by Alan Thornhill
Australians put an extra $121 billion into their superannuation pots last year.
That’s a very healthy rise of 17.9 per cent.
The Statistician is now reporting that the total amount Australians have invested in superannuation is a staggering $802.4 billion.
Australia’s superannuation funds, in turn, are now major property owners. Their assets include golf courses, city buildings and fabulous tourist resorts.
Some of their assets, though, are starting to attract attention, for the wrong reasons.
The fund managers for one of the really big funds, Comsuper, were forced to confess, effectively, that they may well have more than $1 billion tied up in hedge funds.
And hedge funds are looking much less healthy now than they were a year or so back, when those investments were made.
This was reported – exclusively – in Private Briefing.
We can expect not only Federal public servants, but the nation’s serving soldiers, sailors and Air Force personnel to start asking some very tough questions, when the newspapers, television stations and radio finally catch up with that story.
If they ever do.
The main fund manager’s defence, at the Senate committee, which extracted the confession, was interesting.
It was, basically, that all fund managers had been doing the same thing.
With amounts liike $802.4 billion at stake, fund managers everywhere can expect some very sharp questions from their members, if things don’t improve rapidly, for the hedge funds.
At present, though, the immediate prospects for hedge funds don’t lookÂ good.
by Alan Thornhill
It had to happen. And it came when Kevin Rudd’s Labor government was little more than 80 days old.
That’s when the government made its first big mistakes. And one of Kev’s old mates, from Goss government days, Professor Glyn Davis, can be blamed for both of them.
Indeed, Mr Rudd, himself, has already come close to doing just that.
With substantially less than 20-20 foresight, Mr Rudd appointed just one woman, Cate Blanchette, to the steering committee for the 20-20 ideas Summit, that he will hold on April 19 and 20.
The absent minded Professor Davis, who will chair that committee, played a big part in that.
He is the chief organiser of the conference.
But what was he thinking?
And, what’s probably more important, what had Kevin Rudd’s staff been thinking, when they let him make that announcement?
Politically, there were two huge flaws in it.
One woman, on a committee of 11? That’s hardly fair representation.
Especially as that committee is to choose the team of 1,000 of Australia’s brightest and best, who will actually attend the Summit, on April 19 and 20, to give the government the benefit of their, presumably bright, ideas.
There’s a big problem with those dates, too.
It’s a fair bet that any fair pick of 1,000 of Australia’s brightest and best would include more than a few Jews.
They have had to get smart, to survive all the pogroms that history has thrown at members of their race.
Yet April 19 is an important day, on the Australian Jewish calender. It is the feast of the Passover, which celebrates the liberation of Jews from slavery, in ancient Egypt.
Yet nobody in Kev’s office thought of that, when the date for the Great Ideas’ Summit was set.
It’s a terrible pun. But we can’t resist the temptation. The Jews were passed over on the feast of the Passover.
They have been quite forgiving. One Jewish spokesman simply said his community was simply waiting to see what alternative arrangements would be made, to accommodate them.
Australian women, though, were not prepared to remain silent.
by Alan Thornhill
If you have ever wanted to see Talahassee,Â it’s time to start packing.
The $A is rising so strongly against the greenback now that it hit 94.3 US cents this morning.
So your trip should be cheap.
Indeed, with the Reserve Bank itching to raise Australia’s interest rates again next Tuesday talk of parity between the two currencies is not all that far fetched.
Especially if HBOS Australia economist Alan Langford is right. He is not predicting a 0.5 percentage point rise in rates next Tuesday. But he is warning that something “more aggressive” than the usual 0.25 percentage point rise “cannot be ruled out.”
Oil prices again hit a new record of $US102 a barrel overnight. While the strong $A is giving Australian motorists some protection from fuel price hikes, that is sure to worry the Reserve Bank board.
The Reserve Bank once regarded oil prices as just one more “volatile” item, like fruit prices, which could safely be ignored when setting rates. And, even now,Â the prospect of severe snow storms in the North Eastern States of the US is, undoubtedly, pushing up oil prices.
