Odds are still for at least one rate rise this year. Photo: Sze Kai Chen
THE minutes of the Reserve Bank's May 3 meeting that were published yesterday tell us nothing new about the next move in interest rates, but something interesting about who likes our dollar.
The minutes were written within days of the meeting that left the cash rate unchanged at 4.75 per cent, and in time for the Reserve's quarterly Statement on Monetary Policy on May 6, which concluded that while the economy was two-paced, ''further tightening of monetary policy is likely to be required at some point for inflation to remain consistent with the 2-3 per cent medium-term target''. The minutes, of course, say exactly the same thing.
The Reserve went into the May 3 meeting armed with consumer price index data for the March quarter that showed inflation building towards the top of its 2-3 per cent target range, but there have been pointers to softness since.
The economy shed a net 22,100 jobs last month including 49,100 full-time jobs, retail sales data for March showed a seasonally adjusted 0.5 per cent fall, house prices fell by an average 0.6 per cent nationally in the March quarter and new lending for houses fell by 1.5 per cent in March to be down 12 per cent since December.
We must wait until the result of the Reserve's next meeting is revealed on June 7 to see what it makes of all that, but the odds are still for at least one rate rise this year.
In the minutes, the Reserve highlights an important source of support for the Australian dollar, saying ''purchases by other central banks seeking to invest their official reserve assets'' have been an ''important influence''.
The Bank of International Settlements calculates that the Aussie's share of global foreign exchange turnover rose from 3 per cent in 1998 to 6.6 per cent in 2007 as the global crisis was taking off, and to 7.6 per cent in 2010, behind the US dollar, the Euro, the yen, and sterling.
And the International Monetary Fund estimates that so-called ''other currencies'', a category that would be dominated by the Australian dollar and the Canadian dollar, accounted for the equivalent of $US224.5 billion of official foreign exchange currency reserves last year, 4.4 per cent of the world's total official foreign currency reserves. The ''other'' total was up from just $US94.8 billion in mid-2009, and the rise is substantially due to $A buying of Australian government bonds by central banks, including those in China, Taiwan, South Korea, Brazil and Chile. China's buying accelerated a year ago, and it and Brazil have also been buying semi-government paper.
It would be a stretch to say that the $A is a now a major reserve currency. But almost three-quarters of Australian government securities are in foreign hands, and central banks are buying. That's a vote of confidence in our economy.
FAIRFAX Media's decision to run a ''formal conditional'' sale process for its city and regional radio stations is formal in that it creates a process to consider offers, and conditional in that Fairfax has a price in mind, and will not sell if it doesn't get it.
The radio stations are solidly profitable - earnings before interest and tax were $15.6 million in the December half on 3.8 per cent higher revenue of $57.5 million - and there's no pressing need for a sale. Fairfax (owner of The Age) said on Monday that the maturity date of a $441 million tranche of its syndicated facility had been extended from April 2012 to April 2015, putting it behind a tranche of $422 million due in April 2013, and one of $292 million due in April 2014. The facility is drawn to $395 million.
The radio business can live on alongside the print and online businesses Fairfax's new chief executive, Greg Hywood, is focusing on. But their mid-market demographic is below the one Hywood is aiming at, and they are a relatively small business, accounting for just over 4 per cent of group revenue and profit. Sale money would initially be used to pay down debts, but could also give Fairfax more acquisition muscle.
Fairfax wouldn't expect to get back what it paid. The stations were picked up from Macquarie Media in 2007 after Macquarie took over Southern Cross for $1.35 billion, with Fairfax buying out seven city radio stations and the Southern Star television production and distribution business for $520 million, and reducing its net cost to $480 million by selling nine regional radio stations to Macquarie. Southern Star was sold in 2009 for $75 million, and the radio stations are estimated to have a value of between $250 million and $300 million.
But there is definitely a price hurdle. John Singleton's Macquarie Radio talk network, Lachlan Murdoch's DMG, APN and private equity funds are expected to have a look.
