Businesses hopeful; Farmers rejoice; Cash is still king

NAB business survey; ABARE Crop Report; Consumer finances

Business confidence is up; conditions are down. According to the NAB business survey, the business confidence index rose from +2.4 in July to +11.2 in August. The business conditions index fell from +5.3 in July to +4.5 in August – the fourth decline in five months.
Retail discounting returns. The NAB survey suggested that discounting had returned with retail prices up just 0.1 per cent in August.
ABARE has lifted its crop forecasts. ABARE has lifted its forecast for the wheat crop by 13.4 per cent. The wheat crop is now seen up 15.9 per cent on a year ago. The cotton crop is expected to be up 69 per cent. The overall winter crop is expected to be the third largest on record.
Yesterday we reported the latest credit & debit card data. We revisit the issue by focussing on the changing use of cash in the community. Fewer dollars are being credited to accounts and fewer dollars are being withdrawn from ATMs while EFTPOS transactions are rising. All this suggests that cash payments are alive and well across the economy. The increased preference for cash also raises fresh questions on the size of the ‘black economy’ in Australia.

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ASIC reaches sixth Westpoint settlement

ASIC has reached an agreement to settle its actions against Barzen Pty Ltd (formerly Dukes Financial Services Pty Ltd) and Mr Joseph Dukes (collectively ‘Dukes’), for $1 million. This settlement is subject to the approval of the Federal Court.

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More joy for motorists; Construction loans slump

Lending finance; Petrol price; Credit/debit cards

The Australian Institute of Petroleum reports that the average Australian petrol price fell by 2.2 cents last week. Over the past fortnight prices have fallen by 4.9 cents a litre – the biggest fortnightly fall in 21 months. The national pump price is now holding at a near 11-month low of 119.3 cents a litre.
Total lending (business, housing, personal and lease loans) rose by 5.2 per cent in July all but reversing the previous months loss. Lending continues to track sideways.
Loans for construction of dwellings (owner-occupier and investor) fell by $31.8 million to $1.69 billion in July – a 17-month low.
The average credit card balance stood at a $3,267.70 in July, down $15.30 on June. The average credit card balance is up 5.1 per cent on a year earlier – the fastest annual growth in 29 months.

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Aussie tourism in trouble

Regional economy

Australia’s tourism sector was already in trouble, but it is now set to come under even more pressure from renewed strength of the Aussie dollar. The Australian dollar rose to near 21-year highs against the Euro this morning while also lifting above US93 cents.
The tourism deficit (excess of departures over arrivals) is at record highs and poised to go higher. Over a million more Aussies travelled overseas for holidays in the past year than foreign tourists visited our shores.
CommSec has found that passenger numbers on seven of Australia’s top domestic tourist air routes fell by 6.2 per cent in 2009/10 and were down almost 11 per cent from the highs reached in the year to January 2009. In comparison, passenger numbers on the Sydney-Melbourne route rose 12.2 per cent in 2009/10.
Regional Australia is particularly vulnerable to the high Aussie dollar, especially northern NSW, North Queensland, Tasmania and the Northern Territory. And apart from tourism, manufacturers and exporters will come under renewed pressure from the strong Aussie dollar.
A high Aussie dollar depresses economic activity while at the same time capping inflationary pressures, thus reducing the scope for the Reserve Bank to lift interest rates.

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Chinese economy powers along

Chinese economic data

The Chinese economy strengthened in August. Production, retail trade, inflation and money supply all grew at a stronger annual rate in August suggesting that authorities will need to lift rates to slow the economy.
Industrial production rose at a 13.9 per cent annual rate in August with retail spending up 18.4 per cent and consumer price inflation hit a 22-month high of 3.5 per cent on higher food costs.

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China engineers a soft landing

Chinese economic data; Mobile phone sales

Chinese trade surplus eases as imports surge. China recorded a trade surplus of US$20.03 billion in August – below forecasts centred on a result near US$26.9 billion. Exports were up 34.4 per cent on a year ago (consensus +35.0 per cent) and imports were up 35.2 per cent (consensus +27.5 per cent).
Chinese property prices slow. Urban property prices rose by 9.3 per cent in the year to August, down from 10.3 per cent in the year to July and the 12.8 per cent peak in April.
Mobile phone shipments (in effect, sales) sales have slumped due to seasonality factors. However a more smooth measure of activity would be a comparison of mobile phone shipments with the same period last year, which shows sales are down 9.5 per cent on a year earlier.

