Reserve Bank risks grinding Australia to a halt – economist

FURTHER official interest rate rises could choke off consumer spending and grind the economy to a halt, economists warn.

Herston Economics chief economist Clifford Bennett says if the Reserve Bank raises the cash rate to five per cent by year’s end, the economy would “grind to a standstill”.

The current cash rate is 4.25 per cent, after the RBA lifted the rate by a quarter of a percentage point on Tuesday in an effort to further rein in expansionary pressures.

It was the fifth monthly interest rate rise by the central bank since October last year.

“If the cash rate gets to 5 per cent … the domestic economy will grind to a standstill,” Mr Bennett said.

“The only thing that’s going to be impacted by higher rates are struggling Australian families.

“We’re seeing in the Sydney press examples of them having to choose between buying groceries and paying their electricity bill and the added burden from the RBA is completely unwarranted, unnecessary and unwanted.”

RBA governor Glenn Stevens said it was appropriate to raise the cash rate towards its long-run average given that “the risk of serious economic contraction

Most economists say the average long-run cash rate is around 5 per cent.

Nomura Australia economist Stephen Roberts said rising interest rates meant consumers were paying a greater proportion of their income in servicing debt.

Data compiled by the central bank showed that when the cash rate was 3.75 per cent at the and of the December quarter of 2009, the average household was paying more than 10 per cent of its income, minus taxes and some other regular payments, on interest payments.

When the cash rate topped 18 per cent in December 1989, the average household was spending just under nine per cent of its income on interest payments.

The figures also show that in December quarter of 1989, household debt was slightly less than half household yearly income.

Twenty years later it was equal to one and a half times an average household’s yearly income.

“That data is from fourth quarter (2009) and you have to remember we’ve had two more interest rate rises already,” Mr Roberts said.

He said a lower interest rate of 3.75 per cent to 4 per cent would be more appropriate given the current difference between the cash rate and the interest rates of major lenders.

Official economic data now points to a slowing economy, with building approvals, employment and retail sales data for March all coming in under market expectations.

Mr Bennett said the data suggested Australia’s economic performance post the global financial crisis was weaker than first thought.

“When you look at the domestic economy, there are patchy elements,” he said.

“There are storm clouds on the horizon.”

Source  :  www.news.com.au

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Petrol prices ‘rising’ in next fortnight

Further increases in petrol prices are predicted as Australia’s unleaded benchmark price scaled a 10-month high of almost $100 a barrel in the past week.  

While the continued signs of a recovery in the global economy had been great news for share market investors, the same could not be said for motorists, Commonwealth Securities economist Savanth Sebastian said.

The Australian Institute of Petroleum’s weekly report showed the unleaded petrol prices rose by an average 1.9 cents per litre in the past week to 124.5 cents.

The average metropolitan price rose by 2.6 cents a litre to 124.2 cents, while the regional average price rose by 0.7 cents to 125.1 cents.

“The glut of oil inventory on global markets is not putting downward pressure on prices,” Mr Sebastian said, adding traders and investors were focussed on the recovery story.

Even a strong Australian dollar has not been able to significantly absorb the rally in oil prices.

This resulted in the benchmark for Australian unleaded petrol – the Singapore gasoline price – rising to a 10-month high of $99.70 from $97.33 in the past week.

“If there is any consolation for motorists, it is that the rise in pump prices is likely to be rather sedate,” Mr Sebastian said.

“The petrol price will rise over the next fortnight, but only modestly, up around three to five cents a litre.”

Source  :  www.thewest.com.au

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Explosion rips through Newport Marina

THREE people have been injured and five luxury boats engulfed by flames after an explosion at Newport Marina in Sydney this afternoon.    

One person was seriously injured, while another two were treated at the scene following smoke inhalation.

The fire started when one boat caught alight while moored. The flames quickly spreading to two other boats which were moored nearby.

Two of the burning craft were dragged to nearby sand flats and extinguished, but one drifted to nearby Sirsi Marina, and set another two boats alight.

NSW Fire Brigades spokesman Norm Buckley said the boats were dragged out into open water to prevent further damage.

“We pushed those crafts that were actually on fire out into the water so they don’t pose any danger to the actual wharf itself or any part of the structures or indeed any of the other boats,” he said.

 “We’re also using one of the Rural Fire Service’s fire boats, and they’ll be putting those fires out on those boats that are floating in the bay.” 

Plumes of smoke from the blazing boats have reportedly been seen from as far away as Gosford on the Central Coast.

Source  :  www.news.com.au

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Perth’s driest start to autumn on record

This is turning out to be Perth’s driest start to autumn on record, taking at least 47 days to exceed just five millimetres of rain.   

Before this year, the longest it had taken to exceed five millimetres in autumn was 46 days and that was in 1994.

The rest of this week will be bone dry for southwest WA, much the same as the last three weeks. But rain is just around the corner.

The next rain will arrive in Perth early next week when a high finally moves east from the Bight and allows a front to make an impact on the southwest of the state. This will signal the turning of the season. Showers initially will be light but are likely to become more frequent and heavier as the week wears on as more fronts extend further inland.

Showers will even penetrate to inland areas which have been extremely dry recently. Lake Grace in the Great Southern has not had a drop of rain so far this autumn, the driest start to the season in 96 years of records.

www.watoday.com.au

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Budget 09: Skilled intake cut by 6900 people

THE federal Government has cut the skilled migration intake by a further 6900 people to help protect local jobs during the economic crisis.

But it will increase the number of people allowed to migrate to Australia for family reunions, the Government said yesterday as part of Budget 2009.

In March, the Government shed 18,500 skilled migration places in response to growing unemployment, which is forecast to hit 8.25 per cent in 2009-10.

The latest cut, the second to be made this year, brings the program down to 108,100 places in 2009-10.

Overall, the Government has slashed previous planning levels by close to 20 per cent.

Immigration Minister Chris Evans said the cuts would not be made to professions on the critical skills shortage list such as IT.

The migration intake in the coming year reflects the economic climate while ensuring employers can gain access to skilled professionals in industries still experiencing skills shortages,” Senator Evans said in a statement. The Government will provide more opportunities for family reunions by increasing the family component of the migration program by 3800 places to a total of 60,300 in 2009-10.

“This boost … will benefit Australians who seek to have their parents, partners or children join them to live here permanently,” Senator Evans said.

Overall, the migration program will total 168,700 for 2009-10.

www.news.com.au

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