by Alan Thornhill
The Federal government says its stimulus package is still plugging holes, that the global economic crisis has left in the Australian economy.
The Federal Treasurer, Wayne Swan, said that is reflected in new capital spending figures, that have just been released.
These show that capital spending in Australia fell by 3.9 per cent in the September quarter, on seasonally adjusted figures.
Mr Swan said the third stage of the government’s package, which involves investment in infrastructure, like new school libraries, is helping to offset that soft performance.
And he said that infrastructure spending would remain “very important” to the Australian economy in the year ahead.
Mr Swan said Australia had done better than any other advanced economy, after the global economic crisis struck last September.
The government’s stimulus packages had helped. So had the resilience of the Australian people.
“I think all Australians can be proud of what we have all achieved,” Mr Swan said at question time in parliament.
But he also warned that there are still challenges ahead.
Mr Swan said unemployment would keep rising for a while yet.
The Opposition’s Treasury spokesman, Joe Hockey, then asked how much interest the government now expects to pay, before the extra debt incurred, in the wake of the crisis, is repaid by 2022.
Mr Swan responded by accusing the opposition of running a standard scare campaign, on the debt issue.
by Alan Thornhill
High prices are already freezing young Australian families out of the nation’s housing – and their plight is likely to become even worse next week.
That’s because the Reserve Bank is likely to increase interest rates, when its board meets next Tuesday to review the nation’s economy.
The bank’s deputy governor, Ric Battellino, spoke about the under 35s, when he addressed a housing industry conference in Melbourne yesterday.
He said there had been “a noticeable decline” in home ownership levels, in this age group over the past ten to fifteen years.
The bank has admitted, many times, that it is worried by house price inflation, particularly in Australia’s capital cities.
And it has made no secret of the fact that house prices are one factor – among many – that it considers when its board meets to review rates.
Mr Battellino admitted that the bank is not yet sure why young Australian families are staying out of the nation’s housing market, in increasing numbers.
“It may be that this is being driven by demographic factors,” he said.
Young people, now, are staying in education longer.
And that could be delaying family formation.
“But it may also be financially driven,” Mr Battellino added.
Few economists would be surprised if the Reserve Bank, once again, increases its target interest rate by another 25 basis points next Tuesday, for the third successive month.
And an even bigger rise - of perhaps 50 basis point – is also possible.
Mr Battellino also told his audience that bank margins – or profits – on housing loans had mostly narrowed, in the wake of the global economic crisis.
“To the extent that there has been a widening in banks’ margins, it has been on their business lending,” he added.
by Alan Thornhill
Australians are not saving enough to provide even a comfortable living for themselves in retirement.
This finding has been confirmed, yet again, in new research just published by the National Centre for Social and Economic Modelling, NATSEM.
Its research is supported by the AMP.
“Australians have very high retirement expectations,” Craig Meller, the managing director of AMP Financial Services said.
“But we are not saving enough to even afford a comfortable retirement, let alone one which meets our expectations.”
NATSEM’s research showed that a move from the present level of 9 per cent – in compulsory superannuation contribution - to 12 per cent would help fill that gap.
By increasing the superannuation guarantee to 12 per cent, the average superannuation balance could increase by one quarter, Mr Meller said.
Thousands of Australians were shocked late last year, when the stock market crash took a huge bite out of their retirement savings.
Their fortunes have been partly restored, though, by steady gains in share prices since March this year.
However there was a small set back in October, with Australia’s superannuation funds suffering an average loss of 1.5 per cent, during the month.
However Jeff Bresnahan, of Super-ratings, which published this result, said it is still too early to tell whether this loss, the first in eight months, amounts to more than a hiccup.
by Alan Thornhill
Australia is already heading for respectable economic growth this year - and stronger growth next year.
So why is the Federal government persisting with its economic stimulus, instead of scrapping it?
Especially as the Reserve Bank is – very conspicuously – returning the nation to more normal interest rate levels.
Isn’t there a contradiction here, with two arms of economic policy pointing in different directions?
That thought is certainly understandable, at present.
But the Treasurer, Wayne Swan, says there are things we musn’t forget.
He notes, for example, that the OECD is warning that it would be risky to remove stimulus measures too soon.
Swan says, too, that Australia must heed its own experience.
“The lesson of previous recessions is clear,” he says.
“Unemployment takes a lot longer to go down than to go up.
“And nothing is more debilitating to a country and to an economy than prolonged high unemployment.”
The OECD now expects Australia’s unemployment to peak at 6.3 per cent, well below the level of 10 per cent, plus, that the United States has already chalked up.
Swan points out, too, that two of the three phases of the government’s stimulus packages have now largely passed.
