Australia has yet to feel the full effects of the global financial crisis despite an upturn in consumer confidence and economic conditions, Federal Opposition treasury spokesman Joe Hockey has warned.
Speaking to Business Spectator, Hockey said the “third stage” of the crisis will be political in nature and claims business leaders are pleading for the Opposition to eliminate the Carbon Pollution Reduction Scheme from Parliament.
Hockey also warned against high levels of debt, and said if taxes must rise in order to save the economy they will rise less under a Liberal Government.
“It’s a question of degrees and if you throw enough money at a problem, it will fix it or it may go some way to fixing it, but it’s the level of waste associated with the solution that we have a problem with and it’s been a sugar hit – there’s no argument about that, a massive sugar hit to the Australian economy,” he said.
“If too much debt got the world into this problem, then too much sovereign debt is not going to get the world out of this problem, and a lot of economists and a lot of people in markets focus on market fundamentals, but all of these crises have three stages; financial crisis stage one, economic crisis stage two, political crisis stage three, and very few people understand stage three and that’s where we will get our next economic challenge,” he said.
The comments come after Prime Minister Kevin Rudd told ABC Radio today that recovering the economy will mean unpopular budget cuts must be introduced.
The Government is looking at “pretty hard-line” disciplines, he said, “which means some unpopular budget cuts”.
Shares open lower after losses on Wall Street
The Australian share market opened 0.5% lower today, after US stocks fell on a larger-than-expected drop in consumer confidence.
The benchmark S&P/ASX200 index was down 4.4 points or 0.1% to 4165.1 at 12.15 AEST. The Australian dollar has also lost ground, moving back to US82c.
Commonwealth Bank shares have gained 0.8% to $40.35, with Westpac shares also gaining 1.2% to $21.03. ANZ lifted 1.3% to $17.36, while NAB shares also gained 0.2% to $23.13.
Australia’s biggest investment bank, Macquarie Group, has said it expected profit in the first half of the 2009-10 to drop by 28% while it remains “cautious” about funding and capital.
“It should be noted that, given the volatility in market conditions, short-term forecasting remains extremely difficult,” Macquarie chief executive Nicholas Moore said at the company’s AGM today.
“Macquarie’s surplus capital and high cash levels, strong team and market conditions provide opportunities for medium-term growth,” he said. “We expect to continue to build on the strength, diversification and global reach of our businesses. Ongoing organic growth initiatives and incremental acquisitions remain underpinned by effective risk management.”
In other investment banking news, NAB has announced it has paid $99 million to acquire an 80% share of Goldman Sachs JBWere’s Australian wealth management business.
The new business will be branded JBWere, with GSJBW holding onto the remaining 19.9% stake.
NAB abandons overdrawn fees
NAB has also announced it will abandon a $30 fee on overdrawn personal transactions and savings accounts in order to reduce the number of customer complaints.
The new changes will come into effect from October, and will also cost the bank about $100 million a year. Personal banking group executive Lisa Gray said in a statement that many of its customers were managing multiple direct debits and automatic bill payments.
“Everyday we hear their stories – a customer’s pay goes in a day late, gym fees or an insurance premium comes out early – the bank either pays the overdrawn amount or not – but either way an overdrawn account fee is generated. Most of our customers who experience these fees don’t think it is fair.
“The benefit to NAB is that we want to be even more competitive – we want our customers to have a stronger relationship with us and we want to say to customers of other banks take a look at NAB.”
Microsoft and Yahoo strike advertising deal
In the US, Wall Street fell only slightly despite the US consumer confidence index falling more than expected in July, its second consecutive drop. The Dow Jones Industrial Average fell 11.79 points, or 0.13%, to 9,096.72.
Meanwhile, tech and internet giants Microsoft and Yahoo have reportedly struck an online search and advertising deal in an attempt to rival Google, Reuters has reported a source as saying.
The deal will involve sharing revenue between the two companies, who have reportedly been speaking about a deal for months. Microsoft attempted to buy out Yahoo last year, but the $US47.5 billion bid was rejected.
The deal could involve using Microsoft’s “Bing” search engine as the default on Yahoo pages. The deal is reportedly set to be announced within the next 24 hours.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
