Fruit fall takes heat out of CPI power hit

Interest rates are expected to remain at their record lows until well into 2018 after a collapse in fruit and vegetable prices offset soaring electricity bills and kept inflation below the central bank’s target range.

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The consumer price index rose 0.6 per cent in the September quarter, missing market forecasts of 0.8 per cent, and taking the annual rate of inflation to 1.8 per cent, Australian Bureau of Statistics figures show.

Inflation has now been under the Reserve Bank of Australia’s target band of two to three per cent since the end of March.

RBC head of fixed income strategy Su-Lin Ong said the key core measures of inflation remain benign, and are consistent with the RBA leaving interest rates on hold for some time.

“Core inflation may have troughed but is showing limited signs of momentum,” she said.

“And looking forward, we see little reason for any acceleration given continued tepid wages growth and annual unit labour cost growth which has averaged around flat for the last few years.”

JP Morgan analyst Ben Jarman said the latest inflation numbers would not deliver anything new to the RBA but are an uncomfortable reminder that financial conditions are too tight.

“There is a lot at stake in hoping that growth will recover sufficiently to achieve the inflation target over time,” he said.

One positive of slow price growth, Mr Jarman said, is that it preserves the value of real wages amid rising household debt levels.

Electricity prices staged the biggest gain recorded in the quarter, soaring 8.9 per cent as wholesale prices jumped amid supply concerns.

Electricity prices jumped 11.5 per cent in the year to September, the ABS data showed.

Commsec analyst Craig James said households hit by rising energy bills were also benefiting from lower food prices, which have taken their biggest annual drop in five years,

Vegetables were the main contributor, with prices tumbling 10.9 per cent in the September quarter.

Petrol prices dropped 2.3 per cent in the quarter and the price of telco equipment and services fell 1.5 per cent.

Underlying inflation, which strips out volatile price movements, was 1.8 per cent over the year, after a quarterly rise of 0.4 per cent.

Mr James also said he expects the RBA to stay on the interest rate sidelines until late 2018.

“In short, the inflation genie remains trapped in its bottle,” he said.

The weaker than expected data sent the Australian dollar to a three month low of 77.17 US cents, after trading at 77.81 US cents just prior to its release.

Wesfarmers may end quarterly reports

Wesfarmers, the owner of Coles, Bunnings and Kmart, is considering dropping quarterly sales reports with incoming chief executive Rob Scott calling them a distraction.

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Mr Scott said he was talking to investors and analysts about potentially discontinuing the company’s quarterly sales updates, after unveiling on Wednesday an ongoing slowdown in Coles’ first-quarter sales.

He said feedback from investors has been positive towards the move, with many warning him to not get caught up in short-term figures.

“Investors like the long-term focus and in many ways quarterly sales reporting is a distraction,” Mr Scott told reporters on Wednesday.

“And there are many opportunities we have through the year to ensure the market is appropriately informed.”

Mr Scott was backed by outgoing chief executive Richard Goyder who said quarterly reports were time consuming and did not create a lot of value for investors.

“What we see is speculation beforehand which leads to the market moving one way or the other and the market moving one way or the other after we put it out and often, (the market) catches itself out,” he said.

“It consumes a lot of time and effort from people in this organisation and in the media and analysts as well and I don’t think there’s great value in that.”

He said there is “nothing sinister” in looking at possibly axing quarterly sales reports.

“We’ve got very clear disclosure obligations so if there’s anything that we are aware of that the market needs to know we would make it known anyway.”

Mr Goyder will step down from the job he’s held for 12 years at the group’s annual general meeting next month.

Stockland on track to meet guidance

Stockland is on track to meet its full-year guidance and the property developer expects positive economic conditions and relatively stable interest rates to remain.

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The company said it expects total funds from operations to grow by between 5.0 and 6.5 per cent from $802 million in 2016/17, and to lift its distribution per security by four per cent to 26.5 cents.

Chief executive Mark Steinert said Stockland has had a positive start to the financial year, driven by all business units – particularly its residential communities division.

“Our diverse portfolio allows us to deliver our purpose of creating a better way to live, and build thriving, affordable communities while continuing to deliver strong profit and sustained growth,” Mr Steinert said in a statement.

He noted the strength of the residential market as a key driver of growth for the quarter and forecast Stockland to achieve about 6,500 settlements in the year.

Stockland forecasts a residential profit margin of over 17 per cent, given broad market strength and higher rates of Sydney settlements, Mr Steinert said.

He said conditions remain favourable in Melbourne and Sydney, where the markets are undersupplied and solid price growth continues.

Stockland took 1,672 net deposits for lots and townhomes during the first quarter, a slight reduction on a year ago due to project timing, with a number of projects set to launch later in the financial year.

Its retail town centres division recorded flat sales growth across the quarter due to an overall subdued environment for retail sales, impacted by some price deflation, low wages growth and energy price hikes.

Slower growth has also continued in far North Queensland and Perth following sustained activity during the mining boom.

But Mr Steinert said indicators such as job advertisements point to a return to more stable trading conditions at Stockland centres in these areas.

“Retail conditions remain challenging, however services, food, lifestyle, mini majors, entertainment and leisure offerings continue to perform well and these categories remain the focus for our centre remixing,” he said.

Stockland shares gained 13 cents, or three per cent, to a four week high of $4.47.

