Brokerage views on stocks/sectors to be impacted by Budget 2013

Finance Minister P Chidambaram stuck to fiscal prudence and managed to rein in the runaway fiscal deficit despite political compulsions. He hiked the outlay for infrastructure and other development projects, increased excise on SUVs and imposed a surcharge tax on the super rich.

"Finance Minister Chidambaram maintained his self-imposed 'red lines'. The former is consistent with a sizeable underlying budget squeeze which will have capped GDP growth in the second half of the current fiscal year, while we judge the latter to be fairly easily achieved via a modest additional tightening.

These headline numbers will come as a relief to the rating agencies and RBI, among others," said Credit Suisse in its budget report.

Following are the views of some brokerages on stocks and sectors that are likely to be impacted by the Union Budget:

Goldman Sachs:

We think the increase in the corporate tax surcharge for large companies will have a negative impact on the equity market. Our sector analysts think that the budget will be positive for agriculture (due to interest rate subsidies and higher credit availability for the sector), infrastructure (due to allowing more tax free bonds), financials (due to tax breaks on housing loans) and negative for consumer goods (increase in excise duties for cigarettes) and autos (increase in excise duties for SUVs).

CLSA:

According to the brokerage, the budget proposals have come across as a relief or ITC as feared ad-valorem duty did not come in for cigarettes. Power, media and property get negatively impacted by budget proposals.

ICICI Bank, Axis Bank, Tata Motors, ITC and Zee remain top ideas. CLSA has also added L&T to its top pick ideas after the sharp correction in the stock.
Increase in service taxes and 1 per cent TDS is seen as a negative for property companies.

JP Morgan:

Meltdown in equity markets post budget was due to elevated investor expectations. JP Morgan has maintained its cautious view on Indian equities for 1H CY2013.

According to the brokerage, the hike in surcharge on corporate profits is likely to impact earnings by 1-2 per cent. The rise in taxes for cigarettes and SUVs was in line with expectations.

It is positive on IT services and healthcare sectors, state-owned utilities and high quality financial stocks.

It is of the view that policy window for reforms will progressively get narrow and the FM's targets do look aggressive against the backdrop of macro data.

Bank of America Merrill Lynch:

The brokerage says that the Finance Minister sticking to fiscal deficit targets for FY13, 14 is good news. The market will now focus on the possible rate cut on March 19 policy meet. The tax hike for corporate India is likely to impact EPS by 1.5 per cent.

It is of the view that the market got spooked by worries on FII taxation, and expects a positive clarification from the Finance Minister on DTTA norms. Stock-wise announcement on house loan tax benefits are positive for HDFC and LIC HousingBSE 2.00 %. Its top picks include Maruti, ICIC Bank, Lupin, Tata MotorsBSE 1.50 % and DLF.

Hike in excise duty for SUVs is negative for M&M and rise in import duty of coal is negative for Adani Power and Tata PowerBSE 2.59 %.

Business still hoping for Nov rate cut

BUSINESS groups are still hopeful the central bank will cut the cash rate again in November, despite a bigger than expected jump in inflation. 

 

Retailers took heart from the fact the annual consumer price index at two per cent is at the lower end of the Reserve Bank of Australia's (RBA) target band, even though it jumped 1.4 per cent in the September quarter.

Australian National Retailers Association chief Margy Osmond says there's still room to drop the official interest rate further.

"Retailers will want to see the cash rate continue down before Christmas," she said in a statement.

"The RBA set Christmas off and racing with the cash rate drop at the start of the month. We hope to see the theme continue come Melbourne Cup Day."

The RBA's November board meeting often coincides with the "race that stop a nation".

The Australian Chamber of Commerce and Industry said while the inflation figures were higher than expectations, the broad economic climate, and the conditions on the ground for small and medium enterprises, demanded further consideration be given to a rate reduction.

The chamber's director of economics and industry policy, Greg Evans, said annual underlying inflation - which smooths out volatile price swings - at 2.5 per cent was also consistent with the RBA's forecast by the end of 2012.

"With the outlook for the global economy deteriorating and having prompted a sharp correction in bulk commodity prices, there remains a compelling case for another rate cut," Mr Evans said.

"Sluggish employment growth and the upward trend in the unemployment rate, also highlight the need for additional interest rate relief."

New government data also released on Wednesday showed that job advertisements on the internet tumbled 7.7 per cent in September to their lowest level in nearly seven years.

Source  http://www.theaustralian.com.au/news/breaking-news/business-still-hoping-for-nov-rate-cut/story-fn3dxiwe-1226502567793

RBA concerned dollar may be too high

The Reserve Bank of Australia has admitted the dollar is squeezing the economy harder than expected but that it has limited room to cut interest rates because of the mining investment boom and carbon tax.

In a statement on monetary policy published on Friday, officials at the central bank upgraded their outlook for economic growth and inflation and said the resources investment boom might peak earlier than thought, in 2013-14.

For the first time, the Reserve Bank suggested the dollar might be too high, while pointing to the risks of intervening in the markets to send the dollar lower.

It said the Swiss National Bank, which is defending a currency ceiling, had been forced to sell rising numbers of freshly printed francs, piling up a €130 billion hoard of reserves in three months that were now being swapped for other currencies, including the dollar.

The Reserve Bank acknowledged the dollar was high despite the worsening global backdrop and lower terms of trade – the ratio of import prices to export prices.

“It is possible that the persistently high level of the exchange rate may be more contractionary for the economy than historical relationships suggest,” it said in its quarterly Statement on Monetary Policy.

Over the past two weeks The Australian Financial Review has reported calls by former board members Warwick McKibbin and Adrian Pagan for the bank to drive down the dollar by printing money to sell to foreign central banks.

Central banks in Germany, Kazakhstan, Russia, the Czech Republic, Switzerland, Qatar, Kuwait and Abu Dhabi – as well as technology companies Google, Microsoft and Apple – have purchased almost 77 per cent of Australia’s AAA-rated government bonds.

The dollar traded just above $US1.05 late on Friday after hitting $1.06 during the week, its highest in 4½ months.

Professor McKibbin told the Weekend Financial Review on Friday: “They’re saying that in fact there could be a case where there is actually an overvaluation [in the dollar] and at some point something is probably going to have to be done about it.”

