The Reserve Bank is worried about factors that are causing Australia’s house prices to rise.

And it could raise interest rates to curb those rises.

The head of the bank’s economic analysis branch, Tony Richards, explained why, when he addressed a housing forum in Sydney yesterday.

“…as a nation, we are not really any richer when the price of housing rises,” Mr Richards said.

“but the more vulnerable tend to get hurt.”

“We all need to consume some level of housing services,” Mr Richards said.

And if house prices rose,  low income families would have less to spend on other things they need,” he added.

“Lower income households are less likely to own housing,…than higher income ones.

“So when the price of housing rises, higher income households tend to benefit at the expense of lower income households,”

Mr Richardson said housing supply had not been keeping pace with the demand for new houses, arising from population growth and other factors.

“…there is a wide range of evidence that the supply side has not been all that responsive in recent years,” Mr Richardson said.

He cited problems in land zoning and approval processes, as well as finance issues, due to the global economic crisis.

The Federal government’s accounts are in better shape than it expected, when the Treasurer, Wayne Swan, delivered his budget in May.

Mr Swan said the final underlying cash deficit, of $27.1 billion, is $5 billion better than he had expected at budget time.

He said cash receipts had been $2.8 billion higher than expected while government spending had been $2.2 billion lower.

Company tax receipts had been $3.6 billion higher than expected, but that had been offset by a $500 million shortfall in personal income tax revenue.

Mr Swan said the government’s net debt, at the end of June this year, had been $16.1 billion, a level $11.5 billion lower than the budget forecast.

The Treasurer said Australia’s net debt – at 1.3 per cent of gross domestic product – is “dramatically better” than those of other advanced countries.

Their net debt, collectively, stood at 59 per cent of GDP, Mr Swan said.

But he said the Rudd government is still committed to returning the Federal budget to surplus as the economy recovers.

Can a sudden bear market overwhelm a stock exchanges front line surveillance?

Investors, still shaken by the events of last September might well believe that they already know the answer to that question.

But the Australian Securities and Investment Commission thinks it is worth further study.

In a report just released, ASIC says surveillance “plays a critical part in identifying matters warranting further investigation.”(see www.asic.gov.au)

And it has urged the Australian Stock Exchange to investigate this matter further.

The report said, though, that this and three other recommendations ASIC made, while important, did not cause the Commission to qualify its conclusion that ASX licensees have met their statutory obligations over the past troubled year.

ASIC said, too, that there would be value in the exchanges “undertaking further consideration” of the way they “administer trading halts and suspensions.”

It noted that both algorithmic trading and direct market access are taking an increasing roles in ASX activities.

ASIC said it had identified incidents in which these developments had highlighted a potential for these activities to threaten the orderliness of ASX markets.

It urged the ASX to investigate these matters, too.

Australians should not lose confidence in the nation’s economy, the Reserve Bank Governor says.

Glenn Stevens, delivered that message, when he addressed the Senate Economics Committee, in Sydney today.

However Mr Stevens also reminded Australians that they can expect the nation’s interest rates to rise, as the recovery takes hold.

“I have maintained throughout (the crisis) that Australia’s medium term prospects remain good,” the governor said.

“And that we should not lose confidence.”

Mr Stevens said both business and personal confidence levels had shown a “very substantial” pickup from the low points the nation had seen earlier this year.

Share prices had risen by almost half in that time.

However, he said both fiscal and monetary support, that had been delivered in the crisis, would have to be unwound as private demand increases.

“In the case of monetary policy, the bank has already signalled that that interest rates can be expected, at some point, to move off their current unusually low levels, as recovery proceeds,” Mr Stevens said.

Do Australians have coal dust into their eyes?

The question is worth asking, as the nation’s hopes for recovery rest heavily on hopes for increased coal sales to China.

But lower coal prices are already leaving a big hole in the nation’s export earnings.

The Treasurer, Wayne Swan, admitted that at the weekend, saying the value of Australia’s energy exports is expected to fall by 36.2 per cent this financial year.

The Federal government is making no secret of the fact that it is now looking to China to boost Australia’s growth  in the months ahead.

But things are already changing rapidly in China.

That country is already planning to generate 10 per cent of its energy from renewable resources, including solar power, by next year.

It expects, also, to lift that proportion to 15 per cent by 2020.

