The Australian sharemarket has enjoyed another rise today after the US central bank surprised Wall Street by announcing it will embark on a mission to purchase Government debt to pull the country out of recession.
The US Federal Reserve will buy up to $US300 billion of long-term debt over the next six months, and will expand purchases of mortgages related to debt.
The bank has also said it will keep the official interest rate at 0.25%, but that rates will remain low for “an extended period”.
“In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability,” it said.
Wall Street reacted positively to the news, with the Dow Jones Industrial Average gaining 90.88 points or 1.23% to 7486.58.
Back in Australia, the benchmark S&P/ASX200 index was up 20.9 points or 0.61% to 3467.2 at noon AESDT. The dollar also rose to US67 cents.
NAB shares rose 2% to $19.58, while Commonwealth Bank also rose 2.1% to $33.39 after it announced it raised $865 million in a share purchase plan.
Westpac gained 2.4% $18.17 as AMP also gained 3% to $4.45.
ACCC takes action against Telstra
The big corporate news was the announcement that the corporate watchdog will take legal action against Telstra for allegedly breaking standard access obligations.
The Australian Competition and Consumer Commission claims that Telstra breached the Trade Practices Act 1974 and the Telecommunications Act 1997 by limiting access to certain internet services.
“Telstra must ensure that access seekers receive equivalent technical and operational quality and timing of interconnection to that which Telstra provides itself,” ACCC said.
“The ACCC alleges that there was capacity available, or that could have been made available, on Telstra’s main distribution frames. The ACCC also alleges that Telstra has breached the access regime in the Telco act which requires Telstra to provide access to its facilities.”
Challenge to stimulus payments
Shortly after the first cash payments of the Government’s $42 billion stimulus package have begun their passage to taxpayers, a former barrister has challenged their legality in the High Court.
Bryan Pape has said that the stimulus package contravenes the Constitution. “Is it a law with respect to taxation? I say it is not. I say it is a gift, and that is not a law with respect to taxation, the way it has been framed,” Pape said on radio.
The High Court will hear the challenge with a full bench on 30 March.
Also this morning, the Reserve Bank of Australia has said that while the economy will remain weak in 2009, it is confident that Australia will survive the global financial crisis.
Assistant governor of economics Malcolm Edey has said that while Australia is being hit by the “very severe” crisis, better times are ahead.
“In this environment, it’s not going to be possible for Australia to avoid some further weakness in 2009,” Edey told a Foundation for Aged Care breakfast in Sydney.
“Australia is fortunate to have come into this period in better shape than most, with sound financial institutions, and with more scope than most for macro-economic policies to respond as needed.”
Back in the US, the House of Representatives is preparing to vote on legislation that is designed to cover millions of taxpayer dollars delivered as bonuses to AIG executives.
Charles Rangel, head of the House Ways and Means Committee, says the legislation will create a 90% tax on bonus income over $US250,000 that was paid to the executives. AIG has so far received over $US5 billion in bailout funds.
“When you weigh the harm that AIG and other bad actors have done to the system, our economy, and American families, with the concerns regarding the precedent of using the tax code, there is no question this legislation is the best decision we can make,” Rangel told Reuters.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
