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Australia central bank warns of business failures as property vacancies rise

Australia central bank warns of business failures as property vacancies rise

SYDNEY (Reuters) – Business failures in Australia are likely to rise with commercial property seen among the hardest hit sectors as a shift to work-from-home arrangements empties offices and major retail precincts, the central bank said on Friday.

FILE PHOTO: A businessman walks past the headquarters of Australia’s Reserve Bank in Sydney, November 3, 2015. REUTERS/Jason Reed

The Reserve Bank of Australia (RBA) said the outlook for commercial property means banks’ impairment rates will likely climb from current low levels while some indebted landlords will find it difficult to meet their debt repayments.

Risks appear highest for retail commercial property, the RBA noted, while adding there was still a high degree of uncertainty about the magnitude and timing of business failures in the country.

Australia has been lauded for its success globally to curb the spread of the coronavirus and open its economy earlier-than-expected though with domestic and international borders still shut, activity is expected to remain subdued for some while yet.

Over the first six months of 2020, the Australian economy contracted by over 7% under the weight of strict mobility restrictions to suppress COVID-19.

The unemployment rate has since risen from around 5% pre-COVID to near 7% with economists predicting it would jump to 10% in coming months.

“Secondary-grade offices appear particularly vulnerable to falling demand, as tenants are often enticed by lower rents during downturns to upgrade to better premises,” the RBA noted.

At the same time, a high volume of new office buildings are due for completion in Sydney and Melbourne this year.

“While most of these new buildings have pre-committed tenants, it will put further pressure on vacancy rates in second-grade buildings,” the RBA said.

Given the deterioration in rental conditions already underway, office and retail property prices could fall sharply, the RBA added.

Investors

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Stocks rise as Trump tweets on stimulus keep market spinning

Stocks rise as Trump tweets on stimulus keep market spinning

Stan Choe, Damian J. Troise and Alex Veiga, The Associated Press
Published 10:15 a.m. ET Oct. 7, 2020 | Updated 4:39 p.m. ET Oct. 7, 2020

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Federal Reserve Chairman Jerome Powell says the economic expansion is “still far from complete.”

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Stocks closed broadly higher on Wall Street Wednesday after President Donald Trump appeared to backtrack on his decision to halt talks on another rescue effort for the economy.

The S&P 500 climbed 1.7% after Trump sent a series of tweets late Tuesday saying he’s open to sending out $1,200 payments to Americans, as well as limited programs to prop up the airline industry and small businesses.

The tweets came just hours after Trump sent the market into a sudden tailspin with his declaration  that his representatives should halt talks with Democrats on a broad stimulus effort for the economy until after the election, saying House Speaker Nancy Pelosi had been negotiating in bad faith. The stakes are high, as economists, investors and the chair of the Federal Reserve all say the economy needs another dose of support following the expiration of weekly jobless benefits and other stimulus Congress approved earlier this year.

Federal Reserve Jerome Powell: Congress should pass a robust stimulus

“What we’ve seen over the last 24 hours is just confirmation that the market is really addicted to stimulus from the government,” said Sal Bruno, chief investment officer at IndexIQ. “When it thinks it’s not getting it, it sells off, and when it looks like there’s a possibility for that it rises, as we’ve seen today.”

The S&P 500 index rose 58.50 points to 3,419.45, while the Dow Jones Industrial Average gained 530.70 points, or 1.9%, to 28,303.46.

The Nasdaq composite climbed 210 points, or 1.9%, to 11,364.60, despite a call by Democratic lawmakers for

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