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Australia Posts Higher-than-expected Jobless Rate

The nation’s April unemployment rate, on a seasonally-adjusted basis, was unchanged at 5.4%, the Australian Bureau of Statistics said on May 12, after upwardly revising March’s jobless rate to 5.4% from 5.3%.

The number of people employed in April increased by 33,700 to a seasonally adjusted 11.025 million, up 2.2% from a year ago, data showed.

On average, economists expected an unemployment rate of 5.3%, with the number of employed up 20,000, according to Dow Jones Newswires. A separate Reuters survey had also called for a 5.3% jobless rate.

A 37,500 rise in the number of people with full-time employment drove the increase in the number of employed, but the rise was partially offset by a 3,900 decline in the number of those with part-time employment.

“This was the eighth-consecutive month Australia has seen a rise in the number of people employed full time,” the government report said.

The labor participation rate for the month was also unchanged at 65.2% in April.

Australia’s Henry Says Profit Tax Will Boost Mining

Australian Treasury Secretary Ken Henry said the government’s proposed resource profits tax would boost the mining industry and the economy as companies like BHP Billiton Ltd. warned it will force projects offshore.

The 40 percent resource profits tax, announced on May 2, is due to begin in 2012 and earn A$12 billion ($10.8 billion) in its first two years. Miners oppose the tax and as many as 100 are meeting with officials from Henry’s department to discuss the plan. Rio Tinto Group is scheduled to hold talks on May 18, company spokesman David Luff said.

“It is the strong and clearly stated view of Treasury that the Resource Super Profit Tax will grow the mining sector and the economy,” Henry said in an e-mailed statement. “The tax was constructed on that basis, and the modeling released with the tax package clearly demonstrates it.”

The government included the proposal as part of its response to Henry’s review of Australia’s taxation system, the biggest overhaul since World War II. The revenue will be used to cut company tax, boost retirement benefits and create a A$5.6 billion infrastructure fund.

The tax may reduce earnings at Melbourne-based BHP by 17 percent and Rio by 21 percent in 2013, UBS AG said in a May 3 report. BHP’s net income in the year ended June 30 was $5.9 billion while Rio earned $4.9 billion in 2009.

Treasurer Wayne Swan accused miners of conducting a “fear campaign” over the tax. Swan this week released a budget, which will return to surplus by 2012-13 and pay off the nation’s debt by 2018-19, both three years earlier than previously projected.

Australia is the world’s biggest exporter of iron ore, coal and alumina, and demand for resources from China and India helped the country’s A$1.2 trillion economy skirt recession during the global financial crisis.

Andrew Forrest, chief executive officer of Fortescue Metals Group Ltd. and Australia’s richest man, met with Treasury officials. Forrest on May 6 said the new tax was a form of nationalization.

Australia’s CBA Sees Signs of Firmer Business Credit

Commonwealth Bank of Australia (CBA), the nation’s top home lender, joined its rivals in flagging improving demand from corporate but missed cash profit forecast as bad debt charges fell less-than-expected.

On May12, CBA was as cautious as the other top Australian banks in its outlook as the uncertain global market conditions raise funding costs and keep credit growth low.

Its shares were up 0.8 percent after opening weaker. Rivals National Australia Bank, Westpac Banking Corp and Australia and New Zealand Banking Group saw sharper gains as the federal budget gave tax breaks for interest from savings deposits.

CBA saw its bad debt charges in the quarter fall by a fifth to A$500 million ($447.2 million), but still higher than the A$400 million expected. It said key credit quality indicators were still at elevated levels and it expected a gradual improvement.

Analysts say the bank may opt to wait till next year to bring down bad debt charges to more normal levels given its sector leading return on equity.

“They seem to be too conservative with the bad debt provisions, but you need to accept their wisdom during such times,” said Simon Bonouvrie, a portfolio manager at Platypus Asset Management.

“There is a slow pick up in credit but over the next 12-18 months business lending should come back as confidence returns to corporates.”

Australia’s banks have benefited from a home-lending boom since last year as the government has given out grants to first home buyers, but their margins have been squeezed as they have had to raise higher cost funds to support that.

Australia’s central bank has hiked interest rates six times to avert a housing bubble and to curb inflation in an economy thriving on mining exports to China. Investors are now counting on a rebound in lending to businesses, which has remained stagnant for nearly two years as companies raised equity and cut debt in the global crisis, to help boost earnings growth for the banks.

“There will be challenges along the way, evidenced by the current sovereign debt issues in the European Union. Given this uncertainty, the Group is retaining its conservative business settings,” Chief Executive Ralph Norris, who joined the bank in that post in 2005, said in a statement.

CBA’s cash profit rose 30 percent to A$1.5 billion ($1.34 billion) from A$1.15 billion. Four analysts surveyed by Reuters had on average forecast for a profit of A$1.6 billion.

CBA follows a July to June accounting year while the other banks have a September ending.

The bank’s shares have risen 0.7 percent so far this year compared with a 5.5 percent fall for the benchmark S&P/ASX200 stock index AXJO. Shares of its main rivals have also lagged CBA’s.

Australia Elections Hinge on Mining Tax: Opposition

Australia’s upcoming general election will hinge on the government’s plans for a controversial new mining tax, opposition leader Tony Abbott said, warning the move could derail the economy.

Conservative leader Abbott said the 40 percent tax on ‘super profits’ in the key resources sector would “eventually choke the goose that’s laid the golden egg for Australia”.

“Australia’s future depends on the bulk carriers travelling to Asia,” Abbott said in reference to the lucrative shipments of commodities such as iron ore and coal which allowed Australia to weather the global downturn.

The election, which is expected later this year, “will pit a party that thinks it’s reasonable to make Australian miners the world’s highest taxed, against one that doesn’t”.

Addressing parliament at the evening of May 13, Abbott said the centre-left Labor government of Prime Minister Kevin Rudd risked crushing the country’s most valuable sector -- mining -- to help balance the books.

He said the new tax would kick in on profits somewhere above a six percent return on investment, and was “not a normal tax on super profits”.

“It’s a super tax on normal profits,” he said in his formal reply to this week’s budget.

The tax would affect not only mining companies, but the price of fertilisers and building materials and the cost of energy. It would also hurt the price of mining shares, in which Australian pension funds are heavily invested.

Abbott said if the Liberal/National party coalition he leads won power it would remove the tax but cut spending elsewhere by placing a two-year freeze on public service recruitment and scrapping a national broadband network.

The conservative coalition, formerly led by John Howard, lost government in November 2007 after Australians voted against radical changes to labour laws.

With Rudd falling in the polls, Abbott said the right-leaning parties had “heeded the lessons of defeat”.

“We’ve learnt from our mistakes,” he told parliament.