Oil prices will again take centre stage here and overseas this week, and the merger details for the Westpac-St George union will be released, sparking speculation that there might be a party pooper such as the NAB.
And while the speculation about banking is battling market unease about banks coming from the US once again, oil will continue to weave its spell over the markets and the economy
Oil finished over $US132 a barrel in New York on Friday.
Not the best of ways to greet a long weekend that traditionally kicks off the US summer holidays.
It’s the Memorial Day weekend and when the so-called US ‘driving season’ starts for those holidays.
It’s a time of high petrol consumption, which this year will be very, very costly for millions of Americans in the run up to an election. Flying will also be far more expensive and US consumers are likely to be spending a lot of time going local and trying to save money
Cutting the cost of petrol has already been and gone as an issue in the US as an attempt by Hilary Clinton to gain votes by calling for a temporary drop in the US tax on petrol, fell on deaf ears and was laughed out of the debate.
US airlines are slashing, hacking, putting up fares and introducing new charges, US car companies are cutting back, changing strategy, as Ford did last week, and they also putting up prices.
Kimberley Clark, the big tissue and paper products group last week announced a 6%-8% price rise and blamed higher energy costs.
It’s very different here where the Liberal and National parties have abandoned responsible economics and gone down the populist route to try and curry favour.
Now the Rudd Government is in full panic mode on petrol prices, which won’t help markets believe that the Government is committed to sound economic policies.
The Government has asked its review of most taxes to look at whether the GST charged on top of the petrol excise should be scrapped.
Labor has strongly criticised Opposition Leader Brendan Nelson’s plan to cut petrol excise by five cents a litre, but the Government has confirmed its tax inquiry will consider the interaction between the goods and services tax and fuel excise.
As that will involve a look at the GST, which was ruled out when the review was first announced, it’s a sign of how much the Government is becoming rattled.
You’d have to ask what the Rudd government would do if a union or two got stroppy in the building or resource industries and pulled a strike on.
Perhaps they are running at the sight of Mr Nelson and the likes of Opposition frontbencher, Joe Hockey, promising that petrol will always be cheaper under the Opposition if it regains Government.
Both parties should look at the impact of higher petrol prices in Europe, Asia and even the US: there won’t be any relief in the US and in Europe, similar help has been ruled out because they are committed to reducing carbon emissions, of which cars are a major source.
But some Asian countries, such as Malaysia, Taiwan, Korea and Indonesia are starting to cut their huge, multi billion dollar subsidies for petrol, diesel and kerosene because the cost will cripple the governments is maintained at current levels., These are emerging economies with social and political pressures that have grown as food prices have risen.
That these governments realise cutting the budget cost from subsidising energy prices is more important than stoking social unrest and domestic price inflation. That’s a message lost on the likes of the Rudd Government, the Opposition and the whingers in the Australian community.
Oil and fuel costs will never fall dramatically again and we can look forward to slowly rising energy costs for the rest of our lives (and sometimes very rapid rises, and the odd fall: but the trend will always be up).
But the US will see a collection of figures that will add to the weaker sentiment that emerged last week as the markets woke up to the fact that the Fed had stepped to the sidelines and wouldn’t go on underwriting the relief rally, and that high oil prices and other costs, meant inflation was back on the agenda.
The US will assess figures for actual home sales, house prices for March, the last consumer confidence reading for May, durable goods orders and the Fed’s preferred measure of inflation will be released.
The second reading on US first quarter GDP data will also likely be released. It was an initially reported 0.6% annualised rise. It could go up, but it could be no change, like there was for all three readings of the December rise of 0.6%.
Here we will get new homes sales figures, new real capital expenditure by the private sector, as well as construction work spending for the March quarter and private sector credit figures for April are due for release.
The March quarter capital spending figures are out Thursday and will be the most important of the week.. They could show some softening in investment plans for 2008-09 that were very strong in the December quarter estimates.
The final $1.60 a share T23 payment is due by Thursday of this week.
MONDAY:
Institute of Chartered Accountants business conference in Melbourne.
TUESDAY:
Westpac-St George standstill agreement ends. Regional Express 3rd quarter results; Melbourne Institute quarterly wages report; ABB Grain interim result; Uranium Conference in Alice Springs; Centro class action due to start in the Federal Court. Norfolk group, Campbell bros. full year figures.
WEDNESDAY:
Australian Bureau of Statistics construction work done figures for March quarter. Skilled vacancies figures for May from the Department of Employme
