Mar 11 - 17, 2002

Brown pledges business tax cuts

Chancellor Gordon Brown has promised more tax cuts for business in his forthcoming Budget, in a move he says will lead to better public services.

Mr Brown says Labour is committed to fostering "a spirit of enterprise", and that encouraging wealth creation will create a higher standard of living for everyone.

His comments in the Times, which are expected to anger unions, come ahead of a special Cabinet meeting at Chequers in which priorities for the Budget will be discussed.

The meeting will take place at the prime minister's official residence on Friday, amid reports that some ministers are deeply unhappy about possible British support for an American attack on Iraq.

Mr Brown's pledge on business tax follows an indication last month by Tony Blair that taxes will have to rise to pay for improvements in the National Health Service.

Unions have already been angered by claims that the government is planning to renege on pledges to improving workers' rights.

The Chancellor now believes reducing entrepreneurs' tax burden is a priority alongside health, education and transport spending.

In the Times, he writes that the Budget on 17 April will forge a consensus for a "radical pro-enterprise and pro-competition agenda".

"To those who say money would be better spent in other ways, my answer is this: we will make decisions to do what is right in health and public services, matching money to reform and outcomes," he says.

Australian economy grows rapidly

Australia is experiencing breakneck economic growth, far outstripping its main trading partners, figures have revealed.

Between October and December, the country's economy grew by 1.3%, almost double what economists had predicts and the biggest quarterly leap in two years.

The growth was almost four times what the US had achieved in the same period.

Underpinning the spurt was the continuing willingness of Australians to splash out on consumer goods, coupled with a hyperactive housing market boosted by government grants for new house building.

Rising commodity prices were also credited.

The news is likely to shorten the odds on the Reserve Bank of Australia raising interest rates, especially since inflation is also creeping up above the 2-3% target the RBA has set itself.

The base rate in Australia is 4.25%, a 30-year low produced by cuts totalling 2 percentage points last year as the RBA sought to head off the impact of the global economic slowdown.

The data was welcomed by figures including federal treasurer Peter Costello, who told reporters the growth was "just remarkable".

"I'd say the worst in the international environment is over, and Australia survived the worst," he said.

In the financial markets, the Australian dollar hit an eight-week high of 52.40 US cents.

And analysts at SG Securities said they remained "confident that Australia should remain one of the better performing industrialised economies".

In a fortuitous piece of timing, they pointed out, business investment was picking up rising 8.3% in the three months to December just as the global recovery appeared to be taking hold.

Trade war looms over steel dispute

The European Union has promised retaliatory action after the US decided to slap punishing penalties on imported steel.

EU trade commissioner Pascal Lamy said the US move flouted international trade rules, and promised to launch an immediate complaint with the World Trade Organisation.

President George W Bush decided to impose the protectionist measures after pressure from the ailing US steel industry to save jobs.

With a transatlantic trade war on the cards, the first director general of the World Trade Organisation, Peter Sutherland, warned of the "very dangerous" effect on the global economy.

Eurozone interest rates kept on hold

The European Central Bank has left its key interest rate unchanged at 3.25%.

The decision was widely expected by analysts, many of whom now think that the next rate move will be upwards.

The ECB cut rates four times last year as it sought to protect the eurozone economy from the effects of the global economic slowdown.

The last cut was in November, and since then the Bank has resisted calls for further cuts, saying that the eurozone economy is set to recover during the coming year.

Greenspan upbeat on US recovery

Alan Greenspan, the chairman of the US central bank, has said that the US economic recovery is well under way.

In his most optimistic statement yet, the influential central banker told the Senate Finance Committee that "recent evidence increasingly suggests that an economic expansion is already well under way".

It was a highly unusual revision of Mr Greenspan's testimony just one week ago to the House of Representatives where he sounded a more cautious note.

Then, the US Federal Reserve chairman said merely that some of the forces that had been restraining the US economy were "starting to diminish."

Foreign bank forces Japan bankruptcy

Japan's only major foreign-owned bank has forced one of the country's mortgage lenders into bankruptcy.

Shinsei Bank came into being after the Long-Term Credit Bank — itself bankrupt thanks to its huge stable of bad loans — was sold in March 2000 to a consortium of US investors.

Now it is taking steps to improve its position, and First Credit Corp is one of the victims.

Observers say that the sheer number of companies unable to pay their debts means that insolvency is going to have to be a fact of life in Japan for some years to come.

Japan's contraction continues

Any lingering doubts about the depth of Japan's economic troubles were washed away on Friday with news that the economy shrank throughout the last nine months of 2001.

Only once in two decades, in 1993, has that happened, the government said.

New figures released by the Ministry of Finance showed that between October and December, Japan's output fell by 1.2%, a rate that — if carried through a full year — would result in a 4.5% annual contraction.

For 2001 as a whole, growth in the first three months meant that the fall was 0.5%.

China in DVD royalty row

Chinese officials say Britain and Germany have seized batches of digital versatile disc players because of a row over copyright.

Some countries are trying to persuade China to force its manufacturers to pay a royalty for every DVD player produced.

Two international electronic companies claim they hold the patent to at least some of the technology involved in DVD players, and have demanded compensation.