Higher fuel prices, though, do seem to have found a permanent place now, in the world’s financial landscape.
Reserve Bank records show that we last saw parity between the $A and the $US in June 1982.
Twenty years later, in June 1982, the $A was worth just 50US cents.
Peter Costello, who was then Treasurer, made the best of it by calling the $A “super-competitive.”
The then weak $A did, undoubtedly, boost Australia’s exports at that time.
But, for most Australians, it meant holidays at home.
Australia’s interest rates are already some 5 per cent above those now available inÂ the United States.
And the US Fed chief, Ben Bernanke, is again talking of cutting US rates, even though America, too, is already facing new challenges from rising inflation.
That has implications for Australia.
One is that hot money might, once again, flood into this country.
Especially as major commodity prices, like those of iron ore and coal are already at record levels.
A flood of hot money, attracted by Australia’s high interest rates,Â would only add to this country’s already high inflationary pressures.
But don’t tell the Reserve Bank board. It has enough to worry about already.
by Alan Thornhill
The mining boom is bringing billions of dollars to Australia.
But it is also adding to the inflationary pressures that are giving the nation big headaches.
Figures just released by the Australian Bureau of Statistics tell the story.
They also show why those inflationary pressures are not likely to ease any time soon.
The bureau reported, for example, that Australia’s miners currently expect to spend 12.6 per cent more, on new capital in 2008-09, than they did last financial year.
With underlying inflation now running about 3 per cent, that would represent a real increase of almost 10 per cent in their new capital spending.
And miners are the last of the really big spenders, when it comes to capital equipment.
But the boom, with all its demands, arrived suddenly.
So suddenly, in fact, that their fifth estimate of likely spending this financial year was a massive 23 per cent higher than that of the comparable estimate, the previous year.
Estimate 5, for this financial year, is that the miners, alone, will spend no less than $29.6 billion, over the year to June 2008.
With commodity prices now at record highs, the fact is that they can’t afford hold back on new capital projects.
But thissudden rush does have its consequences for tother Australians.
One is that interest rates will probably rise again, next week, as the Reserve Bank tries to curb both demand and inflation.
For some families, that will mean bigger home loan repayments and less to spend on food.
That’s tough. But that’s what mining booms are like.
They haveÂ been a big part ofÂ Australia’s history.
DuringÂ theÂ gold rush days, for example, even common tools, like picks, became too expensive for Australia’s farmers.
That’s because the miners were willing to pay anything for them.
by Alan Thornhill
World oil prices surged overnight, adding fuel to Australia’s inflationary pressures.
Crude oil futures rose by more than $1 , setting a new record price of $101.15 a barrel.
Local factors contributed heavily.
These included forecasts of heavy snow in America’s north-east and the weakness of the $US.
The $A, though, rose overnight, partly on expectations of further interest rate rises, to trade close to 93US cents.
That will help, a bit.
As we know, Reserve Bank and Treasury economists like to exclude so-called volatile items, like petrol prices, when they calculate what they call the nation’s underlying inflation rate.
And it is the Singapore price of crude oil, not the US price, which directly affects petrol prices in Australia.
However, oil is a global commodity. What happens, pricewise, in one market spreads, very quickly, to others.
And economists find it more difficult to exclude items, like oil prices, from their calculations, when price rises become persistent.
There are now signs that this is happening.
New records, for oil prices, have now been set on two consecutive weeks.
Last week’s record, now surpassed, was $US100.85 a barrel.
The Treasurer, Wayne Swan, admitted last night that underlying inflation in Australia has been “on the march” since the start of 2006.
He noted, too, that the Reserve bank has forecast that Australia’s inflation will remain above 3 per cent – the top of its target range – for the next two years.
Just about the last thing Australia needs now, is yet another surge in world oil prices.
The big question, of course, is will it add to pressure for another rise in local interest rates.
