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.

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.

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.

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.

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.”

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,

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.

Until now.

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.

The Federal government says it is still “seriously” considering a national disability insurance scheme.

However the Minister for Families, Housing, Community Services and Indigenous Affairs, Jenny Macklin,  who revealed this, refused to be more specific.

“We have, of course, been interested in this idea since it was presented first at the 2020 Summit,” Macklin said.

“The government has been looking at whether we will go down this approach.

“So we’ll be giving it active consideration.”

Perhaps.  But that is still well short of a ringing endorsement for the plan.

Ms Macklin was speaking at the launch of the “Australia’s Welfare 2009″ report,  in the New South Wales country town of Queanbeyan.

The report, based on independent research, suggests that there could well be a need for such a scheme.

Australia’s population is ageing rapidly.

Its median – or mid point – age is now 36.9.  That’s up from 31.6 in 1988.

And – as Ms Macklin noted – the incidence of poor health and serious disability both rise sharply with age.

She said about 1.5 million Australians would have a high level of disability by 2010 and added that this is expected to rise to almost 2.3 million by 2030.

The Reserve Bank remains optimistic about Australia’s economic prospects – and another rate rise is now likely next month.

The bank’s explanation, of its latest rise earlier this month, makes that evident.

In minutes of its November 3 meeting, which the bank released today, it says both global and domestic economic conditions are now “significantly better” than had been expected earlier this year.

“…the Australian economy was operating with less spare capacity than earlier thought likely,” the bank added.

The bank said, too, that “further gradual adjustment in the cash rate would most likely be appropriate over time,”

But it added:”The pace of the adjustment remained an open question.”

Despite that qualification – another rate rise – the third in the present series, now seems likely, next month.

And, like the two previous ones, it is likely to be of 25 basis points.

Shareholders are to be given tighter control over executive pay-outs.

Under a new law, just passed by the Senate, shareholders will be able to veto termination payments that exceed one year’s base salary of a retiring executive or director.

The Federal Minister for Human Services, Financial Services, Superannuation and Corporate Law, Chris Bowen, welcomed the new law.

“These reforms will empower shareholders to reject excessive termination payments and promote responsible remuneration practices,” Mr Bowen said.

He said that, previously, termination payments could be as high as seven times annual salary before shareholder approval was needed.

Mr Bowen said, too, that the government welcomed the defeat of an amendment which would have had the effect of “torpedoeing” the new law, in three years’ time.

The new law was made under the Corporations Amendment (Improving Accountability of Termination Payments) Bill 2009.

The costs of tackling – and not tackling – climate change became clearer over the weekend, as prospects for a firm outcome, at next month’s Copenhagen conference receded.

A new report estimated that some 250,000 coastal properties, around Australia, could be at risk of flooding as sea levels rise, as a result of global warming.

It said Sydney airport is among the properties at risk.

Developments, on that scale, imply social disruption.

But property damage would just the start of all that.

Earlier studies have shown that many low lying Pacific islands could also be flooded, as Antarctic sea ice melts.

That could well involve the relocation of entire Pacific populations, involving people movements on a scale Australia has not yet seen.

Speaking at an APEC Leaders’ meeting in Singapore yesterday, the Prime Minister, Kevin Rudd, admitted officials, who  have been trying to get a firm outcome, from next month’s climate change talks in Copenhagen, had found themselves “running into all sorts of difficulties.”

“…and therefore it is time for leaders, politically, to step in,” he added.

The reality, though. is that there is now, effectively, no chance of reaching a binding agreement, on steps to tackle climate change, at the Copenhagen meeting.

That became clear when Asian leaders, at the APEC meeting, stepped back from their previous position, which had included a 50 per cent emissions reduction target.

Sources said this had happened at China’s insistence.

Mr Rudd insisted, though, that he will still be looking for “a robust outcome” from the Copenhagen meeting

The retreat by Asian nations, though, is certain to encourage climate change sceptics, when the government’s emissions trading scheme come before Federal parliament again  this week.

