THE sharemarket rose more than 2 per cent this week, to close back above the 4500-point level, thanks to encouraging signs that US politicians might work together to avoid the so-called fiscal cliff.
But the week still ended with most Australian economists predicting the Reserve Bank would cut the cash rate next week, due to signs of a serious deterioration in business confidence and sharp reductions in investment spending.
The benchmark S&P/ASX 200 Index rose 93 points, or 2.1 per cent, to 4506 points for the week. The All Ordinaries rose 86.5 points, or 1.9 per cent, to 4518 points.
Stepping away from the market this week, the head of the federal Treasury, Martin Parkinson, spoke a little on Wednesday about the risk of a global outbreak in inflation.
Dr Parkinson, while speaking at the Association of Superannuation Funds of Australia conference in Sydney, was asked by economist Dr Don Stammer if the massive increase in the global money supply could affect Australia's $1.5 trillion pool of super savings.
"If you look around the world, the GFC and the European crisis has caused each of the big central banks to create base money on an unprecedented scale," Dr Stammer said.
"That money's not circulating at present so it's not creating any problems. But if you look five [or] seven years ahead, what are the risks that money starts circulating, as it did after the Second World War when base money was expanded?"
He asked: can Australia avoid international inflation if it's heavy? Would an outbreak in global inflation impact Australia's superannuation funds?
But Dr Parkinson said he was not too concerned about that happening. "You're entirely right to be concerned about the risk of inflation because inflation hurts the poor," he said.
"[But] I'm not sure though that you should be worrying yourself . . . about the growth in base money. We actually know how to take . . . base money out of the system . . . [but] the question will be whether the central banks globally actually recognise the time to take it out. And if that doesn't happen then we will see inflation begin to pick up. But I suspect we're a long way from that situation, and when you do see inflation begin to tick up, you will see the central banks move."
For the week, BHP Billiton rose 64? to $34.39 even though
chairman Jac Nasser did not guarantee chief executive Marius Kloppers' job.
Rio Tinto rose $1.57 to $58.75 as it flagged job losses at its coal and aluminium operations after announcing a review to reduce costs by more than $US5 billion.
Qantas rose 5? to $1.32 after Tourism Australia reassured the industry the airline's decision to suspend its marketing partnership would not hinder its ability to promote the country overseas.
Primary Health Care rose 7? to $4 after the company looked on track to lift earnings by up to 25 per cent.