by Alan Thornhill
The Federal government has served notice that it will bring back its carbon pollution reduction scheme after parliament resumes in February.
This inevitably raises the spectre of a double dissolution election, in the first half of 2010, as these bills, which have already been defeated in parliament, still have no clear path through the Senate.
The government took this – carefully calculated – step when it released fresh data, which responds directly to Tony Abbott’s claim that the proposed scheme is just “a great big tax.”
The Acting Environment Minister Peter Garrett said, big polluters would have to pay, under the plan.
But everyone, who cut energy use or harmful emissions would be rewarded.
Mr Garrett’s main point, though, was that low income families would be more than fully compensated for the extra costs.
And half of Australia’s middle income earners would also be fully compensated.
He said Mr Abbott’s scare campaign was simply wrong.
In fact, Mr Gattett said, Treasury modelling shows that 2.9 million Australians, who are on low incomes, would be better off under the government’s proposed plan.
On average, these families would be $190 a year in front.
But the Federal Finance Minister, Lindsay Tanner, also said that people who are on very high incomes, like cabinet ministers, would not be compensated.
But the government left the main attack to Mr Garrett,.
“There are two simple facts nobody can avoid,” the former rock star said.
“The first is that there is no free way to tackle climate change.
“The second is that Mr Howard, Mr Costello, Mr Turnbull and the Rudd government all chose a carbon pollution reduction scheme to act on climate change.”
They had done so because this was the cheapest and most effective way to tackle climate change, as it puts a hard limit on emissions and funds compensation for families.
But the Opposition Leader persisted with his claim that the scheme is simply a tax.
“If the best the government can say is that 50 per cent of of middle income earners will be no worse off, obviously a lot of people are going to be worse off under Mr Rudd’s great big tax,” Mr Abbott said.
by Alan Thornhill
So what have we learnt, economically, from the year that is now passing?
Firstly, perhaps, that the economics of John Maynard Keynes are not dead, after all.
The new neo-classicists, who held that markets, alone, could be trusted to keep economies strong, were proved wrong, yet again.
Just as their predeecesors were back in the 1930s, when Keynes argued that monetary authorities and governments must intervene directly, at times, to support economic growth.
Ideologically, at least, Australia’s Liberals are still close to the neo-classicists, at heart.
That’s why the Opposition’s Treasury spokesman, Joe Hockey, was signalling shortly after the crisis struck, late in 2008, that the opposition’s response would be based, primarily, on tax cuts for those in the middle to high tax brackets.
That is, precisely, those who are most likely to save, not spend, any extra money they might receive.
That is not, necessarily, a hot way to tackle an all too imminent recession.
The Rudd government’s response, through stimulus packages, was much more full blooded – and effective
But Joe Hockey does have a point, when he says budget deficits can’t go on forever.
So has the Rudd government overshot the mark?
Two Treasury economists, Dr David Gruen and Colin Clark, made some pertinent remarks about that, in an article published earlier this month.
“…Federal governments of both political persuasions have demonstrated the resolve needed to bring deficit budgets back into surplus after the economy has recovered from recession,” they say.
The economists add, too, that governments, of both persuasions, have also “committed themselves to increasingly well articulated medium term policy frameworks for fiscal policies.”
Comforting thoughts, eh?
by Alan Thornhill
The best way to look at a crisis is to see it as an opportunity.
And figures released on Christmas Eve show Australians are doing just that.
The data, produced by the Australian Bureau of Statistics, have received little attention, so far.
That’s a pity.
For they show that there are advantages to be had, as big players in the corporate world rebuild their financial strength, largely by borrowing.
The bureau reported, for example, that Australians lent no less than $13.6 billion to the nation’s banks and other financial corporations in the September quarter alone.
That looks like being a smart investment, in most cases.
These figures were part of the bureau’s September quarter National Accounts, in the Financial Accounts sector.
The bureau also reported that Australians, in what it calls the household sector, increased their demand for credit by $24.5 billion in the quarter.
The total household sector debt, at the end of September, was $1.3277 trillion.
For a nation of some 21 million people, that’s a truly impressive figure.
