RBA Revises Australian Growth Outlook, Dollar Eases

Marcus Jacob
10 Aug, 2012
New York City

Australian markets closed lower and the dollar sold off after the Reserve Bank of Australia lifted its growth outlook to 3.75% and lowered its inflation estimate to 2.25% from its views three months ago. Casino operator gained after annual net increased 53%.

[R]7:40 AM Sydney – Australian markets closed lower and the dollar sold off after the Reserve Bank of Australia lifted its growth outlook to 3.75% and lowered its inflation estimate to 2.25% from its views three months ago. Casino operator gained after annual net increased 53%.[/R]

Australian stocks closed lower and the dollar was in focus after the latest statement from the Reserve Bank of Australia.

The RBA lifted its growth outlook for the current year to 3.75% from its previous estimate of 3% in May on better than expected consumer spending and sustained investment in the resource sector.

The central bank also lowered its estimate of inflation to 2.25% from the previous outlook of 2.5%.

However, the central bank cited stronger dollar as the headwind for the most businesses and said its elevated price is the key driver for the structural adjustments in the economy.

The bank noted that the Australian dollar has traded close to parity for all but 23 days in the year and its new forecast for growth and inflation is based on an exchange rate of $1.06, up from $1.03 in May.

The dollar sold off after the latest statement was positive on the growth front but the central bank did not appear to be ready to ease anytime soon.

The statement noted, “Despite the recent improvement, employment growth in the near term is expected to remain relatively modest as structural adjustment and pressure to improve productivity in many parts of the economy constrain company’s ability and willingness to employ more staff.”

The ASX 200 index edged slid 31 to 4,277.30 and All Ordinaries index decreased 27.26 to 4,302.80.

For the week, the ASX 200 index gained 1.3%, fourth weekly rise in a row.

The Australian dollar traded lower to close at $1.054.

Stock Movers

Resource companies traded lower after China reported lower than expected international trade data for July.

Exports in the month rose 1% from a year ago month after rising 11.3% in June. Imports increased 4.7% after advancing at a faster rate of 6.3% in the previous month.

BHP Billiton Limited slid 11 cents to $32.69 and, Rio Tinto Limited declined 41 cents to $56.45 and Fortescue Metals Group fell to $4.45.

Iluka Resources decreased 16 cents or 5.8% $9.97, Lynas Corporation Limited slid 1 cent to 76 cents, Newcrest Mining slipped 13 cents to $24.33 and Kingsgate fell 3 cents to $3.95. Whitehaven Coal lowered 2 cents to $3.85.

Oil Search Limited slumped 10 cents to $7 and Santos Limited fell 1 cent to $11.24 and Woodside Petroleum declined 16 cents to $34.27. Sundance Energy closed unchanged at 43 cents.

News Corp rebounded 57 cents to $22.45 after the controversial media conglomerate reported 55% decline in fiscal 2012 and guided a modest increase in earnings in the current fiscal year.

The entertainment and media group and operator of a cable channel with aggressive and speculative commentary also was forced to split its publishing division after a phone hacking scandal in the UK that exposed the widespread practice that went on for more than four years which management to this day continues to deny.

Ten Network rose 1 cent at 46 cents and Fairfax Media edged down 0.5 cents to 52.5 cents.

Consolidated Media Holdings up 1 cent to $3.44 after competition authority approved the offer from News Corporation.

Tabcorp plunged 9% or 29 cents to $2.91 after the casino operator reported annual profit declined to $340 million in the year to June from $534.8 million in the previous fiscal 2011.

Crown gained 3 cents to $8.56 after the casino operator reported annual profit increase of 53% from a year ago to $513.3 million.

Metcash added 2 cents to $3.47, Harvey Norman Holdings closed up 2 cents at $1.94 and Woolworths plummeted 39 cents to $28.11. Kathmandu rose 1 cent to $1.35.

Commonwealth Bank of Australia declined $1.09 to $55.94 and Bank of Queensland slipped 9 cents to $7.69. ANZ rose 2 cents to $23.84. National Australia Bank dropped 24 cents at $25.18 and Westpac Banking Corporation slumped 40 cents to $23.61.

Macquarie Group gained 23 cents to $25.96 and Perpetual Limited increased 16 cents to $25.56.

David Jones Limited fell 1 cent to $2.48 and Wesfarmers slumped 34 cents to $32.27. Billabong International Limited rose 1 cent to $1.38. Breville Group added 5 cents to $5.08.

Harvey Norman added 2 cents to $1.94 after it said full-year profit may plunge 40% and sales are expected to decline 7% in the fiscal year ending in June.

Stockland slid 2 cents to $3.19 after the outgoing managing director Matthew Quinn said current housing market conditions are the worst in two decades.

Toll Holdings gained 4 cent to $4.28 and Leighton advanced 55 cents to $17.11.

Qantas added 2 cents to $1.14 and Flight Centre slumped 16 cents to $21.73 and Virgin Australia lowered 0.5 cents 42.5 cents.

QR National closed unchanged at $3.33 and Telstra decreased 12 cents to $3.76.