The Coalition appeared to be on the verge of a major breakthrough yesterday, in the private talks it has been holding with the government on its proposed legislation.

Reliable reports said the government is prepared to exempt Australia’s farmers, altogether, from its legislation, if the Coalition will pass it through the Senate.

A Federal minister signalled today that Australians can expect shocks, when a new report on tax reform is finalised next month.

However, the Minister for Financial Services, Superannuation and Corporate Law, Chris Bowen, promised that the  public would be given adequate opportunity to consult the government, on proposed changes.

He said he expects some of the changes, proposed by the Henry committee, would be controversial.

And there would be winners and losers.

The Rudd government has asked a committee, headed by the Treasury Secretary, Ken Henry, to recommend ways in which Australia’s tax system should be reformed.

Mr Bowen was speaking at a conference, organised by the Australian Superannuation Funds Association, in Melbourne.

He promised, though, that the government would not make major changes to Australia’s tax system, until adequate time had been given for public consultation on the Henry committee’s recommendations.

Mr Bowen had previously revealed that he may well cut the current, very generous, tax concessions, on superannuation contributions, that are presently available to very high income earners.

He said these tax breaks are not fair, when low to middle income families get little, if anything, by the way of comparable tax breaks.

The Henry committee’s report, though, is likely to lead to the deepest tax reforms made to Australia’s tax system, for more than two decades.

Early indications suggest that traditional State charges, like annual motor vehicle licence fees, might well be swept aside, in the reform processs.

However Mr Bowen’s remarks today suggest that the reform process, itself, will take months, if not years, to complete.

The Federal government challenged Australia’s superannuation industry today to develop more attractive retirement income stream products.

The Minister for Financial Services, Superannuation and Corporate Law, Chris Bowen, had been asked, at a superannuation industry conference, if the government would consider introducing compulsory annuities.

Mr Bowen said would not.  He said people, everywhere, preferred instant gratification.

And superannuation had to be kept attractive.

So it was the task of the superannuation industry itself to develop income stream products, or annuities, that people would find attractive.

Private Briefing asked Mr Bowen, after he had spoken, if he had any suggestions on how that might be done.

He said he did not, repeating that this is an area for the industry, itself, to develop.

Mr Bowen was also asked to elaborate on his previous assertion that Australia should be aiming for something better than bare “adequacy” in its retirement income policies.

“I see it as a theoretical approach,” Mr Bowen said.

“We look for something better,”  he added.

Mr Bowen said he would like to see a national debate on the adequacy of  the retirement incomes, that are available in Australia.

Australians have already put more than $1.1 trillion into their superannuation accounts, to help them provide for themselves in retirement.

Mr Bowen also said, again, today that he would like to see middle to low income earners given more incentive, through the tax system, to save more for their retirements.

Jeremy Cooper says Australian superannuation funds should be able  to buy entire enterprises, not just “bits” of them.

Mr Cooper, who chairs a Federal government commission, which is investigating the structure of Australian superannuation, says Canadian funds can already do this.

He said every time he drives  – on a tollway – to Melbourne’s Tullamarine Airport – he contributes to the superannuation savings of Canadian schoolteachers, with the toll he has to pay.

At present, Australia’s superannuation industry has about $1.1 trillion under management.

It also has some 350 superannuation funds.

However Mr Cooper said that, in 15 years, the superannuation savings of Australians could be worth $2 to $3 trillion.

And he suggested that there should be no more than 30 superanuation funds, by then.

That would make important economies of scale available.

This could mean lower management fees for fund  members.

And, of course,  it would also mean bigger ultimate pay-outs for fund members.

The Federal government ordered the Cooper review, in the shakeout which followed the share market crash in September last year.

Australia’s superannuation funds had invested heavily in shares.

That meant that thousands of Australians, who retired this year, received  less than they had expected, in their superannuation payouts.

Private Briefing asked Mr Cooper if the present take-over talks, involving the AMP and AXA, could prove to be a catalyst in the “getting big”  process he advocates.

He said he would not want to comment on “a live” proposal.