Australian shares set for positive start
Outlook: Aus shares set for positive start February 01, 2011 09:18 AM
The Australian share market looks set to open higher, following a positive session on Wall St. US stocks lifted as investors reacted to strong earnings from Exxon Mobil and rising commodity prices, while still keeping an eye on the political unrest in Egypt. The price of oil advanced, with Brent oil rising above $US101 a barrel for the first time since 2008.
US economic news: The Commerce Department reported personal income increased 0.4 per cent in December, coming in just under economists’ expectations. While personal spending increased 0.7 per cent in the same month, beating earlier forecasts.
On Monday, the Dow Jones Industrial Average, closed 68 points higher to 11,892, S&P500 firmed 10 points to close 1,286 and the NASDAQ added 13 points to close 2,700.
European stocks were mixed: London’s FTSE down 18 points, Paris up 3 and Frankfurt down 25.
To Asian markets, stocks were also mixed: Hong Kong’s Hang Seng was down 170 points, Tokyo was down 122 points and China’s Shanghai Composite rose 38 points.
The Australian share market finished lower on Monday. The S&P/ASX 200 Index dropped 21 points to close at 4,754 and on the futures market the SPI is up 12 points.
Turning to currencies and the Australian Dollar at 8:45AM was buying 99.73 US cents, 62.27 Pence Sterling, 81.89 Yen and 72.85 Euro cents.
In economic news: The Reserve Bank of Australia today meets for its first board meeting of this year and interest rate decision, with economists widely expecting the rate to be kept unchanged at 4.75 per cent. The RBA is also due to release its index of commodity prices for January. Also due today, the Australian Industry Group/Pricewaterhouse performance of manufacturing index for January, the Australian Bureau of Statistics house price indexes: eight capital cities for the December quarter, and National Australia Bank’s monthly business survey for December.
Company news: On Monday shares in Crane Group Ltd (ASX:CRG) rose 3.97 per cent to close at $9.96. Crane Group has recommended its shareholders accept Fletcher Building Group Ltd’s (ASX:FBU) sweetened takeover bid for the company. The endorsement comes after Fletcher boosted its offer from $9.35 per share to $10.07 per share, valuing Crane at over $800 million. The revised $10.07 bid includes $3.50 in cash, one Fletcher share and a fully franked 50 cent special dividend. For the year ended 30 June 2010, Crane reported a net profit of $31.9 million.
On Monday shares in Westpac Banking Corporation (ASX:WBC) added 0.35 per cent to close at $22.99. The Australian Financial Review says Westpac will this year need to secure around $40 billion in funding. The report comes following Westpac’s CEO Gail Kelly’s comments last week, telling the Senate banking inquiry that she predicts funding costs will peak in around 18 months. According to the AFR, Australia’s big four banks will need to find around $135 billion in wholesale funding this year because of their reliance on international financing. Westpac Banking posted a net profit of $6.4 billion in the year to 30 September 2010.
Ex-dividends: Katana Capital is going ex-dividend today with a $0.01 cent fully franked dividend. Coming up on Friday is Australian Foundation Investment Company with an $0.08 cent fully franked dividend.
To commodities: Gold is down $10.70 to $US1,333 an ounce for the February contract on Comex, silver is up $0.85 to $28.17 for March and copper is up $0.11 to $4.46 a pound. Oil is up $4.32 at $92.19 a barrel for March light crude in New York.
Australian daily finance update news bulletin
The data out of the US continues to impress. Personal income and spending
numbers out last night show the US consumer is back. Incomes rose 0.4% in
December, while spending rose 0.7% – the savings rate, meanwhile is at a
comparatively elevated 5.3%. In the manufacturing space, data is no less
promising, with manufacturing surveys for Chicago, Dallas and Milwaukie all
showing robust activity.
Now this is all great news and helped underpin a bid in the equity space.
Admittedly this bid is fading into the close, but at the high the S&P500
was up 0.8% (currently 0.4% at 1281). BY sector, energy stocks were the key
outperformers, boosted by another 3% gain on WTI ($92.17, Brent $100) and
strong earnings from ExxonMobil. Basic materials and industrials also
outperformed, with consumer goods, telecommunications and consumer services
weighing heavy. The Dow otherwise was up 31pts (11853), the Nasdaq rose
0.3% (2693) while the SPI was flat (4727).
