Wall Street rose again overnight, Australian time,for the third consecutive day.
That happened as a computer giant reported strong profits and oil prices continued to ease.

The Dow Jones industrial index closed 52.19 points up on the day, at 12,646.22.

But the market had been 130 points higher, earlier in the day.

Financial stocks captured much of the day’s attention.

Mastercard predicted strong revenue growth.

And shareholders approved the buyout of Bear Stearns.
The S&P 500 closed 7.42 points higher at 1,398.26.

And the tech heavy NASDAQ composite index rose 21.62 points to 2,508.32.

The rises occurred after Dell reported a first quarter profit of $US784 million, or 38 US cents a share.

Analysts had been predicting a profit of 34US cents a share.

Oil futures, too, continued to fall. They easedl by $US4.60 a barrel, to $US126.43

A significant gap has been identified in the Tax Office’s efforts to catch cheats who use offshore tax havens.

It was exposed in a new report, published by the Auditor General.

The report notes that the Tax Office has adopted a risk management framework for its compliance program.

This is meant to identify and assess risks associated with tax havens.

Mitigation strategies are then developed.

“This (system) comprises a combination of oversight committees, intelligence areas and compliance staff from a number of areas,” the report says.

It adds that this is meant to work at both formal and informal levels.

“However, at a formal level the key steering committee, responsible for determining strategic direction has not yet met, ” the report adds.

So it is not providing the strategic direction that is expected of it.

“The Tax Office can improve its governance of tax haven risks by ensuring that this key strategy setting committee meets on a regular basis, in accordance with the terms set out in its charter,” the Auditor General said.

The Tax Office has accepted this advice.

Business confidence is down. Consumer confidence has plunged.

And the Australian economy is said be heading for an abrupt slowdown.

Yet Australian companies still expect to spend $87 billion on new capital projects this financial year.

That is 11.1 per cent more than they said they would spend, last financial year.

This shows up in the latest estimates of likely new capital spending, published by the Australian Bureau of Statistics.

These estimates, in both cases, are the sixth in the regular series, collected by the Statistician.

So why are the nation’s CEOs planning to spend so much, when the world is facing a global credit crisis?

The answer, for once, is simple.

Demand for Australia’s resources, such as iron ore and coal, is high.

China and India are particularly good customers.

But there are problems.

Australia’s ports, railways and mines cannot cope, even with the present level of demand, let alone increased orders.

And, if that continues, these customers -and others – will start looking for new suppliers.

So Australia’s resource companies companies are responding, as enthusiastically as they can.

They are doing that by expanding their operations.

And that – as the latest new capital spending figures show – is an extremely expensive business.

The Prime Minister Kevin Rudd went on the attack over petrol prices today, declaring that his government” National Fuel Watch bill would be introduced into parliament “in a few hours.”

He was speaking to reporters in Canberra, just before the start of question time, at which the opposition is expected to quiz the government closely on aspects of the controversial bill.

But Rudd was firm.

“The debate is simple,” he said.

“Whether Australian motorists should have the same information (about prices) as oil companies.

“We say they should.

“The opposition says they should not,” he said.

Under the bill, service stations would be obliged to hold their prices, at advertised levels, for 24 hours.

The government has been severely embarrassed by two leaks of confidential information, over the bill.

The first revealed that its Resources Minister, Martin Ferguson, opposed the bill.

The second exposed the fact that four government departments, including the Federal Treasury, also advised the government not to proceed with it.

However, Rudd quoted the Chairman of the Australian Competition and Consumer Commission, Graeme Samuel, who has supported the bill.

Samuel said the West Australian Fuel Watch scheme, which the Federal government is copying, had produced “statistically significant” cuts in petrol prices, in that state.

Share prices rose slightly on Wall Street overnight, despite a prediction that oil prices could soon hit $US150 a barrel.

That prediction, by Morgan Stanley,saw oil futures rise above $US130 a barrel again, a jump of $US1.89 a barrel on the day’s trade.

The Dow Jones industrial index rose 45.68 points, to close at 12,594.03.

The S&P 500 also rose, gaining 5.49 points to close at 1,390.84.

The NASDAQ composite index rose. too. It put on 5.46 points to reach 2,486.70.

The turnabout, from recent losses, caused one optimistic trader to declare:”the bottom is in.”

It was, after all, the second straight day of gains.

But there were more cautious assessments, too.

“The market is seeking direction,” one analyst said.

But even he conceded that sentiment is now on the upside, however weakly.

The rises, overnight, were wide-spread.

Seventeen of the 30 components of the Dow Jones industrial index recorded rises, on the day’s trading.

Soaring oil prices brought the Whitlam government’s honeymoon to an abrupt end, a generation ago.

