Sunday, March 21, 2010

India unexpectedly hikes rates a quarter point

India unexpectedly hikes rates a quarter point

India's central bank unexpectedly hikes key interest rates a quarter point on inflation fears


MUMBAI, India (AP) -- India's central bank has unexpectedly hiked key interest rates a quarter of a percentage point, as the bank tries to cool high inflation amid a faster-than-expected economic rebound.

The bank raised the benchmark repo rate -- at which the central bank makes short-term loans to commercial banks -- to 5 percent and raised the reverse repurchase rate -- the rate at which it borrows from commercial banks -- to 3.5 percent, with immediate effect.

"These measures should anchor inflationary expectations and contain inflation going forward," the Reserve Bank of India said in a statement after trading hours Friday. "As liquidity in the banking system will remain adequate, credit expansion for sustaining the recovery will not be affected."

Most economists had expected a rate hike, but not until the bank's scheduled policy meeting on April 20.

The bank said robust growth in manufacturing, a revival of investment, expanding exports and increasing bank credit gave it confidence that economic growth is consolidating.

Inflation, however, has become a growing concern. Headline Wholesale Price Index inflation for February was 9.9 percent, higher than the bank expected, and inflation is spreading from drought-induced high food prices into other sectors of the economy, like manufactured goods.

"With rising demand side pressures, there is risk that WPI inflation may cross double digits in March 2010," the bank said.

This is the bank's first rate hike since it began implementing aggressive monetary stimulus measures in the wake of the global financial crisis.

Beginning in September 2008, the Reserve Bank cut the benchmark repo rate from 9 percent to 4.75 percent, and slashed the reverse repurchase rate from 6 percent to 3.25 percent. It also cut the cash reserve ratio -- the amount of cash banks must keep on hand -- by 4 percentage points.

The bank began to unwind that stimulus in January, by raising cash reserve requirements three-quarters of a percentage point, to 5.75 percent.

Gas the next fuel to fire Australia's boom

KARRATHA, Australia (AP) -- First gold, then coal and iron ore. Now, a new bonanza is about to be unleashed from beneath Down Under: Australia's got gas.

Projects being ramped up to tap huge undersea fields off the country's northwest could quadruple Australia's exports of liquefied natural gas in the next few years and turn it into what the country's resources minister has called an "energy superpower."

It will be the next stage of a long boom that has enriched Australia and made it a key supplier of the raw materials underpinning Asia's development -- from the girders in city skyscrapers to the fuel burned to light them.

"We have what the world, and particularly the rapidly growing economies of Asia, want -- iron ore, energy and minerals," said Colin Barnett, the premier of Western Australia state, which is at the heart of the new boom.

The mostly desert state has become known for a frontier atmosphere not unlike that of Australia's 19th century gold rush, the country's first mining boom that drew enough migrants to almost triple Australia's population within a decade.

As a major source of the materials driving Asia's economic surge, Australia has increasingly been drawn into the orbit of emerging giants China and India, spawning tensions and discord. There are also nagging worries over economic overheating and long-lasting environmental damage caused by its thriving resource industry.

Gas was discovered off Australia's remote northwest coast in the 1970s. But its exploitation has lagged behind iron ore and coal that have been easier to get and more in demand.

Now, gas is gaining popularity as a cleaner-burning alternative to coal in power generation, with a fraction of the greenhouse gas emissions.

The biggest boost in the sector came last September, when Chevron and joint venture partners ExxonMobil and Royal Dutch Shell announced they would go ahead with the massive Gorgon project.

The venture will drill fields about 80 miles (130 kilometers) offshore to tap into an estimated 40 trillion cubic feet of gas, build pipelines and a liquefaction plant and port for about AU$43 billion ($41 billion) -- roughly the size of Guatemala's gross national product.

If that sounds big, the numbers stack up. The decision to proceed came on the heels of news that ExxonMobil Corp. had signed a 20-year deal worth about AU$50 billion to supply PetroChina Co. with LNG from its share of Gorgon. Similar deals for Gorgon gas worth another AU$70 billion were struck with power companies in Japan, South Korea and India.

The Australian government says Gorgon could generate exports worth AU$300 billion during the next 20 years. And that's just one project. There are at least a half dozen other large gas plans in the works, including Australian company Woodside's $12 billion plan to tap the Browse fields holding an estimated 20 trillion cubic feet of gas.

Yet even as the projects pile up, Australia is trying to tamp down strains with China that have taken some of the gloss of its mineral and energy endowments.

On Monday an Australian executive of mining giant Rio Tinto will face court in China charged with stealing commercial secrets in a trial Australian lawmakers are concerned is linked to Beijing's unsuccessful campaign to get lower iron ore prices. The case has added to unease about close China relations after a string of deals for state-owned Chinese firms to buy into Australian resource projects.