The ABC reported, over the holiday period, that on a per capita basis, Australians are now more heavily in debt than Americans.
It said that Reserve Bank figures show that Australian adults now owe an average of $74,000 each.
The share market recovery, over the past year, has helped to put some balance back into family finances though, even for Australians who don’t invest directly in shares.
The crash, of September last year though, showed that thousands of Australian families do, in fact, have big interests in shares, through their superannuation funds.
The value of superannuation payouts plunged, in the months after that crash.
Much, but not all, of the value wiped out at that time has since been restored, as share markets rose - more quickly than expected – over the past year.
by Alan Thornhill
Don’t ring Wayne Swan.
The Treasurer will be busy reading a “comprehensive report” over Christmas on ways to make Australia’s ramshackle tax system “fairer, simpler and more competitive.”
If it actually achieves all that, of course, it might well qualify as Mary MacKillop’s third miracle.
The Treasury Secretary, Ken Henry, risked spoiling his boss’s Christmas, by handing the heavy report to him on December 23.
At this stage, Mr Swan is giving no hints about what might be in the report.
He said, only, that the government would consider the document and release it “in early 2010.”
“I won’t be responding to any of the recommendations in the report,” Mr Swan told journalists.
“There will be enough time for that in the New Year, when we will release the report and the government’s initial response.”
Mr Swan refused to say exactly when that would be.
“This is a comprehensive report,” he said.
“The government will take some time to study it in great detail
“And we will release it in the New Year.”
He thanked Ken Henry and the four other members of the Review Panel, which produced the report, after 18 months’ work.
The panel received some 1,500 formal submissions, zs well as more than 4,700 letter, during the course of its study.
It also held discussion panels right around the country.
Mr Swan said the government “will not be engaging in speculation” about the report, before it is publicly released.
It will leave that to the media.
by Alan Thornhill
So you kept your job, after the crash, and Christmas, now almost upon us, is looking pretty good.
What, though, of those who didn’t.
Before y9u mutter “bah, humbug” have a look at a few figures,
They are for July, so they might be a bit old, by now.
They are so grim, though, that they would, certainly, have put big holes in the Christmas budgets of thousands of Australian families.
The Statistician reports, for example, that the average bout of unemployment for men, at that time, lasted 17 weeks.
That is, on average, they lost more than four months’ wages.
The plight of women, wbo lost their jobs, was almost as bad.
On average, they lost 14 weeks, or three months employment, and pay.
With most Australian families now, geared to a two income budget, these are very serious shortfalls.
The main response young Australians received, when they sought work, was that “there are no vacancies at all.”
That was the blunt reply that 17 per cent received, when 1`5-19 year olds applied for jobs.
But 15 per cent of those over 45, who sought employment, were told that they were “too old” to be considered.
Ill-health or disability also prevented many people, classed as long term unemployed, getting jobs.
All had been out of work for almost a year.
Unemployment or sickness benefits probably helped most of these people, a little.
But there is still no substitute for a good, full time job.
by Alan Thornhill
Here’s the bad news. The cost of living , for Australia’s retired people has been rising faster than that of the general population.
This effect, which may well be temporary. shows up in figures just released jointly by the Australian Superannuation Funds Association and the Westpac bank. They show, for example, that retired people saw their living costs rise of by 0.7 per cent in the September quarter while those of the general population rose by just 0.4 per cent.
The difference arises largely from the different spending patterns or retired people and the general population.
Electricity prices, which affect the entire population, rose by 11.4 per cent in the quarter.
Their figures, published below, also give a very useful guide to how much you will need, in retirement, either to live modestly or to have a comfortable lifestyle.
They indicate, for example, that a retired couple in Australia now needs to spend $51,437 a year, to maintain a comfortable lifestyle.
You would need, of course, to adjust your plans each year, to maintain the value of your retirement savings, in real terms.
The present 9 per cent compulsory super levy will help with that, but it won’t be sufficient alone.
That’s because, by itself, it would provide barely enough to generate an income stream that could be described as “adequate,” let alone modest.