The answer, sadly, is yes.
by Alan Thornhill
The Federal Treasurer, Wayne Swan, says the government’s tax cuts are part of its plan to encourage people to take bigger roles in the nation’s workforce.
Mr Swan has said that before.
But he made the point strongly, once again, last night while addressing the Business Council of Australia in Melbourne.
Business leaders have been complaining that they are finding it hard to get the workers they need, to fill critical jobs in their operations.
“There has been much comment on our tax plan,” Mr Swan said.
“I understand that.
“But what this commentary often misses is the debate we have championed for many years now to re-inject participation incentives into the tax system.”
Those words would have been music to the assembled business leaders’ ears.
They, too, have been arguing for years that there is little incentive for them, in Australia’s ramshackle tax system.
However, it was not the big end of town, primarily, that Mr Swan was talking about.
Only last week, the Statistician confirmed that Australia has a big pool of “underemployed” workers.
That is people who want to work longer, each week.
Mr Swan is convinced that an unsympathetic tax system is one of the reasons they are not participating fully in Australia’s work force.
He argues that educational barriers are playing their part, as well.
Mr Swan told his business audience that was why the Labor government is making education its top priority.
None of this will stop either the Treasury or the Reserve Bank worrying about the government’s plan to offer $31 billion worth of staged tax cuts, while inflationary pressures are as high as they are now.
But Mr Swan is adamant. Tax reform is necessary. But it is still only part of what is needed.
“Putting incentive in the personal tax system is part of the equation,” he says.
by Alan Thornhill
The Australian Tax Office has a well-earned reputation for toughness.
But is it biased, towards producing extra revenue, when it issues private binding rulings?Â That is, does it indulge in a little gouging, when it is asked for such rulings.
There is a perception, at the big end of town, that it is.
Australia’s big companies are the main users of these rulings.
And many are unhappy with the rulings they receive.
They suspect that the Tax Office sometimes seeks more than its fair share.
However the Inspector General of Taxation, David Vos, has scotched that one.
He has examined the matter and says that he found no evidence of “undue bias.”
But Mr Vos said the ATO could do more to prevent such beliefs spreading.
He says there has not been enough transparency in these matters in the past.
Mr Vos admits that the Tax Office has tried to overcome this problem.
“However strong perceptions of undue revenue bias remain,” the Inspector General said.
But the Tax Office genuinely strives to interpret the law to support the ‘policy intent,’” he added.
Some might conclude that this is just another case of the big bureaucrats sticking together.
But that would be unkind.
The Tax Office has said that it agrees with most of Mr Vos’s report.
It has promised that it will try to do better by:-
- increasing transparency
- clarifying its protocols and
- further reducing delays.
by Alan Thornhill
US traders shrugged off predictions of recession overnight, Australian time, to stage a strong rally.
The Dow Jones industrial index rose 189.2 points, to close at 12,570.22.
That happened after a new report showed home sales in the US stronger than the market had expected.
Traders were also encouraged by the news that the ratings agency Standard and Poors had confirmed its Triple-A rating for MBIA inc. and the Ambac Financial Group.
This eased earlier fears about the future of troubled bond insurers.
MBIA shares rose by more than 16 per cent on the news, while Ambac shares jumped by more than 10 per cent.
European share markets also gained ground overnight, as financial stocks generally rose.
Asian markets also recorded strong results.
However analysts warned that the volatility seen in recent weeks is likely to continue for some time yet.
They said that the forces, which set off that unrest, are still strong.
Alan Thornhill is a parliamentary press gallery journalist.
Private Briefing is updated daily with Australian personal finance news, analysis, and commentary.
Friday May 24
The Dow Jones Index fell 12.44 points to 15,294.70
Ford Australia says it will close its Australian manufacturing plants in October 2016. Some 1,200 jobs to go.
Hazel Hawke dies at 83
A British soldier is hacked to death in the London suburb of Woolwich, in an apparent terrorist attack
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