The political brinkmanship in Washington might be over, but it seems the reputation of the United States as a global economic power has been damaged.
US Treasury bills, regarded as the world's safest investment, have been hurt by the uncertainty with interest rates rising in recent days.
AUDIO: US reputation damaged by debt ceiling impasse (AM)
The director of the Institute of Global Finance at the New South Wales University, Fariborz Moshirian, believes the damage could also be exploited by China.
The world's second biggest economy has been positioning its currency as an alternative to the US dollar, which for now remains the world's reserve currency.
"I think in the medium term the damage to the US as an economy is quite severe simply because the US currency is used as a major world currency," he said.
"And now other countries, particularly China, will think that their currency could emerge over time as a competitor to the US dollar."
Dr Moshirian says the crisis has provided with an opportunity China to deepen its capital market, attract foreign investors and ensure that its banks are more competitive with those in Europe and the US.
"China's economy has not been affected," he said.
"China didn't need to rescue her banking system, and they are sitting on massive amount of foreign exchange reserves and so Chinese financial market is very strong.
"During the Great Depression the UK was the largest creditor and US basically took over that. And now in this new era we are seeing that the US becoming the largest debtor and yet China is becoming almost a larger creditor in the world."
Dr Moshirian says there is little that central banks around the world, including the Reserve Bank Australia, could do in the event of a US debt default.
"I think if the US defaults, the Fed in US becomes a weak central bank," he said.
"And unlike during the GFC when the US Fed led a massive coordination amongst other central banks to provide financial liquidity in the system, I'm afraid this time around in the wake of any default by the US, the US Fed might not be able to provide the same leadership.
"That means we might have massive liquidity crisis in the banking system as well as in non-bank corporations."
This means there could be a big change in "in international financial architecture".
"The US currency as a global currency may no longer remain as the key currency," he said.
"And also capital market in the world will become much deeper so that they don't need to rely only on the US bond market as a way of financing their activities."
Thursday, October 17, 2013
Wednesday, October 16, 2013
ASX boss warns of "dramatic consequences" of US default
By Business editor Peter Ryan
The chief executive of the Australian Securities Exchange has warned of "dramatic consequences" if the United States defaults on its debt obligations.
While Elmer Funke Kupper believes President Obama will strike a last minute deal with US republicans, he says the deadlock over raising America's US$16.7 debt ceiling has already damaged America's international standing.
Mr Funke Kupper has echoed predictions from other heavyweight investors that the US Congress understands the potentially catastrophic consequences of a US debt default.
"The ongoing assumption must be that it won't happen. I would still be hopeful that the US parties would know that would have very dramatic consequences for the world economy," Mr Funke Kupper told the ABC's AM program.
"I think it's fair to say that even if it's just theatre the US will have done damage to its international standing irrespective because we cannot have the number one economy in the world going through this every year."
As the debt ceiling impasse remains unresolved, Wall Street investors have started to factor in the likelihood of steep losses if the deadline passes without a deal.
The Dow Jones Industrial Average ended 0.87 percent or 133 points weaker after the Democrat Senator Diane Feinstein said talks had broken down.
In a sign of growing risk, yields on 10-year Treasury notes added four basis points to 2.72 percent after touching a three- week high.
Mr Funke Kupper says the perceived safety of US Treasury bills is coming under renewed pressure because of the deadlock and signals that a US default is looming without a deal.
"In the definition of what's safe, US Treasuries are considered safe and have been for the last 50 years," Mr Funke Kupper said.
"So if that gets shaken other things might get shaken too and I think that would be damaging not just for the US but for the world economy."
"I think all investors would like stability and certainty in the long run and I think in the western world we continue to stumble from minor crisis to minor crisis."
China holds approximately US$1.5 trillion of US debt with around US$5.7 trillion of Treasury notes held offshore around the world.
"They fund the United States so one of the consequences of this going wrong is that it will become more expensive to fund the United States and that will only make the problem worse.
"This is why it is so unimaginable that they (the US Congress) would allow this to go so wrong."
The Australian sharemarket is set to open weaker in the wake of the Wall Street falls.
The Australian dollar has backed away from yesterday's four month high after the Reserve Bank signalled that interest could remain on hold for the rest of the year.
But as hopes for a debt deal fade the local currency is lower at 95.1 US cents.
The chief executive of the Australian Securities Exchange has warned of "dramatic consequences" if the United States defaults on its debt obligations.
While Elmer Funke Kupper believes President Obama will strike a last minute deal with US republicans, he says the deadlock over raising America's US$16.7 debt ceiling has already damaged America's international standing.
Mr Funke Kupper has echoed predictions from other heavyweight investors that the US Congress understands the potentially catastrophic consequences of a US debt default.
"The ongoing assumption must be that it won't happen. I would still be hopeful that the US parties would know that would have very dramatic consequences for the world economy," Mr Funke Kupper told the ABC's AM program.
"I think it's fair to say that even if it's just theatre the US will have done damage to its international standing irrespective because we cannot have the number one economy in the world going through this every year."
As the debt ceiling impasse remains unresolved, Wall Street investors have started to factor in the likelihood of steep losses if the deadline passes without a deal.
The Dow Jones Industrial Average ended 0.87 percent or 133 points weaker after the Democrat Senator Diane Feinstein said talks had broken down.
In a sign of growing risk, yields on 10-year Treasury notes added four basis points to 2.72 percent after touching a three- week high.
Mr Funke Kupper says the perceived safety of US Treasury bills is coming under renewed pressure because of the deadlock and signals that a US default is looming without a deal.
"In the definition of what's safe, US Treasuries are considered safe and have been for the last 50 years," Mr Funke Kupper said.
"So if that gets shaken other things might get shaken too and I think that would be damaging not just for the US but for the world economy."
"I think all investors would like stability and certainty in the long run and I think in the western world we continue to stumble from minor crisis to minor crisis."
China holds approximately US$1.5 trillion of US debt with around US$5.7 trillion of Treasury notes held offshore around the world.
"They fund the United States so one of the consequences of this going wrong is that it will become more expensive to fund the United States and that will only make the problem worse.
"This is why it is so unimaginable that they (the US Congress) would allow this to go so wrong."
The Australian sharemarket is set to open weaker in the wake of the Wall Street falls.
The Australian dollar has backed away from yesterday's four month high after the Reserve Bank signalled that interest could remain on hold for the rest of the year.
But as hopes for a debt deal fade the local currency is lower at 95.1 US cents.
Thursday, October 10, 2013
Janet Yellen Fed nomination no "rubber stamp" for US Senate
United States president Barack Obama has formally nominated Harvard economics professor Janet Yellen as the next chair of the Federal Reserve.
Mr Obama described the nomination as one of the most important economic decisions he would make as president.
Listen to my analysis from this morning's edition of AM.
Dr Yellen, a Brooklyn native, has been vice chair of the Fed since 2010.
Ben Bernanke's eight-year term as chairman ends in January.
If confirmed by the US Senate, Dr Yellen would be the first woman to hold the post in the Reserve's 100-year history.
Mr Obama said that would make her a role model for many.
The announcement appears to have been brought forward, as Mr Obama tries to calm financial markets amid concerns the US government will default on its debts if it fails to raise the debt ceiling by October 17.
Dr Yellen has pledged to promote maximum employment, stabilise prices and create a strong and stable financial system.
She says the US has made progress in recovering from the Great Recession, but more needs to be done.
AUDIO: Business editor Peter Ryan on Dr Yellen's nomination(AM)
"Too many Americans still can't find a job and worry how they'll pay their bills and provide for their families," Dr Yellen said.
"The Federal Reserve can help if it does its job effectively."
Dr Yellen is highly regarded by other central bankers around the world and like Dr Bernanke, she seen as a steady hand five years after the collapse of Wall Street.
Mr Obama says Dr Yellen ticks all the boxes he wants in a Fed chief.
"She is a proven leader and she's tough, not just because she's from Brooklyn," he said.
"Janet is exceptionally well qualified for this role. She has served in leadership positions at the Fed for more than a decade.
"Janet is renowned for her good judgement. She sounded the alarm early about the housing bubble, about excesses in the financial sector and about the risks of a major recession."
Dr Yellen joined Mr Obama in praising Dr Bernanke, who was present at the event, saying he was the epitome of calm, serenity and courage during the worst financial crisis since the Great Depression.
It is possible she will meet Republican resistance during Senate confirmation, but Dr Yellen sent a very clear message that she was more than up to the job.
Dr Yellen is considered to be "dovish" on policy, concerned more with job creation than the risk of inflation.
Thomson Reuters senior analyst John Noonan says that stance and the debt debacle in Washington will keep the Fed's aggressive bond-buying program in place for now.
"I don't think it's fair to typecast her as somebody who's always going to be taking easy monetary policy," Mr Noonan said.
"In her past she has warned about inflation, so I think until she sees the inflation pressures she is going to focus on improving the employment situation in the US.
"There's less likelihood of bond tapering also because of the damage that's been done to the economy from this latest episode."
Like Dr Bernanke, she will be trying her best to demystify the craft of monetary policy and cut the jargon.
Mr Obama described the nomination as one of the most important economic decisions he would make as president.
Listen to my analysis from this morning's edition of AM.
Dr Yellen, a Brooklyn native, has been vice chair of the Fed since 2010.
Ben Bernanke's eight-year term as chairman ends in January.
If confirmed by the US Senate, Dr Yellen would be the first woman to hold the post in the Reserve's 100-year history.
Mr Obama said that would make her a role model for many.
The announcement appears to have been brought forward, as Mr Obama tries to calm financial markets amid concerns the US government will default on its debts if it fails to raise the debt ceiling by October 17.
Dr Yellen has pledged to promote maximum employment, stabilise prices and create a strong and stable financial system.
She says the US has made progress in recovering from the Great Recession, but more needs to be done.
AUDIO: Business editor Peter Ryan on Dr Yellen's nomination(AM)
"Too many Americans still can't find a job and worry how they'll pay their bills and provide for their families," Dr Yellen said.
"The Federal Reserve can help if it does its job effectively."
Dr Yellen is highly regarded by other central bankers around the world and like Dr Bernanke, she seen as a steady hand five years after the collapse of Wall Street.
Mr Obama says Dr Yellen ticks all the boxes he wants in a Fed chief.
"She is a proven leader and she's tough, not just because she's from Brooklyn," he said.
"Janet is exceptionally well qualified for this role. She has served in leadership positions at the Fed for more than a decade.
"Janet is renowned for her good judgement. She sounded the alarm early about the housing bubble, about excesses in the financial sector and about the risks of a major recession."
Dr Yellen joined Mr Obama in praising Dr Bernanke, who was present at the event, saying he was the epitome of calm, serenity and courage during the worst financial crisis since the Great Depression.
It is possible she will meet Republican resistance during Senate confirmation, but Dr Yellen sent a very clear message that she was more than up to the job.
Dr Yellen is considered to be "dovish" on policy, concerned more with job creation than the risk of inflation.
Thomson Reuters senior analyst John Noonan says that stance and the debt debacle in Washington will keep the Fed's aggressive bond-buying program in place for now.
"I don't think it's fair to typecast her as somebody who's always going to be taking easy monetary policy," Mr Noonan said.
"In her past she has warned about inflation, so I think until she sees the inflation pressures she is going to focus on improving the employment situation in the US.
"There's less likelihood of bond tapering also because of the damage that's been done to the economy from this latest episode."
Like Dr Bernanke, she will be trying her best to demystify the craft of monetary policy and cut the jargon.
Wednesday, October 9, 2013
Janet Yellen to be nominated as Ben Bernanke's successor at US Federal Reserve
With financial markets so concerned about the prospect a US debt default, President Obama has moved to temper the jitters by nominating a replacement for Ben Bernanke who's retiring as chairman of the US Federal Reserve.
Dr Bernanke's successor will be his deputy Janet Yellen who is set to become the first woman to lead the world's most powerful central bank.
Listen to my analysis from today's edition of The World Today.
It will be a hard act to follow.
Ben Bernanke is a veteran of sleepless nights after inheriting the Wall Street collapse in 2008 and is still managing the fallout of the global financial crisis which remains far from over.
Financial markets will see Janet Yellen as a safe bet and perhaps a short term antidote to the anxiety being caused by the partial US government shutdown and the fast approaching debt ceiling deadline.
Ms Yellen is not such a big departure from Ben Bernanke's dovish economic mantra.
She is seen as likely to keep official US rates close to zero for as long as necessary and will be cautious about when - or if - to wind back the Fed's economic stimulus program which is currently buying $85 billion in bonds every month.
The official announcement of Ms Yellen's nomination is scheduled for 3pm tomorrow in Washington (6am eastern time Australia) and already investors are welcoming a morsel of certainty in an increasingly volatile world.
