Browsing articles from "November, 2008"

Friday 28th November 2008

The “blame game” ends today

by Alan Thornhill

The old “blame game” ends today.

Or, perhaps, tomorrow.

Either way, it won’t survive the weekend.

This looks like a very big claim.

But the Federal Treasurer, Wayne Swan, who is making it, is quietly confident.

He says that’s because the ground-work has been done very thoroughly, this time, in long, detailed meetings between Australia’s Federal and State officials.

The blame game reached its peak, between 1972 and 1975.

That’s when the Whitlam government sought to extend Federal control of how taxpayers’ money is spent, on items like roads, schools and hospitals, by initiating a string of tied grants.

These might stipulate, for example, that one grant must be spent on roads and another on pedestrian pathways.

Naturally enough, the Premiers hated them.

That’s because it restricted their spending, so tightly.

Mr Swan says that there are still something like 90 special grants, in present arrangements for Federal State funding.

But, he says, that will be cut to something like six, after the Treasurers meet in Canberra today, to put the finishing touches on the new arrangements.

After that, all that will be required is the signatures of Australia’s Premiers and Chief Ministers, to put the new arrangements into effect.

They also meet in Canberra, tomorrow.
As the Federal government is planning huge investments in infrastructure, to stave off a recession, their acquiesence shouldn’t be too hard to get.

Every Premier has his – or her – price.

And the Feds are buying, this time.

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Friday 28th November 2008

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Australian investors – including you – lose almost $100 million over the past year

by Alan Thornhill

In raw dollar terms, Australians have seenÂ almost $100 million stripped from theÂ value of their managed investments,Â including superannuation, over the past year.

And – in terms of true value – the losses were substantially bigger.

That’s because the $A, itself, has also lost a lot of ground in that time.

The Statistician reported yesterday that the consolidated assets of the managed funds, which hold most of the money Australians invest, fell to $1,291,835 million, in the September quarter of this year.

That represented a fall $99,181 million, or 7.1 per cent over the year.

These figures cover the total consolidated assets of superannuation funds, public unit trusts, life insurance offices and all other managed funds.

On this measure, the nation’s superannuation funds did relatively well, suffering a loss of just 4.4 per cent over the year.

Life insurance offices were hit hardest, chalking up a 13.1 per cent loss in that time, while public unit trusts saw the value of their assets fall by11.4 per cent.

These figuresÂ are not the only ones used to measure the performance of Australia’s managed funds.

Another, broader, figure for the superannuation industry puts its losses over the year above the 6 per cent mark.

A graph, produced by the Bureau, shows that the biggest losses were incurred on money invested in shares.

That news won’t surprise anyone.

But it does add weight to the Federal government’s advice to Australia’s superannuation funds.

That was that they should invest more in property and less in shares.

The Treasurer, Wayne Swan, has said that property investment better reflects the long term nature of superannuation than shares.

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Friday 28th November 2008

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Good news at last – on two fronts

by Alan Thornhill

Pleasant surprises – in economics – have been rare over the past month.

So two, that appeared yesterday, will be particularly welcome.

The first was in the housing sector.

The Housing Industry Association reported that sales of new houses jumped by 6.7 per cent last month.

Victoria and Queensland were particularly strong.

Sales in both States leapt by more than 20 per cent.

The second surprise was in consumer confidence.

The Roy Morgan organisation reported that consumer confidence in Australia has jumped by 3.7 points.

This was confirmed in a poll taken last week.

Strong action,Â to boost the economy, helped in both cases.

Housing industryÂ economist Harley Dale said the Federal government’s decision to triple the first home owners’ grant had provided an important boost.

So, too, had the Reserve Bank’s decision to slash interest rates by 1 per cent.

And Gary Morgan noted that the jump in consumer confidence had followed the G20 meeting in Washington, at which world leaders promised to spend heavily, to prevent a global recession.

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Thursday 27th November 2008

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Can deficits be good?

by Alan Thornhill

Deficit is still a dirty word in Australian politics.

And the opposition was delighted when the Prime Minister, Kevin Rudd, finally used it in parliament yesterday.

“Given that the last time a Federal Labor government went into a temporary deficit it lasted over six years, how many years will the Rudd government’s new “‘temporary deficit last?’” the new Opposition Leader, Malcolm Turnbull asked.

Rudd said, in reply, that Australia’s present circumstances do not require deficit.

But he had warned parliament, just minutes earlier, thatÂ a “temporary deficit” might be necessary in future, if “global growth continues to deteriorate.”

And that, bluntly, is all too possible.

Mr Rudd, himself, admitted that.

HeÂ had been reporting to parliament on his recent visit to an APEC leaders’ meeting in Peru.

“This morning I returned from APEC where my discussions with leaders from all around the region confirmed what we already knew,” he said.

“That the world economy is deteriorating rapidly.”

It was a grim message.

