Friday, August 10, 2012

Reserve Bank backflips with optimistic growth forecasts

By Business editor Peter Ryan

The Reserve Bank has backflipped on its earlier cautious forecasts for the Australian economy after a raft of stronger than expected data in recent weeks.

The central bank now sees economic growth at 3.75 per cent by the end of year after earlier predictions of just 3 per cent.

The revisions are outlined in the RBA's quarterly statement on monetary policy released today.

"Information released over the past two months suggests that the Australian economy grew more rapidly over the past year than had been previously indicated by the available data," the statement said.

"Available data suggest that household consumption also grew strongly over the first half of 2012. Retail sales growth picked up in the March and June quarters to around its strongest pace in two years."

However, the RBA says various government payments made to households in May and June in relation to the carbon price "had a noticeable effect on sales at some retailers."

In a bullish statement, the RBA also notes "tentative signs" that the housing market and resident building sector may be starting to improve.

"There are signs that that residential activity might start to pick up in the second half of 2012. Lower interest rates, rising rental yields and population growth are likely to provide support for new housing construction."

The RBA says employment growth has increased "a little faster" in the first half of the year, mainly in the booming resources sector.

However, it confirms that job shedding has continued in the manufacturing, hospitality and building construction industries.

The RBA expects the officially jobless rate to remain at around 5.25 per cent, in line with yesterday's official reading for July of 5.2 per cent.

The central bank's forecast for headline inflation is little changed at 1.2 per cent before moving higher to peak at 3.5 per cent in June 2013.

The RBA says the increase reflects earlier volatility in fruit and vegetable prices and the carbon tax passing through to consumer prices. Treasury has previously forecast the carbon price to add 0.7 per cent to headline inflation.

The RBA has also warned that a persistently high Australian dollar - which surpassed 106 US cents yesterday - had the potential to derail structural reforms to the economy.

It points to a risk that "improvement in productivity growth is not sustained as assumed" and could "put upward pressure on inflation.

The RBA says the debt crisis in Europe is the single biggest threat to the global economy, although it is more optimistic about a resolution.

"The forecasts assume that financial market volatility will remain high but that a severe economic and financial disruption to the euro area will be avoided."

However, it says "an adverse shock" would hit commodity prices and reduce Australia's terms of trade by more than is currently forecast.

The statement also confirms this week's decision by the RBA that the cash rate "remained appropriate" for now.

Market economists believe that means further rate cuts in 2012 are unlikely.

Thursday, August 9, 2012

No news today: Murdoch bans reporter questions at finance briefings

By Business editor Peter Ryan

It was once a highly anticipated quarterly event for journalists - the opportunity to put a rare question to Rupert Murdoch or one of his high flying executives.

But today, the man who lives and breathes the media, showed he doesn't necessarily appreciate having journalists questioning the direction of the News Corporation empire - especially in these troubled times.

Read the story on ABC News Online

In an advisory to journalists about this morning's teleconference on the empire's quarterly earnings, reporters reading the fine print discovered that while they were invited to dial in, it would be on "a listen only" basis.

In the past, reporters were allowed a "window" near the end of the call to queue for questions once the grilling from financial analysts were completed

So disappointed reporters from around the globe, including this one, were sidelined while analysts monopolised questioning of News Corporation president Chase Carey, chief financial officer David Devoe and deputy chief operating oifficer James Murdoch.

Rupert Murdoch was not on the call at today's briefing although he has regularly fronted many briefings in the past taking questions ranging from his love of newspapers, the British phone hacking scandal and who will succeed him once he goes to the big newsroom in the sky.

Hacks questioning the surprise move have been told by News Corporation corporate affairs that the company is moving in line with other US based companies that do not allow journalist question during results briefings.

The answer was non-committal when the ABC asked if News Corporation would consider holding separate media briefings in the future.

The decision by News Corporation to exclude reporters questions ensured this morning's teleconference relating to a US$1.6 billion quarterly loss, was a pedestrian affair.

Here's my analysis from this morning's edition of AM.

There were no inconvenient questions about the UK phone hacking scandal, the future of the global newspapers business or the reputational damage the empire had sustained.

