Australia in News

Sydney and Chongqing Intend to Improve Relationship

In the Sydney-Chongqing Commercial Forum on February 22, the representatives of Chongqing signed the “Memorandum of Establishing Friendly Cooperation” with the representatives of New South Wales and Sydney. The three sides thought it was good for their economic development and showed their strong will to develop friendly cooperation.

NSW president Thomas Kenealy, mayor of Sydney Clover Moore and vice mayor of Chongqing Tan Qiwei wrote their names on the Memorandum on behalf of their governments. Zhang Junsai, ambassador of China in Australia was present in the signing ceremony.

According to the Memorandum, the three sides will start the cooperation and communication on economy, trade, agriculture, mining, forestry, science, tourism, culture and education to promote the common progress of the three sides and the sustainable development. In addition, governments of the three sides should keep in touch and constantly talk on the cooperation.

According to Kenealy, NSW and Chongqing have already launched cooperation in trade, investment and culture. She felt happy and pride of the two sides’ good relationship and believed that the new Memorandum will bring about great impact upon NSW’s economic and social development.

Moore thought that Sydney is the symbol and window of Australia. Therefore, the cooperation between Sydney and Chongqing will create a lot of business opportunities.

Tan Qiwei said that China is the largest trade partner for Australia. Despite the financial crisis last year, the trade volume between Chongqing and Australia still increased by 30%. Good development means good opportunities. The three sides all hope to enhance their cooperation and work together for mutual benefits.

Australia Welcomes China Report on Failed Chinalco Bid

Australian Trade Minister Simon Crean on March 14 that welcomed a report that China had cleared Rio Tinto and the Australian government of blame for the collapse of a USD19.5 billion tie-up between Chinalco.

Chinalco had agreed on a USD19.5 billion equity and asset tie-up with Rio Tinto last February, which the Anglo Australian miner abruptly called off in June when it decided instead to raise money through a rights offer and form an iron ore joint venture with BHP Billiton .

The collapse of the deal soured relations between Australia and China and a month later China arrested four Shanghai-based Rio Tinto staff, including Australian citizen Stern Hu, on allegations of spying and bribery, deepening the rift.

A report to the State Council, or China’s cabinet, said the Chinese deal failed because Chinalco did not do enough to engage other Rio shareholders or to fight the public relations war in Australia. It also said the arrest of Hu and the other three staff did not come in revenge for the Chinalco deal failure.

Australia CBA mandates banks for US$ global bond

Commonwealth Bank of Australia (CBA), the nation’s second largest lender, has mandated three banks to arrange a global 144a bond sale, it said on March 14, 2010.

Citi, Goldman Sachs, HSBC will jointly lead the offer with CBA.

CBA completed non-deal roadshows in Asia and the United States in February.

The bank is among a growing number of borrowers that have recently planned “non-deal roadshows,” although these are often followed by bond issues.

Borrowers tend to prefer calling such presentations non-deal or updates to avoid execution risk if market conditions change.   

Rio Tinto Predicts Continued Strong Commodities Demand from China, then India

China’s demand for iron ore, copper, coal and aluminum will increase dramatically during the next 15 years before India takes the lead in its need for those commodities, global miner Rio Tinto Ltd. predicted in its annual report released on March 16.

Rio Tinto chief executive Tom Albanese said the strong demand for iron ore clearly provided the most obvious option for production growth in Australia.

Albanese was optimistic about long-term growth prospects and said China’s demand for iron ore, copper, coal and aluminum was expected to grow exponentially for the next 15 years.

“India is expected to follow, supporting a further potential wave of strong commodity demand,” Albanese said.

He said Rio’s move toward a joint venture with BHP Billiton to combine their massive iron ore operations in Western Australia’s Pilbara region was a highlight of 2009.

The short-term outlook for mining and metals is also improving but will likely remain volatile, the report said.

Chairman Jan du Plessis said the company had turned itself around after what he called a “particularly testing” 2009.

