OECD Release 14/12/2009

Harmonised Unemployment Rates (HURs), OECD - Updated: December 2009

14/12/2009 - The unemployment rate for the OECD area was 8.8% in October 2009, 0.1 percentage point higher than the previous month and 2.3 percentage points higher than a year earlier.

In the Euro area, the unemployment rate was 9.8% in October 2009, the same as the previous month and 1.9 percentage points higher than in October 2008. For the United States, the unemployment rate for November 2009 was 10.0%, 0.2 percentage point lower than the previous month and 3.2 percentage points higher than a year earlier. For Japan, the rate was 5.1% in October 2009, 0.2 percentage point lower than the previous month and 1.3 percentage points higher than in October 2008, etc.

After a positive lead from overseas, the Australian market jumped upon opening and continued to climb over the course of the day. The All Ordinaries finished Tuesday 65 points higher.

Index                                      Close  Chg     %Chg
All Ordinaries                      4,724   +64.9   +1.4
ASX 200                                 4,704   +69.1   +1.5
ASX Small Ords                    2,527   +22.1   +0.9
Industrials                            3,915   +62.9   +1.6
Fin.-x-Prop Trusts                5,373   +93.7   +1.8
Materials                              12,347  +185.0  +1.5
Cons. Staple                          7,480   +87.8   +1.2
Telecom Serv.                       1,135   +6.8    +0.6
10y Bond Yield                     5.57    +0.11   +1.9

The S&P/ASX 200 closed 69 points up, with all sectors finishing in the black. The Financial sector gained, with Commonwealth Bank (+$0.44), Westpac (+$0.80), National Australia Bank (+$0.31), ANZ (+$0.52), Westfield (+$0.20), QBE (+$0.38), Macquarie Group (+$0.89), Stockland (+$0.10) and Insurance Australia Group (+$0.12) rising. AXA Asia Pacific (-$0.07) bucked the trend. The Industrial and Healthcare sector saw Leighton Holdings (+$0.90), Brambles (+$0.36), Toll (+$0.27), CSL (+$0.61), ResMed (+$0.13) and Cochlear (+$2.58) strengthen. In the Material sector, BHP Billiton (+$0.70), Rio Tinto (+$2.18), Incitec Pivot (+$0.12), Sims Metal (+$0.91) and Alumina (+$0.06) rose, even as Newcrest (-$0.72) went backwards. The Consumer Staples sector saw Woolworths (+$0.45), Wesfarmers (+$0.23) and Foster’s (+$0.10) finish in the black. Other notable movers included News Corp (+$0.42) and Caltex (+$0.47).

Macarthur Coal announced a takeover offer for Gloucester Coal after markets closed with both stocks in a trading halt for the day. The scrip offer values Gloucester at $8.16 a share. An $8.00 cash alternative per Gloucester share has also been made by Macarthur. Nufarm (in a trading halt) has received a revised takeover offer from Sinochem of $12.00 (cash) per share, down compared to the previous offer price of $13.00 (cash) per share. Graincorp (-$0.43) expects FY10 EBITDA (including the NPAT contribution from the Allied Mills JV) of $180M-$210M. S&P has assigned a “BBB+” corporate credit rating to Brambles, with a stable rating outlook.

ABS Release 14/12/2009

Lending Finance, Australia, Oct 2009

OCTOBER 2009 COMPARED WITH SEPTEMBER 2009:

HOUSING FINANCE FOR OWNER OCCUPATION

• The total value of owner occupied housing commitments excluding alterations and additions increased 0.2% in trend terms while the seasonally adjusted series decreased 1.7%

PERSONAL FINANCE

• The trend series for the value of total personal finance commitments increased 0.4%. Revolving credit commitments rose 0.9%, while fixed lending commitments fell 0.2%
• The seasonally adjusted series for the value of total personal finance commitments decreased 1.5%. Fixed lending commitments and revolving credit commitments fell 1.9% and 1.2% respectively

COMMERCIAL FINANCE

• The trend series for the value of total commercial finance commitments remained flat. Revolving credit commitments fell 1.8%, while fixed lending commitments rose 0.8%
• The seasonally adjusted series for the value of total commercial finance commitments decreased 16.3% after an increase of 8.6% in September. Fixed lending commitments and revolving credit commitments fell 17.1% and 14.4% respectively

LEASE FINANCE

• The total value of lease finance commitments increased 0.1% in trend terms and the seasonally adjusted series increased 0.5%.