In FX land, both EUR and Sterling got a decent boost from some higher
European inflation data, especially Sterling which was up 148pips to
1.6007. The market is increasingly taking the view that rates on hold, is
a luxury neither the ECB nor BoE can afford. EUR rose 85pips to 1.3680
after euro zone inflation rose to 2.4%y/y in January from 2.3% (remember
the ECB targets 2% or below). Otherwise AUD was up 40pips to 0.9961, while
JPY was unchanged at 82.05.
In contrast, there was little action in debt markets. US treasury yields
are currently up between 2-4bp with the 2,5 and 10yr trading within a
4-11bp range to be at 0.57%, 1.95% and 3.37% respectively. Aussie futures
are down 1-3 ticks on a 4 tick range with 3s at 94.93 and 10s at 94.47.
Bits and pieces otherwise. Canadian GDP rose by 0.4% in November to be 3%
higher annually. In Germany, retail sales fell by 0.3% in December after a
1.9% fall in November. Note that there are rumours flying around that
Greece and relevant parties are discussing some kind of ‘Brady Plan’ like
deal. Basic gist is that bond holders would take a haircut and the
maturity of Greek loans would extend to 30yrs. The Greek government
confirmed they are discussing plans to extend the maturity of loans, but
denied there would be a restructuring or any haircut applied to bond
holders. Note that over the last week, the ECB bought no bonds, the first
time since October, and a great sign that debt concerns are easing. Also of
interest, US corporate bond sales apparently are at a January record, not
surprising with such a low cost of funding.
So today we can look forward to the RBA’s rate announcement (1430) although
no one is expecting any changes from the Bank today. To be honest, I have
no sense of what the RBA Board will make of recent events, but I would be
genuinely stunned if they are as dovish as the market. I would hope that
they can see sense, see past all the PR rubbish and set policy with an eye
to the medium term national interest. As I highlighted in my piece
yesterday, global growth is accelerating we know this, look at the recent
data flow, especially out of the US.
We know that global inflation is rising, already in Europe and the UK it is
above the band – it is rising sharply in the emerging world. In the
domestic space growth is robust – ok credit growth is sluggish and there
are questions over retailing. But this is the whole point of the exercise
– credit growth should be subdued, likewise consumer spending. With
interest rates barely above average, barely even above neutral, I think it
is ridiculous to sincerely expect the RBA to just sit around and a wait for
a consumer spending rebound (not that I think there is a lot of reliable
evidence that it soft) or a pick up in credit growth – as if these were
somehow desirable outcomes. Similarly, we can’t just expect them to sit
around in fear that Europe will disintegrate or China implode, while global
growth, meanwhile, is so strong.
Whatever the case in the retail space it is clear that high interest rates
are not the problem. Ditto credit. Interest rates are not that high, a
fact plain to see. So with the fantasy of a global double dip over, we are
left with the reality of strong global growth, rising global inflation and
a commodity boom; all thrown in with the most stimulatory monetary policy
humanity has ever seen – which by the by doesn’t look like its going to
change any time soon. It’s a lay down misere, they should hike.
Just prior to that NAB release their business survey for December, the ABS
issue Q4 house prices and then tonight we get US construction activity and
the ISM index.
Have a great day..
Australian CPI
CPI was much less than expected, rising 0.4% compared to my and the
market forecast for a rise of 0.7%. Annually, CPI is 2.7% higher.
Excluding fruit and veg and fuel, CPI was flat in the quarter
(2.4%y/y) while the average of the RBA’s cores is 0.4% which again,
was weaker than my and the market forecast for 0.7%/0.8%. Annually,
core inflation is about 2.3y/y.
Non-tradable inflation rose by 0.4% (+3.4%y/y), while tradable rose
by 0.3% to be 1.6%y/y.
Key upside was from fruit and Veg (+15.5%), domestic holidays
(+3.8%), automotive fuel (+2.1%), house purchase costs (+0.7%).
On the downside were pharmaceuticals (–6.2%), deposit and loans
(–1.3%), motor vehicles( -1%), audio, visual (–4.8%) and motor
vehicle repairs.
