Weak Economic Climate in Australia

123jump.com Staff
19 Nov, 2008
New York City

Stocks in Australia edged lower as global economic slowdown worries continue to haunt investors. Babcock & Brown plans to cut 60% staff to lower operating costs. Leadning economic indicators index declined to annualized increase of 1.1%. AWB Ltd annual revenue rose 51% and net up surged 137%.

[R]3:00AM New York, 7:00PM Sydney- Australia’s leading index falls to 1.1% in September. Babcock & Brown plans to cut 60% staff.[/R]

Australian stocks extended losses on expectations that the global economy will plunge into a deeper recession.

In Sydney trading ASX 200 edged 0.7% lower or 23.6 to 3,499.60.

Of the ASX 200 index stocks 71 rose, 122 declined, and 7 were unchanged. Tower Australia led gainers in the index shares with a rise of 10%.

Australia’s Leading Index Drops 1.1% in September

Westpac Banking Corp. reported today that the annualized growth rate of the Westpac–Melbourne Institute Leading Index, which gauges economic activity in the next three to nine months, eased to 1.1% in September, below the long-term trend of 3.6%.

The drop from 3.5% in August represents the sharpest fall between two months since the 1990/91 recession.

Of the 2.4 percentage points decline between the two months, 0.5 percentage points were from the share price Index, 1.1 percentage points were from the U.S. industrial production and 0.3 percentage points were from material prices.

Three of the four monthly components of the Leading Index fell in September, with the share index dropping 10.4%, dwelling approvals slipping 7.2% and the US industrial production fell by 2.8%.

Westpac says the growth rate is reflecting a very weak growth outlook through the first half of 2009, with the first two quarters of growth in 2009 forecasted to be negative.

Notwithstanding the A$10.4 billion stimulus package, household income is likely to be weak in most of 2009 on declining share prices and “some modest softening in house prices”.

The report noted that commercial construction and mining investment will support growth in 2009 on the strength of current projects.

However new projects are falling sharply on declining business confidence and tight credit conditions.

Babcock & Brown to Cut Jobs to 600 by 2010

Babcock & Brown reported today that it has notified the restructuring plan that is expected to pay 50% of the company’s A$3.1 billion corporate debt facilities by the end of 2011.

The financial institution in seeking changes to financial covenants of existing corporate facilities.

The restructure will lower the company’s headcount from 1,600 to 600 people by the end of 2010 through redundancies and employee transfer of assets as assets are disposed. Operating costs will be reduced by 50% or A$150 million by the end of 2010 after the restructure.

Under the plan, Babcock & Brown will be split into two- the specialist infrastructure investment business and real estate.

Gainers & Losers

Tower Australia led advancers in the ASX 200 index shares with an increase of 10% followed by rises in Suncorp Metway Ltd. of 9.2%, in AWB Ltd. of 6.9%, in Mirvac Group of 6.9%, and Platinum Asset Management Ltd. of 6.8%.

CSR Ltd. led decliners in the the ASX 200 index shares with a fall of 21.1% followed by losses in Babcock & Brown of 19.4%, in Boart Longyear Group of 18.4%, in Gunns Ltd. of 17.6%, and Timbercorp. of 16.4%.

Commodity stocks also dropped after gold prices plunged 1.3% to $732.70 per ounce and crude oil prices dipped 1% to $54.39 per barrel.