JPMorgan senior economist Stephen Walters said while he doubted the RBA was planning to intervene, its commentary showed the dollar was being closely monitored.

“This is part of the process of maybe trying to get it down. I’m sure there will be a lot of talk over the weekend that at least it’s on their radar – and that can be effective jawboning,” he said.

“There might be a suspicion they’ll do something about it.”

Such a move would potentially drag Australia into the global “currency wars” among countries trying to lower their exchange rates.

The central bank left the official cash rate unchanged on Tuesday for a second month, noting the dollar had remained high despite falls in commodity prices and concern about weaker global growth.

The bank’s economists upgraded their outlook for annual gross domestic product growth in the December quarter to 3.5 per cent from their May prediction of 3 per cent after a surge in household spending that was helped by government handouts.

Treasurer Wayne Swan said the RBA’s assessment highlighted the nation’s “rock-solid economic fundamentals”.

“The RBA has today confirmed our economy is currently travelling along better than expected, with growth upgrades that now have our economy growing at above-trend pace this year.”

Annual underlying inflation is forecast to strengthen to 2.5 per cent in the December quarter, 0.25 of a percentage point higher than was anticipated in May.

The carbon tax, introduced last month, is expected to push underlying measures of inflation to the top half of the bank’s 2 per cent to 3 per cent target range by the middle of next year.

The Reserve Bank warned there was “significant uncertainty” about when second-round effects from the tax would show up in prices.

UBS economist Scott Haslem said the forecasts implied inflation was nearing its weakest pace in the current economic cycle.

“The RBA rarely, if ever, eases policy again when it thinks it’s passed the underlying inflation trough,” Mr Haslem said. 

He expects the cash rate to remain on hold at 3.5 per cent, “possibly for a very long time”.

Reserve Bank officials renewed their warnings about the threat posed by Europe as well as the potential for a faster than anticipated slowdown in China.

Australia’s terms of trade, which have fallen about 10 per cent since their peak in last year’s September quarter, were expected to continue declining gradually.

“But they could fall more quickly if global demand is weaker than expected,” the bank said.

“This would lead to lower growth in domestic incomes, including government revenue, weakening domestic demand.

“Some resources companies have adopted a more cautious approach to investment opportunities currently under consideration (but to which they are not yet committed) given the more uncertain global outlook,” it said.

Resource investment – adjusted for its use of imports – was expected to subtract “modestly” from GDP growth over 2014 after accounting for more than half of the GDP growth in 2011, the bank said.

Officials at the bank said recent low inflation readings were likely to have reflected a combination of margin pressure and better productivity growth.

The central bank said it was too early to be sure the recent gains in productivity growth would endure.

“These developments have been driven by heightened competitive pressure in some parts of the economy but, given the economy overall is still operating close to capacity, such restraints could lessen if there is a material pick-up in sentiment and demand,” it said.

Source  http://afr.com/p/national/economy/rba_concerned_dollar_may_be_too_auATy1SOaEBG15aetqvMVM

Shareholders reject Pacific Brands' pay

SHAREHOLDERS have rejected the remuneration package for the board of clothing and linen producer Pacific Brands.

Results from the company's annual general meeting in Melbourne today show the motion to pass the Pacific Brands remuneration report for the 2010/11 financial was defeated by a shareholder vote.

The poll saw 316.7 million votes cast against the adoption of the report, or 52.9 per cent, and 279.6 million were in favour, or 46.7 per cent.

The remainder of votes abstained.

According to the remuneration report, chief executive Sue Morphet and the company's other senior executives received short-term cash incentives despite performance targets not being met.

Ms Morphet was paid a $910,000 cash bonus, while the chief financial officer received $505,845 and other executives received between $127,000 and $450,00.

Short-term incentives were paid despite the company missing its target of earnings before interest, tax, amortisation and significant items (EBITA) exceeding 90 per cent of its budgeted group EBITA.

Pacific Brands posted a $132 million loss in 2010/11, and an EBITA loss of $58.8 million.

Ms Morphet's total remuneration in 2010/11 was $2.3 million.

Before the shareholder vote on the remuneration report at today's meeting, chairman James MacKenzie responded to pre-submitted concerns about the short term incentives from some shareholders.

The 90 per cent EBITA target, or gate, as Mr MacKenzie described it, was only narrowly missed in the 2010/11 financial year, he said.

The board decided to "open the gate" because of the impact of Kmart's decision to stop stocking Pacific Brands products, plus increased costs, such as cotton prices, he said.

Another factor was the progress of the company's significant restructure announced in 2009, which involved the closure of some Australian manufacturing plants and selling of some brands, Mr MacKenzie said.

"What we should have also emphasised was that the delivery of the transformation program - one year ahead of schedule and despite many thinking it couldn't be done - was a critical consideration in the board's decision to open the gate for the payment of STIs (short term incentives)," Mr MacKenzie said.

"The scale and scope of the transformation should not be underestimated."

The incentives paid were about 60 per cent of the maximum available to the executives, he said.

"It is clear that some stakeholders see the gate as something that, once set, should not be subject to any discretion," Mr MacKenzie said.

"And we hear that concern."

Source http://www.news.com.au/business/shareholders-reject-pacific-brands-pay/story-e6frfm1i-1226176222294

Foster's does not rule out takeover talks with

Foster's new Chief Executive John Pollaers, facing a barrage of questions from analysts and shareholders at a business lunch, defended the board's decision to reject the deal and focus on restoring Foster's share in a declining Australian beer market.

"The value put on the table was so far away from reality that it wasn't worth engaging (with SABMiller)," Pollaers said.

But he added: "We are not saying that we would never engage. Our interest is the shareholders' interest."

Foster's, one of the last big prizes in a consolidating global beer market, has high margins and a 50 percent market share in Australia, where it brews the Victoria Bitter, Crown and Pure Blonde brands.

But it has been losing share as consumers switch from traditional brands to premium and craft beers, and on Friday Foster's launched a new logo, rebranding its main beer business with a minor change in name.

Pollaers said the brewer had the support of shareholders for its strategy of focusing on growing the business and not being distracted by the offer on the table.

But not all agreed.

"I would have thought if anyone approaches, you talk to them because you never know what can come of it," said Craig Young, portfolio manager at Tyndall Investment Management, which owns Foster's shares.

