Australian Stocks Extend Gains; Mid-Year Budget Deficit Rises

Marcus Jacob
29 Nov, 2011
New York City

Australian stocks gained for the second day in a row and investors focused on the mid-year budget. The government hopes that the estimated deficit of $37 billion will turn to a surplus in the next year.

[R]9:00 PM Sydney – Australian stocks gained for the second day in a row and investors focused on the mid-year budget. The government hopes that the estimated deficit of $37 billion will turn to a surplus in the next year.[/R]

Australian stocks gained for the second day in a row after trading lower for more than a week. The latest rise came after the government said budget surplus in the net fiscal year will be lower than previously estimated.

Stocks and commodities in Asia were higher ahead of the meeting of finance ministers in Europe later today to finalize the details of the European rescue fund. Stocks in New York surged following strong retail sales during the critical three-day weekend.

The ASX 200 index added 43.9 or 1.1% to 4,102.10 and All Ordinaries index gained 1% or 41.5 to 4,167.30.

The Australian dollar rose 1.1% to US$1.0008.

In trading, turnover was 2.06 billion shares worth $4.34 billion and 562 stocks gained, 438 declined and 375 were unchanged.

Treasurer Wayne Swan said that the government deficit this year is expected to surge to $37 billion from the previous estimate of $23 billion only six months ago. The government also unveiled more cost cuts and increase of taxes and closing of loopholes for executives.

The government estimated saving of $11.5 billion over four years to fiscal 2015 that included cut in the child bonus to $5,000 from $5,400.

Government staff will trim traveling bonus and entertainment budgets with a total savings of $500 million. Contributions to the superannuation changes will save $1 billion over three years.

The government in its mid-year outlook also implied that the current fiscal year economic growth is expected to decline to 3.25% from the previous estimate of 4.25% in the current year and 4% in the next year.

Australia is in the enviable position when it comes to the total government debt and is expected to peak at equivalent of 8.9% of GDP in the current fiscal year.

The rating agency Fitch also upgraded Australia’s debt to AAA from AA+. The latest move puts Australia with AAA rating for the first time from all three widely followed ratings agencies.

Stock Movers

BHP Billiton Ltd added 13 cents to $34.98 and Rio Tinto Ltd gained $0.23 to $63.50. Newcrest Mining increased $0.57 to $35.07.

BHP Billiton also said it will review its diamond mining operations including its mines in Canada.

Fortescue Metals Group decreased 5 cents to $4.65, Lynas Corporation Limited closed unchanged at $1.18 and Iluka Resources rose $0.03 to $14.55.

Oil Search Limited traded up 2 cents to $6.11, Santos Limited gained 16 cents to $12.82 and Woodside Petroleum closed up $0.75 cents to $33.35.

Commonwealth Bank of Australia closed up $0.48 to $47.37 and National Australia Bank increased 36 cents to $23.10. ANZ edged up 31 cents to $19.51. Westpac added 19 cents to $20.45.

David Jones Limited closed up 5 cents to $2.78 and Wesfarmers Limited added 3 cents to $30.71. Harvey Norman closed up 2 cents at $2.05 and the retailer said does not expect a good Christmas season.

Woolworths Limited closed up 27 cents to $24.48 and James Hardie Industries SE increased 21 cents to $6.63.

Qantas Airways Ltd closed up 1 cent to $1.51, Virgin Australia closed unchanged at 33.5 cents and Flight Centre added 47 cents to $18.97.

QBE Insurance Group Limited increased 25 cents to $13.45.

Campbell Brothers closed unchanged at $49 and the laboratory testing service group said first half profit increased and estimated higher full-year net.