Australia's quarterly growth slows to 0.1 percent
Wednesday December 3, 4:06 am ET
By Rohan Sullivan, Associated Press Writer
Australia's economic growth slows to lowest level in 8 years in third
quarter
SYDNEY, Australia (AP) -- Australia's economy scraped bottom in the
third quarter, growing at its slowest pace in eight years as the global
financial crisis sapped consumer spending and demand for the country's
vast reserves of iron ore and other resources.
Gross domestic product expanded just 0.1 percent in the three months to
September 30 on a seasonally adjusted basis, taking the figure for the
year to date to 1.9 percent, the Australian Bureau of Statistics said
Wednesday. The government's growth forecast for 2008 is 2 percent.
Australia has enjoyed an unprecedented 17 years of economic growth,
fueled largely by voracious demand from China and other fast-developing
countries for the country's coal and steel-making resources. The boom
filled the government's pockets with tax revenue but also pushed
interest rates higher as the central bank sought to control inflation.
The global financial turmoil has turned all that around. Commodity
prices have plummeted, the Reserve Bank of Australia reversed six years
of rate rises in just three months, and Prime Minister Kevin Rudd has
raided the budget surplus for an Australian dollars 10.4 billion ($6.7
billion) stimulus package.
The third quarter data covers a period that ended before the first of
four consecutive interest rate cuts and the government spending package
were announced -- moves designed to boost consumer spending to keep the
economy moving.
The figures show that a 15 percent increase in farming sector output
saved the economy from contraction in the third quarter, with consumer
and other spending sagging. Without the farming increase, the economy
would have shrunk by 0.3 percent, the bureau said.
Treasurer Wayne Swan on Tuesday said the growth figures could have been
worse.
"This is a positive outcome for Australia, particularly in the context
of a global recession," Swan told reporters in the national capital of
Canberra, noting that the United States' and major economies in Europe
and Asia had contracted in the same period.
"Today's figures show we can't completely resist the pull of
international economic forces but we are better placed than many other
nations to deal with this global financial crisis," he said. "We have a
strong, well-regulated financial system and plenty of policy ammunition"
to fight off recession.
Analysts agreed the data indicated that Australia was faring better than
some other countries, but warned a contraction -- if not recession --
was still a strong possibility.
"We're grinding to a halt here," said AMP Capital Investors chief
economist Shane Oliver. "The economy has stalled and that's pretty
evident when you look at non-farm GDP, which went backwards. We can't
say the economy is in recession but it's quite close to it and, for most
people, it feels that way."
The stock market had risen about 2 percent before the release of the
data, but reversed those gains to finish flat.
Japan stocks higher but wariness lingers
Wednesday December 3, 2:52 am ET
By Tomoko A. Hosaka, Associated Press Writer
Japan stocks rise but global economic jitters limit gains; auto stocks
slip
TOKYO (AP) -- Japanese shares gained Wednesday after a rebound on Wall
Street, but gloom about the global economy and weakness in auto stocks
tempered sentiment.
The benchmark Nikkei 225 stock average rose 140.41 points, or 1.8
percent, to 8,004.10. The broader Topix index added 1.5 percent to
799.19.
"Investors remained cautious due to sustained worries over a prolonged
global downturn," said Masatoshi Sato, market analyst at Mizuho
Investors Securities Co. Ltd.
Japanese automakers were mostly lower after data showed U.S. auto sales
plunged 37 percent in November to their worst level in more than 26
years. Honda Motor Co. fell 4.7 percent to 1,797 yen, and Toyota Motor
Corp. slipped 0.9 percent to 2,800 yen.
Utilities and retailers were among the sectors that gained as investors
sought out relative safe havens.
Tokyo Gas Co. jumped 4 percent to 473 yen, and The Tokyo Electric Power
Co. gained 4 percent to 2,975 yen after oil prices hit a three-year low
overnight.
Fast Retailing Co. closed up 10.2 percent at 10,790 yen after reporting
record sales for November. The operator of the Uniqlo discount clothing
store chain said Tuesday that its same-store sales jumped 32 percent
from the previous month, bucking an industrywide downturn with its hit
products and low prices.