Reporting its first-quarter earnings last week, SABMiller, the maker of Miller Lite, Grolsch and Peroni, kept the market guessing if it will sweeten its bid.

Foster's rejected SABMiller's A$9.5 billion ($10.4 billion) offer last month and refused to enter discussions.

With no other bidders emerging since then, analysts have said SABMiller may be reluctant to bid against itself and could use Foster's upcoming annual results on August 23 to put pressure on the Foster's board to negotiate.

SABMiller said in June it had shown no intention of going hostile, and it expected to engage the Foster's board in further talks.

It offered A$4.90 per share for Foster's, and after trading to a 10-month high of A$5.23, the shares have cooled in the absence of a rival bid to a slim premium over the offer price.

The shares dipped to A$4.98 on Thursday, recovering a bit on Friday to close at A$5.05, up 1.4 percent in a broader market .AXJO down 0.9 percent.

STABILISED MARKET SHARE

Australia's beer market has declined in recent years, as consumers turn to wine and premixed drinks. But Foster's also has a large stable of traditional beers that are losing share to craft brands, and to main rival Kirin's (2503.T) Lion Nathan.

Pollaers said on Friday Foster's has stabilized its market share for the first time in 10 years and expects the beer sector to return to modest growth.

"We believe that once Australia moves through this period of economic uncertainty, the beer category will return to the long-term trend of modest growth," he said.

The past 12 months have been the most volatile the brewer has seen, mostly due to extreme weather conditions, including an unusually cool and wet southern hemisphere summer.

Pollaers took over as chief executive in May, after being the managing director of the beer business where he was the sixth chief in seven years.

"The company line is, Pollaers has to put his head down and he's got to regenerate the beer business and he has to put at the back of his mind the fact that SAB has approached them," said an analyst who declined to be named because he was not authorized to speak to the media.

Still, Pollaers answered questions for nearly half an hour, longer than his formal speech at the business lunch, and nearly all of them on the company's rejection of SABMiller.

Foster's has forecast its beer volumes in the latest six months to June would decline 3-4 percent, a slight improvement from the December half, but severe floods across eastern Australia earlier this year could have further weakened sales.

The brewer rebranded its beer business on Friday with a minor tweak to the brand name.

The beer business will be called Carlton United Brewers, a slight change from the original Carlton & United Breweries, in what Pollaers said was a renewed focus on beer following the split from the wine unit, Treasury Wine Estates (TWE.AX).

Source http://www.reuters.com/article/2011/07/29/us-fosters-idUSTRE76S0QN20110729

Australia indicates rate rise due to curb inflation

Australia's central bank suggested it could raise interest rates again soon as it lifted inflation forecasts for the next two years.

In a quarterly monetary policy statement, the Reserve Bank of Australia on Friday said underlying inflation, which excludes volatile price items, was expected to be around three percent in 2012 -- the top of its target band.

In February, the RBA forecast underlying inflation would remain below 3.0 percent until the end of 2012.

In the latest estimate the bank said it expects prices to rise to 3.25 percent by the end of 2013 as the economy heads toward full employment, wages rise and mining investment surges.

"Further tightening of monetary policy is likely to be required at some point for inflation to remain consistent with the two to three percent medium-term target," the bank said.

It added that the board would "set policy to ensure a continuation of the low and stable inflation that has made an important contribution to Australia?s strong economic performance over the past two decades".

The bank left interest rates on hold at 4.75 percent earlier this week, having last lifted them in November 2010.

"Looking ahead, given the outlooks for both the world and domestic economies, year-end underlying inflation is expected to pick up over the course of 2011," the RBA said.

It said one of the biggest risks was that as mining investment boomed, companies would compete aggressively for labour, leading to more pressure on wages and other costs than the bank initially envisaged.

Australia, the first major western economy to raise interest rates after the global slump, has hiked its cash rate by 175 basis points since October 2009 as it rides the Asia-driven mining boom that helped it dodge recession.

Economist and chief executive of property Group Rismark, Chris Joye, said the RBA could lift rates three times this year to tackle inflation.

"If unemployment holds steady at 4.9 percent and wages growth remains healthy" the RBA is very likely to hike in June, he said.

Source http://www.google.com/hostednews/afp/article/ALeqM5iLiZnJJVnLFu5dy7ilnkIzmd5MXw?docId=CNG.d3307569a9f63532b17cec86e01675f0.831

Shell Plans to Turn Refinery Into Terminal

The Australian arm of Royal Dutch Shell PLC said Tuesday it plans to stop refining at a plant near Sydney and convert the operation into a terminal for fuel imported from around the region.

The relatively small Clyde Refinery can't compete with the "mega-refineries" going up in Asia and elsewhere, which have led to overcapacity in the industry, said Andrew Smith, vice president of Shell Australia's downstream portfolio. He denied the decision had been prompted by government policy or a proposed tax on carbon emissions.

The company will immediately begin consultations with employees, Mr. Smith said; the boards of two local business units then decide whether to convert the terminal, with a decision expected within weeks. He said that if the plans are accepted, the transition would be done by mid-2013, when the refinery had been scheduled for maintenance.

"Clyde is no longer regionally competitive," Mr. Smith said during a conference call with reporters. "The proposal would secure its long-term future."

Shell acquired the 75,000 barrel-a-day refinery in 1928. It currently supplies about 40% of Sydney's petroleum and nearly half of the requirements of New South Wales state, refining crude oil received from the Gore Bay terminal. Shell's other Australian refinery, near Melbourne, can process up to 120,000 barrels of oil a day.

The Clyde operations employ about 310 people, while a typical terminal employs between 30 and 50 people, Mr. Smith said. If the conversion goes ahead, he said, Shell would look to redeploy workers where possible.

Martin Ferguson, minister for resources and energy, said in a statement that Shell's proposal wasn't related to the government's plans to price carbon. "The decision by Shell to examine this proposal has been taken for a range of commercial reasons," he said.

The government plans to start pricing carbon with the aim of cutting emissions and pollution and boosting investment in renewable energy and low-carbon industries from July 2012, subject to the federal parliament's passing the legislation. Details of the plan haven't been finalized.

Source http://online.wsj.com/article/SB10001424052748704529204576257832586113442.html?mod=googlenews_wsj

Qantas slashes jobs, flights amid rising fuel costs

Australia's national carrier, says it is decreasing staffs and flights in response to high oil and jet fuel prices and the impact of significant natural disasters in Japan, New Zealand and Australia.

