by Alan Thornhill
Share trading will be just for the brave this week.
The lead from Wall Street could hardly be worse.
The Dow Jones industrial index continued to fall Friday, US time, after its plunge on Thursday.
It finished the week no less than 4.2 per cent down.
That happened as oil prices continued to test new highs.
The Australian market performed relatively well, on Friday, Australian time.
It fell, but not by as much as Wall Street had, the night before.
Oil futures have been trading at levels close to $US143 a barrel.
But while the US economy is dangerously close to recession, Australia is looking at a commodities boom.
However Australia still has its problems.
Business and consumer confidence are both down.
Inflation and interest rates are high.
And no-one expects either to ease, anytime soon.
Company profits have been slashed.
And investors know that the local company collapses, that have already occurred, won’t be the last.
Petrol prices, too, are creating havoc.
There is, as always, money to be made at this time.
But faint hearts will fail.
by Alan Thornhill
Australia will start to get an idea of where it is going on climate change, later this week.
That will happen when Professor Ross Garnaut’s draft report on the nation’s options is published.
It will be published on Friday.
Professor Garnaut’s final report won’t be released until September.
Garnaut is making no secret of the fact that climate change science is still far from mature.
But he isÂ also saying that the costs of waiting until it is will, almost certainly, be higher than those of starting to act now.
He compares the state of public knowledge now with that which existed, when Columbus sailed west, several centuries ago, searching for China.
Garnaut admitted, too, that even the best climate change scientists we have now differ, even with each other, on important points.
He concedes, too, that Galileo’s case shows that one person can be right, when many others are wrong.
But he says uncertainty is no excuse for inaction.
And Garnaut warns that, in current circumstances, the “business as usual” option must be rated as “high risk.”
“This has no close precedent,” he said.
The professor’s draft report, though, is expected to provide the first real guide to the approach to climate change, that the Rudd government is likely to take.
This will be a rough – and expensive – ride.
by Alan Thornhill
The Gippsland by-election result will buy a little more time for Brendan Nelson, but probably not much more than that.
The swing of more than 6 per cent against the government was a set-back for Kevin Rudd. The Prime Minister, himself, has virtually admitted that.
And with petrol prices still testing record heights, the government still has more hurdles ahead.
Brendan Nelson’s prediction last week, that Labor might win in Gippsland, was misplaced.
Nobody, though, is likely to blame him for that, or, indeed, even to remember that prediction.
Labor, though, is citing the obvious in its defence.
The electorate is in National Party heartland. It stayed that way.
Both Rudd and his Treasurer, Wayne Swan, have been saying, too, that with inflation high, the government has been taking the necessary tough measures, to prevent it getting worse. Looking out, in fact, for “the long term.”
That might be right.
But it won’t be popular.
And, as the great economist, John Maynard Keynes once said:-”In the long run, we are all dead.”
Rising petrol prices bite even harder in rural areas, than they do in Australia’s capitals.
There is little, if any, public transport in the bush.
So Brendan Nelson’s repeated argument that the Rudd government needs to “do something” about petrol prices has extra resonance there.
But all he is offering to do, himself, is to cut the Federal government’s fuel excise by 5 cents a litre.
As fuel prices have already risen by more than 30 cents a litre this year, that’s not going to make a noticeable difference to family budgets, either in the cities or in the bush.
Rudd keeps telling Labor MPs that their lead, in the polls, is not as great as some might think.
The Gippsland by-election result will emphasise that message.
But the Coalition is still a long way from winning back government.
And Nelson’s hold on the Liberal leadership is still weak.
Voters are still looking for firm, clear leadership from the conservatives.
And Nelson isn’t supplying it.
by Alan Thornhill
The Australian share market will get off to a bad start today, after Wall Street plunged overnight.
The Dow Jones industrial index was almost 300 points down, just minutes before the close, as oil futures had, once again, soared above $US140 a barrel.
It finished even lower. The Dow lost 358.41 points on the day to close at 11,453.42.
All 30 components of the Dow fell.
The blues gripped Wall Street traders after oil prices soared, US interest rates were kept on hold and Goldman Sachs downgraded US brokers.
Oil futures rose $US5.25 overnight and closed slightly below the $US140 mark, at $US139.80. It had touched $US140.39 earlier.
The S&P 500 closed 38.82 points down at 1,283.15.
And the tech heavy NASDAQ composite index tumbled 79.89 points to 2,321.37.
General Motors led the blue chip stocks down.
Falling stocks outnumbered rising ones by more than 6 to one on the day.
There had been good news on the US economy, though.
GDP in the first quarter grew by a slightly better than expected 1 per cent, on an annualised basis.
Home sales data, too, was better than expected.
