The bad news engulfing Australia’s trading partners continues, with new data revealing Japan’s economy, the second-largest in the world, contracted by 3.3% in the fourth quarter, the biggest drop since 1974.
The country’s GDP shrank by 12.7% across 2008, thanks to a drop in external demand, coupled with a decline in capital spending.
Sumitomo Mitsui Asset Management chief economist Akiyoshi Takumori said the economy will continue to shrink until the end of the year.
“January-March will definitely show another drop, although it’s not clear yet whether the contraction would be at the same pace as in October-December. What we know for sure at present is that capital spending will be worse, judging from machinery orders,” Takumori said.
“I expect the economy to bottom out by December, led by rebounds in and outside Japan, on the back of China’s economic stimulus measures as well as large-scale economic packages worth ¥78 trillion in the United States and reportedly ¥20 trillion to ¥30 trillion in Japan.”
Wesfarmers reports profit
Back home, Wesfarmers, which owns the Coles supermarket chain and the Bunnings hardware business, has recorded a 46% increase in first-half net profit.
The group says net profit for the six months ending December reached $879 million – a 40% increase from the previous year. The result is at the top end of the group’s expected profit range of between $850 million and $880 million, which it signalled last month. Revenue also increased 169% to $26.36 billion.
Wesfarmers initially planned to release its results on 19 February, but brought the announcement forward to give shareholders as much information as possible.
The company’s shares jumped 0.4% to $16.22.
Shares lose ground
The Australian sharemarket has opened lower today after negative leads from Wall Street last week. The benchmark S&P/ASX200 index was down 24.9 points or 0.7% to 3534.2 at 12.00 AESDT. The dollar has also slipped back to US65 cents.
NAB shares jumped 0.7% to $18.57, while Commonwealth Bank dropped 3.9% to $30.16. BHP Billiton lost 1.7% to $32.16.
Bendigo and Adelaide Bank has posted a 42.4% increase in first half cash earnings to $122.2 million. It also says revenue has gained 32.3% to $446 million.
“The continued support of our customers and shareholders is providing us with the funding and capital to start taking advantage of opportunities that are emerging in the current business environment,” the company said.
Meanwhile, Brambles said it will slash 750 jobs in order to save $US70 million, and argues volatile trading environments are making it difficult to give guidance figures.
The company has also recorded a 28% decline in first half net profit to just $US212.8 million.
“Brambles has performed well, delivering good sales revenue growth despite the tough economic conditions and has maintained underlying profit in life with prior year,” chief executive Mike Ihlein said in a statement to the ASX.
“Importantly, the balance sheet is in good shape and the company will continue to review market conditions closely and be prepared to respond quickly to any changes.”
Taxes will not rise
The Federal Government has said it will not raise taxes in order to fund its $42 billion stimulus package. Finance Minister Lindsay Tanner has also rejected rumours of an early election, saying the Government is committed to see out its term.
“People in these circumstances expect us to govern, they expect us to deal with the crisis we’ve been presented with,” Tanner told Network Ten. “We are literally one year and three months into our term; the last thing I want to talk about is elections.
Tanner also said the Government has a three-point plan to bring the budget into surplus, dismissing any tax hikes for increasing revenue. “Without having to change any tax rates they will rise again automatically.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
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