Qantas Chief Executive Officer, Mr Alan Joyce, said the measures included reductions in domestic and international capacity, retirement of aircraft, reduction of management positions and ongoing fuel surcharges.

"The significant and sustained increases in the price of fuel is the most serious challenge Qantas has faced since the Global Financial Crisis," Mr Joyce said.

"The price of Singapore Jet Fuel has risen from around US$88 per barrel in September 2010, to more than US$131 per barrel today. Qantas fuel costs for the second half of FY11 will be $2.0 billion.

"There has never been a time when the world faced so many natural disasters, all of which have come at a significant financial cost to the Qantas Group.



"We need to act decisively to respond to rising fuel costs and natural disasters, just like we did during the Global Financial Crisis, to ensure the ongoing sustainability of our business."

The Qantas Group's result for second half of FY11 will be impacted by a number of significant events, including:
- A380 Rolls-Royce engine incident and fleet grounding - $25 million in second half of FY11 in addition to $55 million in the first half of FY11; and
- A number of significant natural disasters which are currently estimated to total approximately $140 million.
- Queensland floods - $60 million
- Cyclones (Yasi and Carlos) - $20 million
- Christchurch earthquake - $15 million
- Japan earthquake and tsunami - $45 million

Mr Joyce said it was too early to estimate the likely impact of these significant events on the Qantas Group's result for FY12.

Qantas management has reviewed operations and are implementing a number of measures which will reduce costs and increase revenue in order to protect the interests of employees and shareholders including:

- Reduction of Qantas Group domestic capacity growth in 2H11 from 14 per cent to 8 per cent and the reduction of Qantas Group international capacity growth in 2H11 from 10 per cent to 7 per cent;
- Suspension of up to four return weekly Jetstar services from Australia to Japan (from 1 April to end of August); the suspension of Qantas services between Perth and Narita (from 8 May); and downsizing of Qantas aircraft between Sydney and Narita from a Boeing 747 to an Airbus 330;
- Reduction of three daily Jetstar domestic New Zealand services to Christchurch and one Melbourne to Christchurch daily service (all from April);
- Fleet changes with the early retirement of two B767 aircraft; and
- Review of manpower costs which will include initiatives to reduce management headcount and annual and long service leave balances.

"We want to limit redundancies wherever possible and will be using a range of initiatives to manage the reduction in capacity including annual and long service leave. At this stage only management positions will be made redundant," Mr Joyce said.
In addition, Qantas has already increased domestic airfares and international fuel surcharges in February and March this year in response to rising fuelprices . Jetstar also increased fares in selected domestic and international markets in February and increased ancillary revenue, including baggage charges.

In spite of the increase in fuel surcharges and fare increases, Qantas will not recover the full impact of current and forecast fuelprices.

Mr Joyce said the diversity of the Qantas Group would assist the business to manage this volatility in the market, by providing greater flexibility than many of the Group's competitors.

"Our portfolio of businesses - Qantas Airlines, Jetstar, QantasLink, Qantas Frequent Flyer and Qantas Freight- allows us to succeed no matter what challenges we face - from economic cycles to fuel price rises and natural disasters," he said.

Source http://au.ibtimes.com/articles/128443/20110330/qantas-slashes-jobs-flights-amid-rising-fuel-costs.htm

Australia’s Home-Loan Approvals, Consumer Confidence Decline

Australian home-loan approvals fell in January by the most in a year as floods inundated the nation’s east coast and consumer confidence slid on expectations a government-proposed carbon tax will lower household income.

The number of loans granted to build or buy houses and apartments dropped 4.5 percent from December, the first fall in seven months, with Queensland state approvals plunging 16.4 percent, the statistics bureau said in Sydney. The sentiment index fell 2.4 percent to 104.1 in March from a month ago, a Westpac Banking Corp. and Melbourne Institute survey showed.

Today’s housing “result was distorted by disruptions from the January floods, which devastated Queensland and impacted parts of New South Wales and Victoria,” Westpac economists led by Bill Evans said in a report after the release.

Reserve Bank of Australia Governor Glenn Stevens held the benchmark interest rate at 4.75 percent for a third meeting this month, citing weaker consumer spending and higher savings. The governor has said the bank will look through the economic impact of torrential rains in Queensland that affected about 30,000 properties, shut coal mines, cut rail lines and damaged crops.

The Australian dollar fell after the data, trading at $1.0081 at 12:51 p.m. in Sydney from $1.0099 in New York yesterday, and was set for its fifth daily decline.

The total value of loans declined 5.3 percent to A$20.3 billion ($20.5 billion) in January, today’s report showed.

Value of Lending

The value of lending to owner-occupiers dropped 4.6 percent, the report showed. The value of loans to investors who plan to rent or resell homes declined 6.8 percent.

First-time home buyers accounted for 15.2 percent of dwellings that were financed in January, down from 15.8 percent in December and lower than 21 percent a year earlier, the report showed today.

Australian consumer confidence fell to a nine-month low in March, the survey of 1,200 consumers taken Feb. 28-March 6 and released in Sydney today showed, with the largest drop of 6.8 percent coming in a gauge reflecting family finances over the next 12 months.

“We expect that the key negative for households, which is highlighted by the prominence of budget/taxation in their assessments, relates to the government’s commitment to introducing a price on carbon by July next year,” Evans said in a statement.

Prime Minister Julia Gillard said Feb. 24 the government intends to set a price on carbon emissions from July next year before moving to an emissions trading plan. Her support fell to a record low in a Newspoll published in the Australian newspaper yesterday as voters rejected the plans.

Source http://www.businessweek.com/news/2011-03-08/australia-s-home-loan-approvals-consumer-confidence-decline.html

Coles slashes price of milk, sells more

WESFARMERS Ltd says milk sales at its Coles supermarkets have risen by about 15 to 20 per cent since it began a price war on the consumer staple to achieve customer loyalty.

Coles last month slashed the price of its home brand milk to $2 per two-litre bottle.

It was immediately matched by rival Woolworths, drawing the ire of Australian dairy farmers who are already battling with the impact of floods following long years of drought.

