 1.69 per cent to $71.73, BHP Billiton 51c, or 1.3 per cent, to $39.65, Macarthur Coal 74c, or 6.4 per cent, to $12.34 and Fortescue Metals 11c, or 2.5 per cent, to $4.54.

"It's a very dramatic development," said Stephen Halmarick from Colonial First State Global Asset Management.

"The markets will be looking to her to move quite quickly to stabilise the debate and come to a resolution."

Start of sidebar. Skip to end of sidebar.

End of sidebar. Return to start of sidebar.

The Australian dollar was trading at US87.43c last night, up US0.40c, after getting an initial boost following reports of a change in the Labor Party's leadership.

"The (Aussie dollar's) high was the initial reaction to the news that the ex-PM had resigned and after that it came down again," said Lee Wai Tuck, a senior currency analyst with financial markets research group 4Cast.

IG Markets strategist Ben Potter said the general feeling in the market was that Ms Gillard would adopt a more flexible and consultative approach with miners.

"She went to great lengths to reiterate this point in her acceptance speech," he said.

"Many brokers have suggested current mining stock valuations were attractive, even with the RSPT in its current form.

"Now that it looks more likely to be watered down under the new PM, this could easily be the catalyst for a significant rerating of the sector. We could even see the return of some offshore investments."

EL&C Baillieu Stockbroking director Richard Morrow said investors initially responded positively to the new Labor leadership but there was a bit of late profit taking among mining stocks.

"There was an initial knee-jerk uplift in the market in the resources sector right at the start of play and then everyone held their breath until the new Prime Minister made her first statements," Mr Morrow said.

"The noises that are coming out of that sector and both Ms Gillard and her deputy (Wayne Swan) are very encouraging for the mining companies.

"It involves both parties with an act of good faith in cancelling their public slanging match."

The broader sharemarket closed marginally weaker as financial and property stocks responded to a tightening of their wholesale funding costs and continuing negative news from the US housing market.

Wed, 30 June 2010
Business tax relief 'essential for economic recovery'
The Australian Chamber of Commerce and Industry (ACCI) says the Federal Government should go ahead with business tax breaks even if it cannot strike a deal on its proposed resource super profits tax.

Prime Minister Julia Gillard says she is confident a deal can be reached with resources companies.

The revenue from the super profits tax is supposed to pay for a 2 per cent cut in company tax rate and more assistance for small businesses to write-off assets.

Chamber chief executive Peter Anderson says those measures must go ahead regardless.

"That tax relief for business and small employers is essential for Australia's economic recovery, it is essential if the private sector is going to take up the slack as the public stimulus withdraws from our economy," he said.

It is understood that two of three big mining companies Rio Tinto, Xstrata and BHP, held talks with the Government over the mining tax yesterday, but so sensitive are the discussions that no-one wanted to confirm they had met face to face.

Queensland ALP president Andrew Dettmer told reporters in Brisbane that Ms Gillard was two hours late for a fund-raising dinner last night because he understood she was in discussions with the mining industry.

There has been speculation Ms Gillard might be preparing to announce a breakthrough as early as today, but one senior minister says there is currently no timeline to achieving a deal.

Mon, 05 July 2010
Financial relief in sight as rates likely to hold * Olga Galacho
THE first decision on official interest rates since Julia Gillard became Prime Minister will be taken by the Reserve Bank board tomorrow, amid signs the pace of economic growth is quickening.

But pundits generally believe the new Labor leader will likely not need to worry about a rise this month, and may even be spared any increases before a federal election, if it is held next month.

At the last election in 2007, voters punished then-Liberal leader John Howard when the RBA jacked up rates just 20 days before polling day.

While the Federal Government has soothed big miners with a dilution of the resources super profits tax, paving the way for greater certainty for businesses, speculation abroad at the weekend began to mount that a double-dip recession could not be ruled out for some economies.

Weak US employment numbers and financial market turmoil in Europe, meant the RBA might feel justified in leaving rates on hold at 4.5 per cent for now, after taking into account potential flow-on effects from the external factors.

Wed, 14 July 2010
Europe stress tests raise finance fears By economics correspondent Stephen Long
Economic and financial concerns have heightened today on news from Europe, China and the United States.

European leaders have revealed that stress testing of the European Union's banks due to be released this month will highlight "pockets of vulnerability".

The Chinese government has squashed speculation it will relax curbs on lending designed to cool its property market, prompting concerns the pace of Chinese economic growth will be slower than expected.

