Building approvals up 9.3%, More banks may drop overdraft fees: Economy roundup

There was more good news for the housing industry today, with the announcement that building approvals rose by a seasonally adjusted 9.3% during June, according to the Australian Bureau of Statistics.

The figures show the seasonally adjusted estimate for private sector houses approved jumped by 4.9%, a sixth consecutive rise, while “other” private sector dwelling approvals rose by 27.7%.

The value of building approvals has also grown, with the seasonally adjusted estimate of the value of all building approvals rising 35.8%. The estimate for the value of new residential building approvals grew by 4.1%, while the value estimate for non-residential buildings rose by a massive 94.5%.

The Australian share market has opened higher today, supported by the major banks, despite negative results on Wall Street overnight.

The benchmark S&P/ASX200 index was up 35.4 points or 0.85% to 4178.2 at 12.10 AEST. The Australian dollar also remained stead at US81c.

NAB shares rose 2% to $23.36, while Commonwealth Bank shares also gained 1.8% to $40.60. ANZ gained 1.4% to $17.36, while Westpac also rose 1.6% to $21.15.

Banks to abandon federal lending guarantee

ANZ chief executive Mike Smith has said the major banks will abandon the Federal Government’s funding guarantee over the next few months.

“In my view, there’ll be a natural process as debt markets normalize, which will wean the banks off [it],” Smith told The Australian. “I think we’ll see this happen in the next few months, as spreads between sovereign guaranteed debt and bank debt narrow to 70 basis points or less.”

Additionally, ANZ, Westpac and Commonwealth Bank have announced they are examining the future of their overdraft fee policy after NAB abandoned its dishonour charges.

“Given recent developments we are reviewing this position, however, we have maintained a position for some time of having very competitive fees in the market overall, and we will continue to do so,” the Commonwealth Bank said in a statement.

“Over the last 18 months we have already made some changes including removing exception fees from our basic bank account,” a Westpac spokesman said. “A lot of our work has been done quietly, but we will continue to make changes where appropriate to reflect our customer strategy.”

Wall Street falls despite signs of stabilisation

In the US, Wall Street recorded losses as investors grew nervous that China would stop lending money to the US, after media reports that China’s two largest government-owned banks have placed a cap on 2009 lending targets. The Dow Jones Industrial Average fell by 26 points or 0.29% to 9070.72.

But there was some good news for the economy, with the Federal Reserve’s Beige Book survey showing the pace of the recession may be slowing.

While labour markets across the country are “extremely soft” and wages have continued to fall, the Fed said growth should return in the second half of the year.

President Barack Obama echoed the survey’s sentiments, saying that the end of the recession may be close at hand.

“We may be seeing the beginning of the end of the recession,” he said, also hitting back at critics of his administration’s $US787 billion stimulus plan.

“I do think we should have a collective memory in terms of spending habits,” he added. “You hand me a $US1.3 trillion bill, and then you’re complaining six months later that we haven’t paid it all back.”

However, the International Monetary Fund is not as optimistic. Managing director Dominique Strauss-Kahn said in Paris that the global economy still has a long way to go.

“It’s good that financial markets are doing better. It’s good that companies are starting to have better results. But 2009 will be a bad year,” he said.

“We are only halfway through. The rest of the year will not be good. And the pick-up that we see really only exists as of 2010. So we mustn’t get wrapped up in it.”