Wesfarmers chief executive Richard Goyder today said the move was designed to bolster "price trust" in Coles shoppers and "was never about doing anything of any harm to primary producers".

"This hasn't been in place for long, but the reaction we're getting from our customers is incredibly positive and our milk sales are up very strongly since this was put in place," Mr Goyder told media after the company delivered a 33 per cent increase in first half profit.

"There has been some shift to the Coles brand milk, as you would expect, but overall milk sales are strongly up.

"Our milk sales were up by 15 to 20 per cent since we put this in place.

"The aim is get price trust and I can tell you, customers love it."

Mr Goyder said Coles' price cuts across various products had attracted more shoppers, who were buying more items.

"If you put that (milk price cut) in the context of 5,000 items that we've reduced, then what we're seeing is a lot more customers walking into our stores and we are now starting to see them increase their basket size with us," he said.

"That's all about giving our customers, many of whom are working families, a better deal at the supermarket.

"Milk is all about providing a core staple to our customers at great value.

"We would hope to increase the market for milk as a consequence as this."

Mr Goyder said there had been a move by consumers towards the Coles brand of milk, which accounted for about four per cent of all milk produced in Australia.

"There's been some shift, but in the scheme of things it hasn't been massive."

Mr Goyder said food inflation in Australia had reduced from about four per cent to two per cent in recent years.

"That's saving Australians significant amounts of money, as in a billion dollars a year or thereabouts."

Source http://www.news.com.au/business/breaking-news/coles-slashes-price-of-milk-sells-more/story-e6frfkur-1226007750622

Rio Tinto posts $14.2b profit, announces buyback

Global miner Rio Tinto has more than tripled last year's earnings, posting an annual profit of $14.2 billion, and announced a share buyback plan worth almost $5 billion.

The company benefited from soaring commodity prices such as copper, which jumped 47 per cent in the period, and iron ore which is negotiated on a quarterly basis.

These increases were driven by rising demand for its exports from emerging markets such as China.

Chief executive Tom Albanese says while he expects Rio Tinto to continue to benefit from these conditions, he did so with a degree of caution.

"GDP growth in emerging markets and supply constraints mean the general pricing outlook for commodities remains positive, albeit with elevated risk," he said.

"In particular the timing and speed at which the post-global financial crisis stimulus packages were removed have the potential to generate volatility and substantial swings in commodity prices."

Shareholders are set to benefit from the plan to return $5 billion through a share buyback to be completed by the end of 2012, as well as a 20 per cent increase in the final dividend.

The on-market transaction to take place on the London Stock Exchange (LSE).

Rio Tinto says that shareholders will benefit from the fact that there will be less shares in circulation.

Chairman Jan du Plessis says that commitment will still allow Rio Tinto to take advantage of any future growth opportunities that may arise.

The profit figure has come in broadly in line with market expectations, but analysts say there were a few surprises.

"The dividend increase is ahead of expectations, and while people were thinking that a buyback is possible, they thought it wouldn't be announced for another six months," UBS resources analyst Glynn Lawcock said.

"So Rio has come and surprised people on the upside with the dividend and the buyback. The buyback is clearly positive and it's what shareholders were asking for."

On its growth outlook, Rio Tinto says it will continue to make investments to drive organic growth and acquire small to medium assets.

"The commitment to small and mid-size acquisitions is good," Pengana Capital portfolio manager Ric Ronge said.

"That will throw the heat on BHP because BHP's strategy has been about buying large market-leading assets so they run into anti-trust issues. Small and mid-size acquisitions will not run into the same issues."

Rio Tinto is currently vying for smaller coal miner Riversdale.

It says it has extended its $3.9 billion takeover offer for the miner to March 4 after signs that Riversdale's second-biggest shareholder was holding up a deal.

Source http://www.abc.net.au/news/stories/2011/02/10/3135652.htm

Yahoo!7 buys online deal site Spreets

Online media company Yahoo!7 has bought online group buying site Spreets.

Yahoo!7 says it acquired both the Australian and New Zealand operations of Spreets (spreets.com.au and spreets.co.nz), which deliver cost-effective marketing to small businesses through online coupon deals.

The financial terms of the deal were not disclosed.

Since Spreets was launched in February 2010, it has gained 500,000 members and had more than 274,000 vouchers purchased.

Yahoo!7 chief executive Rohan Lund said Spreets was a leader in what's becoming a highly competitive and fast-growing market for group buying.

Other sites include Jump On It, Scoopon and Cudo, which is owned by PBL Media and marketed through the Nine Network.

Spreets CEO Dean McEvoy said websites such as Spreets were meeting a growing demand from customers for online coupon deals.

"Australians and Kiwis love an amazing deal and Spreets has seen significant growth delivering over $40 million in savings to consumers over the past year," Mr McEvoy said.

Yahoo!7 is a joint partnership between the Australian media company Seven Network Ltd and US-based technology company Yahoo! Inc.

Source http://www.smh.com.au/small-business/yahoo7-buys-online-deal-site-spreets-20110120-19x90.html

Dollar's rise, rate hikes take toll on manufacturing sector

THE soaring value of the dollar and the Reserve Bank's rate rises are forcing manufacturers to slash production and employment.

Greece is the only country in either the industrialised or the emerging world where manufacturing is performing worse, according to the December performance of manufacturing index, which is a survey conducted globally.

JPMorgan senior economist Helen Kevans said that in the rest of the world, the manufacturing industry was gaining momentum with economic recovery.

"In contrast, the Australian manufacturing sector is still contracting, with the currency being the main issue," Ms Kevans said.

"The Australian dollar was an average of 5 per cent higher in the December quarter."

The survey, conducted locally by PricewaterhouseCoopers and the Australian Industry Group, shows most manufacturers have now been contracting for the past four months, with December's result the worst in a year and in line with scores recorded during the financial crisis.

The index measure dropped to 46.3 points, below the 50-point mark that separates expansion from contraction. Idle capacity in manufacturing has now risen to 27.7 per cent.

Ms Kevans said manufacturing was being squeezed by the mining boom, which was attracting the investment capital and the skilled labour.

The boom continues to gather strength with commodity prices climbing to a new peak, according to the Reserve Bank. Its commodity price index advanced 3.2 per cent in December because of price rises in iron ore, coal, and also wheat.

