Australia Hikes Rates to 3.5%

123jump.com Staff
03 Nov, 2009
New York City

Australia increased its key lending rate second time by 25 basis points in as many months as the Reserve Bank focuses its attention on inflation. Treasurer Wayne Swan comments suggested that rates may rise again next year.

[R]1:00AM New York, 6:00PM Sydney – Australia increased its key lending rate second time by 25 basis points in as many months as the Reserve Bank focuses its attention on inflation. Treasurer Wayne Swan comments suggested that rates may rise again next year.[/R]

Australian market averages dropped after an early morning rally driven by bargain hunters.

Reserve Bank of Australia today cut its base rate by the forecasted 25 basis points as government announced that the interest rates can’t stay at 50-year emergency lows.

In Sydney trading ASX 200 Index fell 0.2% or 8.9 to 4,531.50.

Commodity stocks fell despite rising energy and crude oil prices. Crude oil edged up 1.5% to $78.10 per barrel and gold prices advanced 1.3% to $1,054 per ounce.

Of the ASX 200 Index shares, 94 rose, 86 dropped, and 20 were unchanged. MacMahon Holdings led advancers in the index shares with a rise of 7.5% followed by Astro Japan Properties increasing 7%.

Reserve Bank of Australia Hikes Rates to 3.5%

The Reserve Bank of Australia increased its cash rate 25 basis point to 3.5% and the central bank cited that prospects of a “serious economic contraction” fade in Australia.

RBA Governor Glenn Stevens says economic indicators are recovering, while growth in China is positively impacting on the region and commodity markets.

However, the RBA in the accompanying statement noted that the rising Australian dollar might aggregately affect “the tradeables sector and dampen price pressures.”

“Nonetheless, growth is likely to be close to trend over the year ahead and inflation close to target. With the risk of serious economic contraction in Australia now having passed, the Board’s view is that it is prudent to lessen gradually the degree of monetary stimulus that was put in place when the outlook appeared to be much weaker,” said Stevens.

Separately, Treasurer Wayne Swan announced later that interest rates will not remain at the current 50-year “emergency lows”, intimating that rates may increase next year.

ANZ Increases Rates

Australia & New Zealand Bank also increased its average standard variable loan by 25 basis points to 6.31%, while the rate of other deposit products was increased by 35 basis points.

ANZ acting chief executive officer Graham Hodges said the rate increases will adverse impact the lender’s profit margins.

New Zealand Employment Drop, Wages Rise in September

Statistics New Zealand reported today in its Quarterly Employment Survey employment as measured by the number of full-time equivalent employees fell 3.5% and filled jobs declined 2.6%.

However gross earnings in seasonally adjusted terms increased 1.6% in the review period, while average total hourly earnings gained 4.9%.

The labor cost index showed salary and wage rates climbed 2.1% in the three months to September from same period a year ago. In addition, salary and wage rates (including overtime) gained 0.5% in the September quarter from 0.3% in the previous quarter.

Salary and wage rates (including overtime) for the private sector increased 2% in the year to the September 2009 quarter, and 0.4% in the September 2009 quarter. Public sector salary and wage rates (including overtime) rose 2.9 % in the year to the September 2009 quarter, and 1.1% in the September 2009 quarter.

ASX Movers

Sundance Resources Limited led the decliners in the S&P ASX 200 index with a loss of 9.0% followed by losses in Corporate Express Australia Limited of 5.0%, in Lynas Corporation Limited of 5.0%, in Iluka Resources Limited 4.0% and in QBE Insurance Group Ltd 3.8%.

Macmahon Holdings Limited led gainers in the S&P ASX 200 index with a rise of 7.4% followed by gains in Astro Japan Property Trust 6.9%, in St Barbara Limited of 6.6% and in Babcock & Brown Infrastructure Group of 5.5%.

Other Movers

Astro Japan Property Trust the real estate investor in Japan advanced 6.9% to A$0.46.

Babcock & Brown Infrastructure Group increased 5.5% to A$0.04 said Australia''s Foreign Investment Review Board said that it has no objections to the cornerstone investment in PD Ports owner Babcock & Brown Infrastructure by Canadian finance house Brookfield Asset Management.

Corporate Express Australia Limited the office supplies distributor in Australia and New Zealand declined 5.0% to A$3.95.

Iluka Resources Limited the exploration, mining, concentration and separation of mineral sands dropped 4.0% to A$3.28.

Lynas Corporation Limited the design and construction of a concentration plant in Western Australia slipped 5% to A$0.47.

Macmahon Holdings Limited added 7.4% to A$0.58 on the speculation that the engineering contractor may be acquired by Leighton Holdings.

St Barbara Limited the mining and sale of gold rose 6.6% to A$0.32.

Sundance Resources Limited the exploration of iron ore decreased 9.0% to A$0.15.