In the United States a member of the influential Business Cycle Dating Committee has warned that America's recession is not over.

European commissioner for economic affairs, Olli Rehn, gave a broad hint that Europe's banking system would pass a stress test due out later this month.

"The stress test exercise is of paramount importance for restoring confidence into the European economy," he said.

"I won't be prejudging the results. But in my view the European banking sector is overall resilient."

But then came the caveat: "A the same time when we publish the stress tests we will have to prepare for any pockets of vulnerability," Mr Rehn said.

"For that it is essential that the national backstops will be in place."

The fear is that those "pockets of vulnerability" could unravel the whole fabric.

Jefferies International chief European economist David Owen says the euro system is "a spider's web".

"Everything is so interconnected now. And this is the issue - that a bank in one country is also inextricably linked to a bank in many other countries," he said.

"So if you have problems in one system, it can spread right through to the rest of the system."

Risk analyst Satyajit Das echoed Mr Owen's fears, and says pockets of vulnerability could turn out to be giant sinkholes.

The powers that be are set to relax stringent capital requirements for banks announced last year, realising that Europe's banks will have to raise substantial new capital and may not be able to meet the tough requirements.

Those pockets of vulnerability in the banking system will require more government money in a world where fiscal positions are already overstretched.

"It really depends on how strong the euro zone is going forward. So if you have a strong enough recovery then all the problems of the banking system to some degree will start to disappear, recede from view," Mr Das said.

But it is hard to see that strong economic recovery coming any time soon. Economic prosperity is being replaced by fiscal austerity as governments look to cut unsustainable budget deficits and crippling levels of public debt.

In the United States the economy is performing far better than Europe.

Marty Feldstein, a Nobel laureate economist who sits on the committee that dates recessions in the US, says its economy may be growing on paper, but the recession is not yet over.

Mon, 19 July 2010
Print Email Share Shares slide on economic concerns By finance reporter Rebecca Hyam
Australian shares have closed almost 0.5 per cent lower, reflecting a weak overnight trading session in the United States and a 2.9 per cent slump on Japan's Nikkei.

The US session was dominated by concerns about some worse-than-expected manufacturing data, and the passage of new banking regulations.

Locally, the All Ordinaries Index responded by losing 20 points to 4,437, and the ASX 200 also closed down 20 points to 4,423.

Oz Minerals retreated from earlier gains of more than 3 per cent, to close 1.4 per cent higher.

The miner says its gold output this year will be well ahead of target, at 140,000-150,000 ounces.

But its copper production for the second-quarter fell 11.5 per cent from the March quarter.

Fellow gold miners Lihir and Newcrest both lost more than 2 per cent today.

Rio Tinto gave up 1.25 per cent, but BHP Billiton enjoyed a late rally - closing 2 cents higher at $38.15.

The banking sector failed to hang on to early gains - Westpac fared the worst with losses of 0.7 per cent.

ANZ lost 6 cents, but Commonwealth Bank shares have closed up 3 cents.

NAB finished 2 cents lower - it has prolonged its $13.3 billion bid for AXA Asia Pacific, which is now set to drag on even longer.

The period of exclusive talks between NAB, AXA Asia Pacific and its parent company AXA SA expired at midnight last night.

But NAB says it is in talks to extend the exclusivity agreement, during which AXA cannot look for other bidders.

AXA's shares closed down almost 2 per cent at $5.25.

Sigma Pharmaceuticals lost 11.5 per cent, after it lowered its profit forecast yesterday.

Linc Energy gave up almost 8 per cent today after Wednesday's big gains of around 30 per cent on speculation about asset sales.

Nufarm closed down more than 9 per cent to $3.40 after its profit downgrade earlier this week.

Currencies and commodities

The Australian dollar retreated today - a short time ago it was buying 87.5 US cents.

On the cross-rates, it was worth 76.3 Japanese yen; 67.85 euro cents, 56.82 pence Sterling and $NZ1.22.

On commodity markets, West Texas crude oil eased to $US76.76 a barrel, and a barrel of Tapis is worth $US82.15.

Spot gold was fetching $US1,207.50 an ounce.

Tue, 27 July 2010
Rate rises unlikely to top official move: Citi By finance reporter Lexi Metherell
Citibank Australia's chief executive says it is unlikely his bank would have to lift its mortgage rates by more than an official rate rise, if there is one next week.

The Reserve Bank is tipped to lift the official cash rate to 4.75 per cent if tomorrow's inflation figures show cost of living pressures are rising by more than the RBA expects.