Commonwealth Bank chief currency strategist Richard Grace said the dollar could be expected to remain strong until economic recovery in the US forced interest rates there higher. He said that could take another three to six months.

"Australian interest rates are high and, more to the point, European and US interest rates are at extreme lows that are not sustainable," Mr Grace said.

The head of PwC's global manufacturing division, Graeme Billings, said conditions were difficult even in industries that were not subject to import competition, such as construction materials. "Building materials are a good barometer of confidence within the economy," Mr Billings said. "Through the second half of 2010, activity flattened."

He said the wind-down of the government's school-building program contributed to weaker conditions.

Australian Industry Group director Innes Willox said the Reserve Bank's rate rises last year had made the competitive position of Australian manufacturers more difficult.

"Concerns about where interest rates will go from here has raised questions about investment in manufacturing," he said.

Source http://www.theaustralian.com.au/business/markets/dollars-rise-rate-hikes-take-toll-on-manufacturing-sector/story-e6frg926-1225981976575

DP World sells $1.5bn Australian stake

DP World, the container terminal operator, is to sell a majority stake in its Australian subsidiary to Citi Infrastructure Investors, a private equity company, for A$1.5bn ($1.5bn).

Dubai-listed DP World announced on Wednesday that it was selling the stake to CII and an unnamed partner described as “a major investor”. The company will continue to operate the container terminals at Brisbane, Sydney, Melbourne, Adelaide and Fremantle under a management contract.

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The company said that it expected regulatory approval by the end of the first quarter next year.

DP World said the proceeds of the sale to CII would go towards reducing net debt as part of a strategy “to improve balance sheet flexibility”.

DP World is one of the healthier divisions of Dubai World, the indebted conglomerate, and was excluded from a round of debt restructuring earlier this year. In November last year the Dubai World shocked global markets when it asked for a moratorium on repaying its debts. It has subsequently secured a $25bn restructuring agreement with creditors.

DP World has the widest geographical spread of any of the world’s leading port groups, with operations in Latin America, Africa, the Middle East and Asia. The capacity of the five Australian ports is in excess of 3.5m 20ft-equivalent units a year, a common industry measure, which the company said constituted roughly half the total Australian container market.

The deal values DP World Australia at A$1.817m, the company said. DP World was advised by Deutsche Bank and Citgroup Global Markets while CII was advised by HSBC and UBS.

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Source http://www.ft.com/cms/s/0/97a6b220-0daa-11e0-8b53-00144feabdc0.html#axzz18pfuM6kn

Rosy export outlook but business glum

A rosy export outlook has failed to lift the spirits of businesses, while new government forecasts highlight the impact on farmers from this month's storms in Queensland and NSW.

The heavy rainfalls and flooding have wiped $1 billion off the value of wheat production for 2010/11, the federal government's commodity forecaster said on Tuesday.

Releasing its quarterly commodities report for the December quarter, the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) now predicts wheat production of $5.7 billion in 2010/11 rather than the $6.7 billion forecast in September.

"In addition to expected lower production and export volumes from Western Australia, these downward revisions reflect the impact on grain quality of untimely rain on the wheat crop in the eastern states," ABARES acting executive director Paul Morris said releasing the report.

However, the bureau still predicts record commodity exports overall of $211 billion, a 23 per cent increase compared to 2009/10, despite a $3.8 billion downgrade because crop damage and slower growth in gold, iron ore and coal exports.

The bureau still expects iron ore and coal will make a large contribution to exports in 2010/11, while mine production is forecast to increase significantly in response to higher world prices.

This still rosy export outlook came as a new survey showed only a modest improvement in business conditions in November, while confidence fell for a third straight month.

"The impending mining investment and export boom should prove a spectacular ride, but the reality is that the train is still yet to leave the platform," National Australian Bank chief economist Alan Oster said releasing the results of his bank's monthly business survey.

Its business conditions index rose two points in November, while its confidence index was down two points - both being below their long term trend.

Mr Oster said the survey shows no sign of a pick-up in economic growth half way through the December quarter, after the disappointing outcome for the September quarter.

He expects the Reserve Bank will be surprised by this weakness, and as such is not predicting a further rise in the cash rate from 4.75 per cent to 5.0 per cent until May next year.

Other data released on Tuesday showed that new home building slumped in the September quarter, even before the last round of interest rate increases in November.

Builders started work on under 40,000 homes in the quarter, a 13.2 per cent drop compared to the June quarter, and much weaker than the five per cent fall predicted by economists.

The decline was led by a 13.5 per cent drop in the more volatile other residential building component in the private sector - such as flats and townhouses - although even private house building fell by 4.3 per cent.

"The conclusion from the September report is that residential building is returning to the sluggish pre-2009 trend as the lagged effects from earlier record low cash rates and subsidy schemes in housing are unwound," JP Morgan economist Ben Jarman said.

Growth in building approvals have been in decline for much of 2010 after interest rates rose six times between October last year and May, and as the government ended its more generous first home buyers grant on January 1.

Source http://news.smh.com.au/breaking-news-national/rosy-export-outlook-but-business-glum-20101214-18wlh.html

Proposed ASX merger will serve the national interest

The need for additional scale and regional relevance makes ASX's participation in consolidation mandatory.

Change is rarely easy, or initially easily accepted. When we consider the events that led to the creation of the Australian Securities Exchange as we know it today, such as the amalgamation of six state exchanges, or the closure of trading floors, or demutualisation, or the merger with the Sydney Futures Exchange, we may forget how challenging to various stakeholders they seemed at the time.

ASX understands the public interest in the proposed combination with Singapore Exchange (SGX) to create the first major regional exchange group in the Asian time zone.

In the near future, ASX will release information that outlines how the proposal advances Australia's national interest and informs much of the criticism that emerged after the proposal was announced on October 25.

Let me emphatically dispel concerns about a potential reduction -- or even transfer to Singapore -- of governance and regulatory oversight of ASX's operations.

The proposal is for a merger of exchange groups, akin to that which has been sanctioned in numerous other jurisdictions, not a takeover of Australian law.

ASIC, not ASX, is Australia's financial markets regulator and the Reserve Bank oversees Australia's financial stability standards, enshrined in the Corporations Law.

ASX's capacity to set the content of its listing and operating rules is already subject to a regulatory approval process in which the Australian government has the final say.

The Australian operations of the merged group will remain under Australian law and regulated by Australian authorities.

