Australia Trims Spending and Targets Surplus; March Exports Soar

Marcus Jacob
10 May, 2011
New York City

Australian stocks declined for the second day as the federal government cut spending and deferred infrastructure projects to bring the deficit in control. Australia swung to a trade surplus in March. The dollar declined on the worries that China will tighten rates as trade surplus soared in April.

[R]5:00 PM Sydney – Australian stocks declined for the second day as the federal government cut spending and deferred infrastructure projects to bring the deficit in control. Australia swung to a trade surplus in March. The dollar declined on the worries that China will tighten rates as trade surplus soared in April.[/R]

Australian stocks were under pressure as the federal government proposed a budget to trim spending and lower deficit in the next fiscal year and China reported a sharp rebound in trade surplus.

The latest proposal from Treasurer Wayne Swan proposed a cut of $22 billion in spending, delayed spending on rail and road projects worth $945 million and imposed tax on high income earners of more than $150,000 totaling $1.8 billion.

The government also proposed to defer defense spending by $2.4 billion and increase healthcare and educational spending by $2 billion.

The government estimates a small surplus in the fiscal year 2012-2013 and the government estimated mining industry investment to soar to $76 billion, eight times the level seen before the current boom began.

The ASX 200 index declined 31 or 0.65% to 4,725.80 and All Ordinaries index dropped 28.10 or 0.6% to 4,803.60.

The Australian dollar closed at US$1.079 and crude oil closed down US$1.00 to US$101.55.

Australian trade surplus increased to $1.47 billion in March compared to revised deficit of $87 billion in February according to the latest data from the Australian Bureau of Statistics.

China’s April trade surplus soared to US$11.4 billion from US$139 million in March and currency markets worried that inflation data later in the week may also prompt the Chinese government to tighten rates.

The Australian dollar traced lower from the high of US$1.081 as investors focused on lower than expected Chinese import data.

Stock Movers

Resource sector stocks closed lower on the worries that the government will ramp up tax collection from the mining sector as corporate tax collection declined.

BHP Billiton declined 22 cents to $44.53 and Rio Tinto fell 36 cents to $79.65. BHP announced a plan to invest $260 million in the oldest diamond mine near Arctic in Canada.

Grange Resources eased 0.5 cent to 66 cents after the iron ore miner estimated $2.57 billion development cost for Western Australian mine at Albany.

OneSteel declined 11 cents or 5.1% to $2.02 after it lowered its outlook for the second half on higher operating cost and stronger Australian dollar.

Banks declined. Commonwealth Bank declined 45 cents to $52.20 and Westpac fell 46 cents to $23.60. ANZ dropped 32 cents to $23.07 and National Australia Bank declined 20 cents to $27.64.

Treasury Wine Estate, the wine and beer operations spun off from Foster’s Group opened at $3.21 and closed at $3.36. The parent Foster’s opened at $4.55 and closed at $4.53 after the split-off.

Australian Agriculture Company declined 10 cents or 6.5% to $1.45 after it completed the offering of $56.3 million.

Nufarm increased 25 cents or 5.2% to $5.02 after Japan based Sumitomo agreed to acquire 4.5 million shares from its chief executive Doug Rathbone and said it plans to acquire more stake in the company.