A former member of the US Federal Reserve Randy Kroszner told Bloomberg Ms Yellen will be welcomed as someone who has been "battle tested" having made it through the worst of the financial crisis.
Ms Yellen is also expected to make it through the congressional confirmation process with little drama despite being President Obama's third choice.
Former Treasury Secretary Timothy Geithner couldn't be tempted to leave the corporate world and Larry Summers - a former Treasury Secretary to President Bill Clinton - withdrew after it became clear his nomination would be blocked.
Dr Summers' candidacy was damaged by perceptions by congressional heavyweights that he was responsible for weaker lending standards that contributed to the subprime mortgage crisis.
Investors were also worried that Dr Summers was regarded as a monetary policy "hawk" and might have cut back the Fed's economic stimulus faster than expected.
But the bigger immediate question is if news of Janet Yellen's nomination will temper nerves as the debt ceiling deadline approaches.
The futures market is showing Wall Street will open in positive territory this evening for the first time in two sessions.
But global investors are skeptical on whether the earlier than expected nomination of Janet Yellen will be enough to be considered as any circuit breaker.
Tuesday, October 8, 2013
Industry superannuation funds bracing for gov't battle over trade union influence
Industry superannuation funds are preparing to a fight government proposal to reduce the influence of trade unions on boards that manage retirement savings.
The government is considering a change to the current 50-50 arrangement, where boards positions are split between employer and employee representatives who are tied to unions.
AUDIO: Industry funds brace for Govt stoush on union (AM)
The Coalition is looking at a three-way split to dilute the role of unions and provide more room for independent directors, who tend to be closer to retail funds.
But the chief executive of Industry Super Australia, David Whiteley, says there is no room for political ideology when it comes to delivering super returns.
"We've had several years now of significant change, regulatory change and changes to the taxation system of super, and I think consensus within the community is very much that a period of stability and certainty would be welcomed by some members," he said.
"And I think that applies to both regulatory governance and taxation elements of superannuation."
Prime Minister Tony Abbott said during the election campaign that he would not support any detrimental changes to super.
And Mr Whitely expects Mr Abbott to fulfil that promise.
"I think that the Government will obviously be cautious and consultative in looking at any changes they will be making to the governance arrangements of any superannuation fund and, of course, be very careful and very circumspect in looking at governance changes which might reduce member return," he said.
But he says there is little evidence to show that unions have too much influence on the boards of industry super funds.
"Industry super funds are jointly governed by employer associations and by unions," he said.
"They're a function of consensus and, in fact, in many respects, could be regarded as a very consistent and enduring consensus over the last 20 years."
Mr Whitely warns against any politicisation of super fund boards.
"The most important thing that any government has got in mind will be: what are the long-term net returns to members?" he said.
"The industry super funds, according to the latest data that I've seen, have shown that they've outperformed the retail fund sector, over one, three, five, seven and 10-years.
"So what would be front-of-mind for any government would be making sure that the changes they make are beneficial to members' long-term net returns."
The Cooper Review into superannuation in 2010 recommended more independent directors on the boards of industry super funds.
Mr Whitley says it is unclear whether that would be the case.
"It's hypothetical, of course," he said.
"I think one thing that is clear is that the governance of industry super funds has been central to their outperformance."
"There's a number of reasons for that, of course. One has been the preparedness to invest directly in infrastructure. One has been that industry super funds do not pay sales commission to financial planners.
"But of course, also it has been the governance of those funds themselves and this is something which there has been numerous reports about, numerous evidence presented about, both in Australia and overseas."
Mr Whitey expects to be consulted about any changes to superannuation fund boards.
"I mean, our expectation would be that any government which was seeking to introduce significant change to any part of our industry would be consulting with industry super funds," he said.
Medibank Private boss says selloff in first Coaltion term "likely"
The anticipated multi-billion sale of Medibank Private could take place in the Coalition government's first term.
The publicly owned insurer's managing director George Savvides has told The World Today the selloff remains a key Coalition goal.
"I think it is designed that way and certainly we will respond in a manner required to meet the expectations of the owner," Mr Savvides said.
"But I suspect it will be in the first term."
Listen to my exclusive interview with George Savvides.
The sale speculation was ramped up as Medibank Private announced a 83.8 percent increase in full year profit to $233 million.
Membership rose to 3.8 million members during last financial year, and the company says it has 29.5 per cent market share.
Medibank was valued at more than $4 billion during the Howard Government in 2006.
But with today's price thought to be around half that, the government appears to be waiting for the the right time and a better price tag.
The publicly owned insurer's managing director George Savvides has told The World Today the selloff remains a key Coalition goal.
"I think it is designed that way and certainly we will respond in a manner required to meet the expectations of the owner," Mr Savvides said.
"But I suspect it will be in the first term."
Listen to my exclusive interview with George Savvides.
The sale speculation was ramped up as Medibank Private announced a 83.8 percent increase in full year profit to $233 million.
Membership rose to 3.8 million members during last financial year, and the company says it has 29.5 per cent market share.
Medibank was valued at more than $4 billion during the Howard Government in 2006.
But with today's price thought to be around half that, the government appears to be waiting for the the right time and a better price tag.
Monday, October 7, 2013
Leighton facing class action over Iraq bribery, corruption claims
Construction giant Leighton Holdings has vowed to vigorously defend itself against a shareholder class action relating to allegations of bribery and corruption in Iraq.
Leighton has been notified that Melbourne solicitor Mark Elliott filed a writ against the company in the Supreme Court of Victoria late last week.
LISTEN: Business editor Peter Ryan speaks with class action lawyer Mark Elliott
The writ alleges Leighton breached its continuous disclosure obligations under the Corporations Act by failing to reveal allegations of bribery and corruption against senior officers responsible for a $750 million oil pipeline contract in Iraq.
It also alleges the company failed to disclose an investigation of "misbehaviour" involving senior officers, including "misbehaviour the subject of a claim by Leighton against a former employee for $5.6 million", relating to the construction of a barge in Indonesia.
Mr Elliott, who is also a Leighton shareholder, told PM he launched the class action because he was concerned shareholders still did not know the full story about the alleged incident in Iraq.
The company denies there is a "proper basis for the alleged claim" and says it will vigorously defend itself.
Leighton voluntarily reported the incident to Australian Federal Police in 2011, describing it as a possible breach of its code of ethics, and notified the market in February 2012.
"The initial disclosure in February of last year had no impact on the share price and that's probably because the announcement was very innocuous - it talked about breaches of codes of ethics and similar wording," Mr Elliott said.
"I think you can see from activity in the share market on the 3rd and 4th of October last week that the share market was quite surprised by the most recent round of announcements and decided it was a billion-dollar problem now and marked the shares down accordingly."
Leighton has also attacked "sweeping criticisms" of its governance structures, processes and integrity in ongoing coverage of the allegations, revealed last week as part of a six-month investigation by Fairfax Media.
The reports revealed hundreds of confidential documents that Fairfax says show corruption was widespread, and in some cases approved, across Leighton's international businesses.
The documents include a handwritten note from November 2010 that allegedly shows former chief executive Wal King, who led the company for 23 years, approved $42 million in kickbacks to "a firm in Monaco nominated by Iraqi officials".
The investigation also exposed alleged plans to pay multi-million dollar kickbacks to win contracts to build a barge in Indonesia and a dam-building project in Malaysia.
Mr King has emphatically denied all allegations.
Today, Leighton issued a statement saying its board and management "condemn any form of corrupt or fraudulent behavior".
"Media coverage of the possible employee fraud concerning the construction of a barge has deflected the fact that this issue was investigated on more than one occasion and ultimately by external auditors, engineers and lawyers," Leighton said in the statement.
"The investigations have led to court proceedings being brought against the ex-employee, with Leighton seeking the recovery of $5.6 million.
"These steps were taken before media reporting on the matter, not in reaction to it. The attempt by some media, or their sources, to characterise this issue as a foreign bribery matter is misguided and incorrect."
When Leighton reported the Iraq incident to AFP in 2011, the company said it was not known whether there had been any "wrongful or illegal conduct".
The company says it is cooperating with the federal police investigation.
Leighton has been notified that Melbourne solicitor Mark Elliott filed a writ against the company in the Supreme Court of Victoria late last week.
LISTEN: Business editor Peter Ryan speaks with class action lawyer Mark Elliott
The writ alleges Leighton breached its continuous disclosure obligations under the Corporations Act by failing to reveal allegations of bribery and corruption against senior officers responsible for a $750 million oil pipeline contract in Iraq.
It also alleges the company failed to disclose an investigation of "misbehaviour" involving senior officers, including "misbehaviour the subject of a claim by Leighton against a former employee for $5.6 million", relating to the construction of a barge in Indonesia.
Mr Elliott, who is also a Leighton shareholder, told PM he launched the class action because he was concerned shareholders still did not know the full story about the alleged incident in Iraq.
The company denies there is a "proper basis for the alleged claim" and says it will vigorously defend itself.
Leighton voluntarily reported the incident to Australian Federal Police in 2011, describing it as a possible breach of its code of ethics, and notified the market in February 2012.
"The initial disclosure in February of last year had no impact on the share price and that's probably because the announcement was very innocuous - it talked about breaches of codes of ethics and similar wording," Mr Elliott said.
"I think you can see from activity in the share market on the 3rd and 4th of October last week that the share market was quite surprised by the most recent round of announcements and decided it was a billion-dollar problem now and marked the shares down accordingly."
Leighton has also attacked "sweeping criticisms" of its governance structures, processes and integrity in ongoing coverage of the allegations, revealed last week as part of a six-month investigation by Fairfax Media.
The reports revealed hundreds of confidential documents that Fairfax says show corruption was widespread, and in some cases approved, across Leighton's international businesses.
The documents include a handwritten note from November 2010 that allegedly shows former chief executive Wal King, who led the company for 23 years, approved $42 million in kickbacks to "a firm in Monaco nominated by Iraqi officials".
The investigation also exposed alleged plans to pay multi-million dollar kickbacks to win contracts to build a barge in Indonesia and a dam-building project in Malaysia.
Mr King has emphatically denied all allegations.
Today, Leighton issued a statement saying its board and management "condemn any form of corrupt or fraudulent behavior".
"Media coverage of the possible employee fraud concerning the construction of a barge has deflected the fact that this issue was investigated on more than one occasion and ultimately by external auditors, engineers and lawyers," Leighton said in the statement.
"The investigations have led to court proceedings being brought against the ex-employee, with Leighton seeking the recovery of $5.6 million.
"These steps were taken before media reporting on the matter, not in reaction to it. The attempt by some media, or their sources, to characterise this issue as a foreign bribery matter is misguided and incorrect."
When Leighton reported the Iraq incident to AFP in 2011, the company said it was not known whether there had been any "wrongful or illegal conduct".
The company says it is cooperating with the federal police investigation.
Sunday, October 6, 2013
Raining on the parade or wakeup call? Republican movement slaps PM's monarchist comment
The Australian Republican Movement has criticised yesterday's comments by Prime Minister Tony Abbott that "today everyone feels like a monarchist."
The comments to Prince Harry at the Fleet Review came as Mr Abbott said he regretted that not everyone is a monarchist.
So is the ARM being overly sensitive to the PM's well known monarchist stance? Or is Australia mature enough to celebrate such a significant event without feeling tied to the monarchy?
The question was put to Malcolm Turnbull on this morning's Insiders program on the ABC.
"I NEVER feel like a monarchist".
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| Photo by Peter Ryan |
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| Media Release from Australian Republican Movement |
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Photo by Peter Ryan |
Friday, October 4, 2013
Hockey extends deadline for ADM's $3 billion Graincorp bid
By Business editor Peter Ryan
Treasurer Joe Hockey has delayed a final decision on a controversial bid by the US agricultural giant Archer Daniels Midland for Australia’s Graincorp.
In a statement released this afternoon, Mr Hockey said the deadline for a decision on the $3 billion proposal had been extended to December 17.
Mr Hockey’s decision is seen as the government’s first major policy test of foreign investment amid pre-election speculation about revised guidelines for the Foreign Investment Review Board.
“Given the size of this transaction and the complex nature of the issues involved, I have decided to extend the statutory time period,” Mr Hockey said.
“This will allow sufficient time for the new government to carefully consider all the relevant issues and advice from the Foreign Investment Review Board before making a decision.”
A decision on ADM’s bid for Graincorp had been expected earlier this year but was put on hold when the Labor government moved into caretaker mode before the election.
Today Mr Hockey used powers under the Foreign Acquisitions and Takeovers Act to extend the deliberation period.
“Australia’s foreign investment review framework allows the Government to examine foreign investment applications on a case-by-case basis to ensure they are not contrary to Australia’s national interest,” Mr Hockey said.