But none of that mattered, as fear gripped the US market.
by Alan Thornhill
Brendan Nelson’s leadership of the Liberal party will be tested in the Gippsland by-election tomorrow.
If Labor should win the seat, for the first time ever, Dr Nelson’s hold on his job will be severely weakened.
And he has predicted, himself, that Labor could win.
This might be seen as Dr Nelson’s medical training at work.
Doctors have an interest in exaggerating a patient’s illness.
So if the patient dies, it wasn’t the doctor’s fault.
But if the patient recovers, that is a glorious victory for the doctor.
As parliament rose last night for its long winter break, it was clear that Dr Nelson had made some progress with voters.
He had offered the public some relief from the global fuel crisis, by offering to cut the Federal government’s fuel levy by 5 cents a litre.
At least one voter, in the electorate, was attracted by that.
She told ABC radio that, with four children, including a disabled son, she was heavily dependent on her car.
And the government had “done nothing” to cut petrol prices, this voter said.
She certainly won’t be alone.
The by-election has been precipitated by the resignation of the sitting National Party member, Peter McGauran.
The Nationals, the successors to the old Country Party, have held the seat since 1922.
A Queensland National, Barnaby Joyce, was more optimistic than Dr Nelson.
“I think we’ll win it,” Senator Joyce said.
The Labor party’s, probably slim, chance of victory rests, overwhelmingly, on coal workers in the electorate.
by Alan Thornhill
Watch your cash flows.
Getting on with your work, without doing that, is a recipe for financial failure.
Figures just released show that inadequate cash flow, or high cash use, account for almost 40 per cent of business failures in Australia.
Poor strategic management accounts for a similar proportion.
And the number of business failures is rising.
The Australian Securities and Investments Commission reported that 7,562 business failures were reported in Australia last financial year.
That was up from 6,745 the previous year.
And the challenges facing Australian businesses have risen sharply this year.
Both consumer and business confidence have fallen sharply, as shock waves from the US credit crunch hit Australian shores.
Credit has become scarce – and dearer than it was.
And soaring fuel prices are eroding both shoppers’ spending power and corporate earnings.
In these tough times, the path to bankruptcy is wider and shorter than ever.
by Alan Thornhill
The number of job vacancies in Australia has risen sharply over the past year, even though business and consumer confidence have both fallen over recent months.
The Australian Bureau of Statistics reported today that the nation had a total of 183,600 vacancies at the end of May, a rise of 9 per cent, in trend terms,Â over the previous 12 months.
Despite the Rudd government’s cost cutting, public sector vacancies have risen more steeply over that time than those in the private sector.
The number of public sector job vacancies throughout Australia leapt by 10 per cent in the 12 months to the end of May.
However, the bureau’s figures do reflect some slowing in the rate of job vacancy growth, over recent months.
The total number of job vacancies open rose by just 1.1Â per cent on trend figures between February and May this year.
Other figures, released by the Australian Securities and Investments Commission today also reflect a substantial rise in company failures.
ASIC noted that there were 7,562 insolvencies reported in 2006-07.
That compares with 6,745 in the previous 12 months.
by Alan Thornhill
Wall Street rallied briefly overnight, Australian time, after the US Federal Reserve kept America’s official interest rates on hold, at 2 per cent, as expected.
The Dow Jones industrial index initially rose 100 points on that news.
But it eased later, to close just 4.4 points up at 11,811.83 points.
US authorities also signalled overnight that they are tightening their focus on inflation.
The S&P 500 closed points 7.68 points up at 1,321.97.
And the tech heavy NASDAQ composite index closed 32.98 points up at 2,401.26.
Oil futures eased overnight falling $US2.44 to $US134.56.
The Fed admitted, in a statement overnight, that it fears that rising fuel prices could boost US inflation, as the American economy recovers.
The small fall in oil futures followed news that US oil inventories had risen for the first time in six weeks.
Credit Suisse economists said the Fed’s statement virtually ruled out any potential rate rise in the US until a new president is elected in November.
And a new poll, published by CNN, said Barack Obama has now opened up a 12 point lead over his Republican rival, John McCain.
Alan Thornhill is a parliamentary press gallery journalist.
Private Briefing is updated daily with Australian personal finance news, analysis, and commentary.
Thursday May 23
The Dow Jones Index fell 80.02 points to 15,307.60
Ford Australia says it will close its Australian manufacturing plants in October 2016. Some 1,200 jobs to go.
Hazel Hawke dies at 83
A British soldier is hacked to death in the London suburb of Woolwich, in an apparent terrorist attack
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|Qbe Insur. Fpo||16.230||+1.000||+6.57%|
|Rio Tinto Fpo||55.100||-1.200||-2.13%|
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