Roy Gori says he would not rule out lifting rates by more than any official increase, but it is unlikely.

"Key to our proposition is to make sure that we're competitive, so while we'll look at what happens from an RBA perspective, we'll also have a keen eye on what our competitors do," he said.

"At the forefront of our thinking is making sure we have products and pricing which is competitive and that is offering value to customers."

Mr Gori says Citibank would also be unlikely to lift rates by more than any official increase because the cost of funding its loans is easing.

"In the crisis we saw costs of that money go up quite dramatically, and as a result a lot of players exited the market. The result of that obviously was a lot of concentration of the mortgage market into the big four," he added.

"We're seeing that that's now starting to turn a little bit, we're seeing the funding costs start to come down."

Sun, 01 August 2010
US economic growth slows to sluggish pace By Washington correspondent Kim Landers
There are signs America's economic recovery is starting to fizzle out.

Economic growth in the second quarter has slowed to 2.4 per cent, meaning the brakes have been slammed on what was already a modest rebound from the worst recession in decades.

US president Barack Obama is trying to focus on the positive.

He was touring car factories in Detroit, a little more than a year after taxpayer money had to be used to bail out two of the country's biggest carmakers.

"That means it's now been growing for one full year, our economy's growing again," he said.

"We've got to keep on increasing that rate of growth and keep on adding jobs so we can move forward."

The White House claims one million jobs could have been lost if the Obama administration has not orchestrated a the bailout of Chrysler and GM.

Now, Mr Obama says the car industry is one of the bright spots in the nation's economic recovery.

"Today, for the first time since 2004, all three US automakers are operating at a profit," he said.

Still, America's economy has now lost power for two straight quarters, raising fears that it could be heading towards a double dip recession.

The US commerce department has also released figures showing the recession has been deeper than the government previously thought.

It now estimates the US economy shrank 2.6 per cent last year, the steepest drop since 1946.

The mixed economic news could be a liability for the president as Democrats face midterm elections in November.

In Detroit, Mr Obama was in campaign mode as he tried to weave the car industry bailout into a economic good news story.

"It's going to take some time to get back to where we need to be, but I have confidence in the American worker," he said.

"I have confidence in this economy. We are coming back."

But with the US economy growing at a subpar speed, the current 9.5 per cent unemployment rate is not expected to fall.

Sat, 07 August 2010
Banks push loans to unemployed: report By Lindy Kerin
You might expect the global financial crisis to have made banks more cautious when it comes to issuing debt, but a new report says Australia's banks are aggressively pushing debt onto low income earners and even the unemployed.

The Australia Institute surveyed more than a thousand people and says that the banking sector is going to great lengths to offer customers more debt.

It says the big four lenders alone are spending a billion dollars a year on advertising.

The Institute's deputy director Josh Fear says 66 per cent of those surveyed had recently been offered a new credit card.

"We found that two out of every three survey respondents we spoke to reported receiving [an] unsolicited offer for a new credit card in the past 12 months, and that one in two had received an unsolicited offer to increase their credit card limit," he said.

"So that's many more than 10 million Australians who have been offered additional credit without seeking it out."

However, the most worrying finding according to Josh Fear was that many of those offered extra debt were in no position to pay the money back.

"We found that a majority of people who weren't in paid work had been offered a new credit card, and that one in three people in low income households had received an offer for a personal loan," he added.

"The more money you put into advertising debt and debt products, the more likely people are to take out these products and the more likely that some of them will get into trouble."

The Australian Bankers' Association's chief executive Steven Munchenberg says the finding that banks are lending to those who cannot afford it is false.

"We don't believe that it's actually true. There's no interest in banks providing debt to people, providing credit to people who can't repay it," he said.

"Banks have their own processes to make sure that people are only offered credit when they are able to repay it, and the Government itself is actually bringing in legislation which comes into effect at the end of the year that will actually make that a legal obligation as well."

The Australia Institute's report makes a number of recommendations. It calls for legislation to make sure credit is not extended to those who cannot pay it back.

It also wants legislation to ensure interest rates charged by banks move in line with changes to the RBA cash rate, and it recommends the practice of paying bank workers commissions to sell their products be banned.

That is a call welcomed by Christopher Zinn from the consumer advocacy group Choice.

"Bank workers and staff are incentivised for pushing credit onto people, basically the more credit that they can sell, the more returns they can get," he said.

But the Bankers' Association has rejected that call, saying it is standard practice to offer commissions across a range of industries.

Steven Munchenberg says the new National Consumer Credit Code introduced by the Federal Government will address many of the issues raised in the report.