ADM's grain division president Ian Pinner has been in Australia recently to lobby shareholders, including farmers, to approve the deal.
Mr Pinner has been working to dismiss concerns that the takeover could restrict access to grain storage and ports.
"Open access and arrangements that exist today will, and, I believe, need to exist going forward," Mr Pinner told the “AM” program in June.
"We've spent a lot of time talking to the stakeholders of GrainCorp to ensure that we've got what we believe is the right strategy once we acquire the business," he said.
While in Opposition, the leader of the National Party, Warren Truss, urged the Foreign Investment Review Board to veto the takeover.
Mr Truss has said the deal is not in Australia's national interests as it could see most of Australia's export facilities become foreign owned.
"It makes no sense for us to restrict access to the growers or to the trade to either the up country storage or to the ports," Mr Truss told the ABC earlier this year.
Mr Hockey’s decision reflects the attitude of the previous Labor government and reiterates that the government welcomes foreign investment “because of the benefits that it provides to the Australian economy.”
Treasurer Joe Hockey has delayed a final decision on a controversial bid by the US agricultural giant Archer Daniels Midland for Australia’s Graincorp.
In a statement released this afternoon, Mr Hockey said the deadline for a decision on the $3 billion proposal had been extended to December 17.
Mr Hockey’s decision is seen as the government’s first major policy test of foreign investment amid pre-election speculation about revised guidelines for the Foreign Investment Review Board.
“Given the size of this transaction and the complex nature of the issues involved, I have decided to extend the statutory time period,” Mr Hockey said.
“This will allow sufficient time for the new government to carefully consider all the relevant issues and advice from the Foreign Investment Review Board before making a decision.”
A decision on ADM’s bid for Graincorp had been expected earlier this year but was put on hold when the Labor government moved into caretaker mode before the election.
Today Mr Hockey used powers under the Foreign Acquisitions and Takeovers Act to extend the deliberation period.
“Australia’s foreign investment review framework allows the Government to examine foreign investment applications on a case-by-case basis to ensure they are not contrary to Australia’s national interest,” Mr Hockey said.
ADM's grain division president Ian Pinner has been in Australia recently to lobby shareholders, including farmers, to approve the deal.
Mr Pinner has been working to dismiss concerns that the takeover could restrict access to grain storage and ports.
"Open access and arrangements that exist today will, and, I believe, need to exist going forward," Mr Pinner told the “AM” program in June.
"We've spent a lot of time talking to the stakeholders of GrainCorp to ensure that we've got what we believe is the right strategy once we acquire the business," he said.
While in Opposition, the leader of the National Party, Warren Truss, urged the Foreign Investment Review Board to veto the takeover.
Mr Truss has said the deal is not in Australia's national interests as it could see most of Australia's export facilities become foreign owned.
"It makes no sense for us to restrict access to the growers or to the trade to either the up country storage or to the ports," Mr Truss told the ABC earlier this year.
Mr Hockey’s decision reflects the attitude of the previous Labor government and reiterates that the government welcomes foreign investment “because of the benefits that it provides to the Australian economy.”
US Treasury warns debt ceiling deadlock or default could have "catastrophic consequences" and trigger deep recession
As the budget impasse in Washington starts to hurt financial markets, the US Treasury is warning a deadlock over America's $17 trillion debt ceiling could have "catastrophic consequences".
In a document released this morning, Treasury says a failure to raise the debt ceiling could see America default on its debts for the first time ever.
Treasury warns that will not only hurt America's economic recovery but put it back into a deep recession.
Listen to my analysis from this morning's edition of "AM".
· "Not only might the economic consequences of default be profound, those consequences, including high interest rates, reduced investment, higher debt payments, and slow economic growth, could last for more than a generation."
· "In the event that a debt limit impasse were to lead to a default, it could have a catastrophic effect"
· "Many private-sector analysts believing that it would lead to events of the magnitude of late 2008 or worse, and the result then was a recession more severe than any seen since the Great Depression."
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| Chicago volatility index (VIX) on rise - though nothing like last impasse in late 2011. |
Thursday, October 3, 2013
Leighton denies bribery, corruption claims in Asia and the Middle East
The construction company Leighton Holdings says it is co-operating with federal police amid allegations it paid millions of dollars of kickbacks to win contracts in Iraq.
Fairfax Media has obtained hundreds of confidential documents that it says show corruption was widespread and, in some cases, approved across Leighton's international businesses.
Listen to my story which includes an exclusive interview with former Leighton chief executive Wal King
The documents include a handwritten note from November 2010 that allegedly shows former chief executive Wal King approved $42 million in kickbacks to "a firm in Monaco nominated by Iraqi officials" for a $750 million oil pipeline contract.
The six-month investigation also exposes alleged plans to pay multi-million dollar kickbacks to win contracts to build a barge in Indonesia, as well a dam-building project in Malaysia.
Leighton voluntarily reported the Iraq and Indonesia incidents to the AFP in 2011 but it has refused to confirm when the alleged breaches of its code of ethics occurred.
The AFP says it is treating the case as a priority, and "working to ensure the matter is thoroughly investigated".
Mr King, who was chief executive of Leighton for 23 years until retiring at the end of 2010, told the ABC he was not aware of the activity in the reports and will issue a statement this afternoon.
In a statement, Leighton says it takes the accusations seriously and "is deeply concerned about the suggestions of impropriety".
It described the Iraq investigation and the construction of a barge in Indonesia as "exceptional instances".
"Leighton continues to cooperate with the AFP while the AFP undertakes its investigation," the statement says.
"We are not aware of any new allegations or instances of breach of our ethics."
Leighton has taken action in NSW Supreme Court to recover $5.6 million from a former employee for alleged breaches of "contractual and fiduciary duties" in relation to the construction of the barge in Indonesia for a subsidiary, Leighton Offshore Pte Limited.
And the company says it has already conducted internal investigations into the Iraq case.
It dismissed a senior executive in July 2012 in relation to the Iraq matter, and says it has changed its management and risk structures and revised its code of business conduct.
The allegations come as the Reserve Bank confronts claims that its subsidiary Note Printing Australia tried to strike a deal an illegal deal with Iraq in 1998.
The Australian Securities and Investments Commission (ASIC) says the reports are a matter for the AFP, because such activity is governed by the Commonwealth Criminal Code.
But Independent Senator Nick Xenophon has stepped up his criticism of ASIC in light of the new allegations, saying the regulator should have the power to investigate in such cases.
"If it's an Australian-registered company, it ought to be within the domain of ASIC to look at bribes being paid by an Australian-based company or a company with significant Australian operations in relation to their conduct overseas," he said.
When Mr King's retirement was announced in 2010, Leighton chairman David Mortimer praised his contribution to the company.
"During Wal's leadership, Leighton has risen from being a middle-ranking Australian construction company to a global leader as a contractor and the world’s largest contract miner," Mr Mortimer said at the time.
"Just recently, Engineering News Record ranked Leighton as the 12th largest contractor by revenue in the world."
Leighton shares fell sharply in early trade and at 10:25am (AEST) were down 8.9 per cent at $17.85.
Fairfax Media has obtained hundreds of confidential documents that it says show corruption was widespread and, in some cases, approved across Leighton's international businesses.
Listen to my story which includes an exclusive interview with former Leighton chief executive Wal King
The documents include a handwritten note from November 2010 that allegedly shows former chief executive Wal King approved $42 million in kickbacks to "a firm in Monaco nominated by Iraqi officials" for a $750 million oil pipeline contract.
The six-month investigation also exposes alleged plans to pay multi-million dollar kickbacks to win contracts to build a barge in Indonesia, as well a dam-building project in Malaysia.
Leighton voluntarily reported the Iraq and Indonesia incidents to the AFP in 2011 but it has refused to confirm when the alleged breaches of its code of ethics occurred.
The AFP says it is treating the case as a priority, and "working to ensure the matter is thoroughly investigated".
Mr King, who was chief executive of Leighton for 23 years until retiring at the end of 2010, told the ABC he was not aware of the activity in the reports and will issue a statement this afternoon.
In a statement, Leighton says it takes the accusations seriously and "is deeply concerned about the suggestions of impropriety".
It described the Iraq investigation and the construction of a barge in Indonesia as "exceptional instances".
"Leighton continues to cooperate with the AFP while the AFP undertakes its investigation," the statement says.
"We are not aware of any new allegations or instances of breach of our ethics."
Leighton has taken action in NSW Supreme Court to recover $5.6 million from a former employee for alleged breaches of "contractual and fiduciary duties" in relation to the construction of the barge in Indonesia for a subsidiary, Leighton Offshore Pte Limited.
And the company says it has already conducted internal investigations into the Iraq case.
It dismissed a senior executive in July 2012 in relation to the Iraq matter, and says it has changed its management and risk structures and revised its code of business conduct.
The allegations come as the Reserve Bank confronts claims that its subsidiary Note Printing Australia tried to strike a deal an illegal deal with Iraq in 1998.
The Australian Securities and Investments Commission (ASIC) says the reports are a matter for the AFP, because such activity is governed by the Commonwealth Criminal Code.
But Independent Senator Nick Xenophon has stepped up his criticism of ASIC in light of the new allegations, saying the regulator should have the power to investigate in such cases.
"If it's an Australian-registered company, it ought to be within the domain of ASIC to look at bribes being paid by an Australian-based company or a company with significant Australian operations in relation to their conduct overseas," he said.
When Mr King's retirement was announced in 2010, Leighton chairman David Mortimer praised his contribution to the company.
"During Wal's leadership, Leighton has risen from being a middle-ranking Australian construction company to a global leader as a contractor and the world’s largest contract miner," Mr Mortimer said at the time.
"Just recently, Engineering News Record ranked Leighton as the 12th largest contractor by revenue in the world."
Leighton shares fell sharply in early trade and at 10:25am (AEST) were down 8.9 per cent at $17.85.
Friday, September 27, 2013
Thursday, September 26, 2013
Fixed line phone hangups tell story of Telstra's long term transition
Telstra says its decision to cut 1,100 jobs from its operations division will not get in the way of winning lucrative new business from the National Broadband Network.
The decision was the result of a major restructure as the decline of traditional fixed line telephone connections continues.
There have been some dramatic changes for Telstra since its privatisation began right back in 1997.
So is this latest round of cuts a sign that Telstra's strategy is part of a new approach?
Telstra is no longer a company just known just for its copper wire network and phone lines into homes.
The first big change came in 2005, when the then-chief executive Sol Trujillo revealed a big decline in traditional fixed-line phone connections.
AUDIO: Telstra to trim more as it eyes NBN deal (AM)
He said this was because more customers were relying on their mobile phones.
More recently, consumers have been using new services like Skype, and there is also the threat of free calls from Apple's new operating system.
Telecommunications analyst David Kennedy says the old lines of the business are fading, but even new technologies are being superseded.
"The reason they've been forced to accelerate this sort of process is that a lot of the traditional business lines, especially for residential homes, public switched data network is in decline, but mobile and fixed broadband have reached a kind of maturity," he said.
"The connection growth has really tailed off over the last three years. So to maintain profitability the whole industry is now looking to reduce the cost base at a faster rate than they have done in the past."
With the shift to the NBN, Telstra has needed to become more efficient to compete.
And, of course, there is the unrelenting pressure to keep shareholders happy.
Under Labor, Telstra negotiated an $11 billion deal to decommission its copper network and to move customers over to the NBN.
Under the Coalition plan, Telstra might get even more work to get the NBN from the street corner to households using its copper wire.
But Mr Kennedy says it is not a done deal, and Telstra might need to trim even more staff.
"Telstra need to proceed with the sorts of efficiencies which they're implementing, irrespective of whether the NBN goes ahead or not - or in what form," he said.
"We now have a new government and its likely that the old copper network will continue to operate in some shape or form. If Telstra's going to operate the underlying copper then it's going to need to do so on a more efficient basis."
The decision was the result of a major restructure as the decline of traditional fixed line telephone connections continues.
There have been some dramatic changes for Telstra since its privatisation began right back in 1997.
So is this latest round of cuts a sign that Telstra's strategy is part of a new approach?
Telstra is no longer a company just known just for its copper wire network and phone lines into homes.
The first big change came in 2005, when the then-chief executive Sol Trujillo revealed a big decline in traditional fixed-line phone connections.
AUDIO: Telstra to trim more as it eyes NBN deal (AM)
He said this was because more customers were relying on their mobile phones.
More recently, consumers have been using new services like Skype, and there is also the threat of free calls from Apple's new operating system.
Telecommunications analyst David Kennedy says the old lines of the business are fading, but even new technologies are being superseded.
"The reason they've been forced to accelerate this sort of process is that a lot of the traditional business lines, especially for residential homes, public switched data network is in decline, but mobile and fixed broadband have reached a kind of maturity," he said.