The Australian market opened in the black and shrugged off a couple of pullbacks over the day to remain firmly in positive territory. The All Ordinaries finished Friday 28.5 points higher.

The S&P/ASX 200 also closed 28.5 points up. The IT sector benefited from a strong showing by Computershare (+$0.27). The Consumer Discretionary sector strengthened, helped by News Corp (+$0.43), Harvey Norman (+$0.14) and Fairfax (+$0.05). In the Material sector, BHP Billiton (+$0.54), Fortescue (+$0.12), Orica (+$0.57), Lihir (+$0.05) and Incitec Pivot (+$0.13) climbed, while BlueScope (-$0.03) went backwards. The Industrial sector saw Leighton (+$0.54) and Asciano (+$0.05) enjoy a good day. In the Financial sector, National Australia Bank (+$0.21), QBE (+$0.30) and Macquarie Group (+$0.99) gained while Westpac (-$0.21) and ANZ (-$0.20) dipped. The Healthcare sector was buoyed by CSL (+$0.33). One notable loser was Oil Search (-$0.10).

Friday was a quiet day for company news. Abacus Property Group (unchanged) has completed a $91.4M placement of approximately 228M securities at $0.40cps to institutional security holders.

ABS Release 10/12/2009

Labour Force, Australia, Nov 2009

TREND ESTIMATES (MONTHLY CHANGE)

• Employment increased to 10,844,400
• Unemployment decreased to 659,400
• Unemployment rate decreased to 5.7%
• Participation rate remained at 65.2%
• Aggregate monthly hours worked increased to 1,528.3 million hours

SEASONALLY ADJUSTED ESTIMATES (MONTHLY CHANGE)

• Employment increased 31,200 (0.3%) to 10,868,200. Full-time employment increased 30,800 to 7,627,400 and part-time employment increased slightly, up 300, to 3,240,700
• Unemployment decreased 13,300 to 653,100. The number of persons looking for full-time work decreased 11,100 to 486,400 and the number of persons looking for part-time work decreased 2,100 to 166,700
• Unemployment rate decreased 0.1 pt to 5.7%. The male unemployment rate decreased 0.1 pt to 5.8% and the female unemployment rate decreased 0.1 pt to 5.5%.
• Participation rate decreased slightly to 65.2%
• Aggregate monthly hours worked increased 13.4 million hours (0.9%) to 1,536.3 million hours

LABOUR UNDERUTILISATION (QUARTERLY CHANGE)

• Trend estimates: Labour Force underutilisation rate constant at 13.6%
• Seasonally adjusted estimates: Labour Force underutilisation rate decreased 0.1 pt to 13.5%. The male labour force underutilisation rate decreased 0.1 pt to 11.9% and the female labour force underutilisation rate decreased 0.3 pts to 15.3%

After an uncertain opening, the Australian market strengthened in the late morning only to tumble again around lunchtime. After the market’s slide accelerated in the afternoon, the All Ords finished Thursday 30 points lower.

The S&P/ASX 200 closed 31 points down. All sectors except Telcos and Industrials fell. In the Energy sector, Santos (-$0.69) and Oil Search (-$0.21) fell. The Material sector was hurt by selling in BHP Billiton (-$0.59), Rio Tinto (-$1.10), Newcrest (-$0.32), Lihir (-$0.09) and Incitec Pivot (-$0.16). The Consumer Discretionary sector saw News Corp (-$0.39) sold down. Amongst the Financials, Commonwealth Bank (-$0.35), Westfield (-$0.19), QBE (-$0.29), Macquarie Group (-$1.26) and Suncorp-Metway (-$0.25) fell while Westpac (+$0.18) and Insurance Australia Group (+$0.05) gained. In the Industrial sector, Macquarie Infrastructure (+$0.04) and Seek (+$0.28) fared better than Toll Holdings (-$0.13). Another notable loser was CSL (-$0.35).

Goodman Fielder (-$0.03) has entered into an agreement to sell its Commercial division edible fats and oils operations for $240M to Cargill. Metcash (-$0.04) has agreed to acquire a 50.1% interest in the Mitre 10 Group via an estimated $55M capital injection. Metcash will have the right to acquire the remaining 49.9% following the finalisation of Mitre 10’s audited accounts in either 2012 or 2013, based on an agreed multiple of earnings.

