Inflation sinks to 10-year low, NAB to raise $2.75 billion: Economy roundup

The consumer price index rose 0.5% during the June quarter, but the annual rate of inflation has fallen to a 10-year low of just 1.5%.

The results compare with a rise of 0.1% during the March quarter, and an annual rise of 2.5% to the March quarter.

“The most significant price rises this quarter were for automotive fuel (3.6%), hospital and medical services (3.6%), rents (1.4%), furniture (3.7%) and house purchase (0.8%),” the Bureau said.

“The most significant offsetting price falls were for deposit and loan facilities (-4.3%), vegetables (-6.9%), fruit (-7.6%), and overseas holiday travel and accommodation (-3.4%).”

The Australian share market has opened flat today, despite good results on Wall Street overnight, where Apple and equipment manufacturer Caterpillar posted solid results.

The benchmark S&P/ASX200 index was up 20.1 points or 0.5% to 4070.8 at 12.00 AEST. The Australian dollar also remained at US81c.

Commonwealth Bank shares dropped 1.2% to $39.28, with Westpac also losing 1.4% to $20.02. ANZ gained 0.1% to $16.79, with AMP gaining 1.6% to $5.12.

NAB requests trading halt to raise $2.75 billion

Meanwhile, National Australia Bank, the country’s largest lender, has requested a trading halt as it launches a capital raising of up to $2.75 billion for further acquisitions.

NAB also announced that cash earnings for the quarter ending 30 June were about $900 million, but that asset quality has weakened and its bad loan rate has increased to 177 basis points in June from 138 basis points in the previous quarter. Trading is expected to recommence Thursday, after an announcement about the results of the capital raising.

BrisConnections starts collection process

Toll road company BrisConnections has begun legal proceedings against 135 former unit holders have allegedly failed to pay the second installment on their shares.

“They bought them, they haven’t paid and we have a legal obligation to pursue them,” BrisConnections spokesperson Patrick Southam told Fairfax.

The company has issued statutory demands for the payments, while the companies and investors targetted can either produce the payments or fight for the proceedings to be overturned in a court.

BHP’s iron ore output falls

Mining giant BHP Billiton has reported a 10% drop in iron ore output compared to the corresponding quarter one year ago, after operations have been affected by flooding and fatalities in Western Australia.

“The 2009 financial year proved to be very challenging, with significant demand contraction exacerbated by dramatic movements in inventory levels,” BHP Billiton said in its fourth quarter production report.

Copper output has also fallen 21%, while the output of metallurgical coal, used for making steel, rose by 4%.

In the US, Wall Street had another positive night after Caterpillar increased its full-year guidance despite a 66% decline in second-quarter profit. The company’s shares increased by 7.7% to $US39.46. Stocks were also assisted by positive results from computer maker Apple.

The Dow Jones industrial average gained 67.79 points, or 0.77%, to 8,915.94.

But the news wasn’t all good. CIT Group said it may record a loss of over $US1.5 billion for the second quarter, and could still file for bankruptcy if a debt restructuring plan is rejected by bondholders.

“We think every day the odds of bankruptcy are substantially higher,” Fifth Third Asset Management president and chief investment officer Keith Wirtz told Reuters. “They are fighting a huge uphill battle, and all the efforts to source temporary funding are having little reception.”