Australia Holds Rates as Current Account Deficit Shrinks

Marcus Jacob
03 Jun, 2014
New York City

Australia left its interest rate at record low 2.5% and current account deficit fell after a surge in iron ore and coal exports in the last quarter. RBA also noted high value of Aussie despite the sharp fall in coal and iron ore prices. Retail sales in April declined 0.2%.

[R]5:00 PM Sydney – Australia left its interest rate at record low 2.5% and current account deficit fell after a surge in iron ore and coal exports in the last quarter. RBA also noted high value of Aussie despite the sharp fall in coal and iron ore prices. Retail sales in April declined 0.2%.[/R]

Australian stocks opened higher after the release of several economic reports but broader indexes dropped 0.7% at close.

The Reserve Bank of Australia decides to keep official cash rate at an historical low for the ninth meeting in a row.

The central bank left its key rate at 2.5% and reiterated its policy of “stable interest rates.” The move was widely anticipated and economists and investors so no sign of the change in the rate regime at the next meeting either.

The Australian Bureau of Statistics said seasonally adjusted retail sales in April rose 0.2% to $23.17 billion following gain of 0.1% in March.

The current account deficit in the first quarter declined to $5.67 billion following the downwardly revised deficit of $12.7 billion in fourth-quarter, the ABS said in a separate report.

The surge in iron ore and coal exports cut the current account trade significantly but exporters are also struggling with weak commodities prices. Iron prices in 2014 have declined 30% and the spot price of the ore is at a 20-month low.

International trade increased to a surplus of $3.6 billion from a deficit of $609 million in the December quarter.

A separate report also indicated retail sales in April rose 0.2%, meeting the expectations set by economists.

Australian dollar eased to 92.65 U.S. cents and stock market trading turnover jumped to 760 million shares worth $4.22 billion.

ASX 200 index slipped 38.80 or 0.7% to 5,479.70 and the broader All Ordinaries fell 38.70 to 5,460.50.

Stocks in Review

Decmil Group Limited gained 1.7% to $1.78 after the engineering and construction group secured governmental contracts worth $10 million with the Australian Defence Force and Main Roads Western Australia.

Fletcher Building Limited slid 0.4% to $8.23 after the New Zealand-based construction company completed the sale of its Pacific Steel New Zealand business to BlueScope Steel and expects to record a significant expense of up to $19 million in expenses in the process.

The sale price of $120 million comprised $30 million at initial payment and $60 million for working capital and $30 million to be paid at the time of BlueScope completed a new mill at Glenbrook.

Growthpoint Properties Australia Ltd dropped 2.7% to $2.51 after the property developer agreed to acquire NSW Police Headquarters in Parramatta for $241 million.

Yowie Group Ltd slipped 1.7% to 56 cents after the chocolate and confectionery product maker won its first order for Yowie confectionery product in US market from a retail candy chain for 68 cases or 4,896 units.