"The connection growth has really tailed off over the last three years. So to maintain profitability the whole industry is now looking to reduce the cost base at a faster rate than they have done in the past."
With the shift to the NBN, Telstra has needed to become more efficient to compete.
And, of course, there is the unrelenting pressure to keep shareholders happy.
Under Labor, Telstra negotiated an $11 billion deal to decommission its copper network and to move customers over to the NBN.
Under the Coalition plan, Telstra might get even more work to get the NBN from the street corner to households using its copper wire.
But Mr Kennedy says it is not a done deal, and Telstra might need to trim even more staff.
"Telstra need to proceed with the sorts of efficiencies which they're implementing, irrespective of whether the NBN goes ahead or not - or in what form," he said.
"We now have a new government and its likely that the old copper network will continue to operate in some shape or form. If Telstra's going to operate the underlying copper then it's going to need to do so on a more efficient basis."
Economist warns GFC fallout yet to hit as world marks Lehman Brothers collapse anniversary
Five years after the collapse of Lehman Brothers, economists are warning the worst fallout from the global financial crisis is yet to hit Europe and parts of Asia.
The concerns come as the US Federal Reserve decides just when to start scaling back its massive economic stimulus program, which has so far succeeded in keeping much of the world from falling back into crisis.
The Fed shocked financial markets when it decided to delay any slowdown in the money printing.
Tim Hodgson is senior investment consultant at the global pension fund advisors Towers Watson.
He argues that the current era of cheap and easy money from central banks might need to be extended.
"I think it's changed more than just the financial world. But there's a lot of repair still to do," he said.
"So it's clear that despite progress in banking systems to get risky assets off balance sheets, improve tier-one capital ratios, I don't think anybody thinks that banks are home and dry yet, particularly, I would argue, in Europe."
Audio: Europe, Asia still at risk from GFC fallout (The World Today)
He says the economy - and broader society - is yet to recover from the Lehman Brothers collapse.
"Never before in history have we had this level of monetary stimulation ,and for growth to be so disappointing," he said.
"The growth response to the level of stimulation says to me that the old linkages that we expected are broken."
Monetary measures cannot continue forever
An important question, Mr Hodgson say, is how long global monetary intervention can continue.
"I suspect it might last longer than we expect," he said.
"Where's the improvement going to come from? Where's the reset mechanism? There's still a lot of deleveraging to do. The European banks haven't really succeeded in deleveraging to any material extent. Australia - the households haven't deleveraged. So I'm not sure that we're on a healing process yet."
We often look at the global recovery through what is happening with Fed decisions in the United States, or what might be happening in Europe with the eurozone crisis.
In reality, emerging economies such as India are exposed to the day when all this cheap and easy money is going to be wound back.
Certain emerging markets benefited massively from that liquidity," Mr Hodgson said.
"The slight drawback, or the threat of drawback from the withdrawal of the Fed stimulus, has seen certain emerging countries really suffer massively."
And he warns that there will be serious social consequences if living standards do not improve.
"In a sense, what's happening in the likes of Spain is remarkable because historically, youth unemployment over 50 per cent of the population," he said.
"That has historically been associated with reasonably significant social unrest.
"And yes, as these economies adjust, it is perfectly possible that we'll see social tensions rise. I'm expecting geopolitical tensions to rise."
It is unclear exactly how long it will take the global financial crisis to run its course.
"It's a kind of five to ten year, maybe 15 year workout phase," he said.
"It's not all doom and gloom because the system adapts and the human spirit is generally forward looking and generally optimistic and I'm pretty sure that we will work through this and there will be a brighter dawn. But it might not be in 2014."
The concerns come as the US Federal Reserve decides just when to start scaling back its massive economic stimulus program, which has so far succeeded in keeping much of the world from falling back into crisis.
The Fed shocked financial markets when it decided to delay any slowdown in the money printing.
Tim Hodgson is senior investment consultant at the global pension fund advisors Towers Watson.
He argues that the current era of cheap and easy money from central banks might need to be extended.
"I think it's changed more than just the financial world. But there's a lot of repair still to do," he said.
"So it's clear that despite progress in banking systems to get risky assets off balance sheets, improve tier-one capital ratios, I don't think anybody thinks that banks are home and dry yet, particularly, I would argue, in Europe."
Audio: Europe, Asia still at risk from GFC fallout (The World Today)
He says the economy - and broader society - is yet to recover from the Lehman Brothers collapse.
"Never before in history have we had this level of monetary stimulation ,and for growth to be so disappointing," he said.
"The growth response to the level of stimulation says to me that the old linkages that we expected are broken."
Monetary measures cannot continue forever
An important question, Mr Hodgson say, is how long global monetary intervention can continue.
"I suspect it might last longer than we expect," he said.
"Where's the improvement going to come from? Where's the reset mechanism? There's still a lot of deleveraging to do. The European banks haven't really succeeded in deleveraging to any material extent. Australia - the households haven't deleveraged. So I'm not sure that we're on a healing process yet."
We often look at the global recovery through what is happening with Fed decisions in the United States, or what might be happening in Europe with the eurozone crisis.
In reality, emerging economies such as India are exposed to the day when all this cheap and easy money is going to be wound back.
Certain emerging markets benefited massively from that liquidity," Mr Hodgson said.
"The slight drawback, or the threat of drawback from the withdrawal of the Fed stimulus, has seen certain emerging countries really suffer massively."
And he warns that there will be serious social consequences if living standards do not improve.
"In a sense, what's happening in the likes of Spain is remarkable because historically, youth unemployment over 50 per cent of the population," he said.
"That has historically been associated with reasonably significant social unrest.
"And yes, as these economies adjust, it is perfectly possible that we'll see social tensions rise. I'm expecting geopolitical tensions to rise."
It is unclear exactly how long it will take the global financial crisis to run its course.
"It's a kind of five to ten year, maybe 15 year workout phase," he said.
"It's not all doom and gloom because the system adapts and the human spirit is generally forward looking and generally optimistic and I'm pretty sure that we will work through this and there will be a brighter dawn. But it might not be in 2014."
Monday, September 23, 2013
Spruikers back as property prices boom - ASIC warns self funded retirees are new targets
The recent steady rise in property prices has heralded the return of the property spruiker.
But this time around, the corporate watchdog is moving early to crack down.
The Australian Securities and Investments Commission says some sales pitches that offer advice on increasingly popular self managed superannuation funds could be breaking the law.
In the last major property boom a decade ago, the so called "get rich quick" experts made a name for themselves spruiking real estate.
LISTEN: Business editor Peter Ryan examines the return of the property spruiker.
Some investors made big money. Others less fortunate lost their life savings. And a few spruikers who broke the law went to prison.
But now with property prices on the rise, there is evidence that the property spruiker is back.
And self-funded superannuation funds are the new targets, according to ASIC commissioner Greg Tanzer.
"We're certainly seeing an increase in advertising that's specifically directed to SMSFs," he said.
"We know that there are a number of SMSF investors who, like many Australian investors, have an affinity with property. And there's nothing wrong with that, provided you understand the limitations, some of risks that you're taking on."
ASIC says some spruikers could be breaking the law.
Mr Tanzer says some spruikers who try to sell property into self-managed funds are are not licensed to offer financial advice.
"If you want to extol the virtues of investing in property, obviously that's something that's just subject to normal state and territory laws," he said.
"But it's where you are doing that in the context that you're encouraging that investment through an SMSF, ASIC's jurisdiction might be enlivened."
The one-time real estate agent turned consumer advocate Neil Jenman says there is no doubt the property spruiker is back.
"They've gone into their hibernation for a few years but they're certainly back in force at the moment," he said.
Mr Jenman has been running seminars of his own around the country, warning about the perils of bad advice - especially ones involving retirement savings.
"It's what they call FOMO. Everybody seems to be suffering from FOMO, which is fear of missing out," he said.
"And the spruikers have headlines. And one of them has actually got a headline - we are about to enter the greatest boom in history. Don't you be the one to miss out. Come to my free seminar and I'll tell you what to do, provided you give me $25,000 after that, of course."
Mr Jenman believes ASIC is right to be concerned.
"People are, without realising it, already losing thousands of dollars," he said.
"I mean, they're selling property in America for goodness sake. The difference is, if you went America to buy them yourself, you'd find that you'd probably be able to get them for nothing because they can't give them away in some parts of America."
But ASIC is moving quickly this time to head the spruikers off.
Mr Tanzer is keen to ensure history doesn not repeat itself.
"We've seen examples in the past where people have been burned by getting into property investments that might be overpriced, that might be promised but not delivered," he said.
The Reserve Bank is also worried and says the use of property in self-managed super funds is one area where households might be taking on risk.
But this time around, the corporate watchdog is moving early to crack down.
The Australian Securities and Investments Commission says some sales pitches that offer advice on increasingly popular self managed superannuation funds could be breaking the law.
In the last major property boom a decade ago, the so called "get rich quick" experts made a name for themselves spruiking real estate.
LISTEN: Business editor Peter Ryan examines the return of the property spruiker.
Some investors made big money. Others less fortunate lost their life savings. And a few spruikers who broke the law went to prison.
But now with property prices on the rise, there is evidence that the property spruiker is back.
And self-funded superannuation funds are the new targets, according to ASIC commissioner Greg Tanzer.
"We're certainly seeing an increase in advertising that's specifically directed to SMSFs," he said.
"We know that there are a number of SMSF investors who, like many Australian investors, have an affinity with property. And there's nothing wrong with that, provided you understand the limitations, some of risks that you're taking on."
ASIC says some spruikers could be breaking the law.
Mr Tanzer says some spruikers who try to sell property into self-managed funds are are not licensed to offer financial advice.
"If you want to extol the virtues of investing in property, obviously that's something that's just subject to normal state and territory laws," he said.
"But it's where you are doing that in the context that you're encouraging that investment through an SMSF, ASIC's jurisdiction might be enlivened."
The one-time real estate agent turned consumer advocate Neil Jenman says there is no doubt the property spruiker is back.
"They've gone into their hibernation for a few years but they're certainly back in force at the moment," he said.
Mr Jenman has been running seminars of his own around the country, warning about the perils of bad advice - especially ones involving retirement savings.
"It's what they call FOMO. Everybody seems to be suffering from FOMO, which is fear of missing out," he said.
"And the spruikers have headlines. And one of them has actually got a headline - we are about to enter the greatest boom in history. Don't you be the one to miss out. Come to my free seminar and I'll tell you what to do, provided you give me $25,000 after that, of course."
Mr Jenman believes ASIC is right to be concerned.
"People are, without realising it, already losing thousands of dollars," he said.
"I mean, they're selling property in America for goodness sake. The difference is, if you went America to buy them yourself, you'd find that you'd probably be able to get them for nothing because they can't give them away in some parts of America."
But ASIC is moving quickly this time to head the spruikers off.
Mr Tanzer is keen to ensure history doesn not repeat itself.
"We've seen examples in the past where people have been burned by getting into property investments that might be overpriced, that might be promised but not delivered," he said.
The Reserve Bank is also worried and says the use of property in self-managed super funds is one area where households might be taking on risk.
Tuesday, September 17, 2013
Reserve Bank warns on property price bubble, but says banking system "relatively sound"
By Business editor Peter Ryan
The Reserve Bank has joined a growing chorus of local and global authorities to signal that record low interest rates have the potential to fuel a property price bubble.
In the minutes from its September meeting, the central bank's Board mirrored last week's warning from the prudential regulator APRA (Australian Prudential Regulation Authority) for banks to be vigilant about their lending standards.
"In the current environment of low interest rates and slow credit growth, members agreed that it was especially important that banks maintained prudent lending standards," the minutes say.
According to the minutes, the RBA board was briefed on the recent intervention by the Reserve Bank of New Zealand which has introduced a stricter loan to value ratio (LVR) as it deals with signs of a property price bubble.
Earlier today, the International Monetary Fund also signalled that the current era of low inflation and low interest rates around the world had the potential to created a price bubble.
In calling for the wider use of macro-economic tools, the IMF said the access to cheap money "encourages households to borrow more and can make them more vulnerable to shocks."
However, the RBA appears confident that the Australian banking system remains in "a relatively sound position" and the "profitability remains strong compared with that seen in other advanced economies."
"Households continue to show prudence in managing their finances with higher levels of saving and a slower pace in credit growth for some time.
"The continued high rate of excess home loan repayments was consistent with low rates of financial stress among households with mortgages."
But the RBA appears less comfortable about the growing use of property in self managed superannuations funds which are gaining popularity in Australia.
"Property gearing in self-managed superannuation funds was one area identified where households could be starting to take some risk with their finances."
