The Reserve Bank of Australia says the official interest rate is at an appropriate level for the medium term according to its latest minutes.
The record of this month’s board meeting, during which the RBA decided to keep interest rates steady at 4.75%, reveals that even though there were short-term impacts from the floods in Queensland rates are at an appropriate level.
“Given the medium-term outlook for the economy and the limited amount of spare capacity that existed, members judged that this slightly restrictive policy stance remained appropriate,” the RBA says.
“The continuation of subdued growth in consumer spending and the lower-than-expected inflation outcomes provided additional time for the Board to assess at future meetings the evolving balance of risks to both output and inflation.”
The RBA noted that increased commodity prices will help boost terms of trade forecasts.
Westpac has recorded a $1.55 billion profit for the first half of the financial year, up 5% from the previous two quarters in 2010 but down from $1.6 billion in the previous corresponding period.
The bank said it was a “solid” start to the year and said its market share in mortgages is helping negate some of the weaknesses in instructional lending and the St George subsidiary.
The company said it had an $80 million bill from natural disasters in Queensland.
Chief executive Gail Kelly said the bank is “well placed to support increased customer activity as sentiment improved”.
“Lending increased 0.3% over the quarter with growth in Australian mortgages offset by institutions and large corporates continuing to pay down debt. Lending in the institutional bank was around $2.5 billion lower over the quarter,” Westpac said.
Operating income was up 2%, with a net interest margin of 2.2%, up by three basis points from the second half of the 2010 financial year.
The Australian share market opened flat this morning after a mixed night in overseas markets and alongside mixed financial results back home.
The benchmark S&P/ASX200 index was down three points or 0.07% to 4932.5 at 12.15 AEST while the Australian dollar remained above parity at $US1.005.
AMP shares gained 0.37% to $5.44, Commonwealth Bank shares dropped 0.41% to $53.62, Westpac shares gained 0.49% to $24.54 and NAB lost 0.04% to $26.29.
Foster’s said its first half net profit fell by 12% to $312.1 million, with operating revenue down 6.7% to $2.2 billion, but announced its plans to split the business will go ahead.
The company said spinning off Treasury Wine Estates will mean each unit will have a focused strategy and that shareholders will receive one share in the new company for every three shares they hold now.
“Fosters has completed a detailed evaluation of the issues, costs and benefits of the demerger, and the board unanimously considers that the demerger represents the best path forward and is in the best interests of Foster’s shareholders,” chairman David Crawford said.
The company said beer volume going forward is likely to be lower.
“(Foster’s) currently expects beer market volume in the half year to June 2011 to be between 3-4% below the prior year,” the company said.
“However having regard to the unusually high beer market volume in the December 2009 quarter the rate of volume decline is expected to moderate through the second half.”
European shares hit a 29-month high over night after data from China promised good results for miners but Wall Street ended flat after president Barack Obama’s budget plan neglected to elaborate on many details of how the government plans to reduce a deficit over $US1 trillion.
The Dow Jones Industrial Average fell five points or 0.1% to 12,268.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
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