Super:Why the watchdog is barking

It all seems to add up to a good- if desperate – idea.

Like thousands of other Australians, this global economic crisis has left you strapped for cash.

But there are still bills to pay.

And there is that pot of gold, that’s just sitting there, tied up in  your super.

Besides, as recent events have shown, you couldn’t do any worse at managing your super than that damned fund you are in.

It all seems so reasonable.

Why not cash it out early, take a bit out to tide you over these bad times, and put the rest into a self managed super fund, to provide for your retirement?

You could hardly do worse than those, so-called professionals, who are managing your super now  could you?

Well, actually, yes.

There are problems with these ideas.  Big ones.  In many cases, taking early access to you super is simply illegal.  Then there are the tax complicati0ns.  These, too,  are serious.

But this adviser is telling me that he can guide me through all that.  So what’s the problem?

One, is that he won’t be doing it for free.  The commissions charged, in setting up a self managed fund, this way, can be very large.

There is also the risk of outright theft, of your super, as your superannuation money is being moved.

So where can you go, for good advice on all this?

The Australian Securities and Investment Commission has some excellent advice on its consumer website, called Fido.  (Go first to www.asic.gov.au, then follow the prompts).

The fifteen minutes this will cost you could well be the best investment you make this week.

It’s all in simple language.

“Sometimes, when you are in financial trouble, it might seem like a solution to access your super,” Fido says.

“But, depending on your situati0n, this may not be the best way to help you out of your financial trouble,” it adds.

Fido says you might do better to make an application for a hardship variation.

What’s that?

A trip to the website, to find out, might well be a very good idea, indeed.

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Big numbers this week

We should get a better picture of the Australian economy this week.

The June quarter national accounts, which the Statistician is planning to release on Wednesday, will be particularly important.

Americans learnt last week that the US economy shrank by 1 per cent, in that quarter.

Even that figure was welcomed, as most economists had expected an even worse result.

Australia’s growth is expected to be stronger than that.

However, Wayne Swan is still urging caution.

The Australian Treasurer warns that the nation’s road to recovery will still be “long and very bumpy.”

In his weekly economic note (www.treasurer.gov.au) Mr Swan describes the June quarter national accounts as “all important.”

There is no risk, though, of these figures tipping Australia into a technical recession.

That requires two successive quarters of negative growth.

And the March quarter National Accounts showed that the Australian economy grew by an admittedly glacial 0.4 per cent earlier this year.

The national accounts, though, won’t be the only important figures to be released this week.

The Bureau is also planning to release its business indicators for the June quarter today and its balance of payments figures, for the same period tomorrow, along with its building approval statistics for July.

It will also publish its international trade figures for July on Thursday.

Meanwhile, Wayne Swan will be travelling to London this week, for a G20 Finance Ministers’ meeting.

He said those attending that meeting would be working to ensure they are doing all they can to keep the world out of global recession.

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Stimulus package “working:” Government Report

The Federal government does not accept that its stimulus measures are being “swamped” by the global credit crisis.

Its response to that charge, made by building industry leaders, is set out in a report published yesterday.

The government report covered the first quarter of the government’s $42 billion nation building economic stimulus plan.

It concludes that while the plan is still “far from complete” there has been “significant progress.”

Some 33,000 projects have already been approved under the plan.

These are worth more than $18 billion.

“Some elements of the plan are achieving their objectives at lower than the expected costs,” the report says.

Others have been doing so faster than anticipated.

“…other elements have experienced exceptional demand.”

The report said these included work on the Primary School program, which is part of the plan.

It said the government had already made strategic adjustments to the plan in reponse to emerging issues.

And it conceded that there are risks with the plan, including possible inflationary pressures.

The report said these, too, need to be managed.

“A particular challenge will be to manage industry capacity and supply constraint risks,” the report said.

There was independent confirmation, too, yesterday that the government’s stimulus plans are working.

The Roy Morgan organisation, for example,  reported that consumer confidence in Australia rose by 1.1 points, in its latest survey, to 123.7 points.  That was its highest level since December 2007.