According to the minutes, the rising risk "would be closely monitored" by RBA staff.
The warning from the RBA, APRA and the IMF coincides with the fifth anniversary of the Lehman Brothers collapse which sparked the global financial crisis.
The seeds of the GFC can be found in weaker lending standards and creation of a subprime housing market which burst to spark America's worst housing crash since the Great Depression.
The RBA left the cash rate on hold at 2.5 per cent earlier this month, saying the current setting was "appropriate".
The RBA has cut the cash rate by 2.25 percentage points since November 2011 to breathe life into the economy and to tame the high Australian dollar which has fallen by 15 percent since April.
The Reserve Bank has joined a growing chorus of local and global authorities to signal that record low interest rates have the potential to fuel a property price bubble.
In the minutes from its September meeting, the central bank's Board mirrored last week's warning from the prudential regulator APRA (Australian Prudential Regulation Authority) for banks to be vigilant about their lending standards.
"In the current environment of low interest rates and slow credit growth, members agreed that it was especially important that banks maintained prudent lending standards," the minutes say.
According to the minutes, the RBA board was briefed on the recent intervention by the Reserve Bank of New Zealand which has introduced a stricter loan to value ratio (LVR) as it deals with signs of a property price bubble.
Earlier today, the International Monetary Fund also signalled that the current era of low inflation and low interest rates around the world had the potential to created a price bubble.
In calling for the wider use of macro-economic tools, the IMF said the access to cheap money "encourages households to borrow more and can make them more vulnerable to shocks."
However, the RBA appears confident that the Australian banking system remains in "a relatively sound position" and the "profitability remains strong compared with that seen in other advanced economies."
"Households continue to show prudence in managing their finances with higher levels of saving and a slower pace in credit growth for some time.
"The continued high rate of excess home loan repayments was consistent with low rates of financial stress among households with mortgages."
But the RBA appears less comfortable about the growing use of property in self managed superannuations funds which are gaining popularity in Australia.
"Property gearing in self-managed superannuation funds was one area identified where households could be starting to take some risk with their finances."
According to the minutes, the rising risk "would be closely monitored" by RBA staff.
The warning from the RBA, APRA and the IMF coincides with the fifth anniversary of the Lehman Brothers collapse which sparked the global financial crisis.
The seeds of the GFC can be found in weaker lending standards and creation of a subprime housing market which burst to spark America's worst housing crash since the Great Depression.
The RBA left the cash rate on hold at 2.5 per cent earlier this month, saying the current setting was "appropriate".
The RBA has cut the cash rate by 2.25 percentage points since November 2011 to breathe life into the economy and to tame the high Australian dollar which has fallen by 15 percent since April.
Tuesday, September 10, 2013
Switkowski set to head NBN Company despite "no comment" from Turnbull
The Coalition frontbencher Malcolm Turnbull has refused to confirm speculation that former Telstra chief executive Ziggy Switkowski will be appointed to head the company responsible for the rollout of the National Broadband Network.
Mr Turnbull says any decision would have to be made by the Coalition cabinet.
“That decision would be taken by a cabinet and obviously if I’m the Communications Minister it would be on my recommendation," he said.
“It’s not the first time Ziggy’s name has been flagged. He is obviously highly qualified and most people would regard him as an eminently suitable person but no decision has been taken by a Coalition government because we haven’t been sworn in yet.”
However, speaking on ABC News Breakfast, Mr Turnbull expressed concerns about the operation and makeup of the NBN Co board.
“It is remarkable that there is no one on that board who has either run or built or managed a large telecommunications network. That is a singular deficiency," he said.
Mr Turnbull confirmed the Coalition will order a forensic audit into NBN Co to examine governance and policy.
“We have not ruled out a judicial inquiry. That is certainly a possibility,” he said.
The current chief executive of the NBN Co, Mike Quigley, announced his retirement in July and is expected to remain in the role until a successor is appointed.
The ABC contacted Mr Switkowski in relation to the speculation but he refused to comment.
Mr Turnbull says any decision would have to be made by the Coalition cabinet.
“That decision would be taken by a cabinet and obviously if I’m the Communications Minister it would be on my recommendation," he said.
“It’s not the first time Ziggy’s name has been flagged. He is obviously highly qualified and most people would regard him as an eminently suitable person but no decision has been taken by a Coalition government because we haven’t been sworn in yet.”
However, speaking on ABC News Breakfast, Mr Turnbull expressed concerns about the operation and makeup of the NBN Co board.
“It is remarkable that there is no one on that board who has either run or built or managed a large telecommunications network. That is a singular deficiency," he said.
Mr Turnbull confirmed the Coalition will order a forensic audit into NBN Co to examine governance and policy.
“We have not ruled out a judicial inquiry. That is certainly a possibility,” he said.
The current chief executive of the NBN Co, Mike Quigley, announced his retirement in July and is expected to remain in the role until a successor is appointed.
The ABC contacted Mr Switkowski in relation to the speculation but he refused to comment.
Wednesday, August 21, 2013
Business lobby ramps up push for IR overhaul; ACCI says both major parties rapidly writing cheques with no money in the bank
So far this election campaign, the normally hot issue of
industrial relations has barely rated a mention.
But behind the scenes, business lobby groups are ramping up their wish lists on IR reform regardless of which party wins on September 7.
The Australian Chamber of Commerce and Industry has today presented more than a hundred reform priorities to both major parties which includes an overhaul of the Fair Work Act.
But in the lengthy submission, the Chamber is urging the Coalition needs to get more aggressive about workplace reform if, as expected, it wins office.
The chamber's Peter Anderson says he is "not particularly" surprised that industrial relations has been taken the back seat during the election.
Listen to my interview with ACCI chief executive Peter Anderson.
"Because I don't think that the Government has you know a particularly good story to tell," he said.
"Because there's now been four or five years of experience with the Fair Work laws, and many of the claims the Government made about how those laws would apply to businesses, especially small and medium businesses, have not been met."
But Mr Anderson believes the Coalition needs to deal IR in an "orderly way".
"We know on industrial relations that the Federal Coalition has been very cautious and I think that there is still a very steep road for the business community to climb to convince the Coalition that there needs to be some significant changes to our employment regulation," he said.
"It needs to deal with these issues in an orderly way but it simply can't put them on the backburner.
"And the reason for that is that the Government's fair work laws, from almost all business perspectives, as well as independent perspectives, have swung the pendulum too far back towards centralisation and union power over bargaining."
Tuesday, August 20, 2013
Reserve Bank leaves door open to more rate cuts - but reluctant to say another is imminent
By Business editor Peter Ryan
The Reserve Bank has signalled that the official interest rate could remain on hold at a historic low unless there is a major deterioration in Australia's economic outlook.
In the minutes from the decision a fortnight ago to cut the cash rate to a 2.5 per cent, the RBA board appears to have settled on a neutral monetary policy stance with a bias to ease as required.
"Members agreed that the Bank should neither close off the possibility of reducing rates further, nor signal an imminent intention to reduce rates further," the minutes say.
The minutes from the RBA's August decision effectively rule out a pre-election rate cut when the Board next meets on September 3.
Listen to my analysis broadcast on The World Today.
"The Board would continue to examine the data over the months to judge whether monetary policy was appropriately configured," according to the minutes.
The RBA's decision to sit on the fence follows a raft of soft economic data with GDP expected to slow to 2.25 per cent and the jobless rate tipped to peak at 6.25 per cent.
However, the RBA says the further decline of the Australian dollar will be "important" in deciding the course of monetary policy.
The dollar "had declined since the previous meeting though remained high by historical standards" the minutes say.
The minutes add that further declines in the exchange rate would assist in rebalancing growth in the economy.
The minutes appear to signal that further rate cuts would require a material worsening of the economic outlook beyond the outlook in the RBA's recent Quarterly Statement on Monetary Policy.
Since the August meeting, Treasury release its Pre-Election Economic and Fiscal Outlook (PEFO) which confirms the outlook for slower economic growth, and rising unemployment.
The minutes shed little new light on the decline of the mining investment boom other than to confirm that business spending would be affected by a "turning of the cycle".
The Reserve Bank has signalled that the official interest rate could remain on hold at a historic low unless there is a major deterioration in Australia's economic outlook.
In the minutes from the decision a fortnight ago to cut the cash rate to a 2.5 per cent, the RBA board appears to have settled on a neutral monetary policy stance with a bias to ease as required.
"Members agreed that the Bank should neither close off the possibility of reducing rates further, nor signal an imminent intention to reduce rates further," the minutes say.
The minutes from the RBA's August decision effectively rule out a pre-election rate cut when the Board next meets on September 3.
Listen to my analysis broadcast on The World Today.
"The Board would continue to examine the data over the months to judge whether monetary policy was appropriately configured," according to the minutes.
The RBA's decision to sit on the fence follows a raft of soft economic data with GDP expected to slow to 2.25 per cent and the jobless rate tipped to peak at 6.25 per cent.
However, the RBA says the further decline of the Australian dollar will be "important" in deciding the course of monetary policy.
The dollar "had declined since the previous meeting though remained high by historical standards" the minutes say.
The minutes add that further declines in the exchange rate would assist in rebalancing growth in the economy.
The minutes appear to signal that further rate cuts would require a material worsening of the economic outlook beyond the outlook in the RBA's recent Quarterly Statement on Monetary Policy.
Since the August meeting, Treasury release its Pre-Election Economic and Fiscal Outlook (PEFO) which confirms the outlook for slower economic growth, and rising unemployment.
The minutes shed little new light on the decline of the mining investment boom other than to confirm that business spending would be affected by a "turning of the cycle".
Thursday, July 18, 2013
Bernanke's caution on stimulus withdrawal welcomed by investors
Less than a month ago, the world's most powerful central banker unsettled financial markets when he laid out a timeline for ending the unprecedented stimulus to the US economy.
The comments from the Federal Reserve's chairman Ben Bernanke sparked big swings in both the US and Australian currencies and a global selloff of stocks.
But overnight in Washington, Dr Bernanke tried to soothe investor nerves when he said the end of the Fed's money printing program was not necessarily on a preset course.
Ben Bernanke’s carefully chosen words are critical as prepares to execute a smooth exit from the quantitative easing program where the Fed is buying US$85 billion of bonds every month.
The trouble is that investors remain addicted to what has become an era of cheap and easy money as the causes of the global financial crisis fade into history.
So any suggestion that the party is over because of good news about the US economic recovery is being greeted as bad news.
The US dollar dived when Dr Bernanke’s prepared statement hit markets and as a result the Australian dollar rocketed to 92.92 US cents in more evidence that Australia remains at the whim of words from Washington or Wall Street.
But the money printing has to end given that to since 2009 the Fed’s stimulus has quadrupled to US$3.5 trillion.
The numbers might be mind-boggling. But any suggestion, signal let alone decision to taper quantitative easing is enough to cause painful financial lurches around the world.
So when Dr Bernanke addressed Congress overnight, he was choosing his words more cautiously than usual and said that while the stimulus could be scaled back, it could also be pumped up in the event of the economic shock.
It appears Ben Bernanke knows he has to have a bet each way to have any chance of a smooth and graceful escape from the bond buying.
But the evidence is that investors are hearing what they want to hear and today they were celebrating that the easy money might be around for a while yet.
Monday, July 15, 2013
Energy efficiency would add billions to economy: report
By Business editor Peter Ryan
An improvement in energy efficiency of just 1 per cent would add $26 billion to Australia's economy by 2030, according to a new report.
Research commissioned by the Climate Institute and US energy giant General Electric says Australia's poor investment in energy efficiency is costing tens of billions of dollars in potential economic growth.
But instead of following the lead of other developed nations, the study says Australia is failing to match efficiency improvements in other economies.
The research by Vivid Economics found that on average a 1 per cent improvement in energy efficiency would boost gross domestic product (GDP) per person by 0.1 percentage point and generate an additional $8 billion by 2020 and $26 billion by 2030.
Climate Institute chief executive John Connor says the improved energy efficiency is critical given the Prime Minister's proposal to lift annual productivity growth to 2 per cent.
"This is an important contribution to improving Australia's productivity as well as cutting our energy bills and carbon pollution," Mr Connor said.
"Our research puts a figure on just how much we are missing out on. The reality is that our current policies are inadequate to address the barriers preventing smarter energy use.
"To get to the next level, we need policies like a national energy saving initiative, ambitious performance standards for vehicles and equipment and bipartisan support for a robust long-term signal for low-carbon investment."
The research examines 28 countries including Japan, China, South Korea, the United States and Britain and is forecast over 30 years.
It points to key sectors such as manufacturing, resources, construction, freight and transport as areas which could cut their energy use by 11 per cent and save $3 billion per year.