Brennan’s No.6 NRL challenge to Elgey

Gold Coast coach Garth Brennan says Kane Elgey will have to prove himself worthy of the No.

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6 jersey, with the new Titans’ mentor throwing down a pre-season challenge to his playing group.

Elgey starred for the Titans in 2015 but missed the 2016 campaign after a knee reconstruction and struggled in his return last season while battling a sternum injury.

Off contract at season’s end, the Gold Coast junior will need to convince Brennan he is the man many had tipped him to be two years ago.

On Wednesday, Brennan was happy to anoint re-signed No.7 Ash Taylor as the man he would build the club around, but would not be drawn on the likely identity of his halves partner.

“Kane Elgey’s a local product; I’m excited by him; he had a fantastic year before he done his knee and I think he’ll complement Ash very well,” Brennan said.

“But where players are going to play, that’s something I’m coming in with a fresh approach to.

“It’ll be who puts their hand up in the pre-season.

“No one’s guaranteed a position no matter who they are. They’ve got to work for it and it’s important they all realise that.”

Brennan attempted to hose down talk that fullback Jarryd Hayne might move to five-eighth, but left it on the table as a possibility and even touted Taylor as an option.

“My quote was that I wanted the football in Jarryd’s hands as much as possible,” he said.

“Where Jarryd plays, or whether Ash wears the six or seven on his back, that’s something that I’ll look at over the next few months before round one and will be a decision made between myself and the players.”

Meanwhile, Penrith hooker Mitch Rein, who played last season in Brennan’s NSW Cup premiership side, has been linked to a move north.

Rein’s arrival would go some way to addressing the loss of utility back Tyrone Roberts to Super League’s Warrington.

Premier dismisses November poll rumours

Queensland Premier Annastacia Palaszczuk insists it would take something ‘serious’ for her to call the election before next year, amid speculation she could call a November 25 poll.

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When asked at a media conference on Wednesday whether the election will be called this weekend, the premier said: “Well I hope not”.

“It would have to be something serious for me to contemplate an election this year,” she told reporters.

Ms Palaszczuk was at the Port of Brisbane with Treasurer Curtis Pitt and Tourism Minister Kate Jones to announce the green light had been given for a new mega cruise terminal at the Port of Brisbane.

There have been calls for a new cruise ship terminal for Brisbane for years, with larger ships unable to fit under the Gateway Bridge.

Heralding the start of the project would be a good sweetener ahead of an election announcement.

Energy Minister Mark Bailey flew to Bundaberg on Wednesday for a lightning visit to spruik the government’s power policies.

It’s unusual for ministers to venture far from Brisbane on a sitting week, but Ms Palaszczuk said Mr Bailey would be back in time for the afternoon sitting, including Question Time.

“Just because parliament’s sitting in the afternoon doesn’t mean my ministers and members of parliament can’t get out and do other jobs during the day,” she said.

The election is due by early May at the latest. It has been widely tipped to be held late this year, however the window for calling the election in 2017 is rapidly closing.

This weekend would be one of the last opportunities to call the election before the poll would have to be pushed into December, butting against school holidays and Christmas.

Tassal ‘not reliant on Macquarie Harbour’

Salmon farmer Tassal says it is not dependent on its operations in Tasmania’s Macquarie Harbour and can grow fish at other marine leases held around the state.

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Tassal holds three leases at Macquarie Harbour, which became a focus last year because of concerns over the environmental impacts of intensive fish farming.

Tassal has fully de-stocked one lease, Franklin, following Tasmania’s environmental regulator ordering the move in January after finding 14 non-compliance issues.

The Franklin lease is expected to be stocked again in 2018.

Tassal chief executive Mark Ryan told shareholders at the company’s annual general meeting on Wednesday that there had been some market concern about reducing the amount of salmon farmed at Macquarie Harbour.

“Tassal illustrated during 2017 that we can direct salmon numbers and biomass to other locations and materially reduce the number of fish grown in Macquarie Harbour for harvest in FY2019,” Mr Ryan said in presentation slides at the AGM.

Tassal said in February that it may have to reduce the number of fish put into Macquarie Harbour by almost half to around one million over the medium term.

In November 2016, Tasmania’s Environmental Protection Agency advised salmon leaseholders in Macquarie Harbour that it would reduce the number of salmon allowed in the harbour, after a report showed marine life in the vicinity of the salmon farms had declined.

Tassal chairman Allan McCallum said on Wednesday that Tassal is committed to maintaining a sustainable operation in Macquarie Harbour that complies with Environmental Protection Agency requirements.

He said Tassal has installed waste collection systems on fish cages where the biomass exceeds 13 tonnes per hectare.

Mark Ryan said Tassal’s cost of growing salmon is getting closer to the average global cost of $6.50 a kilogram as the company moves towards production of fish that weigh an average of five kilograms.

Tassal said it was improving operational efficiency, which would help lift margins.

The company is adopting new feeding methods, rolling out seal and bird-proof “sanctuary” pens, and has a higher-capacity harvesting vessel.

Mr Ryan said salmon pricing is expected to remain strong in both domestic and export markets in fiscal 2018.

Global demand for sustainable salmon is expected to grow by five to seven per cent per year, with demand from China expected to lift by 25 per cent.

Other factors supporting the price are lice infestations in Norway which have reduced production, the loss of salmon in Chile because of an algal bloom and health-conscious Australian consumers preferring salmon over chicken.

Shares in Tassal closed two cents higher at $4.18.