This maintenance of existing local sovereignty occurred with New York Stock Exchange's combination with the Euronext exchange group in 2006 and with Nasdaq's combination with the OMX group of Nordic exchanges in 2008. There can be no change to ASX rules without the agreement of the Australian Securities and Investments Commission and the Australian government.

ASX views the proposed combination as a natural competitive and regulatory evolution of Australia's capital markets.

Despite the fact that ASX is already one of the most cost-efficient exchange groups in the world, the need for additional scale and regional relevance makes ASX's participation in exchange consolidation a mandatory -- not an elective -- matter for all its stakeholders, and not just its shareholders.

Financial capital is highly mobile and increasingly free of geographic boundaries.

Governments appear to welcome new types of trading participants with high-performance technology-based trading strategies, while multinational corporations are drawn to listing venues of regional and global scale and efficiency. These trends are driving market structure, irrespective of whether or when competition between market operators is introduced in Australia.

At the same time, the global balance of power has been shifting from developed economies to developing ones, especially those in the Asia-Pacific region.

The global crisis accelerated this trend. It is no coincidence that Australian government policy has oriented towards building support for the concept of an Asia-Pacific community, focused on regional economic and security.

The Johnson report concludes: "Greater integration of financial markets is an important aspect of the concept of an Asia-Pacific community, and can contribute to Australia's broader national economic and security objectives in the region."

The Johnson report also notes that the contribution to GDP of Australia's financial sector ranks comparably with its counterparts in other advanced economies, such as the US, Britain Japan and Canada, but it ranks much lower in financial services exports as a share of financial services value added. Additionally, the report quotes Rainmaker statistics showing that half of the 20 largest fund managers are overseas companies, but that only between 3.5 per cent and 11 per cent of the $1.2 trillion funds under management are from offshore.

This compares unfavourably with the situation in Britain (31 per cent of total FUM sourced from abroad), Hong Kong (64 per cent) and Singapore (80 per cent), which broadly defines the challenge facing Australia's financial services industry to evolve beyond its domestic origins.

The merger presents the opportunity for a larger volume of financial transactions involving offshore parties to flow through Australia -- a key characteristic of leading financial centres.

The increased size, liquidity pool and product diversification of a combined exchange group will enable better matching of the risk and reward preferences of investors and companies, reducing the cost of capital for ASX-listed entities. An outcome unequivocally in the national interest.

This is the context in which the ASX-SGX transaction should be judged. As a nation we are indebted to the strength of Asia's industrialising economies and their appetite for our resources (and government debt) -- factors that helped us avoid the worst effects of the global crisis.

Yet, despite talk of becoming more integrated with the pan-Asian economy, a transaction that seeks to achieve this causes parts of the community to raise the spectre of loss of national sovereignty, without understanding the protection afforded by the existing regulatory framework or the competitive forces that threaten to marginalise ASX if parochialism prevails.

Public policy consistency dictates that encouragement of new foreign-owned competitors for domestic exchange-related services, to use their global scale in Australia, also calls for allowing the incumbent exchange group to be similarly allowed to extend its presence through a regional or global combination beyond local shores. Such action, through the proposed ASX-SGX combination, strengthens the national interest and helps to develop Australia's financial services sector.

Source http://www.theaustralian.com.au/business/proposed-asx-merger-will-serve-the-national-interest/story-e6frg8zx-1225965415691

End in sight for unpaid NAB customers

The National Australia Bank says work on restoring customer accounts should be complete by tomorrow.

This afternoon, the bank said work would continue into the night to rectify accounts after a corrupt computer file last Wednesday night left people without wages and payments unprocessed.

NAB says while the glitch that caused payments and transactions to be delayed has now been fixed, additional work on around 19,000 accounts where duplicate or multiple transactions have occurred still needs to be completed and will be done so overnight.

Spokesman George Wright says outstanding transactions are being processed in chronological order.

"A person might have had a payment coming in on Wednesday and there might have been something going out on Thursday," he said.

"So you can't really say it's fixed for this number of customers, it's not that number. But we're up to Friday, so we're working through Friday."

In some cases there have been multiple debits and credits, but the bank says it is aware of the problem and it will be fixed as soon as possible.

Mr Wright says customers who have been charged fees or interest because of the glitch will be reimbursed.

"For NAB customers who may have incurred a fee or interest charge from the bank as a result of these delays, we're putting in a process to identify that and rectify it and refund people," he said.

"And anyone who might have incurred a charge from another institution as a result of these delays, we would ask them to contact us. We don't want people to be out of pocket and we'll work with them to fix that up."

Consumer group Choice says the payments system used by the major banks needs to be scrutinised in the wake of the NAB incident.

Choice spokesman Christopher Zinn says the delays have dragged on for far too long and highlight the vulnerability of the system.

"If this really was just a corrupted file which has caused this much damage, this much distress, we think it's a good time to take a long, hard look at the payments system and see if it really is robust enough and efficient enough for what is something that is essential to our daily lives," he said.

Mr Zinn says the current system is preventing new players from entering the market.

"We've been in talks with those who would seek to enter the banking sector in Australia, with new, competitive and innovative products who feel the structure of the payments system, some of its archaic nature, actually makes it impossible for them.

"We think that is something which the regulators, such as the Reserve Bank and the Federal Government, need to look at."

Source http://www.abc.net.au/news/stories/2010/11/29/3079719.htm?section=justin

ACC drops Paul Hogan tax investigation

THE Australian Crime Commission has revealed it will not lay charges against actor Paul Hogan and his artistic collaborator John "Strop" Cornell.

After a five-year investigation, the ACC today took the extraordinary step of issuing a press release saying it was no longer pursuing the pair over their offshore tax arrangements put in place following the success of the Crocodile Dundee movies.

"This decision has been made following a careful process, including obtaining high-level legal advice on some issues," the crime commission said.

Hogan and Cornell have been targets of the nation's $300 million Wickenby tax probe into offshore structures. They have always maintained their innocence and denied any wrongdoing.

Earlier this year, the Crocodile Dundee star was temporarily banned from leaving Australia at the request of the Australian Taxation Office.

The two-week standoff ended on September 3 and the 70-year-old was allowed to return to Los Angeles where he lives with his wife Linda Kozlowski and their son Chance.