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Crisis hits builders hard

Australia’s building and construction industries have had a tough year, despite the Federal government’s stimulus packages.

Figures just released by the Bureau of Statistics show that these industries suffered a 5.7 per cent downturn in the June quarter -and an 8.5 per cent fall over the year -= on  seasonally adjusted comparisons.

The residential sector suffered a 2.6 per cent fall in the quarter and a 7.6 per cent fall over the year.

The non-residential sector saw a 9.5 per cent fall in the quarter and a 9.8 per cent fall over the year.

The chief economist of the Master Builders Federation, Peter Jones, said the boost the non residential construction sector had received from the government sector had been swamped by a major fall in private sector work.

“Commercial builders are being choked by tough lending criteria imposed by financial institutions,” Mr Jones said.

Softening market conditions are also leaving a significant hole in activity, he said.

The Federal government has tried to boost the non residential building sector with a bold program of school library construction.

That was a prominent part of the second stage of its stimulus package

Mr Jones and the Housing Industry Association’s chief economist, Harley Dale, agree that the housing sector is likely to pick up next year.

Mr Dale warned, though, that home building work is getting bogged down in the approvals stage.

Home building approvals are lagging well behind the present strong surge in lending for new homes.

“That suggests that the new home building recovery will b e very modest to begin with and will not show up in earnest for construction work done until 2010,” Mr Dale said.

The bureau had better news, though, for the engineering construction sector.  It saw a 5.7 per cent rise in the June quarter and a 22.7 per cent rise, in a year on year comparison.  That happened as new resource projects were launched, despite the global economic crisis.

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Personal bankruptcy laws to be overhauled

Australians who fall on hard times may soon be eligible for greater protection under the nation’s personal bankruptcy laws.

The Attorney-General, Robert McClelland has just announced proposed changes to those laws.

“Increasingly, bankruptcies tend to involve people who have simply fallen on hard times rather than unscrupulous debtors trying to avoid paying their debts,” Mr McClelland said.

He was speaking as he  released the Government’s proposed reforms to Australia’s personal bankruptcy laws for public consultation.

Mr McClelland said the Bankruptcy Legislation Amendment Bill 2009,  is meant to modernise personal insolvency arrangements.

He said it would do this by recognising that the majority of bankruptcies relate to consumer debts and involve people with relatively few assets and little income.

In a statement accompanying his announcement, Mr McClelland also said the proposed changes would give hard-pressed Australians a more realistic opportunity to consider their options, reorganise their affairs and where possible, avoid bankruptcy, by:-

• increasing the minimum debt for which a creditor can petition for bankruptcy from $2,000 to $10,000
• increasing the stay period from when a declaration of intent to file a debtor’s petition is filed to when a creditor may commence action to recover debts from seven to 28 days and
• increasing the income, asset and debt thresholds to allow more people in financial distress to enter into voluntary debt agreements.

He said though that the draft bill  also proposes to strengthen the penalties for some offences, particularly those involving fraud.

This would appropriately reflect the seriousness of the conduct and ensure the penalties align with similar offences in other Commonwealth, State and Territory legislation, Mr McClelland said.

It also strengthens powers for the Inspector-General in Bankruptcy to investigate possible offences.

“The Government is committed to ensuring our bankruptcy laws are able to deal with personal insolvency issues quickly and efficiently so that people can get back on their feet as soon as possible,” he added in the statement

“These reforms aim to ensure those in financial difficulty have the opportunity and the ability to obtain advice and information about their options and possible alternative solutions before entering bankruptcy.”

He said the draft Bill would be open for public comment until  September 14.

The draft Bill and accompanying Explanatory Memorandum are available on the Attorney-General’s Department website at http://www.ag.gov.au/.

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Older Australians face long waits for jobs

Older Australians, who lose their jobs, are finding it hard to get a new one.

A study, just published by the Bureau of Statistics shows that, on average, it takes men aged 55 and over four months to either find a new job, or leave the nation’s workforce.

