Markets sharply up despite financial gloom: Economy roundup

Australian sharemarkets are up strongly this morning following a strong lead performance from US markets on Friday.

The S&P/ASX200 is up 2.6% on Friday’s close to 5569.7 at 12.15pm, while the US Dow Jones Index lifted 1.81% to 12849.36 on Friday.

The strong performance in US on Friday came despite the announcement of a $US5.11 billion quarterly loss due to sub-prime writedowns by global banking giant Citigroup.

Analysts had expected an even bigger fall, and combined with some good results from the likes of Google – it reported a 30% increase in profits to $US1.31 billion for the March 2007 quarter –markets decided that, overall, it was good news.

Even if the US does hit some further sub-prime speed bumps, it may not be enough to seriously slow down the Australian economy, however.

According to economic think tank Access Economics, Australia will continue to prosper as long as China does, and that is likely to see the economy continue to grow at a good clip for at least the rest of this year.

With that continuing strong growth – pushed along by the tax cuts set to come in the middle of this year – comes continuing high levels of inflation however, with Access predicting inflation will stay above 3% until mid-2009.

There are parts of Australia that clearly aren’t feeling the economic good news at present, however. A survey of Victorian business conducted by VECCI found business confidence at low levels. Only 6% of businesses surveyed in the first quarter of 2008 believe business conditions will improve over the next 12 months, down from 17% in the December quarter 2007 and in the March 2007 quarter.

The bad news for Victoria was also reflected in new car sales figures for March. The number of new car sold declined by 0.2% seasonally adjusted in Victoria in March, the worst result for any state.

An 11.8% lift on new car sales in the Northern Territory and smaller growth for the other states pushed the car sales up 1% across the nation.