The Prime Minister, Kevin Rudd, has warned repeatedly that Australia could miss out on manby job opportunities, arising from technoligical change, if it hangs back on moves to combat global warming, in misguided efforts to protect the nation’s coal industry.

China’s move towards renewable energy will be swift, but not abrupt.

It will continue to import Australian coal for some years yet.

It’s move to renewables, though, has strong support, at the highest levels of the Chinese Communist party.

The country’s chief legislator, Wu Bangguo, made that plain, earlier this month, when he witnessed the signing of a deal that will set up the world’s biggest solar power station, in Ordos City, Inner Mongolia.

There was a lesson in that event, which the Senate would  be wise to accept.

It is due to debate the Federal government’s proposals for an emissions trading scheme very soon.

And, on present indications, the government’s legislation could well be defeated there.

Frazzled?

Too much work?

Not enough time for the kids?

Well, at least you are not alone.

The Statistician recognises your lifestyle.  If you can call it that.

In a report just released, the Australian Bureau of Statistics concedes that extra hours, multiple jobs and weekend work are all “cutting into” our family lives.

That comment is contained in the latest issue of the Bureau’s publication Social Trends.  (see www.abs.gov.au).

This observation is remarkable, as the Bureau has also noted that many Australian employers have responded to the global economic crisis by putting workers on short time arrangements, to save money.

Some workers, apparently, have responded by taking second jobs.

The Bureau said most of Australia’s more than 1.5 million families with children – and most of them have two parents working.

It noted, too, that 80 per cent of these families had at least one parent who said they were often – or always – pressed for time.

That happened – mainly – because those working parents struggled to find a balance between their work and family lives.

The Bureau said, too, that;”Over half – 58 per cent – of all working couples had at least one parent who usually worked extra hours.”

It said, also, that a similar proportion regularly worked in the evenings,

Weak income growth is threatening Australia’s recovery.

You have Ken Henry’s word for that.

The Treasury Secretary made himself absolutely clear on that point, in a speech he gave to business leaders in Brisbane yesterday.

“A key risk to the timing and speed of a recovery in private demand is the near term weakness in income growth,” Mr Henry said.

He warned that this is often overlooked.

It is, he said, “something that is not often given the same degree of attention as real economy developments.”

Mr Henry, though, was not suggesting that the business people present go back to their factories and offices and give their employees  big pay rises.

The problem, as he sees it, is more basic.

“Income growth is expected to be very weak in 2009-10,” Mr Henry said.

He said corporate profits would decline and family income growth would be subdued.

Why?

“This largely reflects significant price falls for Australia’s non-rural commodity exports,” Mr Henry said.

That, in turn, had driven a decline of more than 15 per cent in Australia’s terms of trade.

Mr Henry said Australia’s recovery would also depend on the pace of global recovery.

And he warned against the premature withdrawal of government stimulus measures, either in Australia or overseas.

The Federal government’s stimulus package is expected to save up to 50,000 jobs in Australia’s non residential building sector.

That estimate comes from a new survey, just published by the Master Builders’ Association.

The Association says the global economic crisis hasn’t yet caused a collapse in the nation’s construction industry.

But it warns that disturbing trends are starting to appear.

The Association says two factors prevented an outright collapse.

The industry already had a backlog of  work when the crisis struck last September.

The stimulus package had also helped.

However tighter criteria for bank lending had led to a massive fall in both residential and non-residential building approvals.

The Association said its latest survey confirmed a continued rebound in builder sentiment, during the March quarter.

It said that was encouraging.

However, it said,  most builders still believe conditions in the industry are poor.

“Builders are expecting slow improvement in the residential sector over the next six months,” the association said.

However it warned, also, that investor activity in the sector is still “sluggish.”

Glenn Stevens’ latest book probably won’t make any best seller lists.

That’s a pity, because it is a thriller.

The title doesn’t help.

Reserve Bank of Australia, Annual Report 2009.

But don’t let that deter you.  It’s a great read.

That’s because it tells, precisely, how Australians have responded to the global economic crisis, which arrived with a great crash, last September.

Did you know, for example, that Australians were holding $4 billion more in cash, at the end of last financial year, than would ordinarily have been expected?

Some,  no doubt, were storing it in socks, or pillow-cases.

You can’t be too careful, after a stock market crash.

But it didn’t stop there.