Major retailer Seven & i Holdings Co. soared 12 percent to 2,810 yen
In a volatile session Tuesday in New York, the Dow Jones industrial
average rose 270 points, or 3.3 percent, to 8,419.09, making back some
of Monday's 7.7 percent plunge.
The U.S. market withstood mixed messages from troubled U.S. automakers
-- Ford Motor Co. said it had enough cash to make it through 2009 while
General Motors Corp. said it needs $12 billion in government loans.
In currencies, the dollar was trading at 93.27 yen from 93.13 yen late
Tuesday. The euro held steady at $1.2692.
Associated Press Writer Shino Yuasa in Tokyo contributed to this report.
China reluctant to invest in foreign banks
Wednesday December 3, 2:17 am ET
By William Foreman, Associated Press Writer
Head of China's biggest government investment fund says not investing
more in foreign banks
HONG KONG (AP) -- China's sovereign wealth fund, which last year poured
$5 billion into Morgan Stanley, is reluctant to plow more money into
foreign banks until governments hash out coherent policies to cope with
the global economic and financial turmoil, the fund's head said
Wednesday.
The remarks by Lou Jiwei, chairman of the $200 billion China Investment
Corp., represent a new blow for ailing banks that were hoping the
Chinese government investment fund would use its deep pool of cash to
bail them out.
Lou said that he was unwilling to invest in foreign banks amid so much
turbulence and uncertainty. Confidence in financial institutions is
lacking because foreign governments seem to be changing their policies
every week, he said.
"Right now, we do not have the courage to invest in financial
institutions," said Lou, speaking on a panel discussion in Hong Kong at
a conference organized by former President Bill Clinton.
He added, "We have to wait for the time when there won't be massive
collapses of financial institutions."
The Chinese government investment arm was set up to make profitable use
of Beijing's foreign reserves, which totaled $1.9 trillion by the end of
September.
Most of those funds are kept in U.S. Treasuries and other safe but
low-yielding securities. But there have been complaints about the
performance of some of the fund's higher profile investments amid the
recent market turmoil.
CIC's biggest investment to date was a $5 billion investment in Morgan
Stanley in December 2007 -- one of nine major banks that subsequently
sought relief from the deepening credit crisis through the U.S.
government's $700 billion banking bailout. That investment gave CIC a
9.9 percent stake in the investment bank.
The Chinese sovereign wealth fund was also said by Chinese media to have
invested more than $100 million in Visa Inc.'s $19.1 billion initial
public offering in March and has invested in a fund managed by J.C.
Flowers, a U.S. private equity firm.
Last month, the private equity firm Blackstone Group said in a
regulatory filing that it has agreed to raise CIC's ownership limit from
9.9 percent to 12.5 percent. CIC paid $3 billion for a stake in
Blackstone's June 2007 initial public offering, but it has seen the
value of that investment plunge -- a major sore point for many Chinese
officials and citizens.
Also speaking on Wednesday's panel, called "Moving Forward: Coping with
the Financial Crisis," was Laura Tyson, professor of the Haas School of
Business at the University of California, Berkeley. Tyson argued that
governments needed to spend more money to stimulate the global economy
and speed up recovery.
"China is one of the countries in the world that is well positioned to
be part of the solution," she said.
Lou said China's fund would help soften the bite of the ongoing global
crisis by continuing to invest in wealthy countries as well as in
developing nations. But he said people should not count on China to pull
the world out of the economic crisis.
"China can't save the world. It can only save itself," he said.
Lou said China's economy, the world's fourth largest, is in relatively
good shape, but is facing several major challenges, such as boosting
domestic consumption and becoming less dependent on exports.
"This will be very difficult and requires a lot of reforms," he said.
"It might take one to two years."
Another panelist, Stephen Roach, chairman of Morgan Stanley Asia Ltd.,
said that the financial crisis will help accelerate the shift of
economic power to Asia. But he said that Asian economies still had much
more to do before the region can stand on its own as an economic force.
For example, Roach said, Asia is more dependent on exports than ever
before. He also said Asian consumers aren't spending enough because they
believe they need to save money for emergencies in societies lacking
safety nets, like health insurance, pensions and unemployment funds.
"I think there's a lot of heavy lifting that still needs to take place
in Asia," he said.