Recent research by ClimateWorks Australia says companies can save energy by upgrading equipment, retrofitting buildings and recalibrating operational processes.
"We need to get beyond the idea that energy efficiency means changing light bulbs. In fact, just about every product and process can be streamlined to reduce energy waste, " Mr Connor said.
"Businesses are starting to recognise this, but there's a lot more they can do."
While the Climate Institute wants energy pricing to more accurately reflect the true cost of energy use, it also wants to maintain the carbon price mechanism which the Prime Minister is about to scrap in favour of an emissions trading scheme.
"Emissions trading puts not just a price but also a limit on carbon pollution," Mr Connor said.
"In moving from the fixed carbon price to a limit on carbon emissions, the interaction with other climate action becomes critical.
"Remember why we did all this in the first place: it is about reducing Australia's disproportionate contribution to climate change and making our high-carbon economy competitive in the low-carbon reality of the 21st century."
Mr Connor says any decision to bring an emissions trading scheme forward should include a "statement of increased ambition" and an continuing role for the independent Climate Change Authority.
An improvement in energy efficiency of just 1 per cent would add $26 billion to Australia's economy by 2030, according to a new report.
Research commissioned by the Climate Institute and US energy giant General Electric says Australia's poor investment in energy efficiency is costing tens of billions of dollars in potential economic growth.
But instead of following the lead of other developed nations, the study says Australia is failing to match efficiency improvements in other economies.
The research by Vivid Economics found that on average a 1 per cent improvement in energy efficiency would boost gross domestic product (GDP) per person by 0.1 percentage point and generate an additional $8 billion by 2020 and $26 billion by 2030.
Climate Institute chief executive John Connor says the improved energy efficiency is critical given the Prime Minister's proposal to lift annual productivity growth to 2 per cent.
"This is an important contribution to improving Australia's productivity as well as cutting our energy bills and carbon pollution," Mr Connor said.
"Our research puts a figure on just how much we are missing out on. The reality is that our current policies are inadequate to address the barriers preventing smarter energy use.
"To get to the next level, we need policies like a national energy saving initiative, ambitious performance standards for vehicles and equipment and bipartisan support for a robust long-term signal for low-carbon investment."
The research examines 28 countries including Japan, China, South Korea, the United States and Britain and is forecast over 30 years.
It points to key sectors such as manufacturing, resources, construction, freight and transport as areas which could cut their energy use by 11 per cent and save $3 billion per year.
Recent research by ClimateWorks Australia says companies can save energy by upgrading equipment, retrofitting buildings and recalibrating operational processes.
"We need to get beyond the idea that energy efficiency means changing light bulbs. In fact, just about every product and process can be streamlined to reduce energy waste, " Mr Connor said.
"Businesses are starting to recognise this, but there's a lot more they can do."
While the Climate Institute wants energy pricing to more accurately reflect the true cost of energy use, it also wants to maintain the carbon price mechanism which the Prime Minister is about to scrap in favour of an emissions trading scheme.
"Emissions trading puts not just a price but also a limit on carbon pollution," Mr Connor said.
"In moving from the fixed carbon price to a limit on carbon emissions, the interaction with other climate action becomes critical.
"Remember why we did all this in the first place: it is about reducing Australia's disproportionate contribution to climate change and making our high-carbon economy competitive in the low-carbon reality of the 21st century."
Mr Connor says any decision to bring an emissions trading scheme forward should include a "statement of increased ambition" and an continuing role for the independent Climate Change Authority.
China's economy slows again. But how low can the China powerhouse go?
The latest growth figures from China were highly anticipated given concerns the world's second biggest economy is in the midst of a slowdown.
There was little doubt that China's annualised growth would dip from the previous reading of 7.7 per cent - the question was by how much.
The result of 7.5 percent growth in gross domestic product (GDP) in the second quarter was welcomed because it was in line with forecasts, and to use jargon from the global financial crisis, "less worse than expected" given recent sombre data releases.
AUDIO: China's economy continues to slow, but still remains strong (The World Today)
Today's result is a long way from the 12.08 per cent annualised growth achieved in 2010, as Chinese authorities continue with their strategy of a managed slowdown.
China's economy has now slowed in nine of the past 10 quarters.
Newly-appointed Federal Treasurer Chris Bowen would also be watching the China numbers with interest, given his recent downbeat comments about Australia's economy.
Despite the slowing, the pace of economic growth in China remains stellar: urban investment grew at an annualised 20.1 per cent; retail sales expanded at an annualised pace of 13.3 per cent; and industrial output grew at an annualised 8.9 per cent
China's National Bureau of Statistics has described the results as "stable", suggesting the government does not see the need for stimulus to protect the economy from a hard landing.
While the Chinese government's official growth target for 2013 is 7.5 per cent, it remains the slowest pace in 23 years.
A significant concern for Chinese authorities is whether the slower economic times add to the jobless rate, which could result in social unrest as workers are turned away from cities when projects dry up.
The Australian dollar jumped to 91.09 US cents after the data hit, suggesting investors remain confident that China's demand for resources will continue to underpin Australia's economy.
But it is now very clear that any piece of data from China will be scrutinised and anticipated as investors hedge bets on the lifespan of the China growth story.
There was little doubt that China's annualised growth would dip from the previous reading of 7.7 per cent - the question was by how much.
The result of 7.5 percent growth in gross domestic product (GDP) in the second quarter was welcomed because it was in line with forecasts, and to use jargon from the global financial crisis, "less worse than expected" given recent sombre data releases.
AUDIO: China's economy continues to slow, but still remains strong (The World Today)
Today's result is a long way from the 12.08 per cent annualised growth achieved in 2010, as Chinese authorities continue with their strategy of a managed slowdown.
China's economy has now slowed in nine of the past 10 quarters.
 |
| Rollercoaster economy - China GDP since 1999 Source: Bloomberg |
Newly-appointed Federal Treasurer Chris Bowen would also be watching the China numbers with interest, given his recent downbeat comments about Australia's economy.
Despite the slowing, the pace of economic growth in China remains stellar: urban investment grew at an annualised 20.1 per cent; retail sales expanded at an annualised pace of 13.3 per cent; and industrial output grew at an annualised 8.9 per cent
China's National Bureau of Statistics has described the results as "stable", suggesting the government does not see the need for stimulus to protect the economy from a hard landing.
While the Chinese government's official growth target for 2013 is 7.5 per cent, it remains the slowest pace in 23 years.
A significant concern for Chinese authorities is whether the slower economic times add to the jobless rate, which could result in social unrest as workers are turned away from cities when projects dry up.
The Australian dollar jumped to 91.09 US cents after the data hit, suggesting investors remain confident that China's demand for resources will continue to underpin Australia's economy.
But it is now very clear that any piece of data from China will be scrutinised and anticipated as investors hedge bets on the lifespan of the China growth story.
Friday, July 12, 2013
NBN Co boss MIke Quigley jumps - but was he pushed?
After months of speculation, the embattled chief executive of NBN Co Mike Quigley has announced his resignation.
Mr Quigley, who was appointed to the role four years ago, will remain as CEO until a successor is appointed.
Significantly, Mr Quigley says he will "retire from corporate life" after coming out of retirement to build the National Broadband Network.
Mr Quigley has been plagued by political pressure and more recently has been criticised for delays in the rollout and disputes with contractors.
Wednesday, July 10, 2013
More pain expected for mining industry, expert warns
Insolvency experts are predicting more pain to come over the next six to 12 months as the shakeout in Australia's mining sector takes hold.
Restructuring firm Ernst & Young is expecting to see more receiverships and distressed sales as miners end their investment and construction phase to focus on production.
The forecast comes after almost half of the listed companies exposed to mining services issued profit downgrades as projects are deferred and market conditions falter.
Ernst & Young's Asia Pacific leader of mining and metals transactions, Paul Murphy, told AM the slowdown in mining is starting to reverberate in the sector, especially among companies with high debt
"I think that's inevitable. I think things grew so quickly as all the mining companies were looking at growth at all costs," he said.
"A lot of inefficient companies went along for the ride with that. And some companies that have the higher debt levels and are more vulnerable than others, there will be a rationalisation period that occurs and some will become insolvent and go to the wall.
"Overall it is a bit of a correction in some ways that had to happen. What tends to happen during these periods of rationalisation is that longer-term the industry becomes stronger and better able to withstand these shocks to slow-downs and capital expenditure."
The Reserve Bank has repeatedly warned that mining investment will peak earlier than expected and that other sectors of the economy are not taking over quickly enough.
The transition is also hostage to the fortunes of China, which is undergoing a growth slowdown from double digit pace to the current 7.5 per cent.
Mr Murphy says the recent political uncertainty and the restoration of Kevin Rudd as Prime Minister has contributed to mining sector instability even though the slowdown began a year ago.
"Like any sector really, uncertainty in the political sphere or the regulatory sphere creates a period of uncertainty for the sector and so people tend to delay and defer investment decisions," Mr Murphy said.
He says while capital expenditure in mining is expected to fall by as much as 20 per cent, there will be winners as well as losers.
"Players that are more diversified, that have stronger tender and management practices are going to be in stronger positions," he said.
"That means that the players that don't exhibit those characteristics - they're not diversified, they might have one contract, they tend to have weaker management and tender practices - are going to be more vulnerable.
"It just depends how quickly this slow-down in [capital expenditure] takes hold. So hopefully a lot of these smaller players will be able to reposition, do something about their debt and not necessarily go to the wall. "
Ernst & Young's analysis shows 49 per cent of listed companies which generate revenue from mining services have issued profit downgrades in the past six months - more than third in the past three months.
The study shows the market capitalisation of the 84 listed mining services companies has fallen 16 per cent in the year to June.
The performance of mining companies is expected to be a major focus of the the upcoming reporting season as investors seek to identify winners and losers.
Restructuring firm Ernst & Young is expecting to see more receiverships and distressed sales as miners end their investment and construction phase to focus on production.
The forecast comes after almost half of the listed companies exposed to mining services issued profit downgrades as projects are deferred and market conditions falter.
Ernst & Young's Asia Pacific leader of mining and metals transactions, Paul Murphy, told AM the slowdown in mining is starting to reverberate in the sector, especially among companies with high debt
"I think that's inevitable. I think things grew so quickly as all the mining companies were looking at growth at all costs," he said.
"A lot of inefficient companies went along for the ride with that. And some companies that have the higher debt levels and are more vulnerable than others, there will be a rationalisation period that occurs and some will become insolvent and go to the wall.
"Overall it is a bit of a correction in some ways that had to happen. What tends to happen during these periods of rationalisation is that longer-term the industry becomes stronger and better able to withstand these shocks to slow-downs and capital expenditure."
The Reserve Bank has repeatedly warned that mining investment will peak earlier than expected and that other sectors of the economy are not taking over quickly enough.
The transition is also hostage to the fortunes of China, which is undergoing a growth slowdown from double digit pace to the current 7.5 per cent.
Mr Murphy says the recent political uncertainty and the restoration of Kevin Rudd as Prime Minister has contributed to mining sector instability even though the slowdown began a year ago.
"Like any sector really, uncertainty in the political sphere or the regulatory sphere creates a period of uncertainty for the sector and so people tend to delay and defer investment decisions," Mr Murphy said.
He says while capital expenditure in mining is expected to fall by as much as 20 per cent, there will be winners as well as losers.
"Players that are more diversified, that have stronger tender and management practices are going to be in stronger positions," he said.
"That means that the players that don't exhibit those characteristics - they're not diversified, they might have one contract, they tend to have weaker management and tender practices - are going to be more vulnerable.
"It just depends how quickly this slow-down in [capital expenditure] takes hold. So hopefully a lot of these smaller players will be able to reposition, do something about their debt and not necessarily go to the wall. "
Ernst & Young's analysis shows 49 per cent of listed companies which generate revenue from mining services have issued profit downgrades in the past six months - more than third in the past three months.
The study shows the market capitalisation of the 84 listed mining services companies has fallen 16 per cent in the year to June.
The performance of mining companies is expected to be a major focus of the the upcoming reporting season as investors seek to identify winners and losers.
Monday, July 8, 2013
ASIC to monitor analyst briefings in wake of Newcrest investigation
By Business editor Peter Ryan
The corporate watchdog will conduct random checks on companies this reporting season to ensure discussions with analysts don't break insider trading laws.
The Australian Securities & Investments Commission will have its officers sit in on boardroom briefings because of concerns some analysts sometimes receive inside information not available to the general public.
Listen to my interview with ASIC commissioner Cathie Armour broadcast on AM.
The crackdown comes as ASIC investigates allegations that Newcrest Mining selectively briefed analysts days before officially revealing deep job cuts and a multi-billion dollar profit downgrade.
In the leadup to the market announcement on June 7, analysts at six investment houses downgraded their outlook which saw the Newcrest share price fall almost 12 per cent.
