Australia in News

Bank Of Queensland Expects Bad Debts To Peak In FY10

Regional lender Bank of Queensland Ltd joined its bigger rivals in calling a likely peak in bad debt charges in the first half of the current financial year (July 1, 2009 to June 30, 2010) amid more buoyant signs for the Australian economy.

“Economic data is pointing to more conducive trading conditions for the bank in 2010 than the past 12 months,” Chairman Neil Summerson told shareholders at the bank’s annual general meeting.

Chief Executive David Liddy said that bad debts continue to rise but are tracking well below the levels seen by the group’s larger competitors.

Most of Bank of Queensland’s larger rivals, including Australian and New Zealand Banking Group Ltd., have also indicated they expect impairment charges for sour loans to peak in the current financial year after Australia’s economy avoided the worst of the global economic downturn.

Liddy also told shareholders the first three months of the group’s current financial year indicate continuing strong lending growth above system levels and margin expansion is on track.

Meanwhile, small acquisition opportunities are becoming increasingly available at attractive prices, Liddy said, adding growth opportunities in retail and small business lending are showing signs of strength.

However, the bank also pointed to a number of head winds, including higher retail cost of funds and a possible increase in regulatory burdens from proposals for increased liquidity and capital requirements.

“While the worst of the financial crisis in Australia may well be behind us, there are still many risks, particularly as overseas countries continue to be in recession and governments and regulators begin to unwind stimulus packages,” Summerson said.

“Maintaining substantial liquidity levels will continue to be important and it is likely there will be increased regulatory focus in this area,” Summerson told investors.

Australian Inflation to Moderate As Economy Rebounds In 2010

Australia’s inflation outlook is expected to moderate in early 2010 even as the economy sets course for stronger growth, according to a survey by Dun and Bradstreet.

Expectations for selling prices in the first quarter of 2010 have fallen to their lowest reading ever recorded, D&B said.

Only a net 7% of Australian firms expect to raise prices in early 2010. Just 19% firms expect to raise prices in the first quarter, while 12% expect to lower prices, it said.

Expectations for selling prices have fallen by 68 percentage points since the first quarter of 2009, D&B added.

But at the same time, expectations for business sales and profits have risen. Capital investment intentions are also strong but employment expectations fell, reaching an index reading of -1%, according to the survey.

The survey shows that the rates of growth of sales, profits, inventories and investment in the first quarter of 2010 are likely to be positive, said D&B economic consultant Duncan Ironmonger.

“The survey also points to a much lower rate of inflation in the Australian economy in 2010,” he said.

The data also support the Reserve Bank of Australia’s view that economic growth will strengthen in 2010 and that inflation will be back to within the desired 2%-3% target band, Ironmonger added.

The latest D&B survey was conducted in November 2009 and took in 1,200 business owners and senior executives representing major industry sectors. Since then, the Australian central bank has raised its cash rate target by 25 basis points to 3.75%.

Australian Drug Companies Top High-Tech Exporters

Australian drug companies, makers of swine flu vaccines and cervical cancer medication, beat carmakers as the nation’s largest exporters of so-called high- tech products, said a local newspaper in Australia.

Sales of drugs and vaccines reached A$4 billion last financial year (from July 1, 2008 to June 30, 2009), more than the A$3.6 billion generated from overseas vehicle sales, the newspaper said.

Australia’s pharmaceutical industry contributes about A$7 billion annually to the A$1 trillion domestic economy, the report said. Melbourne-based CSL Ltd. makes inoculations for swine flu, the H1N1 virus responsible for the influenza pandemic.

Australian Retail Sales Will Be ‘Modest’ in 2010

Australian retail sales growth will be “modest” in 2010 as rising borrowing costs and slower wages growth erodes spending.

Retail sales growth, adjusted for inflation, will slow to 1.4 percent in the 12 months through June 30, 2011, from 2.1 percent in this fiscal year, David Rumbens, director of the research company, said in a report released in Canberra today. Sales will gain 3.1 percent in 2011-12.

Consumer spending surged in the first half of 2009, stoked by Prime Minister Kevin Rudd’s decision to distribute more than A$20 billion ($18 billion) to households, helping the economy skirt a recession and prompting the central bank to boost its benchmark interest at the end of December 2009 for an unprecedented third month. Access says borrowing costs will rise further.

“While the Australian economy is performing better than we feared and better than most other economies, it’s far from all guns blazing,” said Rumbens.

“Net jobs created over the past year amount to a grand total of zero, some sectors of the economy are still suffering notably, and the temporary boosts which helped support the economy in 2009 are being withdrawn,” he said.

Company Bond Risk Falls in Australia, Credit-Default Swaps Show

The cost of protecting corporate bonds from default decreased in Australia at the end of 2009, according to traders of credit-default swaps.

The Markit iTraxx Australia index dropped 2 basis points to 82.5 basis points as of midday of December 29, 2009 in Sydney while the Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan was little changed at 93 basis points as of 8:56 in Hong Kong, ICAP Plc prices show.

The Markit iTraxx Japan index increased 1 basis point to 131 basis points as of 9:51 a.m. in Tokyo, according to BNP Paribas SA.

Credit-default swap indexes are benchmarks for protecting bonds against default and traders use them to speculate on credit quality. An increase suggests deteriorating perceptions of creditworthiness and a drop shows improvement.

The swap contracts pay the buyer face value in exchange for the underlying securities if a borrower fails to meet its debt agreements. A basis point is 0.01 percentage point.

NSW Hails Big Summer for Tourism

State Tourism Minister Jodi McKay says New South Wales holiday bookings are up 10 per cent and the tourist sector will inject US$1 billion into the economy this summer.

Ms McKay says the global downturn and swine flu saw the international tourism sector shrink by 9 per cent with the domestic market down 7 per cent nationally in the last quarter.

But she says a summer upturn in Sydney should flow on to the rest of country.

“It is important to Australia because most people choose to come into Sydney for wherever they want to travel and if Sydney is working, it is the global gateway to Australia and the rest of tourism in Australia operates,” she said.

The Australian Hotels Association says better infrastructure is needed to attract business people if Sydney is to have a much bigger share of the international conferencing market.

The association’s NSW spokesman, Richard Neville, says the boost in holiday bookings represents almost a full recovery from the damage done by the global financial downturn.

Mr. Neville says most of the summer guests are Australian holiday makers, while the local business community is again booking conferences.