The federal government has warned that the economy still faces a rough ride, even though another rise in the jobless rate was more moderate than experts had predicted.

The unemployment rate struck a six-year high of 5.8 per cent in June data released on Thursday, rising one notch from the 5.7 per cent posted in May.

This was slightly less than the 5.9 per cent predicted by economists.

Still, there was a solid 21,400 drop in the total number of people employed in the month.

The total number of jobs lost in May was also revised to 8,500, up from an originally reported 1,700.
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Falling inflation could lead to another official interest rate cut even though the Reserve Bank of Australia (RBA), as expected, decided to stay on the rates fence for another month.The RBA’s board held its monthly (except for January) monetary policy meeting on Tuesday.

At the end of the meeting the RBA governor Glenn Stevens issued a statement confirming the interbank overnight cash rate, the benchmark for short-term rates in Australia, would stay at 3.00 per cent.

The cash rate has been at that 49-year low since April where it steadied after an eight-month series of cuts from a 12-year high of 7.25 per cent.

The reasons given for the decision were a virtual repeat of the statement made a month earlier.

There are signs the global economy is steadying but risks still abound, while the Australian economy is showing signs of life in the housing sector though business investment is being pared back.
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photo credit: another_finnRegional and foreign banks have a chance to take on the big four banks as a price war over term deposits drives a convergence of savings and transaction accounts, a research company says. More funds have shifted into high interest paying accounts combining savings and transaction functions as consumers seek versatility and greater returns for their cash, Datamonitor’s annual survey of 2,300 bank customers says.

Datamonitor senior analyst Petter Ingemarsson says the change could establish a new product category that may boost the market positions of foreign and regional banks.

“In the 1990s with mortgages there was the opportunity for new entrants to enter the market, and we saw it with high interest savings accounts,” Mr Ingemarsson said.

“What we’re seeing now is that the next focal point is in the area of retail deposits and combined accounts.”
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The Reserve Bank of Australia (RBA) has maintained official interest rates at a 49-year low amid signs that the global economy is stabilising and that domestic inflation will continue to abate.But the central bank left open the door to further rate cuts, if they are needed.

“The board’s current view is that the outlook for inflation allows some scope for further easing of monetary policy, if needed,” governor Glenn Stevens said in a statement accompanying the decision.

“In assessing how it might use that scope, the board will continue to monitor how economic and financial conditions unfold and how they impinge on prospects for a sustainable recovery in economic activity.”

The RBA decided to leave the cash rate unchanged at three per cent after its board meeting on Tuesday, as had been widely expected.
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By Jill Fraser for Lending Central 

Defying the dire predictions of many commentators and the domination of the Big Four banks, regional banks, credit unions and building societies have continued to deliver solid financial results (although significantly down on prior periods) and strengthened balance sheets in the 2009 financial year to 31 March.

KPMG has analysed the ‘second tier’ of the Australian banking sector and found that the sector continues to be a relevant and important provider of financial services.

“These sectors have continued to be profitable. However their ability to compete with the major banks is being sorely tested in these challenging markets” said Martin McGrath, partner at KPMG.

Profitability was significantly lower compared to the previous half-year due primarily to an increase in bad debts expense in business lending for the regional banks and, for credit unions and building societies, a decline in net interest and non-interest income.
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The federal government is defending its economic stimulus package against reports cash payments to taxpayers have fallen short by nearly $1 billion.

The government planned to outlay about $20 billion in direct bonus payments as a way of bolstering the local economy’s defence to the global recession.

But $800 million has not found its way into the pockets of 270,000 taxpayers who failed to meet a June 30 deadline for lodging their annual tax return, an analysis by The Australian Financial Review reveals.

Competition Policy and Consumer Affairs Minister Craig Emerson says critics of the package can’t have it both ways.
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The central bank is expected to leave interest rates on hold for a third straight month in July as more signs emerge that the economy is faring better than most amid the global recession.

