The Australian share market has opened at a nine-month high after positive leads from Wall Street late last week, and strong commodity prices.
The benchmark S&P/ASX200 index was up 48.6 points or 1.19% to 4148.4 at 12.00 AEST. The Australian dollar has also opened higher at US81c. It topped the 4124.5 mark – the highest level since 7 October 2008.
Commonwealth Bank shares jumped 1.2% to $40.24, while NAB share also rose 0.9% to $22.46. ANZ rose 1.1% to $17.13 as Westpac gained 0.8%.
Government examines Medicare reform
A new report outlining recommendations for an overhaul of the Australian health system suggests introducing a subsidised dental care scheme, the introduction of standalone elective surgery hospitals to cut waiting lists and an onsite nurse for every school.
The report also flagged safety issues, hospital bed availability and waiting times as areas in the healthcare system that need to be improved.
Prime Minster Kevin Rudd has said the Government will continue to consult with professionals about the options put forward in the report, which include different types of Federal takeover of state healthcare responsibilities.
Rudd said a Council of Australian Governments meeting later this year will be called to discuss the reform, but has said he is prepared to call a referendum in order to see the reforms come to pass.
“We leave open the option of going to a referendum to seek a mandate from the people,” he said in Melbourne yesterday.
Business optimism rising
Meanwhile, a new survey shows that Australian businesses are cautiously optimistic for the 2010 financial year.
The Ernst & Young survey, which questioned 380 executives in June, found that 76% said the current financial crisis will have only a temporary effect on profits.
Additionally, 92% said they are cutting costs and 71% said they are looking to review cash management and cashflow issues. Over half had cut jobs, while 68% said they had cut staff numbers and 38% said they are looking at employee reduction programs.
“The results show Australian businesses are cautiously optimistic for the 2010 financial year, with far more proactive plans over the next 12 months,” Ernst & Young’s corporate accounts leader Patrick Winter told Business Spectator.
“Many have introduced flexible working practices to help them avoid substantial headcount reduction, with a view to retaining the talent they will need when the market recovers,” Winter said.
Gerry Harvey sees economic recovery
The survey comes as retail giant and Harvey Norman chief executive Gerry Harvey says the worst of the downturn is over.
“All the media headlines at the moment are pretty positive but six or nine months ago it was like Armageddon or all sorts of problems but now there’s a general heightened… the consumers are just more positive,” Harvey said on ABC Television’s Inside Business.
“I’m watching, obviously, July, August, September sales because that will tell the story… we’re certainly more confident than we were six or nine months ago,” he said.
Harvey Norman recorded a 3.8% rise in total sales to $6.03 billion for 2008/09, down from 8.7% growth recorded in the previous year. Harvey said consumers’ optimism was not short-lived due to the Government’s stimulus packages.
“So is it possible that confidence works? I think it is. Then on that basis you never needed a stimulus package if only you could have made the population confident.”
But the optimism may not last long. According to a report in The Australian newspaper, corporate Australia will suffer from $200 billion in debt over the next three years, with analysts suggesting infrastructure and small companies will collapse.
The report shows that companies are looking at $38.5 billion in debt maturities next year, with a further $97.3 billion maturing in 2011 and $64.7 billion in 2012.
The infrastructure industry is facing the highest levels of debt at $31 billion, followed by property at $26 billion, then finance companies at $16 billion. Construction follows with $15 billion in debt coming up over the next three years.
The telecommunications, mining and healthcare sectors will suffer over $31 billion in debt over the next three years combined.
Property group Australand has recorded a first-half loss of $269 million due to impairment charges, property revaluations and challenging economic conditions. The company also downgraded its full-year profit guidance by 5% to 35% and said harsh conditions will remain during the second half.
“The first half of 2009 saw the continuation of the themes that impacted the property sector during the course of 2008. Asset values continue to fall and credit conditions remain constrained for the sector. It is expected that the remainder of 2009 will continue to be challenging,” Australand said in a statement to the ASX.
“However, there are signs of stabilisation emerging in each of our major markets which should see conditions improve in 2010.”
“However, the benefit of the investment approach taken by AFIC has been evident through the performance of the portfolio during this period as well as over the long-term.”
Boral chairman Ken Moss will be replaced by Wesfarmers chair Bob Every in May 2010, after spending a decade in the role.
Every will step down from his role as chairman of miner Iluka Resources when he takes the role next year, and will be replaced by deputy chairman John Pizzey.
“Bob is a very capable and well respected director, with significant operational experience in the building and construction materials industry, and will serve shareholders well as chairman of Boral,” the company said in a statement.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
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