Analysis & News
One of the recommendations of the Cooper Review of the superannuation system, accepted by the government, will require self-managed superannuation funds (SMSFs) to consider death and permanent disability insurance as part of the fund’s investment strategy. The main reason for the recommendation is the alarmingly low level of life insurance inside SMSFs. Less than 13 per cent of SMSF members have life insurance. This is significantly less than the levels of cover within traditional superannuation funds, where cover is often provided automatically. Under current laws, SMSF trustees are not required to obtain any insurance cover for members, nor do they need to consider insurance as part of the fund’s investment strategy. The proposal is that the Government will amend the superannuation law so that SMSF trustees must consider life and total and permanent disablement (TPD) insurance. Although there is no commencement date for the proposal,…Read more ››
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The RBA unexpectedly kept the cash rate on hold at 4.25%. It seems that the Board took some comfort from the improvement in financial market sentiment since early December, primarily driven by the actions of policy makers in Europe. With growth expected to be close to trend and inflation close to target, the Board decided the current monetary policy was appropriate for the current environment. However, the Board noted that should demand conditions weaken materially, it will provide scope for easier monetary policy. Press release
Tags: interest rate, RBA, Reserve Bank of Australia
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The chance of another interest rate cut by the Reserve Bank tomorrow is diminishing – potentially given major banks a break from a flurry of bad publicity. Until last weekend, the odds were heavily in favour of the RBA making it three rate cuts in a row when its monetary policy board meets in Sydney. Surprisingly strong jobs news from the US, though, and broad-based market rallies since the start of the year have given the central bank scope to delay another cut. “People are looking at that data and saying the US labour market looks the best it has since the recession started,” said UBS interest rate strategist Matthew Johnson. “So, the case for the RBA to cut rates tomorrow is materially weakened.” The US unemployment rate last month dropped to its lowest in almost three years, adding to recent signs that…Read more ››
Tags: big banks, borrowing, businesses, consumers, economic climate, interest rate, RBA, recession, Reserve Bank of Australia, US unemployment rate
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Malaysian authorities have granted approval to Australian miner Lynas Corp to operate its 700 million ringgit ($A217 million) rare earth plant. The Atomic Energy Licensing Board says it will grant Lynas a temporary operating license. It must submit plans for a permanent disposal facility within 10 months and make a $A47 million financial guarantee with the government. The approval on Wednesday eases uncertainty for Lynas and investors after speculation that the licence could have been rejected in the face of opposition from political parties and residents near the plant ahead of national elections expected within months. The board warned on Wednesday that the licence can be revoked if conditions are breached. “The temporary licence has been approved with conditions. If these conditions are not met, the temporary licence can be suspended or cancelled and subsequent applications for the licence will not be considered,” the atomic licensing…Read more ››
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Treasurer Wayne Swan says a new report showing continued growth in major investment projects is another example of the economy’s strong fundamentals. Deloitte Access Economics says investment projects continued to progress through the planning stages during the December quarter, despite the backdrop of an uncertainty global economy. The independent economic forecaster said importantly for current economic activity, much of the growth in investment projects has been in definite projects – either under construction or committed to commence soon. “The value of projects underway provides a healthy buffer against a potential global slowdown in 2012,” Deloitte Access Economics partner David Rumbens said on the release of the forecaster’s Investment Monitor for the December quarter today. It shows that the total value of projects grew by a further 2.1 per cent in the quarter, compared to the previous three months, to a staggering $912.7 billion. Projects have increased…Read more ››
Tags: economy fundamentals, major investment projects, report, Treasurer Wayne Swan
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A slowdown in Australia’s housing market is starting to strain bank balance sheets, with the nation’s biggest lenders being forced to pay top dollar to lock in longer-term funding. Commonwealth and Westpac have tapped local investors for a combined $6.6 billion in recent weeks, paying a premium to secure bonds with a maturity of five years at a time when Europe’s debt problems continue to push up costs. This month, ANZ raised $1.2 billion in 10-year funds from European investors in the most expensive raising so far this year. ANZ is also planning to sell four-year bonds to Japanese investors over the next few weeks. This high cost is adding to pressure to push through additional interest rate rises on home loans as banks seek to protect profit margins. While Australian banks remain well funded, senior bank executives privately concede a slowing housing market, as…Read more ››
Tags: ANZ, Australian, Australian banks, bank balance sheets, Commonwealth Bank, covered bonds, debt problem, deposits, Europe, Housing market, local investors, long-term wholesale funding, maturing funds, nation, Westpac
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Photo Source: Reuters World Trade Organisation judges rejected China’s appeal of a ruling that found restrictions on exports of nine raw materials break global rules and give the country’s manufacturers an unfair edge over competitors. The WTO concluded on July 5 that Chinese quotas, export duties and license requirements on overseas shipments of industrial ingredients including coke, zinc and bauxite are discriminatory. The restrictions have stoked tensions between China and its trading partners, which accuse the Chinese government of having unfair commerce and currency policies. US Trade Representative Ron Kirk called the Appellate Body report a “tremendous victory,” particularly for manufacturers and workers. The decision “ensures that core manufacturing industries in this country can get the materials they need to produce and compete on a level playing field,” Kirk said in an e-mailed statement from Washington. Today’s affirmation of the initial panel ruling may prompt…Read more ››
Tags: China, Chinese government, competitors, exports, global rules, manufacturing, raw materials, World Trade Organisation
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Australian banks aggressively cut their exposure to Europe’s troubled economies as the region’s debt crisis intensified late last year, pulling billions of dollars in funds from Belgium, France and Spain. At the same time, Europe’s banks cut more than $US8 billion worth of loans from the Australian economy, as they began to feel a funding squeeze in their home market. Still, figures to be released this morning from the Swiss-based Bank of International Settlement show Australian banks increased their exposure to Italy by more than $US700 million in the September quarter even as fears spread that Europe’s third-largest economy would not be able to meet its massive debt obligations. There were also signs that funds were being shifted to Switzerland, which is not a member of the euro zone. The most dramatic change has been with private and public debt in Spain, where Australian-bank exposure…Read more ››
Tags: Australian economy, Bank of International Settlement, banks, Belgium, debt crisis, Europe economy, exposure, France, funding, funds, home market, Spain
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