Well, again we’ve been hit by a surprisingly low CPI print and at face
value, it would imply that rates can stay lower for longer. As the third
quarter low print, the evidence appears to favour the idea that inflation
is not a problem for the Australian economy. The policy implications would
seem clear then and I have to concede that it’s highly unlikely we’ll get a
near-term rate rise (although I view that as a mistake).
The question is why? Why is inflation lower – third quarter in a row.
What’s driving it. Are inflationary pressures truly moderating? The
persistent, underlying pressures? The chart below shows the breakdown by
sector – for both the % change in the quarter and the contribution each
component made to the 0.4% quarter rise in headline inflation.
(Embedded image moved to file: pic17866.gif)
The moderating influences this quarter were from health, household
contents, clothing and financials services (which I find odd given RBA and
commercial bank hikes). Together, these components knocked off about
0.2%pts, which isn’t a lot I guess. The thing is for household contents and
clothing, price falls are not at all unusual. In addition to the currency
benefits (AUD up 9% or the quarter), most of the items in those components
are subject to structural disinflationary forces anyway.
Just note the significant margin expansion underway for the retailers.
There is certainly little evidence that they are passing much of the AUD
rise on – or much evidence of discounting for that matter.
Now the other things to note are that 1) we can’t keep relying on a 9%
increase the AUD each quarter to soften prices. Also consider 2) the fact
that inflation or excess inflation, is generally only driven by a few key
components. In the Australian context, inflation is generally speaking,
driven by food (including booze and smokes), housing (rents, house
purchase, and utilities), health and education. Normally about 80% of the
gain over any time period is driven by these components, noting that they
account for around 50% of the basket of goods surveyed. Throw in fuel,
during times of crude price rises and around 90% of the increase can be
explained by 55% of the CPI basket.
Here’s the thing. I don’t reckon that price trends in any of these
components have really changed. I mean I haven’t seen any evidence of
that. We saw some sign of that this quarter with price increases for food,
housing and fuel. But the series doesn’t show a steady consistent increase
in each quarter usually, the numbers are volatile. Missing this quarter
were coincident increases in the highly seasonal education and health and
utility components. It seems that we’ve just be lucky in reality, that
when utility prices or what have you have surged, we’ve either had soft
food or a drop in fuel prices or some other oddity. But our luck is going
to run out.
Think about what’s happening to health costs, costs of education, food,
fuel etc. The key drivers of CPI. They are going up – I don’t think anyone
would argue against that. Now think of what happens when they start rising
together, as they did from 2006-08. It’s not pretty.
Having said that, I have to concede that headline and core inflation, on
the face of it, are nothing to worry about. But I think my logic and
reasoning is sound and I remain sceptical about any suggestion that
inflation pressure has moderated.
Near-term inflation is not going to provide the smoking gun the RBA needs,
this is clear. My concern though, very real concern, is that the RBA and
market participants consequently become complacent. If I’m right, we will
get an inflation surge at some point soon. All the key drivers of inflation
are rising rapidly, but they are volatile – the timing of some of these
moves have proven very fortuitous and allowed some quite favourable
quarterly outcomes. At this stage I think the RBA is probably alert to this
problem, I guess we’ll find out soon enough if that isn’t the case. But as
things stand now, I seriously doubt the RBA will remain on hold till the
2H11.
weekly finance news and outlook
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There is not a lot in the form of mind altering data for Australia this
week. For Oz it’s all 2nd and third tier stuff, but the flow is steady. I’m
probably going to be more interested in the consumer related data flow this
week. That is, motor vehicle sales data today (1130) and the consumer
sentiment numbers on Wednesday (1030), although we do get some useful
construction data on Wednesday and Thursday and of course trade price data
on Friday (1130).
Naturally enough, my interest in the consumer related data results from
this supposed debate going on about the health of the consumer, which I
briefly touched on last week. As I mentioned last week, the retail
association argues the sector is struggling. The monthly retail sales data
would support that view, although more reliable data elsewhere doesn’t. As
a reminder, the broader measures of consumer data in the national accounts,
the fact that retailers were a key employer in 2010 etc etc, all suggest
consumer spending is robust.