ASIC commissioner Cathie Armour says the reporting season is an "opportune time" to send a message to listed companies that the regulator is watching what is said in communications to analysts.
"One of the things we're looking to do is to check with a limited number of companies exactly how they go about doing this, how they go about briefing analysts, and what sort of conversations they have, what sort of procedures they may put in place," Ms Armour told AM.
While the random checks by ASIC will have to be approved by companies, ASIC is expecting a high level of cooperation.
"We think companies will be delighted to do so, because this issue really goes to that heart of market integrity and this is a matter that companies are as interested as ASIC is," Ms Armour said.
However, Ms Armour rejected criticisms that companies will be on their best behaviour if an ASIC officer is sitting in on briefings.
"It doesn't matter if there's great behaviour when we go along; we learn something from that. We have some guidance already that we've published about how companies should interact with analysts, and the things we learn from what we see will inform our assessment of whether the guidance we have is good enough."
Ms Armour refused to rule out the option of using telephone interceptions if there was evidence of insider trading.
"If there's a reason for a concern, we'll consider using all of our powers. At the moment, we're just talking about a thematic and proactive approach to the issue, as distinct from a law enforcement approach."
The crackdown from ASIC might prompt better boardroom behaviour, but a tougher challenge will be to eliminate the informal passing of privileged information away from offices.
ASIC has refused to comment on the Newcrest investigation.
Newcrest recently appointmed former ASX and ABC chairman Maurice Newman to review its adherence continuous disclosure laws.
The corporate watchdog will conduct random checks on companies this reporting season to ensure discussions with analysts don't break insider trading laws.
The Australian Securities & Investments Commission will have its officers sit in on boardroom briefings because of concerns some analysts sometimes receive inside information not available to the general public.
Listen to my interview with ASIC commissioner Cathie Armour broadcast on AM.
The crackdown comes as ASIC investigates allegations that Newcrest Mining selectively briefed analysts days before officially revealing deep job cuts and a multi-billion dollar profit downgrade.
In the leadup to the market announcement on June 7, analysts at six investment houses downgraded their outlook which saw the Newcrest share price fall almost 12 per cent.
 |
| Newcrest share price slide in leadup to to June 7 announcement Source: Bloomberg |
ASIC commissioner Cathie Armour says the reporting season is an "opportune time" to send a message to listed companies that the regulator is watching what is said in communications to analysts.
"One of the things we're looking to do is to check with a limited number of companies exactly how they go about doing this, how they go about briefing analysts, and what sort of conversations they have, what sort of procedures they may put in place," Ms Armour told AM.
While the random checks by ASIC will have to be approved by companies, ASIC is expecting a high level of cooperation.
"We think companies will be delighted to do so, because this issue really goes to that heart of market integrity and this is a matter that companies are as interested as ASIC is," Ms Armour said.
However, Ms Armour rejected criticisms that companies will be on their best behaviour if an ASIC officer is sitting in on briefings.
"It doesn't matter if there's great behaviour when we go along; we learn something from that. We have some guidance already that we've published about how companies should interact with analysts, and the things we learn from what we see will inform our assessment of whether the guidance we have is good enough."
Ms Armour refused to rule out the option of using telephone interceptions if there was evidence of insider trading.
"If there's a reason for a concern, we'll consider using all of our powers. At the moment, we're just talking about a thematic and proactive approach to the issue, as distinct from a law enforcement approach."
The crackdown from ASIC might prompt better boardroom behaviour, but a tougher challenge will be to eliminate the informal passing of privileged information away from offices.
ASIC has refused to comment on the Newcrest investigation.
Newcrest recently appointmed former ASX and ABC chairman Maurice Newman to review its adherence continuous disclosure laws.
Wednesday, June 26, 2013
Friday, June 21, 2013
US foundry moves to Australia to exploit resources boom
Times are tough for Australian manufacturing, even though the Australian dollar has fallen from its recent highs.
But while some companies are struggling to survive by off-shoring, a big US company is reversing the trend.
Weir Minerals has moved its divisional headquarters to Australia to be closer to the production phase of the mining boom.
Listen to my story broadcast on this morning's edition of AM.
Hidden on Sydney's lower north shore, the company's foundry makes heavy duty pumps and components for the mining industry - 1,000 parts a week from 11,000 tonnes of molten metal poured every year.
It is the biggest foundry of its type in Australia.
Late last year it "in-shored" - relocating its divisional headquarters from the United States to Australia.
Weir Mineral's plant manager Howard Cullis believes the company on track for growth.
AUDIO: Weir Minerals relocates to exploit mining boom (AM)
"I think geographically we're well placed to service the whole of Australia," he said.
"We have probably some of the shortest lead times with what we manufacture anywhere else in this business so the customer gets what he wants when he wants it."
The company's managing director Dean Jenkins says basing the division in Australia was a no-brainer.
"It's a matter of being prepared to make quick decisions and being flexible about where you do things and what you do, and making sure you understand in a local environment what really adds value that customers will pay for,"
"And for us here in Australia it's about how do we get parts to the customer very quickly. And to be in Australia, have a manufacturing capability in Australia allows us to do that."
Weir employs a thousand people in Australia, half of them at Artarmon.
It is evidence that manufacturing in Australia is not necessarily fading, despite the outlook for the resources sector.
And it is not just hot work in the foundry.
Weir also carries out major research and development locally as it stays ahead of industry needs to keep the business model viable.
But while some companies are struggling to survive by off-shoring, a big US company is reversing the trend.
Weir Minerals has moved its divisional headquarters to Australia to be closer to the production phase of the mining boom.
Listen to my story broadcast on this morning's edition of AM.
Hidden on Sydney's lower north shore, the company's foundry makes heavy duty pumps and components for the mining industry - 1,000 parts a week from 11,000 tonnes of molten metal poured every year.
It is the biggest foundry of its type in Australia.
Late last year it "in-shored" - relocating its divisional headquarters from the United States to Australia.
Weir Mineral's plant manager Howard Cullis believes the company on track for growth.
AUDIO: Weir Minerals relocates to exploit mining boom (AM)
"I think geographically we're well placed to service the whole of Australia," he said.
"We have probably some of the shortest lead times with what we manufacture anywhere else in this business so the customer gets what he wants when he wants it."
The company's managing director Dean Jenkins says basing the division in Australia was a no-brainer.
"It's a matter of being prepared to make quick decisions and being flexible about where you do things and what you do, and making sure you understand in a local environment what really adds value that customers will pay for,"
"And for us here in Australia it's about how do we get parts to the customer very quickly. And to be in Australia, have a manufacturing capability in Australia allows us to do that."
Weir employs a thousand people in Australia, half of them at Artarmon.
It is evidence that manufacturing in Australia is not necessarily fading, despite the outlook for the resources sector.
And it is not just hot work in the foundry.
Weir also carries out major research and development locally as it stays ahead of industry needs to keep the business model viable.
Thursday, June 20, 2013
Markets melt as Bernanke suggests Fed money printing is almost over
The world's most powerful central banker has declared that the economic emergency in the United States is nearing an end.
The chairman of the US Federal Reserve, Ben Bernanke, has signalled that the unprecedented money-printing program, known as quantitative easing, might be wound down by the end of the year.
But the cautious optimism about the US sparked a heavy fall on Wall Street as investors fretted that an era of cheap and easy money might soon be over.
The Australian dollar dived to a two-year low as global investors moved their bets to a resurgent greenback.
The straight talk from Dr Bernanke is as significant as earlier mixed signals about the future of quantitative easing, which have in the past have sparked confusion and major sell-offs in global markets.
But today, his language was explicit.
Using a driving analogy, Dr Bernanke said the Fed's current bond purchases, valued at $US85 billion a month, might be about to go into reverse.
"If the incoming data support the view that the economy is able to sustain a reasonable cruising speed, we will ease the pressure on the accelerator by gradually reducing the pace of purchases," he said.
The comments are being interpreted as Dr Bernanke coming out of the economic closet after weeks of speculation that the Fed was about to taper its money printing.
Speaking after the Fed's two-day meeting, he even flagged some rough dates - a scaling back by the end of the year, and maybe an end by mid-2014.
AUDIO: Bernanke flags end to US stimulus program (The World Today)
These are qualified forecasts, and are coupled with the prediction that the US jobless rate will fall from the current 7.6 per cent to 6.5 per cent by next year.
So does that mean US interest rates are about to rise?
Using the driving analogy again, Ben Bernanke said although the Fed might be taking its foot off the accelerator, it wouldn't be slamming on the brakes any time soon.
"The economic conditions we have set out as proceeding any future rate increase are thresholds, not triggers," he said.
"For example, assuming that inflation is near our objective at that time as expected, a decline in the unemployment rate to 6.5 per cent would not lead automatically to an increase in the federal funds rate target but rather would indicate only that it was appropriate for the committee to consider whether the broader economic outlook justified such an increase."
Negative reaction
After almost five years of crisis since the collapse of Lehman Brothers, you might expect elation on Wall Street.
But instead of popping champagne, investors started selling as soon as the Fed's statement hit their screens.
The Dow Jones Industrial Average closed 1.3 per cent weaker in what some see as an overreaction to the prospect that the era of easy stimulus money is over.
Fund manager Cliff Noreen told Bloomberg that Dr Bernanke's intention to slow money printing should not have been a shock.
"I think what he said was very logical. A lot of market participants forget that we've had quantitative easing for four and a half years now," he said.
"Eventually this has to stop and they need to pull the throttle back on it."
The Australian share market followed the US lead and was down 2.4 per cent at 1:25 pm (AEST).
JP Morgan senior economist Ben Jarman says the Fed is moving cautiously with a clear timeline to ensure investors don't panic.
"He's been very clear this time around to make clear that if they do follow the plan and if they are tapering their QE and in effect and absolutely stopping that by mid-next year, then they'll only be doing that in a situation where the labour market is hitting its stride," he said.
Mr Jarman doubts the Australian dollar is in a permanent decline.
"It's going to go higher from here and that's really on the view that China, while there are risks around it, actually the talk around the downside is somewhat overdone," he said.
But that China insulation theory might not be has not been immediately validated.
Factory production shrank at a faster pace this month, adding to signs that growth is weakening in the world's second-biggest economy.
The chairman of the US Federal Reserve, Ben Bernanke, has signalled that the unprecedented money-printing program, known as quantitative easing, might be wound down by the end of the year.
But the cautious optimism about the US sparked a heavy fall on Wall Street as investors fretted that an era of cheap and easy money might soon be over.
The Australian dollar dived to a two-year low as global investors moved their bets to a resurgent greenback.
The straight talk from Dr Bernanke is as significant as earlier mixed signals about the future of quantitative easing, which have in the past have sparked confusion and major sell-offs in global markets.
But today, his language was explicit.
Using a driving analogy, Dr Bernanke said the Fed's current bond purchases, valued at $US85 billion a month, might be about to go into reverse.
"If the incoming data support the view that the economy is able to sustain a reasonable cruising speed, we will ease the pressure on the accelerator by gradually reducing the pace of purchases," he said.
The comments are being interpreted as Dr Bernanke coming out of the economic closet after weeks of speculation that the Fed was about to taper its money printing.
Speaking after the Fed's two-day meeting, he even flagged some rough dates - a scaling back by the end of the year, and maybe an end by mid-2014.
AUDIO: Bernanke flags end to US stimulus program (The World Today)
These are qualified forecasts, and are coupled with the prediction that the US jobless rate will fall from the current 7.6 per cent to 6.5 per cent by next year.
So does that mean US interest rates are about to rise?
Using the driving analogy again, Ben Bernanke said although the Fed might be taking its foot off the accelerator, it wouldn't be slamming on the brakes any time soon.
"The economic conditions we have set out as proceeding any future rate increase are thresholds, not triggers," he said.
"For example, assuming that inflation is near our objective at that time as expected, a decline in the unemployment rate to 6.5 per cent would not lead automatically to an increase in the federal funds rate target but rather would indicate only that it was appropriate for the committee to consider whether the broader economic outlook justified such an increase."
Negative reaction
After almost five years of crisis since the collapse of Lehman Brothers, you might expect elation on Wall Street.
But instead of popping champagne, investors started selling as soon as the Fed's statement hit their screens.
The Dow Jones Industrial Average closed 1.3 per cent weaker in what some see as an overreaction to the prospect that the era of easy stimulus money is over.
Fund manager Cliff Noreen told Bloomberg that Dr Bernanke's intention to slow money printing should not have been a shock.
"I think what he said was very logical. A lot of market participants forget that we've had quantitative easing for four and a half years now," he said.
"Eventually this has to stop and they need to pull the throttle back on it."