Other problems are local but no less intractable.

Gorgon, Browse and some of the other big deposits lie off the Pilbara, a remote Outback region of Western Australia that is buffeted by a half-dozen cyclones a year and where temperatures can soar to 118 degrees (48 C).

Western Australia's few urban areas are already bursting at the seams because of the mining boom. A five-hour flight across nearly unbroken desert from Sydney, the state capital of Perth can't build hotels fast enough to keep up with demand, and cranes building office towers dot the skyline.

A severe worker shortage means companies compete for just about everyone from mine site managers to truck drivers -- who can earn more than AU$120,000 a year in salary and a rest and recuperation flight to Perth every month.

One of the main supply towns is Karratha, a sweltering collection of houses and a few shops and pubs nestled between hills covered in spinifex and boulders of a deep-maroon color that belies the iron content within.

It's more than 1,000 miles (1,800 kilometers) from the nearest city, surrounded by some of Australia's harshest territory, and there's almost no one here but miners. A bungalow with a pool can set you back AU$2,000 a week in rent.

"It's gone bloomin' overboard," said Jim Holland, a driver and 40-year-veteran of mining in the region. "The house down the road from me sold the other week for $900,000, three bedrooms."

Holland is one of the lucky ones. Rio Tinto in the 1980s offered to sell some company-owned houses to longtime workers for around AU$45,000, and he took it up. Before too long he plans to sell up and retire in comfort to Thailand.

The federal government has appointed a task force to find ways to fill an expected shortfall of 70,000 construction workers in the resource sector in the next decade, with fast tracking of visas for skilled migrant workers -- likely from Asia and the Middle East -- a key consideration.

Gorgon alone is expected to create 10,000 jobs -- including several thousand workers during construction on currently uninhabited Barrow Island.

Conservationists say the government should never have approved Barrow Island as a site for the liquefaction plant. The nature reserve is home to species such as the flatback turtle and the burrowing bettong, a rat-like kangaroo that no longer survives on the mainland.

"I don't see how you can have a safe operating environment for an industrial facility and also create the natural dark conditions that turtles need in order to not be disturbed from their natural nesting," said Gilly Llewellyn, the World Wildlife Fund's conservation manager.

Chevron says the plans for Gorgon avoid conservation sites and the project is environmentally friendly because it includes plans to inject polluting carbon dioxide gases into an underground trap. Chevron did not respond to requests for an interview.

Environmental concerns about the industry deepened last year after fire erupted on an oil and gas rig at a different field off the northwest coast and burned unchecked for more than two months, spilling thousands of barrels of oil into the sea.

On Barrow Island, the first signs of Gorgon are starting to show. Shipping containers -- entirely shrink-wrapped to prevent mainland pests such as rats or cockroaches being introduced -- are being unloaded and scrub cleared for an accommodation camp, said Anne Nolan, a state government official who visited this month.

Before long, it will be a bustling scene of more than 3,000 people working around the clock.

Obama on the brink of a health care reinvention

WASHINGTON – Rarely does the government, that big, clumsy, poorly regarded oaf, pull off anything short of war that touches all lives with one act, one stroke of a president's pen. Such a moment now seems near.

After a year of riotous argument, decades of failure and a century of spoiled hopes, the United States is reaching for a system of medical care that extends coverage nearly to all citizens. The change that's coming, if Sunday's tussle in the House goes President Barack Obama's way, would reshape a sixth of the economy and shatter the status quo.

To the ardent liberal, Obama's health care plan is a shadow of what should have been, sapped by dispiriting downsizing and trade-offs.

To the loud foe on the right, it is a dreadful expansion of the nanny state.

To history, it is likely to be judged alongside the boldest acts of presidents and Congress in the pantheon of domestic affairs. Think of the guaranteed federal pensions of Social Security, socialized medicine for the old and poor, the civil rights remedies to inequality.

Change is coming, it now appears, but in steps, not overnight. The major expansion of coverage to 30 million people — powered by subsidies, employer obligations, a mandate for most Americans to carry insurance, new places to buy it and rules barring insurance companies from turning sick people away — is four years out.

In contrast, on June 30, 1966, after a titanic struggle capped by the bill signing a year earlier, President Lyndon Johnson launched government health insurance for the elderly with three simple words, as if flicking a switch: "Medicare begins tomorrow."

Obama practically needs a spreadsheet to tell people what's going on and when.

Yet if the overhaul goes through, he and LBJ will share a distinction: the only two presidents to succeed with a transcendent health care law.