Indeed when I speak to retailers myself (mainly senior sales staff), and I
have across several major Australian cities, the feedback I get is
consistent with that view. Responses typically suggest that sales have been
“solid”, “pretty good” or “strong but certainly not a record year”. This
makes sense. I mean to believe that consumer spending is weak you
literally, I mean literally, have to accept that of the 360 odd thousand
new employees we’ve seen this year – roughly $15bn in additional post tax
income or $1.25bn per month (5% of retail) – none of them need to eat or
wear clothes, have any furniture or even live anywhere – not to mention the
fact that they have must have absolutely no interest in anything else.
Other than that, we get TD’s inflation gauge today, DEWR’s skilled vacancy
index Wednesday (11) and consumer inflation expectations (Thursday 1030).
Looking across the Tasman (NZ) we do actually get some mind altering data
out and the big news is the CPI on Thursday (0845 Oz time). We already know
the drill here. The GST increase on October 1, by itself should lead to
about a 2% (give or take) increase in prices for the quarter. With that in
mind, I’m looking for a 2.6% quarterly lift which is only a touch above the
RBNZ’s forecast of 2.3%q/q (which is also the market forecast). Annually,
CPI should rise to just below 5% from a 1.9% increase in Q3.
Otherwise the Kiwi’s also put out retail sales on Friday (also 0845).
Remember the common perception is that a GST bring forward prior to the
introduction of the GST caused a surge in sales which subsequently caused
sales drop in November. For mine the argument is theoretically unsound and
I would suggest instead that there are problems with the seasonal factors.
The market is looking for a 1.2% lift in sales for the month (November).
For the rest of the globe, we get a reasonable flow of data although not
much of it from the US. Indeed, it’s Martin Luther King Day so markets are
closed on Monday. For the rest of the week we get the Empire State
Manufacturing survey on Tuesday (alongside TIC flows and the NAHB housing
market index). Wednesday we see construction work done and housing starts
with the Philly Fed index and existing home sales due Thursday. The general
flow of the data is expected to be fairly solid with housing data forecast
to pick up and the manufacturing surveys expected to remain elevated.
The big guns are out on Thursday with China’s GDP data, CPI, retail sales
and industrial production (all expected 1300 Oz time). It’s all expected to
be pretty strong with GDP in particular forecast at 9.4% in Q4 from 9.6% in
Q3.
Elsewhere just watch out for the German Zew and Ifo surveys and in the UK
we get CPI, retail sales and labour market data. The BoC also meet (no
change expected)
Hope you have a good week.
Outlook: Aus shares set to open weaker January 14, 2011 09:21 AM
Outlook: Aus shares set to open weaker January 14, 2011 09:21 AM
Australian shares look to open weaker this morning following mixed overseas leads. Wall Street closed steady as investors took note of weak unemployment figures. Commodities eased after recent gains.
US economic news: Federal Reserve Chairman Ben Bernanke says the US economy is strengthening, with three to four per cent growth likely this year. He cautioned that despite the growth, unemployment would not reduce at a rapid rate. The Department of Labor’s weekly jobless claims report showed the number of Americans filing new unemployment claims jumped to 445,000 last week, higher than expected. The Commerce Department reported the Producer Price Index rose 1.1% in December. The trade balance was virtually unchanged at $US38.3 billion.
On Thursday, the Dow Jones Industrial Average, closed 24 points weaker to 11,732. S&P500 fell 2 points to close 1,284 and the NASDAQ down 2 points to close 2,735.
European stocks were mixed: London’s FTSE fell 27 points, Paris up 30 and Frankfurt up 6.
To Asian markets, stocks were higher: Hong Kong’s Hang Seng up 113 points, Tokyo up 77 points and China’s Shanghai Composite up 6 points.
The Australian share market finished stronger on Thursday. The S&P/ASX 200 Index lifted 71 points to close at 4,795 and on the futures market the SPI is down 13 points.
Turning to currencies and the Aussie Dollar at 8:35AM was buying 99.74 US cents, 63.02 Pence Sterling, 82.62 Yen and 74.67 Euro cents.
Company news: On Thursday shares in Rio Tinto Ltd (ASX:RIO) gained 2.18 per cent to close at $87.05. Rio Tinto Alcan says the Queensland floods are severley affecting the supply of aluminium from smelters near Gladstone. Flooding has cut road and rail access between Gladstone and Brisbane and the port is closed, preventing deliveries. Rio advises alternative arrangements are being investigated. For the year ended 30 June 2010 Rio Tinto reported a net profit $7.4 billion.