But it wasn't always that way.

Rupert Murdoch has often used financial teleconferences to outline his wide ranging views on political and economic matters assisted by questions from the odd pesky journalist.

For example, in August 2010 during the federal election, Mr Murdoch dispensed with me efficiently when I asked him to say who he'd prefer as Prime Minister.

PETER RYAN: I just wanted to get your thoughts on the Australian election campaign. What are you seeing as the big issues for the economy? And who would you want to see as the prime minister of Australia - Julia Gillard or Tony Abbott?

RUPERT MURDOCH: I think I have no comment at all. Just read our newspapers and see what our editors think. They have the freedom to decide that. We're obviously watching it closely. And there haven't been any really great issues emerge yet.

PETER RYAN: What's your view of the campaign and how it's been conducted by the two leaders? It's been criticised by some quarters back here as being a bit of a debacle.

RUPERT MURDOCH: Well that might be true of the ABC's comments but, and what part you're playing in it. So I think I'll just let that pass.

A year later on, I asked Mr Murdoch how his succession plans were going given the pressure James Murdoch was facing in relation to the News of the World scandal.

Mr Murdoch made news by nominating Chase Carey, rather than one of his own children as his successor:
RUPERT MURDOCH: Well I hope that the job won't be open in the near future (laughter) and I ahh, I have, I have you know Chase is my partner if anything happened to me I'm sure he'll get it immediately but if I went under a bus but Chase and I have full confidence in James but you know in the end the succession is a matter for the board.  

There are many more moments like these that unlikely to be repeated in a briefing dominated by questions from financial analysts.

And before you suggest this reporter's nose is out of joint, there is the public interest to consider.

The role of a journalist is to shine a light into dark corners, and by blocking journalists questions, one can only assume there are questions News Corporation and Rupert Murdoch would prefer not to confront.

Tuesday, August 7, 2012

Standard Chartered branded a "rogue institution" after alleged illegal dealings with Iran

One of the world's biggest banks is being pursued by US regulators over claims that it violated anti-terror laws by dealing with Iran.

The London-based Standard Chartered Bank has been branded as a "rogue institution" after allegedly hiding transactions valued at US$250 billion.

The bank has rejected the claim, but the scandal could see Standard Chartered stripped of its licence for the state of New York which could ultimately cut if off from lucrative US financial markets.

According to New York's Department of Financial Services, Standard Chartered is a "rogue institution" that broke US law and exposed America's banking system to terrorists, drug traffickers and corrupt states.

The department claims the bank "schemed" with the Iranian government to conduct 60,000 secret transactions that generated hundreds of millions of dollars in fees.

The dealings go back as far as 2006 when, it alleged, Standard Chartered insider debated whether to continue the Iranian dealings.

A top US-based employee warned head office in London that the dealings could cause "catastrophic reputational damage" and "serious criminal liability".

A top executive in London shot back: "You f---ing Americans. Who are you to tell us, the rest of the world, that we're not going to deal with Iranians."

Regulators say that reply shows an obvious contempt for US banking regulations and already there are moves to strip Standard Chartered of its New York licence which allows it to process US$190 billion every day.

The loss of a New York banking license would be a devastating blow as it would cut off direct access to the lucrative US financial services sector.

Meanwhile Standard Chartered issued a statement rejecting the claims and says it ceased all new business in any currency with Iranian customers over five years ago.

"The Group takes its responsibilities very seriously, and seeks to comply at all times with the relevant laws and regulations. It is in this spirit we initiated this review and have engaged with the US agencies."

Investigations are focussing on so-called "u-turn" transactions where Standard Chartered allegedly moved money for Iranian clients among banks in Britain and Middle East and cleared through Standard Chartered's New York branch, but which neither started nor ended in Iran.

Such transactions have been illegal since November 2008, when the Treasury Department banned them on concerns that they were being used to evade sanctions, and that Iran was using banks to fund nuclear and missile development programs.

Standard Chartered shares dived six percent in late London trade and fell as much in seven percent when they opened in Hong Kong this morning.