Women of the same age are typically waiting even longer.  The average, for them is four and a half months.

The situation facing Australia’s older workers may already be even worse than these figures suggest.

That’s because the calculations, on which these findings are based were for 12 months to February this year.

With the global economic crisis still hitting Australia’s job market very hard, the already grim situation facing Australia’s older workers may well have deteriorated since then.

Predictably, Australia’s employers were more eager to take on younger workers, who they could reasonably expect would stay longer in their jobs.

The bureau reported that, on average, 15-19 year olds had the shortest waits, when they were looking for new jobs.

They spent an average of just 13 weeks, waiting for work.

The average wait, for Australians of all ages, was 16 weeks.

That wait was the same for both men and women.

The bureau also reported that 1.7 million Australians had looked for work at some time during the 12 month period.

It noted too, that 117,700, or 7 per cent of these people. had spent the whole year looking for work, without finding it.

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New calculations for Australian pensions

Almost 3 million Australian pensioners can look forward to a small, but significant improvement in their living standards from next month.

That’s because the Federal government is changing the basis on which pension rates are calculated.

The Federal Minister for Families, Housing, Community Services and Indigenous Affairs, Jenny Macklin,  announced two basic changes yesterday.

One is the calculation of a new index, called the Pensioner and Beneficiary Living Cost Index.  This index, ordered by the Federal government, was calculated by the Australian Bureau of Statistics.

Ms Macklin recalled that, before the last election, Labor had promised that pensions would  be set on a measure that reflected their costs more closely than the Consumer Price Index.

She said pensioners’ costs are often different from those of other Australians.

Age pensioners, for example, are estimated to spend 21.1 per cent of their income on food, on average.

That compares with 15.4 per cent for other families.

Ms Macklin said that to keep pensions in line with community standards, they will also be adjusted against a new wage benchmark.  That would be 27.7 per cent of the male total average weekly earnings measure, which the bureau also calculates.

She said the base pension rate would be adjusted twice a year in future, each March and September.

“These new indexation arrangements will help provide a more liveable pension for Australia’s pensioners,” Ms Macklin said.

So what will all this mean, in terms of cold, hard cash?

The precise calculations haven’t been done yet.

But Ms Macklin said the new rates would be published soon.

Pensioners’ costs, measured on the new index, rose by 0.9 per cent in the March quarter and 0.1 per cent in the June quarter.

The CPI rose by 0.1 per cent in the March quarter and 0.5 per cent in the  June quarter.

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Local blues or better news?

Better news could outweigh local blues on Australia’s share markets this week.

Worries about bad debts, particularly at Westpac, dampened the local market last week, causing the All Ordinaries to fall by 3.6 per cent, over that time.

But the New York stock exchange, was moving upwards  again towards the end of last week.  It chalked up a rise of 155.91 points on Friday, to reach to a new high of 9,505.96.

That development was based, largely, on reports that the global economy may now be coming out of its worst recession since World War II.

Bloomberg, for example, reports that sales of established homes in the US jumped in July to the highest level since July 2007.

“There is no question that the global economy is healing and emerging from recession,” Harvard economist and former chief IMF economist, Kenneth Rogoff said in a Bloomberg television interview.

Australia’s economic news, over the past few days, has also been mostly good.

As the Treasurer, Wayne Swan, points out in his weekly economic note Australia has just signed its biggest resource export deal ever.

That is for the sale of liquefied natural gas from Western Australia’s Gorgon project.  That sale, to Petrochina, is likely to be worth some $50 billion over the next 20 years.

Mr Swan says, also, that Gorgon, itself, will be the biggest single investment ever made in Australia.

This announcement is particularly significant, as it came while the global economic crisis still gripped Australia, at a time when investors, particularly, are extraordinarily cautious.

However, Mr Swan also noted that this caution might be easing. He cited the respected Dun and Bradstreet survey, which rated Australia as one of the safest places in the world to invest.

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