And the Rudd government’s luck, with oil prices, hasn’t been good, either.

So far, though, it hasn’t suffered anything like the damage that the Whitlam government did.

But the opposition, led by a reinvigorated Brendan Nelson, has been making its attack stick.

Nelson – and his colleagues – have been demanding a guarantee that the government’s Fuel Watch scheme won’t add to fuel prices.

The Prime Minister, Kevin Rudd, has of course, refused. Political leaders, since the time of King Canute, have known that government orders don’t hold back waves.

Bob Hawke learnt his lesson, on decrees, the hard way, after he had he boldly declared that “by 1990, no Australian child will live in poverty.”

Still, Rudd has been left in an awkward position.

His Fuel Watch scheme was never going to have much effect on fuel prices, either way.

And it became an embarrassment, when news that the Resources Minister, Martin Ferguson, had opposed the plan  was leaked.

The government’s embarrassment became acute, a few days later, when another leak revealed that at least four government departments had also advised the government against adopting the Fuel Watch plan.

That’s the rub. The government appears to be incompetent, because it can’t stop its own public servants leaking embarrassing information, about their submissions to Cabinet.

The government’s defence is sound enough. The Treasurer, Wayne Swan, says the Competition and Consuumer Commission, which is the expert in this area, had said that the scheme would probably help to keep fuel prices down.

But there are, also, more fundamental forces, like supply and demand, at work.

Governments, of course, do have a right to reject bureaucratic advice, when they believe that is necessary.

That’s what we have governments for. To make democratic choices. And to take the consequences, if they get it wrong.

But a sense of perspective is needed, too.

Fuel price hikes are certainly painful.

But petrol prices in Australia are still among the lowest in the developed world.

We should remember, too, that oil prices quadrupled, in a very short time, back in the early 1970s.

So far, they have risen by just 60 per cent, in the six months the Rudd government has been in power.

The responses of the two governments have been very different, too.

The Whitlam government came to power, back in 1972, with a big spending program.

It destroyed any economic credibility it might have had, when it persisted with its heroic spending, despite the then rising threat of oil fuelled inflation.

The Labor party has never forgotten that lesson.

With inflation a serious problem, once again, the Rudd government cut deeply into Federal spending programs, when it brought its first budget into parliament in May.

But the present oil price hike will, certainly,  require a careful response.

It is due, in large part, to increased demand from developing countries, such as China and India.

That suggests that higher oil prices will be permanent, this time. It’s time, as Gough Whitlam might have said, to start thinking of smaller cars a better public transport.

Although building construction work in Australia is flat, engineering construction is booming.

And this development, already evident in figures produced by the Austrlian Statistician, might well be the first glimpse of the two speed economy that is thought to lie just over Australia’s economic horizon.

The bureau reported that Australian companies spent more than $13.5 billion on engineering work, on seasonally adjusted figures, in the March quarter of this year.

That was 5.2 per cent up on the December quarter figure.

Although the bureau did not provide a break-up, it’s a safe bet that much of this work was done, directly or indirectly, for the mining industry.

High interest rates, though, have dampened demand for other kinds of construction work.

The value of residential work, for example, rose by a bare 0.3 per cent, in the March quarter, to just $9.7 billion.

And the value of non-residential building fell by 0.5 per cent in the quarter to just $6.7 billion.

The Federal Treasury is worried about the secondary effects of the mining boom.

It has warned that money flowing into Australia, under new, higher priced contracts, could have a serious inflationary effect on Australia.

But Westpac data, released yeterday, shows that other sectors of the Australian economy are likely to slow down abruptly in the months ahead.

And another bank, the ANZ, is already predicting that Austraiia’s inflation will hit 4.9 per cent, later this year.

It is warning, too, that further interest rate rises will be needed, if that happens.

A major bank says the Australian economy is heading for an abrupt slowdown.

And some people – such as homebuyers – might welcome that – as it could reduce the risk of further interest rate rises.

But that is by no means certain.

Westpac reported today that its leading index now stands at its lowest point in almost five years.

Its senior economist, Matthew Hassan, said this indicator is continuing to point to “an abrupt slowdown.”

He said shoppers had already been “jolted” by previous rate rises.

“Meanwhile business investment is also coming under pressure,” Hassan added.

He pointed to the likelihood of a two speed economy, with the minerals boom continuing to run at full speed, while other sectors of the economy slowed.

But Australia’s banks are by no means unanimous in their predictions.

The ANZ, for example, expects Australia’s inflation to peak at 4.9 per cent, later this year.

And it believes this will lead to further interest rate rises.

“…further rises will be the appropriate policy,” an ANZ economist said.

