Daily Tele fails economics exam. The economic geldings at Sydney’s Daily Telegraph want the Federal Government to tell the banks to cut interest rates, if the Reserve Bank cuts official rate next month. In a story headlined “Drop interest rates or we’ll … sook” the paper mocked the Federal Treasurer, Wayne Swan, who pointed out that the Government can’t force banks to drop rates:
You can imagine the fear sweeping through bank boardrooms. If even supermarkets are powerless to resist the Government’s website kung fu, what hope do banks have? This fear will be particularly acute given the Treasurer himself, Wayne Swan, is leading the Government’s bank-attack brigade. At issue is whether banks are going to reduce high interest rates once the Reserve Bank cuts its official rate. Mr Swan is determined that banks will fall into line and drop their rates. He aims to accomplish this by the unusual tactic of simply looking at them.
The paper knows the Federal Government is powerless. After all, we live in a market based economy where there’s no diktat issued by rate control central in Canberra. You can imagine how The Tele and other News Ltd papers would react if they were forced to cut their cover prices or advertising rates by Mr Swan or some other Canberra operative. If its good enough to force the banks to cut the price they charge for money, why not the cover price for the Tele, or Foxtel’s monthly subscriptions (it is a Pay TV monopoly, after all)? — Glenn Dyer
Westpac to raise bad debt provisions. Westpac Banking Corp., seeking to become Australia’s biggest mortgage lender by buying St. George Bank Ltd., said provisions for bad debts are set to rise in the second half as the economy slows.
“Given the challenging economic environment, Westpac expects higher collectively assessed provisions for the second half as a result of growth in lending, a modest rise in delinquencies and an expected further increase in its economic overlay provision,” the bank said in a statement today.
Full-year cash profit, which excludes income from derivatives trading, will grow between 6 percent and 8 percent in the 12 months to Sept. 30, Westpac, the nation’s third-largest bank by market value, said. Westpac’s shares have slumped this year as banks face increased funding costs, rising bad debts and a slowdown in an economy that’s grown for 17-straight years. Westpac said last month its investments in collateralized debt obligations had little impact on earnings. — Bloomberg
Bendigo punts on Beijing. When the Olympic Games opening ceremony hits Australian TV screens tonight all the major sponsors will be on the edge of their seats — was the outlay of around $5 million for a major corporate package really worth it? But no one will be more attentive than Bendigo Bank chief Rob Hunt. There are just two banks among the 14 major sponsors. It was no surprise to see the Commonwealth Bank there but the emergence of one of the smaller Australian banks to use the Olympics as a promotional opportunity is a real surprise. Bendigo has about 400 branches but only around 50 in our most heavily populated state, NSW, which will be a big slab of the TV audience.
Given the number of eyeballs that been lured away from free-to-air TV screens over the last few years, the Olympics is one of the few occasions when you know you will have the best possible audience. You pay top dollar to advertise but unlike regular advertising inventory you know it will deliver the maximum possible audience. One only has to see the big screens that have been walking out of retailers over the last month to realise that Australians both rich and poor, young and old are excited about sitting down to watch the Olympics. — Robert Gottliebsen, Business Spectator
Gunns funding deal cut. The Rudd Government has torn up a $4.5million funding deal with Gunns Ltd, accusing the timber giant of breaching a commitment not to make redundancies at sawmills in northeast Tasmania. About $2million of the funding deal had already been advanced to try to keep the two mills at Scottsdale operating amid uncertainty about long-term pine log resources.
However, federal Industry Minister Kim Carr suspended further payments last month, after Gunns announced one of the mills, at Tonganah, would close with the loss of 130 jobs. Senator Carr yesterday announced he would terminate the deal. Instead, he promised the remaining funds, thought to be about $2.5million, would be used on projects to help create jobs in Tasmania’s northeast. — Matthew Denholm, The Australian