All of the 19 economists surveyed by AAP this week expected the Reserve Bank of Australia (RBA) to leave the cash rate at a 49-year low of three per cent at Tuesday’s RBA board meeting.

AMP Capital Investors senior economist Robert Cunneen said recent economic data and indicators of improved consumer and business confidence pointed to growth picking up in the second half of 2009.

“There’s no real impulse for the central bank to change at this point in time,” Mr Cunneen said.
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photo credit: Andres RuedaAustralian remains a cash-based society but the use of plastic credit and debit cards is growing as consumers seek more convenient payment methods and loyalty or reward program benefits, new central bank research shows.

A Reserve Bank of Australia (RBA) study of consumer payment behaviour released on Wednesday found cash is still king, accounting for 70 per cent of all transactions.

EFTPOS and MasterCard and Visa debit card payments make up 15 per cent of all transactions, followed by MasterCard and Visa credit card transactions at nine per cent and American Express and Diners Club cards at one per cent.
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Litigation over Bank of Queensland’s (BOQ) involvement with the failed financier Storm Financial could substantially eat into the bank’s profit just as losses from bad debts peak.

BOQ revealed last Thursday it had a total lending exposure of $105 million from 319 Storm Financial clients - $20 million more than the bank’s interim 2009 cash profit.

However, BOQ has said the majority of the customers were repaying their loans and no margin loans were provided to Storm customers.

BOQ was caught off guard last week when the Australian Securities and Investments Commission (ASIC) placed the bank under investigation for matters relating to Storm one day after BOQ issued a denial over a regulatory probe.
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Australian superannuation funds will return their biggest losses since the introduction of compulsory super 17 years ago, researchers say.

“2008/09 will go down as the worst financial year for super fund investors since the introduction of compulsory super in July 1992,” SuperRatings managing director Jeff Bresnahan said.

“The global financial crisis has now been the catalyst for two consecutive poor results from our super funds.”

SuperRatings, an independent research group, said it expected medium balanced investment funds to post a loss of 13 per cent for 2009/10 financial year.
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A range of new tax relief measures come into play from Wednesday, which will further help business and jobs in the face of the global recession, Treasurer Wayne Swan says.

Income tax cuts, refunds for education expenses and increased child care benefits form part of a new wave of stimulus for the economy, and come on top of the one-off welfare and tax bonuses dished out this year.

“These payments have overwhelmingly benefited low and middle-income Australians and have been very effective in supporting business activity, limiting job losses and keeping Australia from falling into technical recession,” Mr Swan said in a statement.
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Demand for credit remains subdued in an uncertain economic climate with only the housing sector showing any signs of strength, new data shows.

The Reserve Bank of Australia’s monthly credit report released on Tuesday shows total credit demand eased 0.1 per cent in May compared with April, to stand at a paltry 3.9 per cent higher than a year earlier.

Annual growth was over 13 per cent in May last year.

Demand for credit by businesses continued to tank against a backdrop of weak trading conditions and a cut in investment plans.
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NSW Premier Nathan Rees says unemployment will be the main issue in the state over the next 18 months, so the government is targeting its infrastructure spending on short-term projects to boost jobs.

The recent NSW budget predicted unemployment would rise to 7.75 per cent next financial year, and peak at 8.5 per cent in 2010-11, making it a crucial issue for the state government, Mr Rees said.

“In the short and medium term the key issue … for probably the next 18 months, is going to be jobs,” he told Fairfax Radio on Tuesday.

“If people haven’t seen unemployment rise in their neighbourhood, then I’m willing to bet that it will in the next 18 months as we feel the effects of the global recession.”
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Federal Treasurer Wayne Swan says he’s encouraged Australia remains one of the best performing economies in the world but there’s still no room for complacency.

In his latest economic update, Mr Swan used three reports - from the World Bank, International Monetary Fund (IMF) and Organisation for Economic Co-operation and Development (OECD) - to support the strategy the Rudd government had taken to deal with the global recession.

He took particular note of an IMF statement that budget deficits were appropriate in current circumstances.

“This is a big tick for our strategy,” he said.
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