It is understood the ATO will not be dropping its probe into Mr Hogan's affairs. An ATO spokesman declined to comment on the case on Tuesday.

In its statement issued today, the crime commission also noted the number of legal challenges Hogan and Cornell had made in relation to the investigation.

"The delay in resolving this long-running investigation hinges on the international complexity of the structures put in place by those who are the subject of the investigation and a clear strategy by those being investigated to legally challenge the ACC's attempt to establish the facts in the case," it said.

The decision was welcomed by Robinson Legal's Andrew Robinson who released a statement vindicating the innocence of his clients.

"After nearly six years of massively costly investigations during which our clients have been routinely branded in the local and international press as 'tax cheats' and 'tax criminals', the news that the ACC has acknowledged that it does not have the basis to continue with a criminal investigation is of immense relief to them," Mr Robinson said today. "It vindicates the position they have taken since the start of this investigation."

"Unfortunately, we have not been able to contact Paul Hogan to give him the news but John Cornell's reaction was: 'that speck in the sky is my hat and I look forward to sampling some of Strop's patented hangover cure tomorrow morning'."

Source http://www.theaustralian.com.au/news/acc-drops-paul-hogan-tax-investigation/story-e6frg6n6-1225959464455

New South Wales Receives Bids for Electricity Assets

The government of New South Wales, Australia’s most-populous state, has started evaluating bids for the electricity assets it put up for sale and plans to complete the review by the end of the year.

Submissions closed at 3 p.m. Sydney time, the state government said in an e-mailed statement, declining to identify any potential buyers. AGL Energy Ltd. said today it had made an offer, while Origin Energy Ltd. has previously said it planned to bid.

The sale, which includes the retail businesses of EnergyAustralia, Country Energy and Integral Energy, is the “last available opportunity to obtain a significant retail and generation presence in Australia’s largest electricity market,” state Treasurer Eric Roozendaal said in the statement.

New South Wales may raise A$3.5 billion ($3.4 billion) selling the retail assets, David Leitch, an analyst at UBS AG in Sydney, has estimated. The state is also offering development sites for new power plants and contracting the right to sell electricity produced by state-owned generators.

Australian regulators are scheduled to announce Nov. 25 whether purchases of New South Wales power assets by AGL and Origin would raise competition concerns. The Australian Competition and Consumer Commission had previously expected to report its findings on Oct. 28.

Origin spokesman Tim Scott, TRUenergy Holdings Pty spokesman Carl Kitchen and International Power Plc spokesman Trevor Rowe declined to comment on whether the companies had bid.

Competition, Funds

New South Wales Premier Kristina Keneally said Nov. 3 that the plan to sell the assets by the end of the year remains on schedule. The government has said it wants to spur competition in the electricity market, reduce the need for state investment in power generation and strengthen its finances.

Completion of the sale is expected by early 2011, state Auditor-General Peter Achterstraat said in a report earlier this month. He cited “significant uncertainty” surrounding the value of the assets because of the unknown impact of a potential carbon pollution reduction plan in Australia.

The effort to sell the government assets began about 12 years ago, the auditor-general’s report said.

AGL and Origin may spend more than A$5 billion combined, Leitch of UBS said this month. Origin may buy EnergyAustralia and AGL may get Country Energy, Leitch said. TRUenergy, CLP Holdings Ltd.’s Australian unit, was evaluating a bid, CLP Chief Executive Officer Andrew Brandler said Sept. 28.

The government of New South Wales said last month that it intends to keep ownership of the Cobbora coal mine to supply state-owned power stations with fuel.

Source http://www.businessweek.com/news/2010-11-15/new-south-wales-receives-bids-for-electricity-assets.html

Deaths in Australia at record low

Australia's death rate has hit a record low, as the nation older citizens are growing in number and living longer.

There were 140,800 deaths officially recorded Australia-wide during 2009, according to figures released by the Australian Bureau of Statistics (ABS).

It was a real decline of about 3,200 deaths from 2008, when 143,900 Australians died.

The figure also marked a new low in deaths measured against the population, continuing a declining trend which has unfolded over the past few decades.

In 1989, there were 9.1 deaths per thousand Australians, and in 2009 this figure hit a record low of 5.7.

"It's not just more younger Australians who are surviving through to older ages, those people who get through to age 50 are increasingly likely to live longer," demographer and Professor of Geography Graeme Hugo said in response to the figures released on Wednesday.

"Since 1970 we've added nearly eight years of extra life to an Australian aged 50 ... that's an incredible increase in life expectancy, a remarkable change in a generation when you think about it."

Prof Hugo, from the University of Adelaide, attributes the change to medical breakthroughs that now keep stroke, heart attack and cancer patients alive, along with improving treatments across the board.

Smoking rates were in decline while Australians now enjoyed safer workplaces and roads, and a blurring of once traditional male and female roles was allowing men to catch up to usually longer-lived women.

The ABS figures show over the past two decades, life expectancy increased six years for men (to just over 79 years) and more than four years for women (to almost 84 years).

Prof Hugo said there was room for more improvement as other countries had lower rates of cancer, heart attack and road crash deaths, but there were also emerging challenges.

"Obesity is much higher than it was in previous generations and it could compromise the continued year-by-year improvement in life expectancy," Prof Hugo said.

The ABS figures also show more men than women died in 2009, with 72,300 male deaths compared to 68,400 females.

The nation's infant mortality rate increased slightly, from 4.1 deaths per thousand births in 2008 to 4.3 last year.

Prof Hugo also said "closing the gap" between indigenous and non-indigenous health was also a must, and it would further boost the nation's average life span.

There were 2,400 indigenous deaths recorded last year, accounting for 1.7 per cent of all deaths.

The NT had the nation's highest death rate, at 7.9 deaths per thousand people, while the ACT came in with the lowest at 5.4 deaths.

While total deaths were down last year, the change appears to occur on a scale not immediately felt by the funeral industry.

"I've been around every state in the last few months and none of the funeral directors I've spoken to say `gee, we're down`," Australian Funeral Directors Association president John Scott said.

"(But) there is no doubt people are certainly living longer ... I know in our area (Kyneton, Victoria) we've got some very old people who are well into their hundreds."

Source http://news.smh.com.au/breaking-news-national/deaths-in-australia-at-record-low-20101110-17nhj.html