Inflation rises 0.9% during March quarter: Economy Roundup

The Australian consumer price index rose by 0.9% during the March quarter, compared with a rise of 0.5% during the previous quarter, according to the latest figures from the Australian Bureau of Statistics.

The figures indicate the Reserve Bank of Australia may raise the official interest rate once again when it meets next Tuesday, May 4.

The CPI rose by 2.9% through the year to the March quarter. The biggest rises were in automotive fuel, up 4.2%, pharmaceuticals, up 13.3%, deposit and loan facilities, up 3.4% and vegetables, up 10.3%.

Additionally, electricity, house purchases and medical services were up by 5.9%, 1.2% and 2.9% respectively.

The biggest falls were recorded in furniture, down 4.6%, fruit, down 5.7%, domestic holiday travel and accommodation, down 2.3% and AV equipment, down 5.9%. Men’s outwear and children’s clothing were both down 6.7% and 9.9% respectively.

Meanwhile, the Australian sharemarket has slumped over 2% this morning after a shocking day on Wall Street, where investors have been scared off due to a credit ratings downgrade for both Greece and Portugal because of their debt problems.

The benchmark S&P/ASX200 index was down 69 points or 1.43% to 4810.3 at 12.00 AEST, with the Australian dollar down over 1% to US91c at the day’s opening.

ANZ shares were down 1.9% to $24.70, with Commonwealth Bank shares also down 1.9% to $57.07. Westpac lost 1.5% to $26.76, with NAB also down 1.3% to $28.07.

The losses in the United States were even larger. On Wall Street, treasury bond prices increased as investors sought refuge in domestic debt following Standard & Poor’s downgrade of Greece and Portugal’s credit ratings.

Both countries have been suffering debt problems over the last few months, with the European Union even banding together to provide a bailout plan. The Dow Jones Industrial Average fell 213 points or 1.9% to 10,991, with the S&P500 also falling 2.3%.

In Europe, shares fell by their fastest rate in five months with the FTSEurofirst 300 index falling 3.1% to close at 1,069.16.

IMF considering upping investment in Greek bailout

Additionally, the Financial Times has reported that the International Monetary Fund is considering raising its contribution to the Greek bailout plan.

It has reported that the IMF is in discussions to raise its share in the financial package to 25 billion euros. Currently the package is at 45 billion euros.

“The fund’s current ceiling for Greece is €25 billion and the release of the extra amount is under discussion,” an unnamed analyst told the publication. The comment comes after Canadian finance minister Jim Flaherty told reporters over the weekend that Greece would require more money than previously thought.

Back home, mining giant BHP Billiton will begin discussions with the Queensland Government regarding the construction of a new coal terminal as it continues ramping up exports to steel manufacturers.

“The new Abbot Point Coal Terminal is a key element in our growth plans,” BHP’s metallurgical coal division president Hubie van Dalsen said in a statement.

“BHP Billiton will now enter into detailed discussions with the Queensland Government, through North Queensland Bulk Ports, to negotiate arrangements for construction of the terminal.”

Meanwhile, Commonwealth Bank of Australia has said its funds under administration fell during the March quarter, dropping 1.7% to $189 billion with net flows at a negative $4.4 billion.

Funds under management came to $145 billion, representing a decline of 2.6% from the previous quarter, with CBA attributing that to outflows from short-term “cash mandates”.

David Jones to stock Quiksilver, Roxy merchandise

Department store giant David Jones has signed an agreement with surfwear brands Quiksilver and Roxy, with both companies to have merchandise displayed in the company’s stores. It is the first time in 20 years that mainstream surfwear brands have been in a department store, instead opting for niche retailers.

“We knew that we would be the first leading surfwear brand to decide to again distribute through an Australian department store, but we believe that to continue to be a market leader in our industry, we must look to differentiate what we sell, who we sell it to and through which channels,” Quiksilver Asia Pacific chief executive Greg Healy said.

Citigroup expects to grow its Australian private wealth portfolio by 25% this year, with clients moving back to safe investment markets, one executive has said.

“In the last three to five months, we have had cashed-up customers ask: ‘Is it time to re-engage with the market?’. Overall the outlook is turning bullish,” country business manager Roy Gori told Reuters. “We want to be the 600-pound gorilla in the affluent customer segment here.”

Back in the United States, Federal Reserve chairman Ben Bernanke has said the nation’s budget deficit is unsustainable and action must be taken in the short-term to see it reduced.

“In the absence of further policy actions, the federal budget appears set to remain on an unsustainable path,” Bernanke told the National Commission on Fiscal Responsibility and Reform.

“Given the significant costs and risks associated with a rapidly rising federal debt, our nation should soon put in place a credible plan for reducing deficits to sustainable levels over time,” Bernanke said.

But while Bernanke’s comments reflected growing concern over the Government’s fiscal situation, consumers have actually gained confidence.

According to the US Conference Board, consumer confidence has risen to 57.9 from 52.3 in March, above the forecast for a reading of 53.5. The Board said in its report that figure is the highest since Lehman Brothers collapsed in September 2008.