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Unemployment rate slides to 19-month low

Labour force

Employment rose by 30,900 in August, in line with forecasts centred on job gains of around 29,000. The July result was revised up to show job growth of 25,000 (previously showed a rise of 23,500). Full-time employment rose by 53,100 (July down 9,600) and part-time jobs fell by 22,100 (July rose by 34,700).
There was no mention of temporary election workers being included in the August data.
The unemployment rate fell from 5.3 per cent to 5.1 per cent as job growth more than matched new entrants. To two decimal points, the jobless rate fell from 5.31 per cent to 5.12 per cent in August – a 19 month low. The participation rate fell from 65.5 per cent to 65.4 per cent.
Average hours worked rose for the first time in three months, lifting by 0.9 per cent. Hours worked are up 4.4 per cent over the year. The working age population grew by 32,000 in August.
Across the states and territories unemployment rates in August were: NSW 5.0 per cent (5.5 per cent in July); Victoria 5.5 per cent (5.5 per cent); Queensland 5.4 per cent (5.6 per cent); South Australia 5.4 per cent (5.1 per cent); Western Australia 4.5 per cent (4.4 per cent); Tasmania 6.0 per cent (6.6 per cent); Northern Territory 3.0 per cent (2.9 per cent); ACT 3.1 per cent (3.2 per cent).

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Financial Services Council launches Chief Investment Office Investment Index

Chief Investment Officers mildly optimistic about investment outlook

The inaugural ‘Financial Services Council Chief Investment Officer Investment Index’ shows Chief Investment Officers (CIOs) are mildly optimistic about the performance of Australian and international investments over the next 12 months, but are concerned about short and long term risks related to the slowdown of the US and European economies.

The quarterly Index, which is based on CIO responses from a sample of Financial Services Council members, measures 11 from a range of -100 to 100, where a score of 0 is considered neutral.

John Brogden, CEO of the Financial Services Council, said: “This new Index provides an insight into the factors weighing on the minds of Chief Investment Officers of Australia’s leading investment companies.

“While they expressed some confidence about the Australian economy, they are concerned about the risks presented by debt and deleveraging in Europe and the US.

“Overall, CIOs describe the investment environment as complex and fragile,” Mr Brogden said.

In terms of specific asset classes:

Australian and international equities are expected to be the best performers over the next 12 months;
International property is expected to perform better than Australian property; and
Fixed income assets, both domestically and internationally, are not expected to perform as well as other assets.

The Index shows that while sentiment is on the whole mildly optimistic, CIOs have concerns about risks within the US and European economies. Their concerns are predominantly related to the fiscal positions of those regions and the austerity measures that have been taken.  They also have concerns about the risk attached to Australia’s increasing reliance on Asia, in particular China.

Looking to the longer term (five years), CIOs consider debt and deleveraging to be the most significant potential sources of risk.  Inflationary pressures are also considered potentially significant as economies move out of recession.

BT Financial Group announces new head of Asgard

BT Financial Group (BTFG) has today announced the internal appointment of Craig Lawrenson to lead the Asgard business.

BTFG’s General Manager of Platforms, Marketing & Communications, John Shuttleworth, said, “It is fantastic to be making an internal appointment into the Head of Asgard position after a very comprehensive internal and external search over the past few months.

“Craig is very well positioned to take on this leadership role,” Shuttleworth said. “He knows what advisers and dealer groups want from their platform providers, he has more knowledge than just about anyone on what platforms can deliver to advisers and their clients, he’s deeply engaged in the current regulatory reform agenda and he knows how to motivate a team to consistently deliver high quality projects and product enhancements.

“That’s quite a combination of skills which Craig’s developed over many years in the BT Wrap business, and based on this background he’ll be hitting the ground running in Asgard,” Shuttleworth said.

“Craig’s joining Asgard at an important time for the business. It has good momentum in terms of its service delivery, its new distribution structure which better aligns our team to advisers, and the exciting pipeline of product enhancements which will build on recent developments on the Asgard master trust and the newly launched first phase of our three-year program of equities enhancements.”

Lawrenson has been with BT for some 14 years, most recently as Head of Product and Strategy for BT Wrap with responsibility for the design, execution and ongoing management of product strategy for BT Wrap. A chartered accountant, he joined BTFG in 1996 in fund accounting and during his career at BTFG has held various roles in Wrap operations, product management, strategy and product development.

Lawrenson’s appointment is effective 1 October 2010.

AMP appoints new Hillross Managing Director

AMP Financial Services has appointed Hugh Humphrey as Managing Director of Hillross  commencing 15 November.

Mr Humphrey joins Hillross from Singtel Optus where as Director, Mobile and Convergence he was
responsible for its integrated mobility offerings for corporate and government customers.
AMP Director of Financial Planning, Advice & Services Steve Helmich, said Mr Humphrey will be
charged with growing the Hillross business in an increasingly competitive market.

“Hugh’s appointment will bring a fresh approach to the Hillross business. His extensive sales and
marketing experience with some of Australia’s largest and most competitive companies will ensure
Hillross is well placed for future growth.”

Prior to joining Optus Mr Humphrey spent six years with Vodafone in a number of senior roles
including General Manager Business Markets and General Manager for People and Brand.

Mr Humphrey started his career as a Management Consultant at PricewaterhouseCoopers and
later with IBM Business Consulting Services after its acquisiton of the PwC Consulting business in
2002.

Mr Humphrey has a Bachelor of Commerce with double majors in Marketing and Economics from
The University of Sydney and is completing his MBA at Henley Management College within the
University of Reading (UK).

Ray Djani, who has made a significant contribution to Hillross, especially over the last few months
as acting Managing Director, will continue in the acting MD role until Mr Humphrey joins in
November.