Share prices rose on Wall Street overnight as oil prices fell.

The Dow Jones industrial index gained 68.72 points to close at 12,548.35.

Oil futures fell $US3.58 a barrel, to $US128.61.

As that happened, the S&P500 index rose 9.42 points to 1,385.35.

And the tech heavy NASDAQ composite index jumped 36.57 points to 2,481.24.

But there was bad news in the US overnight, too.

Consumer confidence, for example, fell as house prices showed no clear sign of recovery.

The NASDAQ was boosted amid speculation about Microsoft’s plans to take over the internet giant, Yahoo.

Trading on Wall Street was heavy, with the volume of sales topping 1.1 billion.

The day’s optimism was also reflected in the direction of individual sales.

Advancing stocks outnumbered retreating ones by almost 2 to 1.

The heaviest trade, on the day, was in the high tech sector.

Chile has come a long way since the days of General Augusto Pinochet.

It has, for example, become an important trade and investment partner for Australia.

Two way trade between the two countries is now worth $855 million a year.

And that is likely to soar to the $1 billion a year mark, under a new free trade agreement, that the two countries have now reached.

Australia’s Trade minister, Simon Crean, who announced the deal yesterday, said it would probably come into effect on January 1 next year.

“It is an agreement of the highest quality on goods,” Crean said.

He said tariffs on 97 per cent of the goods traded between the two countries would be removed from “day one.”

The rest would be scrapped by 2015.

Crean said, too, that the new agreement exceeded WTO standards, in the services sector.

“It includes a ratchet mechanism that locks in any liberalisation achieved within Chile on services and investment,” he added.

Australia is also a major investor in Chile, with foreign direct investments of some $3 billion, mostly in that country’s mining industry.

Australia’s banks are starting to recover their nerve.

Their confidence collapsed in the second half of 2007, as the global credit crunch hit.

But  their panic passed -in the first quarter of  2008 – and  they began lending again, overwhelimingly to domestic customers.

A bulletin, that the Australian Bureau of Statistics released yesterday, tells the story.

It’s available at www.abs.gov.au. Look for document 5332.0.55.001, called Assets and Liabilities of Australian Securiitisers, March 2008.

A graph tracking  percentage changes in the total assets of Australia’s securitisers plunged in the second half of 2008, as the credit crunch hit.

But it has turned up again, in the first three months of this year, as Australia’s banks, the main securitisers, began to realise that they needed to lend, particularly to home buyers, if they were to make  profits.

The bureau reports that mortgages account for almost 77 per cent of total securitised assets in Australia.

Your home loan might be a big liability to you and your family.

But it is also an equally big asset to your  bank, so long as you keep making the proper repayments.

America’s banks forgot about that need for a while, apparently deciding that they would still have  securitised assets, even if their borrowers could not repay.

That lapse led, firstly, to a great deal of reckless home lending in the US.

It then led to catastrophic losses for the banks, as house prices in the US plunged, removing the banks’ last line of protection.

That, in turn, produced a global credit crunch and produced a set of economic circumstances that the IMF is calling the nastiest seen since the Great Depression of the 1930s.

But the worst of the credit crisis appears to have been avoided in Australia.

That was confirmed yesterday, when the bureau reported that Australia’s banks – and other lenders – increased their stock of long term asset backed securities, in Australia, by no less than $11.8 billion, in the March quarter.

That wasn’t all new mortgage money.

But a lot of it was.  And although Australia’s house prices have eased, in many places, over the past few months, that should be enough to stop an outright collapse in the domestic housing market.

Australia’s banks still haven’t learnt to trust foreigners again, though.

The bureau also reported that the proportion of “asset backed securities” that Australia’s banks and other lenders have  issued overseas” fell  3.8 percentage points, in the March quarter.

Share prices fell again on Wall Street overnight, but US growth figures- due out later this week – might offer some relief.

The Dow Jones industrial index fell 145.99 points to 12,479.63.

The S&P 500 also fell, losing 18.42 points to close at 1,375.93.

And the tech heavy NADAQ composite index fell 19.91 points to 2,444.67.

However oil futures rose slightly, adding 76US cents a barrel, to $US132.95.

Some analysts, though, believe that US growth figures, due out Friday, Australian time, will be better than expected.

The first estimates put the likely growth in US gross domestic product in the first three months of this year at 0.6 per cent.

However, there are now predictions that it might be as high as 0.9 per cent.

Even that news, though, has been treated with some scepticism.

Analysts noted that consumer confidence in the US is still very low

And one said that could drag down US consumer spending, which has shown some resilience, so far.

Still, the new GDP figures are providing perhaps the one slim hope of any bounce in US share prices, in the immediate future.