The row has exploded because of a sudden growth in cheap exports of DVDs from China.

Japanese steel firm sinks deep into red

Japanese steel giant NKK is expecting to sink deep into the red this year after its US subsidiary, National Steel, declared itself bankrupt.

National's decision to seek protection from creditors came within 24 hours of the US move to slap tariffs on foreign steel.

But National said it would continue merger talks with rival US Steel.

Results

John Lewis: UK department store and supermarket chain John Lewis, posted a 5% fall in yearly profits to £141m ($200m).

Cathay: Cathay Pacific Airways, Hong Kong's main carrier posted an 87% drop in net profit at 657m Hong Kong dollars (£59.2m, $84.2m), below analyst's expectations and in a striking contrast to the record HK$5bn in 2000.

Exporters learning to love euro

According to the report by international courier group DHL, 52% of exporters believe British membership of the single currency would improve their business prospects, up from 45% in December.

Only 9% thought the euro would be of no help, the lowest reading since 1997, the survey suggests.

US regulators clear HP-Compaq merger

Federal regulators in the United States have approved a proposed merger of the computer and printing giant, Hewlett-Packard, and the second largest American computer maker, Compaq.

Oil output cuts 'threaten US recovery'

Oil producers cartel Opec risks slowing down economic recovery in the United States unless its steps up oil production by 1 million barrels per day, a US energy agency has warned.

Opec has pushed through output cuts to bolster the price of crude oil and is pushing to extend them.

Its current output quota is at its lowest level since March 1991, analysts say.

Sticking to current output limits threatens economic revival not just in the US but globally, the US Energy Information Administration has warned.

Big rise in stamp prices threatened

The price of a first class stamp might rise if mail delivery is opened up to competition, the UK's publicly-owned postal service Consignia has warned.

Under proposals from the mail watchdog Postcomm, Consignia's monopoly on bulk deliveries would be phased out over the next four years.

Argentina cautious over loan chances

Argentina's chances of getting a badly needed loan from the International Monetary Fund should be clearer by next week, Deputy Economy Minister Jorge Todesca has said.

Mr Todesca's comments came ahead of a week-long meeting between the Argentine government and a delegation from the IMF.

Argentina is trying to persuade the IMF to release almost $10bn (£7bn) of funds from a $22bn loan programme which was suspended last year.

The action triggered a sequence of events which led to the overthrow of the government, default on the country's foreign debt, and the floating of the peso against the dollar.

Hopes of an agreement with the IMF rose after the Argentine Senate approved a cost-cutting budget for 2002 late on Tuesday.

Approval of the budget was one of the conditions set down by the IMF before it would release any more money.

Toyota targets European expansion

Toyota, the Japanese mass producer of cars which recently took a first step into Formula One motor racing, has revealed extensive expansion plans in a bid to boost its European market share from 3.8% to 5% by 2005.

German jobless total holds steady

The number of people out of work in Germany rose by a smaller than expected amount last month, raising hopes of an end to the country's economic downturn.

German unemployment rose by 1,000 in February on a seasonally adjusted basis, taking the jobless total to 3.979 million and leaving the unemployment rate unchanged at 9.6%.

The headline jobless figure, which is not seasonally adjusted, grew by 6,200 to 4.296 million.

World Bank's war on poverty

The World Bank, the agency that lends to poor countries, has called for a doubling of foreign aid by rich countries ahead of a controversial development summit later this month.

The head of the World Bank, James Wolfensohn, says that rich countries must build on the global war against terrorism by launching a new war on poverty.

But the United States appears set against making any concrete commitments at the special world development summit in Monterrey, Mexico, which begins on 18 March, despite pleas from UK Chancellor Gordon Brown.

Hong Kong takes deficit risk

Hong Kong will rely on cuts in state spending rather than tax rises to ease the effects of a soaring budget deficit, financial chief Antony Leung has said.

Mr Leung, unveiling Hong Kong's 2002-03 budget, warned that the introduction of further taxes would damage consumer's confidence even further

"While the medium and long-term outlook is promising, it will take time for our economy to recovery," he said.

Hong Kong faces a budget deficit of HK$45bn, equivalent to 3.6% of economic output, for the new fiscal year.

Weak consumer spending, and a fall in exports, have been largely implicated in Hong Kong's fall into recession last year.

Over 2001 as a whole, economic output rise 0.1%.

China spends to avoid recession

China says it will dramatically increase government borrowing and public spending this year as it attempts to spend its way out of the world economic slowdown.

Speaking to China's annual session of parliament on Wednesday, the country's finance minister said the government's budget deficit for the 2002 financial year would balloon to nearly $40bn.

With demand from its main export markets in America and Europe decreasing, China has little choice but to try and spend its way to continued economic growth — hence what China's finance minister is proposing. The $40bn will be China's biggest ever budget deficit.

Nigeria mulls bank fines

Nigeria's central bank has said it may fine banks found guilty of illegal foreign exchange trades.

The move has upped the ante in the Nigerian authorities' bid to reform the country's ramshackle banking sector, and has triggered fears that some banks could collapse.

The Central Bank of Nigeria is investigating 21 banks suspected of exploiting the gap between the cheaper official naira/dollar exchange rate — reserved for importers — and the higher open market rate.