ABS Release 9/12/2009

Housing Finance, Australia, Oct 2009

VALUE OF DWELLING COMMITMENTS

October 2009 compared with September 2009

• In trend terms, the total value of dwelling finance commitments excluding alterations and additions increased 0.3%. Investment housing commitments increased 0.4% and owner occupied housing commitments rose 0.2%
• In seasonally adjusted terms, the total value of dwelling finance commitments excluding alterations and additions decreased 1.4%

NUMBER OF DWELLING COMMITMENTS

October 2009 compared with September 2009

Adhering to its promise, the Federal Government of Australia announced that the super concessional contributions cap will be slashed to 50%, from 2009-10 financial year. It will then become $25000 from the current $50000. The move will also have a positive impact on transitional concessional contributions for people aged between 50 and 74, it will be decreased from $100000 annually to $50000.

The transitional cap according to the Australian law is not indexed. From 1 July 2012 onwards, according to new developments the concessional contributions cap for people aged 50 and above will back to lower $25000 cap.

But, the new development will have no impact on non-concessional contributions cap, it will remain at $150000 for the year 2009-10 or $450000 over 3 years. However in future the non concessional contributions cap can be surged if the new lower $25000 cap is increased by indexation, it will be calculated as six times the level of the indexed concessional contributions cap. Besides, the existing grandfathering arrangements will continue, and it will be further extended to persons who were part of defined benefit schemes as on 12 May 2009.

Be careful

The 50% slashing of the concessional contributions cap to $25000 from July 2009 offers a wonderful opportunity to taxpayers from diverse backgrounds to review their salary sacrifice understanding. The reduced cap will also have considerable repercussions on people who are eligible to claim a deduction for personal superannuation contributions that are calculated towards the concessional contributions cap.

Moreover, the reduced concessional contribution cap will advertently or inadvertently force taxpayers to breach the cap and face tax penalty in accordance with laws of the government, with an effective tax rate of up to 93%, to be more precise, 15% tax paid by the fund on the concessional contributions and an addition 31.5% in excess concessional contributions tax and 46.5% in excess non-concessional contributions. What is striking is that many of the taxpayers may not be from high earning group, which the government is aiming. According to financial experts government most probably will end up catching low and middle income earners, who might get the timing of the contribution wrong by June 30.

Further, the risk of generating a punitive effective tax rate of 93% for contributions can aggravate in many situations, such as where the concessional contributions cap exceeds and an individual is already at his or her non-concessional contributions limit of $450000 that falls under the three year bring forward rule.

The following table shows the proposed caps and the excess contributions tax rates from 2009-10:

Concessional contributions in layman language can be defined as the contributions that are included in assessable income of the receiving superannuation fund, for example employer contributions for superannuation guarantee purposes, salary sacrifice contributions and deductible personal contributions covered by a valid 290-170 notice. This mentioned cap applies on the basis of per person per annum. Excess concessional contributions tax of 31.5% is applied on the individual. Nevertheless an individual is able to withdraw from their superannuation fund an amount to fulfill tax liability. Therefore it can be said that the annual concessional contributions is a limit on the level of contributions, which will only be taxed once during the contributions stage.

Non-concessional contributions’ include many other contributions that are not included in the assessable income of the receiving superannuation fund, some of these include non-deductible personal contributions made out of the member’s after tax income. There are also many more particular inclusions (excess concessional contributions) and exclusions (government co-contributions and proceeds from the disposal of small business assets up to the CGT cap amount of $1.1 million for 2009-10-$1.045 million for 2008-09).

ABS Release 9/12/09

International Trade in Goods and Services, Australia, Oct 2009

BALANCE ON GOODS AND SERVICES

• The trend estimate of the balance on goods and services was a deficit of $1,936m in October 2009, an increase of $122m on a revised deficit in September 2009
• In seasonally adjusted terms, the balance on goods and services was a deficit of $2,379m in October 2009, an increase of $534m on a revised deficit in September 2009

CREDITS (EXPORTS OF GOODS & SERVICES)

• Seasonally adjusted, goods and services credits fell $703m (3%) to $19,468m.Non-rural goods fell $325m (3%) with the coal, coke and briquettes component down $344m (12%), the metal ores and minerals component down $267m (7%) and the other mineral fuels component up $217m (18%). Rural goods fell $156m (8%) and non-monetary gold fell $235m (17%). Services credits rose $31m (1%).

DEBITS (IMPORTS OF GOODS & SERVICES)

• Seasonally adjusted, goods and services debits fell $170m (1%) to $21,847m.Intermediate and other merchandise goods fell $207m (3%) with the fuels and lubricants component down $236m (10%). Non-monetary gold fell $66m (9%),consumption goods fell $42m (1%) and capital goods rose $35m (1%). Services debits rose $111m (2%).