The Australian share market followed the US lead and was down 2.4 per cent at 1:25 pm (AEST).
JP Morgan senior economist Ben Jarman says the Fed is moving cautiously with a clear timeline to ensure investors don't panic.
"He's been very clear this time around to make clear that if they do follow the plan and if they are tapering their QE and in effect and absolutely stopping that by mid-next year, then they'll only be doing that in a situation where the labour market is hitting its stride," he said.
Mr Jarman doubts the Australian dollar is in a permanent decline.
"It's going to go higher from here and that's really on the view that China, while there are risks around it, actually the talk around the downside is somewhat overdone," he said.
But that China insulation theory might not be has not been immediately validated.
Factory production shrank at a faster pace this month, adding to signs that growth is weakening in the world's second-biggest economy.
Wednesday, June 19, 2013
ADM's shady history probed by Senate committee as suitor sells GrainCorp deal to regulators
By Business editor Peter Ryan
ADM has encountered intense questioning from a Senate estimates committee amid concerns that the $3 billion deal would put a foreign stranglehold on grain storage and infrastructure.
Listen to my report on the ADM grilling broadcast on The World Today.
The company's grains boss Ian Pinner attempted to deflect the past accusations during occasionally hostile questioning, and has assured the committee that ADM is now a fundamentally different business.
Mr Pinner is in Australia to convince farmers and the Foreign Investment Review Board that the GrainCorp takeover will not leave them worse off.
He also has to win over politicians like Liberal senator Bill Heffernan, who has been digging into ADM's alleged history of price-rigging and corruption.
Senator Heffernan, himself a GrainCorp client, confronted Mr Pinner with a myriad of past accusations and proven incidents that go to concerns about ADM's ethics and market power.
"It's less than glorious, your past record," the Senator said to Mr Pinner during the hearing, before reading out a number of headlines from media reports.
"Archer Daniel Midland settles price fixing charges for $400 million; Deal in food enhancer fixing suite on hold; Court reinstates seed alleging Archer Daniels suite in the market rigged; Archer
Daniels accused of espionage; Big citrus acid buyers sue Archer Daniels; Former ADM official indicted for fraud; and so it goes on."
Mr Pinner told Senator Heffernan that those episodes would not be repeated.
"Senator, there have been incidents in the past which ADM is not proud of, that is absolutely clear, but I would say that there have also been changes," he said.
"ADM is committed to not only acting in a compliant way but acting in an ethical way."
The Senator offered a warning.
"Can I just tell you that our mob here, GrainCorp, we're not into that s***," he said.
"No. And we don't want anything to do with anyone that is."
The New South Wales Nationals Senator Fiona Nash also appeared unconvinced, despite ADM's assurances that it was all history.
"Is price fixing a mistake? How do you term that as a mistake?" she asked.
"I think you're referring to an incident which was nearly 20 years ago now," Mr Pinner replied.
"Sorry, no. The timeline's not of that much interest, we're actually trying to get a sense of the company, where it's been, where it is now, in terms of fit and proper," Senator Nash said.
ADM is also trying to hose down concerns that grain grower access to storage and transport infrastructure that comes with the deal.
ADM says its committed to fair and open dealing, and plans to ramp up its infrastructure spending to $300 million.
But once again Senator Heffernan suggested the deal would hurt rather than assist farmers.
He also wanted assurances that A-D-M was committed to paying its fair share of Australian tax if the deal goes through, given recent allegations that giants like Apple and Google have been avoiding it.
"We hope we don't put the hurdles too high for you but we, also in your aspiration, we want to include a national interests benefit and make sure you pay your tax and all the rest of it," he said.
"God bless you and get on that plane and have a safe journey."
"We will pay our tax, chairman, we can assure you of that," Mr Pinner replied.
The Senate grilling was a warm-up for what might be in store for ADM as it works to convince the Foreign Investment Review board that the GrainCorp takeover passes the national interest test.
The Treasurer Wayne Swan gets the final say.
But unless there is a decision by the 12th of August when the government goes into caretaker mode, a potential Coalition Treasurer could be influenced by National Party concerns.
The US agribusiness giant Archer Daniels Midland has been forced to confront a history of alleged price-fixing and market-rigging as its seeks to win regulatory approval for its controversial takeover of GrainCorp.
Listen to my report on the ADM grilling broadcast on The World Today.
The company's grains boss Ian Pinner attempted to deflect the past accusations during occasionally hostile questioning, and has assured the committee that ADM is now a fundamentally different business.
Mr Pinner is in Australia to convince farmers and the Foreign Investment Review Board that the GrainCorp takeover will not leave them worse off.
He also has to win over politicians like Liberal senator Bill Heffernan, who has been digging into ADM's alleged history of price-rigging and corruption.
Senator Heffernan, himself a GrainCorp client, confronted Mr Pinner with a myriad of past accusations and proven incidents that go to concerns about ADM's ethics and market power.
"Archer Daniel Midland settles price fixing charges for $400 million; Deal in food enhancer fixing suite on hold; Court reinstates seed alleging Archer Daniels suite in the market rigged; Archer
Daniels accused of espionage; Big citrus acid buyers sue Archer Daniels; Former ADM official indicted for fraud; and so it goes on."
Mr Pinner told Senator Heffernan that those episodes would not be repeated.
"Senator, there have been incidents in the past which ADM is not proud of, that is absolutely clear, but I would say that there have also been changes," he said.
"ADM is committed to not only acting in a compliant way but acting in an ethical way."
The Senator offered a warning.
"Can I just tell you that our mob here, GrainCorp, we're not into that s***," he said.
"No. And we don't want anything to do with anyone that is."
The New South Wales Nationals Senator Fiona Nash also appeared unconvinced, despite ADM's assurances that it was all history.
"Is price fixing a mistake? How do you term that as a mistake?" she asked.
"I think you're referring to an incident which was nearly 20 years ago now," Mr Pinner replied.
"Sorry, no. The timeline's not of that much interest, we're actually trying to get a sense of the company, where it's been, where it is now, in terms of fit and proper," Senator Nash said.
ADM is also trying to hose down concerns that grain grower access to storage and transport infrastructure that comes with the deal.
ADM says its committed to fair and open dealing, and plans to ramp up its infrastructure spending to $300 million.
But once again Senator Heffernan suggested the deal would hurt rather than assist farmers.
He also wanted assurances that A-D-M was committed to paying its fair share of Australian tax if the deal goes through, given recent allegations that giants like Apple and Google have been avoiding it.
"We hope we don't put the hurdles too high for you but we, also in your aspiration, we want to include a national interests benefit and make sure you pay your tax and all the rest of it," he said.
"God bless you and get on that plane and have a safe journey."
"We will pay our tax, chairman, we can assure you of that," Mr Pinner replied.
The Senate grilling was a warm-up for what might be in store for ADM as it works to convince the Foreign Investment Review board that the GrainCorp takeover passes the national interest test.
The Treasurer Wayne Swan gets the final say.
But unless there is a decision by the 12th of August when the government goes into caretaker mode, a potential Coalition Treasurer could be influenced by National Party concerns.
Tuesday, June 18, 2013
RBA says dollar demise key to rebalancing economy in transition
The Reserve Bank has signalled it is counting on further falls in the high Australian dollar to help rebalance the economy.
In the minutes from its June board meeting, the RBA said recent cuts to the cash rate had helped tame the currency which was stubbornly high above parity until recently.
Noting the impact of the surprise cash rate cut in May to 2.75 per cent, the RBA said, "the exchange rate had also depreciated noticeably, though it remains at a high level considering the decline in export prices" over the past year.
"It was possible that the exchange rate would depreciate further over time as the terms of trade declined, which would help to foster a rebalancing of the economy," the minutes concluded.
The decline in the Australian dollar began on budget night last month as the Treasurer began his speech, and it has since fallen by as much as 8 per cent.
This morning, the Australian dollar was trading at 95.26 US cents at 11:38am (AEST), and had eased by around 0.3 of a cent after the release of the RBA's minutes.
While recent cash rate cuts and the outlook for slower economic growth have played a role in the dollar's demise, better fortunes for the US economy and a resurgent greenback has been the principal driver.
The minutes released today provide one of the more extensive snapshots on the RBA's view on the direction of the dollar after 2 percentage points in rate cuts since late 2011.
National Australia Bank currency strategist Ray Attrill expects the dollar's decline to continue.
"It is not going to return to the levels we saw at the beginning of the year and for much of last year, and that inherently makes the Australian dollar a less attractive asset for global investors," he said.
"The risks associated with owning a currency like the Australian dollar, in terms of the risk that you're going to get completely blown out of the water by very short-term movements in the currency, is what I think underlies a lot of the reversal of the Australian dollar's fortunes."
Room to move
The RBA's June board meeting left the cash rate steady at 2.75 per cent, but added that the outlook for steady inflation "might provide some scope for further easing".
But TD Securities Asia-Pacific Strategist Alvin Pintoh believes there is no clear indication the RBA is planning a rate cut in July.
"The global backdrop has changed very little since the June RBA meeting, and the tone of the domestic data have been mixed," he wrote in a note.
"A rate cut can't be ruled out, but there is little here to dissuade us from expecting the RBA to stand pat again next month."
The board also "observed that the effects of low interest rates had been evident in a range of housing market indicators", with building and loan approvals higher.
At the same time, the RBA says labour market conditions remain "somewhat subdued", with monthly employment data continuing to be "volatile".
The minutes released today pre-date official data released after the meeting which showed the Australian economy grew by a slower than expected annualised rate of 2.5 per cent in the March quarter.
The RBA also pointed to uncertainty on global markets because of speculation that the US Federal Reserve was about to taper its quantitative easing program.
In the minutes from its June board meeting, the RBA said recent cuts to the cash rate had helped tame the currency which was stubbornly high above parity until recently.
Noting the impact of the surprise cash rate cut in May to 2.75 per cent, the RBA said, "the exchange rate had also depreciated noticeably, though it remains at a high level considering the decline in export prices" over the past year.
"It was possible that the exchange rate would depreciate further over time as the terms of trade declined, which would help to foster a rebalancing of the economy," the minutes concluded.
The decline in the Australian dollar began on budget night last month as the Treasurer began his speech, and it has since fallen by as much as 8 per cent.
This morning, the Australian dollar was trading at 95.26 US cents at 11:38am (AEST), and had eased by around 0.3 of a cent after the release of the RBA's minutes.
While recent cash rate cuts and the outlook for slower economic growth have played a role in the dollar's demise, better fortunes for the US economy and a resurgent greenback has been the principal driver.
The minutes released today provide one of the more extensive snapshots on the RBA's view on the direction of the dollar after 2 percentage points in rate cuts since late 2011.
National Australia Bank currency strategist Ray Attrill expects the dollar's decline to continue.
"It is not going to return to the levels we saw at the beginning of the year and for much of last year, and that inherently makes the Australian dollar a less attractive asset for global investors," he said.
"The risks associated with owning a currency like the Australian dollar, in terms of the risk that you're going to get completely blown out of the water by very short-term movements in the currency, is what I think underlies a lot of the reversal of the Australian dollar's fortunes."
Room to move
The RBA's June board meeting left the cash rate steady at 2.75 per cent, but added that the outlook for steady inflation "might provide some scope for further easing".
But TD Securities Asia-Pacific Strategist Alvin Pintoh believes there is no clear indication the RBA is planning a rate cut in July.
"The global backdrop has changed very little since the June RBA meeting, and the tone of the domestic data have been mixed," he wrote in a note.
"A rate cut can't be ruled out, but there is little here to dissuade us from expecting the RBA to stand pat again next month."
The board also "observed that the effects of low interest rates had been evident in a range of housing market indicators", with building and loan approvals higher.
At the same time, the RBA says labour market conditions remain "somewhat subdued", with monthly employment data continuing to be "volatile".
The minutes released today pre-date official data released after the meeting which showed the Australian economy grew by a slower than expected annualised rate of 2.5 per cent in the March quarter.
The RBA also pointed to uncertainty on global markets because of speculation that the US Federal Reserve was about to taper its quantitative easing program.
Friday, June 14, 2013
News Corp shares bounce as Murdoch-Deng split clears decks before company split
News Corporation shares trading in New York ended 2.4 per cent higher in the wake of news that Rupert Murdoch and Wendi Deng were divorcing.
Listen to my take from this morning's edition of AM.
Investors appear more confident that the bad news has cleared before the official company split between publishing and entertainment arms.
Also, confirmation - if needed - that Mr Murdoch had an ironclad pre-nuptial agreement with Ms Deng soothed fears of a messy divorce.
Quote of the day goes to the celebrity divorce attorney Raoul Felder who told Bloomberg:
"If he (Mr Murdoch) doesn't have a prenup, he would have to see a psychiatrist and not a lawyer."
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