The Border Watch : May 6th 2014
Business Bendigo buys Rural Finance for $1.78b in Brief Confident: Mike Hirst. Kelly in favour of tough budget MELBOURNE: Westpac chief executive Gail Kelly says Australia needs tough spending cuts to deal with a rising deficit. Unlike ANZ boss Mike Smith, who last week criticised a proposed new tax or deficit reduction levy he said would damage confidence and entrepreneurialism, Kelly would not comment on proposed government policies. However, she rejected the suggestion any budget upheaval – whether it be taxes on workers earning about $80,000 or cuts to nearly all government agencies – would hurt an already fragile economic recovery. “We all know it’s going to be a tough budget, it has been well flagged and it needs to be a tough budget,” Ms Kelly said yesterday. “The fiscal deficit issue we have is proving to be quite intractable.” Ms Kelly said she liked the view of Business Council of Australia’s Jennifer Westacott that budgets should contain four planks to deliver: economic growth; efficient expenditure and revenue; and good social policy, including skills training. “Ultimately, if the economy grows, that is good for us all, so what can the budget do that takes away road blocks?” Ms Kelly said. “You really do want to make sure our youth have appropriate skills training for jobs into the future.” AAP SYDNEY: Bendigo and Adelaide Bank has beefed up its presence in the agribusiness market with the $1.78 billion acquisition of the Victorian government’s Rural Finance Corporation. The deal will see the bank significantly expand its Rural Bank division, which specialises in providing financial services to farmers. Bendigo and Adelaide Bank boss Mike Hirst said the company had been looking to bolster the presence of Rural Bank across Victoria for some time. “We had intended to invest in additional capacity in the agri-banking sector in Victoria and this opportunity brings that investment forward,” he said. “Importantly, it brings it forward without the drag on earnings that building from scratch might have had associated with it.” Some analysts have questioned the price tag paid for the Victorian government business, but Mr Hirst said the deal was a better option for Bendigo than the alternative of building up its own agricultural lending operations in Victoria. Morningstar analyst Nathan Zaia said the deal was probably fairly priced and could deliver positive flow-on effects for Bendigo. “They haven’t included any revenue synergies in their forecast, so I think that is probably something they have undercooked and leaves them that extra upside,” he said. The combined customer base of Rural Bank and Rural Finance Corporation will be about 5200. Westpac chalks up record profit Shares slump 42c despite impressive first-half performance MELBOURNE: Westpac chief executive Gail Kelly is banking on home building and continued low interest rates to drive confidence and improvement in Australia’s economy. The head of Australia’s second-largest lender gave an upbeat view of the economy as housing loan growth drove a record $3.77 billion first-half cash profit. The bank also lifted its fully-franked interim dividend to 90c, from 86c. Westpac’s chief economist Bill Evans said despite rises in dwelling approvals, business and commercial lending and business confidence, he was not forecasting an interest rate rise until the second half of 2015. Ms Kelly said the world economy was gradually improving, with the US and Europe performing better as China’s growth slowed to a still-solid 7 per cent. The latest official figures out yesterday showed approvals for new homes in Australia up nearly 20 per cent at 19-year highs. “The pick-up is related to the interest rate cycle at the moment,” Ms Kelly said. “Our focus on tilting to growth is delivering and this is expected to continue into the second half of the year.” The bank increased housing loans by 5 per cent Confident: Westpac chief executive Gail Kelly expects lending growth to increase six per cent for the full year. and was predicting a 7 per cent total for the year. It already has Australia’s second-largest share of the mortgage market, behind Commonwealth Bank. Business lending was up 5 per cent in a positive sign for the economy. Ms Kelly said she thought lending growth overall $1.4b takeover bid for Aquila PERTH: Chinese steelmaker Baosteel and rail operator Aurizon plan to kickstart the stalled $10 billion West Pilbara Iron Ore Project with a takeover of its major stakeholder. The pair have offered $1.42 billion for Aquila Resources, which has a 50 per cent stake in the project, sending Aquila’s shares to a two-year high. Analysts said the deal was attractive for Aquila shareholders, but major hurdles remain for the completion of such a largescale mine, rail and port project. Baosteel Resources has held Aquila shares for five years and become frustrated with the lack of progress on the West Pilbara Iron Ore project, vice president Wu Yiming said. “We are going to get 10 - The Border Watch, Tuesday, May 6, 2014 things started and if our bid is successful our intention is to progress development,” Ms Wu said yesterday. Both Baosteel and Aurizon could fund the West Pilbara Iron Ore Project, she said, which has an estimated price tag of $10 billion. “This does look like quite a good solution for Aquila shareholders,” Morningstar analyst Gareth James said . would increase 6 per cent for the full year. Despite a bumper profit that beat expectations, Westpac’s shares were the worst performers of the four majors, slumping 42c, or 1.2 per cent, to $34.45. Morningstar analyst David Ellis said most promising was Ms Kelly’s Picture: AAP optimistic economic outlook, given banks’ tendency to be a barometer of the economy. “There is evidence of a moderate pick-up and we see it in the bank results every six months: business activity, consumer spending and loan growth,” he said. AAP Building approvals still at record high levels SYDNEY: Housing construction approvals have dipped in the past couple of months, but are still at 19-year highs. Home building approvals AAP were down 3.5 per cent in March, after a 5.4 per cent fall in February, according to official figures released yesterday. However, there were more than 188,000 home building approvals in the year to March, the highest number since 1995 and 20 per cent higher than the year before. “We expect to see sharp rises in the construction activity data in coming quarters,” Commonwealth Bank senior economist Michael Workman said. AAP AAP Watchdog takes Coles to court SYDNEY: Australia’s consumer watchdog is taking Coles to court, accusing the supermarket giant of “unconscionable” conduct towards its small suppliers. Coles has vowed to fight the legal action, insisting it has strong relationships with the 200 suppliers. The Australian Competition and Consumer Commission launched legal proceedings against Coles in the Federal Court, accusing the retailer of abusing its size and strength to obtain more favourable trading terms from suppliers. Job ad growth offers employment hope SYDNEY: Further growth in job advertisement numbers suggests more improvement in the labour market, but a tough federal budget could damage the employment outlook. Job ads rose for a fourth consecutive month in April, up 2.2 per cent, ANZ figures show. Labour demand had strengthened in 2014, with a rise in hiring intentions suggesting the unemployment rate should be close to its peak of about 6 per cent, ANZ chief economist Ivan Colhoun said. The unemployment rate fell to 5.8 per cent in March. Forrest pays $12m for stake in miner SYDNEY: Mining magnate Andrew Forrest has invested $12 million in a prospective West Australian uranium miner aiming to be in production by the end of 2016. Mr Forrest has paid Energy and Minerals Australia $12 million for a 28 per cent stake in the company, which owns land in central Western Australia containing four deposits of uranium. The company has also reached agreement with its lenders to remove $24.5 million of debt. It said the two deals would help set it up to get its Mulga Rock project under way. Metcash resolves tax dispute SYDNEY: The company behind IGA supermarkets has settled a multimilliondollar dispute with the Australian Taxation Office. Metcash said it would get a partial refund of the $24.4 million in income tax it paid in mid-2011. But a tax expense of $10.8 million would also be included in its accounts for the 2013-14 financial year. An audit of the company’s income tax returns for 2005 to 2008 resulted in a dispute over its inability to get tax credits for its foreign subsidiaries.
May 2nd 2014
May 7th 2014