MANY investors across the world appear so worried about the prospects for sharemarkets and commodities that they’d rather put their money in capital-guaranteed government bonds that offer low rates of return – in some cases less than zero per cent.
Such nervousness is contagious, and even apparently healthy Australia is being affected by the global malaise.
The US economy is hard to read, but it’s clear that American banks are withholding huge stocks of defaulted homes from the marketplace, putting an artificial floor under prices.
Suspicions persist that US and European banks are still implicitly claiming that potentially large volumes of derivative assets on their books have respectable values when they are more likely to be worth little or nothing.
More and more heavily indebted nations are struggling to stare down creditors and markets, prompting speculation of more social unrest, low or negative growth and rising unemployment.
Against this background, positive indicators from the Australian economy are failing to placate investors or households, leading the Reserve Bank to cut interest rates in a bid to stimulate spending.
The bank yesterday cut official rates by 25 basis points to 3.5 per cent, prompting celebration from retailers and manufacturers and encouraging speculation about more possible cuts to come.
The now-familiar chorus, calling on retail banks to pass on the rate cut to borrowers in full, has begun in earnest, with the banks being urged not to maintain their recent practice of keeping a portion to fatten their own profit margins.
Bank of Queensland moved quickly yesterday to defy those calls, passing on 20 basis points, arguing that uncertain overseas conditions have pushed up funding costs and demand for deposits.
Such actions do nothing to dispel the sense of apprehension that appears to be constraining household spending.
It seems that many may be waiting for clear signs of recovery overseas before loosening their purse strings and abandoning their preference for debt-reduction and saving.
IN April it was reported that a subsidiary of Dart Energy had breached its coal seam gas exploration licence conditions, failing to properly rehabilitate a drill site at Fullerton Cove, near the Tomago Sandbeds.
A second breach involved lack of appropriate surface water and groundwater monitoring.
Now Dart has been granted approval to drill a series of pilot wells at Fullerton Cove, a decision that may lead many to hope the company has learnt its lesson.
Some environmentalists have expressed concern about drilling being allowed so near the water-bearing sandbeds.
The government has been repeatedly accused of over-eagerness to oblige the coal seam gas industry, and of lack of rigour in assessing and monitoring environmental safety. The government itself, as much as Dart Energy, has put its name on the line at Fullerton Cove.