You can be sure Obama, a student of history, is aware of how LBJ captured the moment when Medicare became law with his pen. That happened in Independence, Mo., in the presence of the very first American to sign up for the program: Harry Truman. The ex-president had ended a world war but could not achieve national health insurance in his time.

"Care for the sick, serenity for the fearful," Johnson promised that day. "In this town, and a thousand other towns like it, there are men and women in pain who will now find ease."

Said Truman: "I am glad to have lived this long."

Ted Kennedy lived long enough to see a goal of his lifetime take shape but not long enough for it to happen. His death last summer was almost the death of the whole plan because a Republican won his Senate seat, changed the voting balance and left despondent Democrats in search of a second wind, which they found.

Why is this so hard? In part, because self-reliance and suspicion of a strong central government intruding into people's lives are rooted in the founding of the republic, and still strong.

The colonial insurgents who dumped British tea into Boston harbor inspired the name and agitating spirit of today's tea party protesters, who rolled a taped-together health care bill up the Capitol steps like toilet paper to show their disdain. "Grandma's not Shovel-Ready," said one of their signs last week, playing off a fear the aged will see their care rationed away.

In 1854, President Franklin Pierce vetoed a national mental health bill on the basis that it would be unconstitutional to treat health as anything but a private matter that is none of the government's business.

Seventy-five years later, the American Medical Association denounced proposals for organized medical services as an "incitement to revolution" at the hands of "Medical Soviets."

And that wasn't even about government-run health care. The AMA's fierce opposition to collectivism included objections to private health insurance, the norm today, and the pooling of doctors into what became health maintenance organizations decades later.

No wonder would-be health reformers were thwarted one generation after another even as they made deep imprints on the nation in other ways.

Teddy Roosevelt couldn't do it — and he's carved into Mount Rushmore.

Franklin D. Roosevelt rewrote the social compact with his job and retirement security and regulatory expansion, all in the jagged teeth of the Depression, then took the nation to war. He made national health insurance a second-tier priority and it eluded him.

Even so, social responsibility for medicine grew.

In 1930, citizens paid nearly 80 percent of the nation's medical costs from their own pocket. Government at all levels covered a mere 14 percent, with industry and philanthropy picking up the few remaining crumbs. Insurance was barely in the picture.

Federal and state programs now cover half the cost of health care purchased in the country and are expected to go over 50 percent in the next year or two, even absent Obama's plan. By that measure, the government takeover of health care that opponents warn about is happening regardless of what's about to happen next.

Why the creep of government in health care? In part, because individualism isn't the entire American story. The idea of watching out for each other is also in the nation's fabric.

Besides, as much as Americans hate overbearing government and higher taxes, give them a federal benefit and then just try to take it away. Today's hot potato becomes tomorrow's cherished check.

That's one reason government programs grow — and why Democrats dared to push for a less than popular package mere months from congressional elections, when people were telling their leaders to create jobs instead.

Johnson, full of beans after his Medicare victory, realized all of this.

"The doubters predicted a scandal; we gave them a success story," he crowed a month after the law took effect, as hundreds of thousands of patients entered hospitals for treatment covered by the government and some 6 million children and needy adults began getting benefits.

"Where are the doubters tonight?" he asked. "Where are the prophets of crisis and catastrophe? Well, some of them are signing their applications; some of them are mailing in their Medicare cards because they now want to share in the success of this program."

Obama can only hope for such a first-blush reception. He took on the cause of universal coverage after a campaign in which he did not promise it, intending only to secure insurance for all children and shrink the pool of uninsured adults. His health care ambition grew in office, quickly.

More than a quarter century before, Ted Kennedy came close to the prize with none other than the Republican president, Richard Nixon, who embraced ideas that mainstream Republicans today cannot tolerate. Nixon was ready to force businesses to provide health insurance to their workers or pay heavy penalties.

Sound familiar? It will.

At its core, Nixon's proposal is a pillar of Obama's plan today. Nixon's willingness to subsidize coverage for the working poor is also seen in the plan, though writ larger.

Back then, Kennedy's union and liberal allies gambled that by spurning Nixon, they'd get something better later. They didn't. In similar fashion years after that, President Bill Clinton aimed high and crashed hard.

Clinton no doubt drew on his own failure when, in December, he advised Democrats to pass what they could manage and not make it an all-or-nothing fight. "America," he said, "can't afford to let the perfect be the enemy of the good."

Obama absorbed these lessons.

For him, a system with government as the sole or principal payer of everyone's medical bills was a nonstarter, nice for the ideologues and other countries but not the American way. He would have liked the option of a government-run plan competing in the marketplace, but didn't need it.

For months he stood so far back from the legislative nitty-gritty that it was hard to tell what he stood for.

In the end, he stood for more than the incremental steps that succeeded in the past, and for less than the towering ideas that failed.