CPI March 2011

The long-awaited inflation figures released this morning have shown a higher-than-expected jump for the March quarter, heightening expectations of an interest rate rise later this year.
The Australian Bureau of Statistics says Australia's consumer price index lifted 1.6% for the three months to March 31, versus expectations for a 1.2% increase.
The increase takes the annual CPI rate to 3.3%, well above the Reserve Bank's 2-3% target.
While the headline figure was influenced by the price pressures created by Australia's horror run of natural disasters, core inflation was also higher than expected.
ABS said the weighted mean measure came in at 0.8%, versus expectations for a 0.6% lift, while the trimmed mean measure was 0.9%.
The Australian dollar, already pushing past the $US1.08 barrier, was trading at $US1.0846 after the CPI data, with investors betting the central bank will be pressured to increase rates sooner than expected.
The local currency reached $US1.08 this morning, for the first time since it was floated in December 1983, after closing for five days for the Easter and Anzac Day break.
Bank of New Zealand currency strategist Mike Jones said the Australian dollar remains the darling of the currency markets, boosted by a "buoyant" global risk appetite and expectations the US dollar will remain weak, AAP reports.
"Certainly, the commodities backdrop is still very strong. Gold and silver prices are making record highs on an almost daily basis and industrial metal prices are still very strong," he said.

Gillard says ties with China in good shape

Prime Minister Julia Gillard has said Australia's relationship with China remains in good shape and that its economic ties are crucial for the nation.
"The relationship with China is in good shape," she said after a meeting with Premier Wen Jiabao. "Of course, our economic relationship is a vital one for Australia's national interest, and it is growing in leaps and bounds."
Gillard added that human rights concerns were raised during the meeting, although China said it did not take a step backwards with regard to its approach.

Abbott attacks carbon price

Opposition leader Tony Abbott says the introduction of a carbon price will put thousands of jobs at risk. He told ABC Radio this morning jobs in industries such as the steel manufacturing business will be hurt by such a tax.
"It's very important that workers right around Australian understand that this carbon tax won't clean up the environment but it will clean out their wallets and it will wipe out jobs big time," he said.
"The Coalition has a strong and effective policy to reduce emissions by planting more trees, getting better soil and using smarter technology."

Sharemarket flat after break, but Origin, banks lift

Before midday, the S&P/ASX 200 was trading flat at 4909.8, while the All Ordinaries was down 0.11% to 4990.
It was helped, however, by a rise in Origin Energy shares, which were trading 4% higher to $16.88 at 1135 AEST.
Origin announced an agreement before the long weekend that China's Sinopec would be liquefied natural gas and a 15% stake in the Origin-operated Australia Pacific LNG project.
The big miners were mixed, with Rio Tinto higher before midday and BHP Billiton lower despite Deloitte tipping strong commodity prices for years to come.
A report in Sydney Morning Herald said the Senate inquiry would focus on encouraging new entrants to the financial sector, rather than more strictly regulate existing players.
The market was also boosted by a solid performance on Wall Street last week, with US stocks reaching their best levels since June 2008 after key companies Ford Motor Co and 3M Co reported strong results.
"It is really from the multinationals that have been reporting good numbers and speaking of good things to come – these are big, big blue chips that are starting to see a bright light," Joseph Benanti, managing director at Rosenblatt Securities in New York, told Reuters.
The wire service says three-quarters of S&P 500 companies to have reported earnings so far have exceeded analysts' expectations.

Private lenders and SME's

SMEs are experiencing a finance crisis due to the scarcity of lenders and a return to strict lending criteria, according to the Mortgage & Finance Association of Australia.
The MFAA, which represents around 1,000 finance brokers who raise debt facilities for SMEs, says recent feedback from finance brokers suggests difficult times for their clients.
According to the MFAA, company directors outside the corporate economy are putting up their family properties as collateral, as the major banks return to dominance in business lending.
MFAA chief executive Phil Naylor says SMEs are being forced to raise capital from a decreasing number of lenders, with tightened criteria excluding many of them from mainstream borrowing.
Naylor says brokers unable to attract funding from mainstream lenders are relying on private lenders, which charge interest rates of up to 20%.
"Many of the smaller banks and the non-bank lenders have left the SME market, especially when it comes to property developing and office equipment and fit-outs," Naylor says.
"That leaves the large retail banks with most of the market."
Naylor says finance brokers are frustrated that cashflow lending, where the decision to lend is made on the quality of the business and the receivables, has been dropped in favour of a return to fully secured lending.
Secured lending focuses on the quality of the collateral, not the business.
"The GFC created a liquidity issue in our banks, and in response most of them have re-absorbed their business finance arms into the main operations of the bank," Naylor says.
"It means experienced business lenders, who negotiated deals with brokers on their business merits, are now subject to more conservative practices."
The MFAA says it's obviously easier to get business finance for an existing business rather than a start-up because lenders tend to view start-ups as "inherently risky".
One way of getting around this is by entering into a franchise because while the business may be new, it is based on a proven formula.
Naylor says while there's nothing wrong with banks being careful with their lending, SME debt finance is an important part of the economy and the MFAA would like to see more competition in this area.
The MFAA's concerns are substantiated by Reserve Bank of Australia data, which shows lending to businesses declined by 1.7% in the year to February 2011.
The RBA says the four major banks controlled 86% of the SME debt lending market in September last year, yet they only wrote 74% of all business loans.
This article firsts appeared on StartupSmart.