Yesterday shares in Telstra Corporation Ltd (ASX:TLS) rose 0.7 per cent to close at $2.87. The nation’s major telcos are facing a bill of more than $50 million and three months of build time to repair communication systems damaged but the Queensland floods. Tens of thousands of people have been left without mobile, landline or internet access. On Thursday Telstra’s director of service delivery said communication services in Brisbane would be back up and running within four days. Central and Western Queensland face a wait of up to 18 days without service. Telstra reported a yearly profit of $3.94 billion to June 30 2010.
To ex-dividends: There are two companies going ex-dividend today. Abacus Property Group with an 8.25 cent unfranked dividend. Viterra with a 5.14 cent unfranked dividend. Coming up next week are Euroz and Mirrabooka Investments.
To commodities: Gold is up $1.20 to $US1,387 an ounce for the February contract on Comex, silver is down $0.28 to $29.26 for March and copper is down $0.03 to $4.38 a pound. Oil is down $0.46 at $91.40 a barrel for February light crude in New York.
Morning finance report
It was another savage session for Treasuries overnight with the 10yr yield spiking up to a high of 3.33% (+14bp from 1630) before a bid developed to calm things down. As I write, the 10yr is up about 5bp to 3.24%, the 5yr +7bp to 1.85% and the 2yr +7bp to 0.62% – 10yrs have had their biggest two day move since September 2008 which is quite remarkable. The $21bn 10yr treasury auction wasn’t even that bad, wasn’t that good, but it wasn’t that bad with cover at 2.92 compared to 2.8 last month and a 12 auction average of 3.07.
So it looks like those tax cuts have caused a bit of a long squeeze and there is plenty of chatter about how the additional stimulus, well the continuing stimulus, may result in the Fed cutting short their Qe2 plans, which is awesome if you live in fairyland and think Bernanke was actually targeting growth or inflation (or whatever else is convenient for him to mention).
For others, the Bernank is just monetising debt and trying to force a rebalancing of global growth, in which case the tax extension is unlikely to force a re-think of Qe2 (quite the opposite). Either way though, treasuries are a sell, although how much further they can go is unclear. I had thought that 3.25% would be the upper limit in this new range although we’re pretty much there already. And then of course there is the global data which continues to surprise on the upside. It’s pretty obvious that material 2H slowing didn’t eventuate and Q4 growth is looking rock solid; it not inconceivable that 10yrs could be closer to 4% over coming weeks.
Check out global industrial production, it is recovering at a rapid clip and German industrial production, out last night, again surprised on the upside. At 2.9% the October production figure was almost 3 times the market expectation. German exports dipped in the same month, yep sure, but this comes after a very strong September figure. It’s all good. Even the Brits are having a good run with their manufacturing output and according to the Confederation of British Industry, this may get better still with the new orders index rising to -3 (highest in over 2yrs) from -15 and a median expectation of -13. With all that to consider I think there is only one way for bonds to go (medium term).
Equities on the other hand, had a reasonably lacklustre session, the major indices in Europe between -0.4% and +0.4% with not much activity in the US either. With about 30mins to go the S&P500 is up only 0.2% (1226), the Dow is about 5pts lower (11354) while the Nasdaq is up 0.3% (2605). Financials look to be having a great session so far, up 1.4% and leading the overall index higher. Otherwise, technology and consumer stocks were the other main outperformers with basic materials industrials, utilities and energy stocks the main deadweight’s. The SPI for its part is 0.3% higher at 4714.
Commodities were mixed overnight with copper up another 1.4% although crude was down 0.3% ($88.43) and gold fell about $19 to $1383. Otherwise AUD is little changed at 0.9791, EUR is 24pips higher at 1.3257 while JPY also pushed a little higher and sits at 84.05. Sterling in contrast had a solid session rising 86pips to 1.5798 on the back of that manufacturing orders data.
That’s about it for price action, there were a couple of other news worthy item including the RBNZ which kept rates unchanged at 3% as expected. If anything though, the Bank has become more dovish and its pretty clear they aren’t going to do anything for a while. I’ll write more about this at a later date, but suffice to say I don’t think things are as bad as the Bank thinks, but certainly there won’t be any Bank action for a while yet. Finally, US mortgage applications fell 0.9% in the week to December 3 although applications for new purchases rose 1.8%.