Sat, 14 August 2010
US economy faces grim outlook By North America correspondent Kim Landers
In the United States the grim outlook for the economy has been heightened by yet more bleak news about the employment picture.

The number of Americans applying for unemployment benefits has risen to its highest level in six months.

Adding to the gloomy picture is the news that banks are taking over foreclosed homes at a near record pace.

In the United States pessimism about the economy is rising. A Wall Street Journal poll shows almost two-thirds of Americans believe the economy will worsen before it gets better.

New claims for unemployment benefits have jumped to the highest level in six months with 484,000 Americans applying for help last week alone.

"These numbers just seem to confirm that the US economy is slowing down quite significantly. I don't think we're back in recession territory but on the other hand we are looking at very sluggish growth," Nariman Behravesh the chief economist at IHS Global Insight.

However, he still thinks a second recession is unlikely.

"I would assess the risks of a double dip in the United States as only about 25 per cent right now," he added.

"On the other hand I think the likelihood of a period of sub-par growth, if you can call it that, which is to say growth of no better than about 2 per cent, that risk is quite high for the US."

The chief US economist for JP Morgan Michael Feroli says the sheer number of unemployment claims is concerning.

"The news we got this morning on the economy certainly was not a very comforting one. Seeing jobless claims above 480,000 for two weeks in a row is not something that makes one really bullish on the economy," he said.

More Americans are also falling into foreclosure. Banks took over almost 93,000 properties last month - the second highest monthly total.

Real estate data company RealtyTrac says unemployment is driving most of the foreclosure activity.

Meanwhile Nariman Behravesh says the US is in what he calls an epidemic of thrift. That is consumers and businesses are saving a lot because they're worried about the strength of the economic recovery.

However, he says that means there should be greater spending at some point in the future.

"There's a countervailing force if you will here and that is there's a lot of pent up demand. Businesses and households are putting off spending on big ticket items, on big projects and so forth," he said.

"And there's a limit to both the thrift if you will, the parsimony and how long they can put off some of these expenditures. Sooner or later we'll start to see some of that pent up demand begin to release.

"We can debate about when that happens. Our best guess is that it'll probably happen at the beginning of next year."

The bleak economic data comes just days after the Federal Reserve downgraded its assessment of the economy's health.

Sun, 22 August 2010
Market slides ahead of election By online business reporter Michael Janda
The Australian share market recovered slightly from a trough in the afternoon, to close around 1 per cent lower.

The All Ordinaries index ended the day down 48 points at 4,462, and the ASX 200 also lost 48 points to close at 4,431.

Earnings season continued, but the biggest report out today was a trading update not a full or half-year profit report.

ANZ posted a $1.3 billion third-quarter profit, and has made $3.6 billion so far in the first nine months of its financial year.

It was also the stand-out stock on the market, up 1.7 per cent at $22.78 when most stocks around it were tumbling.

Among the other major banks, Westpac was down 1.3 per cent, CBA lost 1.7 per cent, and NAB slipped 2.1 per cent.

Consolidated Media reported its full-year profit and, although it fell 8 per cent to $392 million, the decline was due to a large number of asset sales boosting its bottom line in the previous year.

The company's operating cash profit (excluding such one-offs) was up 27 per cent to $89.5 million. Revenues from pay TV were up more than 8 per cent, and Consolidated shares closed up 2.5 per cent to $3.23.

Billabong did not get a good reception for its results though.

The surfwear company's profits fell 4.5 per cent to $146 million on weak Australian sales.

Its shares tumbled more than 10 per cent at one stage, before closing 88 cents lower at $8.03.

AWB gained another few cents today after it said it has agreed to Canadian firm Agrium's $1.50 a share takeover offer, unless GrainCorp can come back with a higher bid.

That seems unlikely, so AWB's shares are trading just under the $1.50 offer price at $1.485.

The market dissatisfaction with Downer EDI's poor profit result continued.

Yesterday it reported a 98 per cent slump in earnings from $190 million to just $3 million.

Its shares were down nearly 7 per cent yesterday, and lost another 3.6 per cent today to finish the week at $4.25.

BHP Billiton shares eased on the general market fall, closing down 1 per cent to $37.90.

Rio Tinto was down 2.2 per cent at $71.58 on the general market fall, and a growing market view that its proposed iron ore joint venture with BHP Billiton is not going to go ahead because of global regulators' competition concerns..

Telstra lost 6 cents to $2.96.