It raised the spectre of sharply rising unemployment in Australia.

And bitter experience suggests thatÂ spectre might well linger, long after the downturn, itself, has passed.

With that in mind, it would be wise to be realistic about a possible, indeed likely, deficit next financial year.

There is more at stake here than a few political reputations.

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Thursday 27th November 2008

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National broadband:A clash of titans

by Alan Thornhill

“It was a non-conforming bid.

“I would have thrown it out, without thinking about it.”

That’s how an old public servant, who wishes to remain anonymous, greeted Telstra’s bid to build Australia’s new national broadband network.

This is, indeed, an urgent project.

How much time do you waste each day, sitting around waiting for the present one to warm up?

That’s what your Grandad did, with his old Ford T.

The Federal government, though, has confirmed that it will consider Telstra’s bid, even though it is, indeed, non-conforming.

There are, of course, other contenders.

These include Optus, Acacia and Axia, Transact and the Tasmanian government.

Ordinarily, though, Telstra would have been the front runner.

It has the size, the technical knowledge and the clout not only to do the job, but to do it well.

The government, though, wants it to set up a separate entity, to run the new system.

It believes that would give others equal access in its use.

The bids are now in.

That part of the process has now closed.

The government has given an expert panel six weeks to consider them.

The panel will then have another two weeks to consider advice from the Australian Competition and Consumer Commission, before a decision is announced.

Separation is, certainly,Â important.

But Telstra is not willing to oblige.

It says it won’t be split.

So the dilemma persists.

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Thursday 27th November 2008

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Banking watchdog “needed”

by Alan Thornhill

Australia’s banking system can be seen – effectively – as a cartel.

In a small country like Australia, even that has its advantages.

Bank failures are not common in this country.

But there are issues, too.

And a powerful parliamentary committee is recommending the appointment of a banking ombudsman to deal with them.

The recommendation, from the House of Representatives Committee on Economics, follows months of investigation.

The committee’s chairman, Craig Thomson, said 12 recommendations had emerged from this work.

The committee also recommended, for example, that the Australian Competition and Consumer Commission be given specific powers to address issues of concern in markets and regulated sectors, like banking.

“We want to see the ACCC on the job,” Mr Thomson said, “looking at competition all the time, not just during mergers and acquisitions.”

“We want to see them better able to stand up for consumers,” he added.

The committee also recommended:-

regulating unsolicited credit card limit increases
inclusion of credit cards in the account switching package
traansparencey of exit fees on mortgage products and
reform of Australia’s credit reporting system.

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Watching the watchdog

Wednesday 26th November 2008

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Barack Obama sets his guidelines

by Alan Thornhill

Barack Obama is in no mood to waste time, in tackling the global economic crisis.

Although the President-elect will not take officeÂ until January, he has already named the team that will take on that task.

Its members include men, like Timothy F Geithner, who are already fully experienced in this kind of work.

Mr Geithner was deeply involved the the Bush administration’s weekend efforts to rescue the US banking giant, Citigroup.

Mr Obama said his team would begin work “today.”

He said too, that the Citibank crisis “has made it clear that we are facing an economic crisis of historic proportions.”

Mr Obama cited the sharp fall in new house purchases, a surge in unemployment claims and the likelihood of further job losses as evidence of the severe difficulties he will face, as US president.

But the troubled US car industry might well prove to be the most severe.

Mr Obama said the industry would not be allowed “simply toÂ vanish.”

But he warned that it could not expect a “blank cheque” from his government.

“While we can’t underestimate the challenges we face,” Mr Obama said, “we also cannot underestimate our capacity to overcome them.”

He said Americans had always been defined by a spirit of optimism and determination.

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Wednesday 26th November 2008

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Federal finances:big changes coming

by Alan Thornhill

The Federal government is planning sweeping changes to the way major services, like education and hospitals, are financed in Australia.

It will put its proposals to Premiers and Chief Ministers this weekend.

The premiers will be well prepared for the Council of Australian Government meeting, that will be held inÂ on Saturday, after a similar meeting for Treasurers the day before.

There have already been extensive talks on the Rudd government’s plans.

The Treasurer, Wayne Swan, is describing those talks, which took place over the past few weeks as “quite constructive.”

He said the proposed reforms “range” widely.

“…not just health, not just education but disability, housing and so on…,”Â he said.

Mr Swan said Australia’s Federal, State and Territory governments all recognise that they face “great challenges” which “do require reform of Federal State relations.”

A “21st Century approach” is “particularly required” in health and education, Mr Swan said.

“I am now convinced that we are putting forward a framework to changes to make the Federation work more efficiently,” Mr Swan said.

He said, for example, that the Federal government would reduce the number of so-called “special purpose” grants that it makes to the States from “90 to just five.”

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Profile

Alan Thornhill is a parliamentary press gallery journalist. Private Briefing is updated daily with Australian personal finance news, analysis, and commentary.

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