Looking to the day ahead, there is some reasonably decent data today, including the final estimate of Japanese GDP, NZ credit card spending data and of course the Australian labour force print (1130). The median market expectation is that employment will rise 20k with the unemployment rate expected to slip to 5.2% from 5.4%. I’m not too far off that with 15k and 5.3%. As to the risks, I think they are fairly symmetric. History tells us its all to the upside, although jobs growth has been exceptionally and consistently strong, so it would be reasonable to expect a moderation at some point. Tonight, watch out for German CPI (final estimate), the BoE’s decision (some people are seriously talking about more money being printed) and US jobless claims.
Finance Outlook
Well it was bound to happen. The US has suffered a ratings downgrade to A+ from AA. Hey whoa! whoa big fella, easy, easy. Not from Moody’s or S&P or even Fitch. But from Dagong Global Credit Rating Co. – one of China’s main ratings agencies and under the circumstances, one of the more credible ones. You may, as some have said, think that the move was politically motivated – but is that really a reasonable accusation? I mean the US IS monetising debt, they are printing money and eroding the value of the dollar. As Dagong rightly points out – this isn’t good for creditors. It’s ridiculous to argue Dagong were politically motivated when you think about it. I think a stronger case can be made that the ‘mainstream’ (US based) credit ratings agencies are politically motivated in not downgrading the US. Where were those guys before the GFC huh? Where?
Ok so markets didn’t really move on the announcement but you simply cannot fault their logic with a straight face. In any case, you would probably be in a minority if you tried. Gold is hovering around records, breakeven inflation rates have spiked higher and at the moment, US treasury yields are on the rise. The market is telling you exactly what they think Qe2 will do and if a Reuters survey of 200 economists is any guide, it ain’t lift growth or create jobs. The survey found that US growth forecasts have been left unchanged post the FOMC decision – ie Qe2 will not be effective in lifting growth or jobs. That said some did suggest it was an insurance policy, though against what is not clear. As we know, domestic demand growth is above trend and there are no signs of deflation. It begs the question; where is the insurance policy against surging asset prices, currency tensions and generalised global instability. No, the ‘insurance’ argument doesn’t make any sense.
Anyways, US Treasury yields were higher last night and had been rising steadily throughout the session when a mixed $24bn 10yr auction saw bonds sell off further. The notes were awarded at 2.636% compared to 2.475% last month and the bid to cover was down sharply as well, to 2.8 from 2.99. Indirect bidders took a record 56% of the auction nevertheless. With 40mins to go the yield on the 2yr is up 5bp to 0.44%, the 5yr yield is 14bp higher at 1.25% and the 10yr is up 12bp to 2.66%. So over the last week, the 10yr yield is up 20bp, the 5yr is up 25bp and the 2yr is up 10bp. Aussie futures for their part bounced around on an 11-13 tick range with 3s down 5ticks (94.85) and 10s down 8 ticks (94.61).
Outside of that, last night’s session wasn’t that exciting – especially in terms of news or dataflow, not that things will likely improve tonight or tomorrow night. We’re in a bit of a dead zone at the mo’. The major US data last night was wholesale inventories and they rose 1.5% in September – another strong gain which suggests inventories may add even more to Q3 GDP. Sales weren’t too bad either, rising by 0.4%.
With no real heavy hitting news, US stocks were weaker and with 40mins to go, the S&P500 is down 0.7% (1216), the Dow is off 52pts to 11353, while the Nasdaq is down 0.5% (2566). Financials, basic materials and industrials are the main underperformers, while energy stocks are just in the black. For Oz, the SPI is 0.2% higher at 4760, seemingly following European stocks higher (Dax +0.6%, FTSE +0.4%).
On the FX front we saw some big moves on Sterling – down a big figure to 1.6032 – although moves elsewhere were much more modest. On the back of generalised USD buying, AUD was 30pips lower at 1.0076, Euro about the same at 1.3827, while Yen was up to 81.6 from 80.98.
Finally in the commodity space we saw gold down $7 to $1402, crude fell 0.5% to $86.63 and copper rose 1.6%.