The third – and final – stage is now largely about infrastructure projects, involving badly needed new road, rail and port facilities, as well as the government’s “education revolution” and its high speed broadband project.
Even so, big sums of money are still involved. And there is still plenty of room for miscalculation, either way.
by Alan Thornhill
Although it hasn’t gained much attention yet, the Federal government has been trying hard to convince Australians that the nation’s move to a greener economy will be accompanied by the creation of many new jobs.
This will be an uphill battle for the government, as many of the 55 year old coal miners, who have traditionally voted Lahor, are very sceptical about such changes.
So far, the government has been using question time in Federal parliament, as its main weapon.
The Deputy Prime Minister, Julia Gillard, told parliament yesterday that Australia would see 50,000 new jobs created, as the government moved to tackle climate change.
Young people would be given training in the new skills that would be required, in areas like plumbing and the maintenance of hybrid cars.
Older workers would also have retraining available, to update their skills.
Although she did not say so, Ms Gillard was relying on Treasury research.
The Federal Treasurer, Wayne Swan, was more specific, in a reply he gave parliament earlier this week.
“There is Treasury modelling on this,” Mr Swan said.
He said $31 billion worth of clean energy projects were already under way or planned “in response to the government’s climate change policies, according to a Climate Institute study.
“We on this side of the house are the party that is supporting jobs,” Mr Swan said.
He described climate change sceptics in the Senate as “economic vandals.”
by Alan Thornhill
A surge in public sector earnings will add to the pressure for another rate rise next month.
That development was confirmed in a second set of figures, that the Australian Bureau of Statistics has just released.
These show that Australia’s public servants received a 5.8 per cent rise in their full time adult ordinary time earnings in the 12 months to the end of August.
That is on seasonally adjusted figures.
Like the wage cost index statistics, released earlier this week, these figures show public sector wage rises have far outstripped those seen in the private sector over the past year.
However private sector wage rises, in that time, have also been impressive.
The comparable figure, for private sector employees, was 4.9 per cent.
But the public servants, who are sometimes described as “fat cats,” are maintaining their lead.
Their earnings rose by 1 per cent in the latest May to August period, while private sector employees saw their earnings rise by just 0.9 per cent.
They suggest that Australia’s public servants have barely been touched by the global economic crisis, which began with the collapse of Lehman Brothers in September last year,
by Alan Thornhill
Australia’s public servants don’t like being called fat cats.
But they certainly have got the cream, in the past year’s wage stakes.
Global crisis? What crisis?
While the financial world was collapsing about them, Australia’s public sector workers managed to chalk up a 4.6 per cent pay rise, over the 12 months to the end of September.
They even managed to get an extra 1.4 per cent in the three months to the end of September.
This shows up in original Labour Price Index figures, that the Australian Bureau of Statistics released today.
Workers, trapped in the private sector, could not match their performance.
But they still managed a substantial pay rise, of 0.8 per cent, in the September quarter.
And a rise of 3.1 per cent in the 12 months to the end of September.
In both cases, these rises are surprising.
Many businesses either sacked, or put many workers on short hours, during the crisis,
There were significant retrenchment programs in the public sector, too.
The fact that hourly wage rates have risen – quite substantially – in the same time has largely escaped public attention.
by Alan Thornhill
Australia’s big four banks did relatively well, in the global economic crisis, but they still have some ground to make up with their small business customers.
A new survey shows Australia’s small business owners have a distinct preference for the nation’s smaller banks.
The survey, conducted by the widely respected Roy Morgan organisation, revealed that the big four banks could only register a combined 64.8 per cent satisfaction rating among their small business clients.
The public, at large, was happier, giving the big banks a 73.2 per cent approval rating.
Of course, the past 12 months, dominated by the global economic crisis, has been a particularly trying time for the nation’s banks, both big and small.
The Saint George bank, though, managed to chalk up a 72.3 per cent approval rating among its small business customers.
Norman Morris, the industry communications director at Roy Morgan, said Australia’s banks, generally, have failed to keep up with the more complex demands of their small business customers.
That matters. Mr Morris said the average small business client is worth roughly twice as much to his or her bank than other clients, because they take more bank products, including loans.
But your correspondent, a former banker, well remembers the agony bank managers go through, wondering whether their small business customers will survive, or go under.
Alan Thornhill is a parliamentary press gallery journalist.
Private Briefing is updated daily with Australian personal finance news, analysis, and commentary.
Wednesday May 22
The Dow Jones Index rose 52.07 points to 15,387.30
At least 24 die in Oklahoma tornado
Unions are seeking a rise of $30 a week in the National Wage Case, which opens today
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