Exchange settlements are one  of the Reserve bank’s most important operations.

These are daily  open market operations, meant, primarily,  to keep interest rates close to the Reserve Bank’s target.

In the financial year before the crash, these settlements averaged $2.5 billion a day.

In the latest financial year, though, they climbed to an average of $4 billion a day.

Cash is king, everywhere, when a recession looms.

The governor’s latest report is, indeed, exciting reading.

We can’t record it all here.

But it is available at www.rba.gov.au.

And you will look as if you are hard at work, on your computer, if you read it on the net.

That is if you can do so, without gasping.

Kevin Rudd expects Australia’s unemployment rate to rise before the present global economic crisis ends.

The Prime Minister made that admission in New York, in an interview with CNN.

He said that would happen because unemployment is “a lagging indicator.”

“Ours currently sits at 5.8 per cent,” Mr Rudd said.

“It’s been that way for a while.”

Mr Rudd said his government is injecting large amounts of stimulus into the Australian economy, because it regards the maintenance of jobs as “critical.”

“…not just to human decency, but critical also in terms of the path to economic recovery.”

The Prime Minister is in the United States for a meeting of the G20, which is to be held in Pittsburgh.

He said he regards present calls for immediate withdrawal of economic stimulus, both in Australia and the world, as

“premature.”

He said, too, that these calls are “misplaced” in terms of the challenges that still lie ahead.

However, Mr Rudd also said that a coordinated withdrawal of current emergency measures would be discussed at the Pittsburgh meeting.

But G20 leaders would also need to look beyond the present crisis, Mr Rudd said.

“We need a new, sustainable growth model for the future.

“Otherwise we may be looking at the prospect of flat global growth for some time to come.”

Almost three and a half million Australian pensioners are to get an immediate rise in their entitlements.

The increase will apply to age pensioners, those on disability support, carers, wife and widow pensioners and those on veterans’ income support,

They will get the extra money on their next regular pay days.

Families Minister Jenny Macklin said the increases will improve the pension’s adequacy, simplify the way it is delivered and improve adequacy.

“These are the most significant reforms since the pension was introduced 100 years ago,” Ms Macklin said.

She also described the rises as “a vital investment in preparing Australia for the future.”

The changes include both an adjustment to the base pension, which the government announced in its budget last May and regular indexation movements.

A single pensioner, on the maximum rate, will receive a total increase of $70.83 and total payments of $671.90  a fortnight.

This will be made up of:-

• an extra $60 a fortnight in the base pension
• an increase of $5 a fortnight in the new pension supplement and
• indexation rises of $5.50 a fortnight in the base pension and 33 cents a fortnight in the pension supplement.

Ms Macklin said pension rates for singles are now set at two thirds of  the rate for couple pensioners.

The total increase for couple pensioners, on the maximum rate, will be $29.93 a fortnight, bringing the total received to $1,013 a fortnight.

Their increases will be made up of:-

• an increase of $20.30 a fortnight in the new pension supplement
• indexation increases of $9.20 a fortnight in the base pension and 43 cents a fortnight in the pension supplement.

Other changes just introduced include:-

• a new work bonus, that allows pensioners to keep more of the money they might earn through part time work
• new indexation arrangements
• a new seniors’ supplement for self funded retirees who have a Commonwealth seniors’  health card
• changes to the pension income test, which include an increase in the withdrawal rate from 40 to 50 cents
• regular six monthly revaluation of all listed securities held by pensioners.

Full details are available at www.australia.gov.au/pensions.

A new report sharply criticises the protection offered to $8 billion worth of aged care accommodation bonds.

Old people, entering residential care, can be asked to pay a bond, usually costing about $190,000, to help pay for their place in the particular home.

The Auditor General’s Office, which prepared the report,  said this generally represented a significant slice of a prospective resident’s life savings.

The task of ensuring that this bond money is used appropriately has been given to the Federal Department of Health and Ageing.

The report notes several shortcomings, in the way the Department does that work.

In certain cases, of financial failure, on the part of the homes operators, the Federal government can be called upon to refund bond money, that is due to either residents, or their estates, when they leave a particular facility.

Under present law, the Federal government can levy the entire aged care industry, to recover any money it pays out, in this way.

The report notes that there have already been three “events” in which these issues arose.

In one case, the government had to pay out $19 million.