There were few other bits and pieces. UK industrial production rose 0.4% in September after a 0.4% rise in the month prior, to be 3.8% higher annually. German CPI was confirmed at 1.3%y/y in October but that’s about it.
So our day kicks off with the NZ stability report followed by RBNZ Gov Bollard’s appearance at a Select Committee on Financial stability at 10am (Oz time). Aussie consumer confidence is then out at 1030 and, while no one really forecasts it, don’t be surprised to see confidence dip. We saw a rate hike in November after all. Its always difficult to gauge underling confidence around rate hikes and as we saw yesterday, business didn’t take speculation over an October rate hike too well (not to mention the higher AUD). Point is, we can’t say with any confidence, that, umm, confidence is actually waning. Business and consumer confidence is very volatile at the moment. Home loans then follow at 1130 with Chinese trade data at some stage.
There is a bit of 2nd tier US data tonight, including mortgage applications, jobless claims and the monthly budget, but other than that the only thing of interest will probably be the BoE’s inflation report.
Australian Tax Office News
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Issue 43/10
3 November 2010
New SMSF member verification system
The new self-managed super fund (SMSF) member verification system is now available and provides you with greater transparency for rollovers from Australian Prudential Regulation Authority (APRA)-regulated super funds into SMSFs.
APRA-regulated super funds and their administrators are able to complete online searches to confirm whether individuals are members of nominated SMSFs as part of the rollover process.
It is important to ensure that your client’s SMSF membership details are recorded correctly with us, so the new system can match clients and confirm membership.
To find out how or for more information, refer to New SMSF member verification system.
Lodgment of business activity statements
We will soon be contacting a number of registered agents about clients that may have outstanding business activity statement/s (BAS). We plan to contact both tax agents and BAS agents where our records indicate their clients have at least one BAS outstanding and request lodgment.
When we make contact, we may need to discuss multiple clients listed against your registered agent number.
To assist us to avoid unnecessary contact, we recommend that you ensure that your client lists are updated.
Leading for all Australians
Speech by Michael D’Ascenzo, Commissioner of Taxation and Chair of the PSMP Board at the Public Sector Management Program (PSMP) ACT Graduation, Canberra on 28 October 2010.
It’s only natural
Speech by the Commissioner of Taxation, Michael D’Ascenzo AO to the New Zealand Institute of Chartered Accountants Tax Conference, Auckland on 30 October 2010.
Message from the Commissioner of Taxation
Broadcast sent on 29 October 2010 thanking tax agents for their assistance during tax time.
Commissioner of Taxation Annual Report 2009-10
This annual report details the performance of the (ATO over the 2009-10 period (NAT 0995-10.2010).
Keydates for registered agents – November
November key dates for registered agents.
Foreign exchange rates
List of daily, monthly and annual foreign exchange rates.
Legal Database updates
The latest updates to the Legal Database.
About the cash economy
The cash economy reduces the amount of money available to fund community services such as health, education and other government programs. We use a range of increasingly sophisticated strategies to identify businesses that may be participating in the cash economy.
Evading tax and super laws by using unrelated trusts
The arrangement outlined in Taxpayer Alert 2010/5 is where a self-managed super fund (SMSF) invests funds in an unrelated trust. The trust then on lends the funds to an SMSF member or relative of the member.
Special disability trusts
Instructions for trusts and beneficiaries on how to lodge their 2010 income tax returns.
International dealings schedule – financial services 2011 (draft)
Draft International dealings schedule – financial services (NAT 73345-10.2010), to be completed by large financial service providers (excluding super funds).
Rates could be worse: ABA – andre di cioccio
Had the major banks just followed RBA moves, the official cash rate would be much higher, according to the head of the Australian Bankers Association.
Steven Munchenberg, chief of the ABA, told The Australian that at the moment, the spread between mortgage rates and the official cash rate is about 100 basis points above the historical average.
“That’s taken into account by the RBA,” he said. “We think the official cash rate could be higher if the banks had just followed the RBA moves.”
While the major banks have been criticised by government for lifting rates out of step with RBA movements, Munchenberg says banks needed to better explain the reasons for doing so.
He admitted that justifying independent rate moves is particularly difficult given reports of record profits.
According to Munchenberg, Australian banks need to be highly profitable to attract international investors.
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