Rio Tinto started 2009 with debt of around 38.7 billion US dollars, largely as a result of its 2007 takeover of Alcan but by December 31 had cut that to 14.8 billion US dollars.

“It certainly felt at times as if we were experiencing an amplified version of the global financial crisis and its knock-on effect on business confidence, demand for commodities and availability of credit,” du Plessis said.

Rio Tinto shares were up 21 cents, or 0.2 per cent, at 75.23 Australian dollars.

Australia home building takes off, fuels growth

New home building in Australia boomed in the fourth quarter of last year, thanks to a potent mix of government stimulus, low mortgage rates and a growing population, promising a big boost to the economy.

A total of 40,022 new dwellings were started last quarter, up 15.1 percent on the previous quarter and the highest in two years. That was the biggest quarterly gain in eight years and the second strongest since the series began in 1958.

It also came on top of an upwardly revised 11 percent jump in the third quarter and left starts up 26 percent for the year.

The jump in home supply could ultimately help cool house prices, which have risen rapidly in recent months and were one reason the Reserve Bank of Australia (RBA) decided to lift interest rates four times since October.

Yet in the near term, the surge in building could intensify competition for skilled labour between the construction industry and the booming mining industry.

“The construction sector is a sleeper that will command attention, quickly absorbing whatever spare capacity there is,” said Annette Beacher, a senior strategist at TD Securities.

“We suspect that this will generate upside price pressures in building materials and boost skilled tradesmen wages as private and public sectors compete for resources.”

That was one reason she expected interest rates to rise to 5.25 percent by the end of the year from the current 4.0 percent.

The RBA has already hiked by 100 basis points since October, putting it far ahead of every other major central bank.

The market is pricing in further tightening of around 110 basis points in the next 12 months, with the next move likely in May.

Sugar Output in Australia to Rise on Good Weather, Growers Say

Sugar production in Australia, the third-largest exporter, may increase by 5 to 7 percent from last season because of favorable weather, a growers’ group said.

“We have had some of the best weather conditions this year that we have seen for many years,” Ian Ballantyne, chief executive officer of Brisbane-based Canegrowers, said by phone on March 18. The group in December forecast a 5 percent gain in output from last year’s production of about 4.3 million metric tons.

Raw sugar has slumped 40 percent from a 29-year high of 30.4 cents reached on Feb. 1 amid bets that global production will rebound. Prices had “overshot” and would surge again if there were any problems in Brazil or India, Ballantyne said.

“There’s a physical premium out there right now particularly in Southeast Asia,” he said. Prices may hold at about the 16 to 18 cents level over the next few years, he said.

The price will drop to less than 18 cents by April as output rises in India and Brazil advances cane harvests, said Prakash Naiknavare, managing director of the Maharashtra State Cooperative Sugar Factories Federation Ltd. The group accounts for more than third of the India’s production.

Growers in Australia are monitoring a tropical cyclone that may near Queensland’s coast on March 20 or 21, Ballantyne said. Rain in the state has damaged some cotton crops while boosting soil moisture for grain planting and assisting sugar cane.

Fewer New Cars Sold in Australia

According to the latest data from the Australia Bureau of Statistics, the sale of cars in Australia kept decreasing in February. Due to the cancellation of the 50% tax reduction policy of commercial investment, the sale of new vehicles in this country saw two straight months’ fall.

In February 85,035 new vehicles were sold in Australia, down 1.9%. But the sale saw a 17.1% increase through February 2010. The analysts attributed the growth to the tax reduction policy taken in the first half of 2009.

Good news is that the sale of passenger cars decreased by only 0.1% in February while the number saw an unexpected 4.1% increase in January. The increasing employment ratio and greater confidence of ordinary people in economic outlook pushed the consumption upward, as well as auto sales, upward.

The number of new cars sold in New South Wales in February increased by 0.9%, making NSW the only place seeing the increase of auto sale in Australia.