Warwick McKibbin does not expect further cuts in interest rates.AUSTRALIAN shares closed the week near a 20-month high, buoyed by resurgent mining stocks and a raft of economic data.

The benchmark S&P/ASX 200 Index rose 61.7 points, or 1.3 per cent, to 4771.2 for the week, while the broader All Ordinaries rose 60.9 points, or 1.3 per cent, to 4733.8.

Data released during the week included retail sales, inflation figures, business and consumer sentiment, and housing finance.

Economists said the figures betrayed weakness in the local economy, with key unemployment data showing the jobless rate picking up in December, to 5.4 per cent from 5.3 per cent. But the news was unlikely to persuade the Reserve Bank to cut the cash rate when it met in February, though further cuts were likely, they said.

However, former RBA board member Warwick McKibbin said he did not think the central bank should cut rates again, because further cuts would only serve to misallocate capital, while doing little to ease pressure on the high Australian dollar.

”[Rates] should stay where they are, otherwise you’ll end up where the Europeans and Americans are,” he said.

”[The importance of] monetary policy hasn’t diminished, but it’s a question of where the problem is. If the problem is that there’s a shortfall in demand in the economy which is temporary, then monetary policy can be very effective to offset that.

”But the problem that we face, which is a massive increase in input costs, and big portfolio shifts from foreigners who want to hold Australian assets, monetary policy’s not a very good tool to offset that,” he said.

Chinese data released on Friday showed gross domestic product accelerated to 7.9 per cent in the December quarter, up from 7.4 per cent in the September quarter.

Economists said this was a good thing for Australia, given China was the country’s most important trading partner.

During the week, Rio Tinto shares had trickled down a little, but they rose again on Friday after the company announced it had sacked chief executive Tom Albanese and made a $US14 billion write-down on its Mozambique assets.

The news was announced after the market closed on Thursday, and Rio’s shares surged $1.75 on Friday to $66.35.

Santos shares also rose for the week, up 28¢, or 2.3 per cent, to $11.78 after the oil and gas company said it was on track to meet its 2013 production forecasts, having enjoyed a 10 per cent rise in 2012.

Woodside Petroleum rose 63¢, or 1.8 per cent, this week to $35.30 after it reported record production in 2012 and said it hoped to do even better this year as it developed more projects overseas.

Billabong International surged 16¢, or 18.6 per cent, to $1.02, amid hopes that a takeover offer from US retailer VF Corporation would ignite a bidding war for the embattled surf wear company.

Qantas slipped 1¢ over the week to $1.52, after the airline cut its order for Boeing 787 Dreamliners, to be bought for its Jetstar subsidiary, as the low-cost carrier prepares for slower growth on its long-haul routes.

It was also announced during the week that travellers would soon know how much it would cost to fly on a combined Qantas-Emirates network after their alliance received interim authorisation from the competition watchdog.


The original release of this article first appeared on the website of Hangzhou Night Net.