It has not yet decided whether it will levy the industry, to recover that money.

The report notes that the Department has developed a “stress test” to measure the sector’s financial well being.

But it said the “self managed” model, under which the industry operates, as well as the demand arising from Australia’s rapidly ageing population, presents the Department with many challenges.

It says these include the emergence of larger and more complex providers, the ability of providers to make “unfettered” investment decisions and “ongoing structural changes” in the aged care sector, itself.

“In the context of these challenges, the administrative framework established by the DoHA does not provide sufficient regulatory oversight,” the report says.

Australians have been hit very hard by the global economic crisis, with the nation’s underemployment and under-utilisation rates both rising sharply over the past year.

This is confirmed in detailed job market figures, that the Australian Bureau of Statistics has just released.

Both are relatively new figures.

But both have been calculated back to 2001.

The bureau reported that, in trend terms, 12.6 per cent of Australian men, that is one in eight,  were under-utilised at work last month.

The situation for women was even worse, with 15.3 per cent classified as under-utilised in August.

The bureau also reported that the trend underemployment for men stood at 6.4 per cent in August.

Women, though, endured a 9.7 per cent underemployment rate last month.

These figures confirm major weaknesses in Australia’s job market, even though the nation’s unemployment rate held steady – at 5.8 per cent – last month.

They also imply that thousands of Australian families are battling to get by, each week, on slimmer pay packets than usual.

A new survey, just released by the Australian Chamber of Commerce and Industry and the Westpac bank, confirms that weakness.

It showed that while business confidence and activity both rose in the September quarter, employment still lags.

Telstra could make real advances, in the present round of negotiations on telecommunications reform.

But they would come at a price.

The reality is that Telstra’s bargaining position, in those talks, is not nearly as weak as many had assumed.

Investors started to realise that yesterday – and Telstra shares regained much of the ground they had lost on Tuesday – after the government’s sudden – and brutal – announcement of its plans.

The Federal Finance Minister, Lindsay Tanner, was more diplomatic than his colleague, the Communications Minister, Stephen Conroy, had been a day earlier, when he made that announcement.

Mr Tanner confirmed, in a radio interview, that Telstra and the government are already engaged in “very detailed discussions” about a wide range of issues.

“…and we hope that we will be able to collaborate with Telstra in achieving a pretty much universal super-fast broadband network that will be of enormous benefit to Australia,” Mr Tanner said.

Many commentators have said that the Government virtually held a gun at Telstra’s head, when it announced on Tuesday that it wants to separate the national carrier’s wholesale and retail networks.

It said, effectively, that it would seek to do that by legislation, if Telstra did not agree to co-operate in this overhaul of Australia’s critically important telecommunications sector.

But the government might not be able to do that.  That’s because it does not control the Senate, which would have to approve its plans, before they could become law.  The Senate would, very likely, be hostile on this issue.

The Senate, though, would find it much harder to oppose a negotiated reform agenda, that Telstra had accepted.

And there is a very big carrot in all this, for Telstra, itself.  Under its previous confrontationist boss, Sol Trujillo, Telstra had effectively dealt itself out of participation in the government’s plans for a super-fast internet network.

That’s a $43 billion project, with prospects that any carrier would want to consider very seriously.

The price, though, would be giving up Telstra’s virtual monopoly in the wholesale market.

What effects other developments, like the rapid expansion of wireless internet, might have on the proposed super-fast carrier, though, is far from clear at present.

A major bank is predicting a return to strong economic growth in Australia next year.

Westpac says it now expects the nation’s economic growth to hit 3.8 per cent in 2010.

That would be well above this year’s expected growth of just 1.4 per cent.

If  Westpac’s latest forecast proves to be correct Australians should see a sharp improvement in the nation’s job market next year.

Australia’s unemployment rate, of 5.8 per cent, hasn’t risen as high as the government first expected, in the wake of the global economic crisis.

But the nation’s job market has weakened this year, with thousands of Australians being moved from full to part time work.

Westpac based its prediction on a surge in a leading index, which it produces with the Melbourne Institute.

Although still well below its long term trend, that index has surged in recent weeks.

The bank’s Chief Economist, Bill Evans, said economic growth this year would remain tepid.

And he says Westpac does not expect the Reserve Bank to raise Australia’s official interest rates before February next year.