Lachlan Harris has stumbled, too.

Spin doctors should never let themselves become the story.

But that is just what Kevin Rudd’s media chief has done.

Harris is the complete professional.

And his management of the media, in the week before the budget was published, on May 13, was superb.

Press gallery reporters, like their colleagues everywhere, are always in the market for an exclusive story.

And the government placed many of those, on the budget, at that time.

That was a triumph for the Prime Minister’s media machine.

But the PM’s media minders – and Lachlan Harris in particular – are now being accused of censorship.

A Victorian Liberal Senator, Michael Rolandson, said the Rudd government had set “an extremely dangerous precedent.”

There is some room for scepticism.

After all, as Mandy Rice Davies once said, in slightly different circumstances:”He would say that, wouldn’t he?”

But Ronaldson was adamant.

“We’ve got ministerial staffers, with no entitlement, removing people (reporters) from licensed areas (of parliament house).

“We’ve got them out the front of the Great Hall, taking them out of the Blue Room (where Prime Ministerial press conferences are held).

“I mean this is a government, in six months, that is totally out of control,” Ronaldson added.

An ABC insider gave Private Briefing another example.

That was of Lachlan Harris objecting to the ABC filming Rudd, while the PM was in the ABC studio in the Press Gallery of Parliament House.

Rudd was reading from notes, during a radio interview.

And that is not a particularly good look, in television footage.

“When we do radio, we do radio,” our insider quoted Harris as saying, in a bullying manner.

“And when we do television, we do television.”

That one has now been settled, in the ABC’s favour.

Lachlan’s objection has been lifted.

But these events have left nasty aftertastes,

Several years ago, public servants in Canberra , were fond of saying that the highly successful TV series, Yes Minister, was not a comedy, but a documentary.

That applies, too, apparently, to the current series of Absolute Power, which studies the activities of spin doctors.

Tricom’s troubles, meeting its share trading debt obligations on time, back in January, are likely to lead to changes in in the way Australian share trades are settled.

This became clear yesterday, when the Reserve Bank released a report on the affair.

The bank said the current settlement practices had served the Australian equities market well for many years.

“The batch settlement process is well established, operationally efficient and minimises liquidity demands,” the bank said.

So, with a CV like that, why would anyone think of changing this system?

Well, the events of January 29 and 30 provide did display weaknesses.

There were significant delays in the settlement of equity trades  on both days.

This rattled the already unsettled share markets, at that time.

Tricom Equities is a significant broker and margin lender.

And it was the first such player, in more than 30 years, to have this trouble.

Its managing director, Lance Rosenberg, said at the time that there had been problems recovering stocks held by other parties.

“They didn’t give us our stock back,” he added.

The Reserve bank said that, despite the delays, there had never been any doubt that “the central counterparty” (Tricom) would be able to meet its obligations.

At present, settlement of most equities transactions occurs in a single daily batch process, run by an electronic clearing house, owned by the Australian Stock Exchange.

Typically, that happens about noon each working day.

However, the Reserve Bank says there “is now room for some changes.”
“In particular, the bank sees a strong case for moving to trade by trade settlement, over the medium term.”

Meanwhile it says  there is also a need to take steps to enhance the the robustness of the existing batch settlement process.

The bank says it will work with the ASX and other players, over the coming months, to see how these changes might best be made.

Wall Street fell sharply, again, on Friday, US time.

The Dow Jones industrial index dropped 145.99 points on the day to 12,479.63.

The S&P 500 fell 18.42 points, to 1,375.93.

And the tech heavy NASDAQ composite index dropped 19.91 points to 2,444.67.

There were sharp falls in Europe, too.

The FTSE 100, for example, fell 94.30 points to 6,087.30.

And with oil futures, hitting $US132.19 a barrel over the weekend, Australian time, traders’ spirits are  likely to remain subdued.

Even the Prime Minister, Kevin Rudd, was sombre, at the weekend.

He reminded the Labor faithful in Melbourne that the International Monetary Fund, has warned that the global economy is currently suffering “the greatest financial shock since the Great Depression.”

“At the same time, oil prices have soared to record global levels, off the back of ballooning demand from China and the developing world,” Rudd added.

He said these forces, combined with  rising domestic inflation, had presented “difficult economic circumstances” as the government put this year’s budget together.

Two huge natural disasters, that have struck Asia recently, are also adding to global financiers’ headaches.

China is now planning to build 1.5 million temporary shelters, to house people left homeless by its earthquake, even before it thinks of permanent reconstruction projects.
And the Burmese generals are now – belatedly – seeking cash from countries willing to help victims of their country’s devastating cyclone.