A Super Tuesday this week

Australians are expected to get their own Super Tuesday this week.

All that is required is that the Reserve Bank board live up to expectations  – and cut interest rates – tomorrow.

After 12 straight rate rises, even a cut of 0.25 per cent would be acceptable.

An a cut of 50 basis points would be even better.

Whatever it is, the government is adamant that the  banks must pass it on in full.

“If the Reserve Bank cuts rates this week, there’ll be absolutely no excuse from any lender not cutting rates, the Federal Treasurer, Wayne Swan, declared yesterday.

The ANZ and the National Australia Bank have already said they will.

The Commonwealth and Westpac were both speaking, earlier this month, of holding out, citing a need to cover the higher costs of the funds they lend.

However competitive pressures will, almost certainly, force them to fall into line, too.

Especially as one small lender, Wizard Home Loans, jumped the gun yesterday by announcing  that it would cut its variable home loan interest rate by 0.25 per cent.

The Reserve Bank is not likely to cut rates by 0.5 per cent tomorrow.

Australia’s inflation rate of 4.5 per cent still worries the board.

Especially as commodity prices are still at a generational high.

The Reserve Bank, itself, insists that it has learnt from its admitted mistakes of the 1980s, when Australia suffered, substantially, from its  stop-go policies.

Some people, though, particularly in Australia’s building industry, are still sceptical.

They argue that the Reserve bank has already kept the nation’s interest rates too high  too long.

There seems little reason, at this point, to believe it will hesitate this week, before cutting rates.

But that could happen.

The government is warning that the opposition’s determination to slice $6.2 billion from its $22 billion budget surplus, could be enough to cause the bank to hold rates steady, yet again, this week.

Private Briefing would like to tell its readers exactly what will happen.

But those who know those things, don’t sweat over hot computer keyboards.

They sit around on beaches, in the South of France, with their feet in buckets of champagne.

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European investors shake off Wall Street fall

European investors weren’t rattled by Wall Street’s fall on Friday (US time) – and Australia’s may not be either.

The Dow Jones industrial index certainly did fall, by a hefty 171.22 points, on Friday, to 11,543.96.

But that happened as Hurricane Gustav threatened the Gulf of Mexico.

Despite that, Wall Street posted a monthly gain of 1.5 per cent.

The European investors, too, knew that Friday’s fall on Walls straight rises, over the three previous days’ trading.

Europe’s DJ Stoxx 50 index rose by a modest 4.12 points, in subsequent trading.

The S&P 500 fell 17.85 points on Friday, US time, to 1,282.83.

And the tech heavy NASDAQ composite index fell 44.12 points to 2,367.52.

Oddly, perhaps, oil prices fell slightly, despite Gustav’s threat to oil rigs in the Gulf of Mexico.

Oil futures fell 13 US cents a barrel to $US115.46.

A short time ago, the $A was trading at 86.18 US cents.

All eyes in the Australian market this week will be on Tuesday’s meeting of the Reserve Bank board, which is expected to cut the nation’s interest rates.

But other important new figures are also due to be released this week.

These will include today’s balance of payments figures for June and July’s building approvals which will be released tomorrow.

Australia’s international trade figures for July will be released on Thursday.

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Industry welcomes unit pricing changes

The financial services industry is welcoming proposed changes to unit pricing rules.

These are spelt out in a guide published jointly by the Australian Securities and Investments Commission and the Australian Prudential Regulation Authority.

It is called Unit Pricing – Guide to good practice for the life insurance, superannuation and funds management industries.

The Investment and Financial Services Association praised these authorities for their decisions.

“In particular IFSA welcomes the amendment to permit scheme operators to elect not to make payments to exited members for unit pricing errors where the compensation due is less than $20,” IFSA’s deputy CEO, John O’Shaugnessy said.

Mr O’Shaugnessy described this change as “commercially workable.”

He said his association – and its Unit Pricing Focus Group – had been working closely with these authorities on these changes.

“IFSA now looks forward to further  the regulators with further enhancements to the Guide,” Mr O’Shaugnessy  said.

The revised guide can be found at http://www.apra.gov.au and following the prompts from the front page.

APRA’s Deputy Chairman, Ross Jones, said there are “significant costs” involved in drawing small cheques.

He said drawing the line at $20 was reasonable.

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