US Fed cuts growth prediction but good news ahead, ANZ calls for changes to dividend imputation

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The Fed’s highly anticipated announcement has no real surprises and US markets see no major reaction… cautious world stocks though before the Fed announcement... Australian share market hit 2-month low... New Zealand hits record current account surplus… and bank chairman calls for rethink of dividend imputation….

US economy growth prediction cut but optimism ahead
The US Federal Reserve made its much-anticipated announcement yesterday after a two-day meeting. The bad news was a slower than expected growth for the economy this year; down to as low as 2.1 per cent rather than the 2.9 per cent that was originally predicted. The good news is that the Fed is optimistic that things are headed in the right direction and that, although slower, key indicators including consumer spending and employment would continue to grow. The predictions for 2015 and 2016 are unchanged and the Fed is now planning a wind-down of its stimulus package. In a later news conference, Fed Chairwoman Janet Yellen said inflation is still too low and unemployment is too high and that low interest rates are still the right policy. The US markets did not see any major changes after the news, as it had been widely expected. Read the full story.
 
Caution in Sydney as markets await news from the Fed
Australia’s sharemarket closed at a two-month low on Wednesday as world markets were cautious ahead of the US Federal Reserve announcement and there were losses in banking and energy. Mining showed some recovery as did retail following the Solomon Lew news. The Aussie was down slightly. Asian markets were mixed with the wait for the Fed and the continued unrest in Iraq, along with some positive outlooks for Japan. Read the full story.
 
NZ exports creates current account record
New Zealand’s current account hit a record (and rare) surplus for the first quarter of 2014, $1.4 billion, thanks largely to meat and dairy exports and exceptional terms of trade. It’s expected that the trade deficit will narrow in the quarter to June and then widen again, eventually settling at around 4 per cent of GDP in the longer term, about half that of the levels seen at the end of the last decade.  Read the full story.
 
ANZ calls for changes to dividend imputation 
The Chairman of ANZ Bank has called for changes to the way dividend imputation works. David Gonski says that the current rules, while great for local investment, were unfairly hitting large companies with offshore operations. As they are unable to get the franking credits needed to avoid double taxation on dividends, they are at a disadvantage. Mr Gonski says that he believes Australian companies investing overseas are of huge benefit to the country and that the government says it wants to encourage it, but this system needs to be reviewed. Read the full story.
 
IMF warns of global housing bubble
The International Monetary Fund says that there is a global housing bubble which must be tackled through tighter regulation of lending. Speaking to Germany’s Bundesbank on Tuesday, the IMF deputy MD Min Zhu said that rising house prices are a significant threat to the global economy and called for governments to do more. Mr Zhu said that tightening lending requirements and putting greater capital requirements on mortgage lenders is required, along with restricting access for foreign investors to overheated markets. The IMF Global Housing Index shows that prices are 23 per cent above where they were in 2000 and 3.1 per cent up on last year. Read the full story.
 

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