The Australian dollar remained at the lower end of this week's trading range today, as global jitters and nervousness about the federal election outcome weighed.

An Australian dollar was buying 89.16 US cents at 4:42pm (AEST).

Fri, 27 August 2010
Market flat on mixed messages By online business reporter Michael Janda
A fall on Wall Street overnight had weighed on the local share market, but a strong result for Fairfax and a further gain for Woolworths are offsetting other falls.

The All Ordinaries index was 2 points higher at 4,391 by 1:42pm (AEST), and the ASX 200 was also up 2 points at 4,359.

Fairfax shares have had one of the strongest gains so far today - they were up more than 5 per cent at $1.43 by 1:27pm.

The company has rebounded from a $380 million loss in the 2009 financial year to a profit of $282 million in 2010, largely thanks to $250 million of cost-cutting including a $52 million reduction in staff costs.

Woolworths has backed up a 2.4 per cent gain yesterday on the release of its profit result and announcement of a $700 million share buy-back with a 1.2 per cent rise to $27.86 today.

Harvey Norman's 8 per cent rise in full-year profit to $231.4 million was not enough to please the market - its shares had fallen 3 cents to $3.51.

Bendigo Bank was 36 cents lower at $8.25 as it trades ex-dividend.

Two of the major banks (NAB and ANZ) were slightly lower, while Westpac was flat and the Commonwealth was up a mere 0.3 per cent.

The two major miners were down: Rio Tinto was 1 per cent lower, while BHP Billiton had lost 0.8 per cent to $37.10.

Qantas was down 2.4 per cent to $2.44.

The Australian dollar is little changed from yesterday afternoon's levels, and was worth 88.63 US cents at 1:40pm.

Wed, 01 September 2010
Home prices stabilise after surprise fall By online business reporter Michael Janda
Australian home prices have stabilised in July, after falling for the first time in 17 months in June.

The widely watched RP Data - Rismark Hedonic Home Value Index for capital cities climbed a seasonally adjusted 0.4 per cent in July, after sliding 1 per cent in June.

However, the modest growth in July still leaves the index 0.3 per cent lower than it was three months ago.

It has also slowed the annual growth in home prices in the capital cities to 9.7 per cent.

RP Data's research director Tim Lawless says he is not surprised by the result.

"In the period between end 2008 and March 2010, Australian home values rose by 16.3 per cent. Yet monthly growth rates have declined consistently since the start of the year," he noted in the report.

"RP Data and Rismark expect to see the market track sideways over the second half of the year."

Prices in regional and rural areas have been even more subdued than those in cities, with 'rest of state' house prices flat in July, down 0.2 per cent over the three months to July, and up only 4.7 per cent over the 12 months to July.

Among the capitals, Darwin recorded the strongest growth of 1.1 per cent over the three months to July, while Perth and Brisbane had the biggest falls of 2.5 per cent.

Sydney's property market edged higher with a 0.3 per cent rise in dwelling prices, while Melbourne prices continued to ease after their recent surge peaked, falling 1.1 per cent in the three months to July.

However, Rismark's chief executive Christopher Joye says it is unlikely that there will be big falls in house prices ahead, because of the significant undersupply of new houses.

"House prices track very closely to disposable household incomes," he told ABC News.

"We're expecting about 5 per cent growth in household incomes this year, we've had around 4.2 per cent growth in national house prices, so we don't expect much more growth for the remainder of the year."

The RP Data - Rismark hedonic index takes account of factors such as the location of properties, number of bedrooms and bathrooms and land area, to adjust for changes in the composition of the housing market in any one month.

Sun, 05 September 2010
Interest rate rises: question is when, not if * By Eoin Blackwell
BORROWERS are likely to be spared an interest rate rise from the Reserve Bank on Tuesday because of a series of mixed economic indicators over the past month.

All 15 economists surveyed by AAP this week said they expected the RBA to leave the cash rate at 4.5 per cent after the central bank board meets for its regular monthly meeting on Tuesday morning.

But analysts are less sure about when the next rate rise will happen, with seven of the 15 surveyed expecting a rate rise of between 25 and 50 basis points in the final three months of 2010.

A 25 basis point (quarter of a per cent) rate rise will add about $50 to the monthly repayments on a $300,000 mortgage.

ICAP economist Adam Carr predicted two 25 basis point hikes in the December quarter because of the risk of inflationary pressures over the rest of the calendar year.

BOOKMARK THIS WEBSITE
To add Small Loans Easy Money to your favourites, simply click here.

|  home  |  news  | links  |