The Bureau of Statistics reported that Australian business profits dropped in the three months through December, the fifth quarterly decline, as earnings weakened at mining, manufacturing and construction companies.
According to a report on Bloomberg, gross operating profits dropped 1 percent from the third quarter, when they fell a revised 2.7 percent. The result matches the median forecast of a Bloomberg survey of 17 economists. Inventories rose 0.2 percent. Economists had forecast a 0.6 percent gain.
According to 27 of 29 economists surveyed by Bloomberg News, Reserve Bank of Australia Governor Glenn Stevens will keep the benchmark interest rate unchanged at 3 percent tomorrow.A separate report says Governor Glenn Stevens and his board, who will meet to decide on interest rates tomorrow, are seeking to keep industries afloat, including construction, to rebalance economic growth and extend 21 recession-free years.
“Fourth-quarter data confirm the economy lost steam in the second half of 2012,” said Katrina Ell, an economist at Moody’s Analytics in Sydney. “Company profits, capital spending and construction have all disappointed. With fourth-quarter gross domestic product growth likely to surprise on the downside, we expect at least one more rate cut in the second quarter.”
The high Australian dollar has had a negative impact on industries like manufacturing, while an easing of commodity prices lessened the gains from exports and the nation’s terms of trade.
The report from the Bureau of Statistics today showed that profits declined by 7.6 percent from a year earlier.
Last month, the world’s biggest mining company BHP Billiton reported a 58 percent decline in their first half profit. Its competitor Rio Tinto Group also reported a drop in earnings as the global growth last year prompted lower prices and a slowing down in the expansion of some miners.
Sydney-based Coke bottler Coca-Cola Amatil’s net income fell 22 percent to A$460 million in 2012. Australia’s largest soft-drink bottler, posted full-year profit that missed analyst estimates after taking A$146 million of writedowns on its packaged food business, according to the Bloomberg report.
“Australia’s currency has remained above parity with the U.S. dollar for eight months, the longest stretch since it was freely floated in 1983, propelled by a mining boom and central bank asset purchases in major developed nations,” reports Michael Heath for Bloomberg. “The central bank has cut interest rates by 1.75 percentage points in the 14 months through December to 3 percent, matching a half-century low reached during the 2009 global recession. It left borrowing costs unchanged last month.”