One of the great failings, of the present compulsory superannuation arrangements is that, by and large, Australians tend to set and forget their super funds, neglecting the fact that they need to be kept up to date.
Table 1: Budgets for various households and living standards
|Modest lifestyle single||Modest lifestyle couple||Comfortable lifestyle
|Housing – ongoing only||$73.34||$75.85||$97.42||$99.93|
|Household goods and services||$50.96||$53.97||$90.56||$95.82|
|Gifts and/or alcohol and tobacco||$24.04||$48.07|
|Total per week||$381.66||$535.10||$736.49||$986.46|
|Total per year||$19,901||$27,902||$38,403||$51,437|
But there is good news, too.
Other figures, just released, show that there has been a strong recovery in super fund earnings, over recent months.
The independent agency, Superratings, reports that the funds have chalked up earnings growth of 10.07 per cent over the past year.
Jeff Bresnahan of Superrattings, admits that the funds are still 11 per cent off the peak they reached in November last year.
But he said this is a far cry from the 25 per cent fall, evident just nine months ago.
In a second development yesterday, the Federal government released simplified product disclosure statements, for the superannuation and financial management industries.
Public comment is being sought.
by Alan Thornhill
A year that most of would rather forget is now fading fast.
But the Federal Treasurer, Wayne Swan, says we still have reason to be proud.
“It should remain a source of pride to all Australians that we have achieved what virtually no other country could over the past year,” Mr Swan said, in a statement he has just released.
In short, the Treasurer said, Australia had avoided a recession, and “some of the destruction” that goes with it, despite the financial meltdown at the start of the year.
He said, too, that:-”Employers and employees deserve credit for doing the right thing by each other and the nation.”
Employers had cut hours, rather than jobs, when the crisis struck.
That had prevented an even bigger rise in Australia’s unemployment.
Mr Swan said he would also like to acknowledge the dedicated work that people in his department, the Federal Treasury, had done over that time.
So what lies ahead?
Access Economics says Australia’s shopkeepers can expect no more than mixed results, from this year’s Christmas trading
In fact, Access said, the nation’s retailers had seen their Christmas early this year, when the Federal government’s $900 cheques spurred consumer spending.
There have been subsequent signs, too, that the nation’s shoppers are cautious.
The Roy Morgan organisation, for example, reports that consumer confidence fell by 4.4 points last week.
However, it noted also, that confidence levels are still 22.5 per cent higher than they were a year ago.
by Alan Thornhill
Australia’s $1.1 trillion compulsory superannuation industry is impressive, but there are still big gaps in its coverage.
These are revealed in figures just released by the Australian Bureau of Statistics.
These show that almost two thirds (65 per cent) of retired Australians strill rely on the age pension, or some other kind of welfare, as their main source of income, in retirement.
Yet the Age pension – and similar benefits – were designed to help people in their retirement years.
They were – and still are – not meant to provide a comfortable standard of living.
The architect of compulsory super, Paul Keating, originally meant contributions to rise gradually to 15 per cent of salary.
But they have did not go beyond 9 per cent, either in the 12 years of the Howard government, which was decidedly cool – if not openly hostile to compulsory super – or under the subsequent Rudd Labor government.
The current superanuation minister, Chris Bowen, talks enthusiastically of seeking more than mere adequacy in retirement incomes, through super.
But he becomes distinctly nervous when asked if the present government is contemplating lifting compulsory superannuation contributions, even to 12 per cent.
Characteristically, though, Mr Keating, himself, remains bold.
He told an interviewer recently that he would push those contributions right up to the 15 per cent level, if he were to return to power.
That’s not likely to happen.
And the upshot is that Australians, who are now living longer than ever, are still quite likely to find themselves strapped for cash, in their retirement years.
Alan Thornhill is a parliamentary press gallery journalist.
Private Briefing is updated daily with Australian personal finance news, analysis, and commentary.
Tuesday December 10
The Dow Jones index rose 6 points to 16,026
Holden boss Mike Devereux refuses to answer Productivity inquiry questions on government funding.
Acting PM Warren Truss writes to Mike Devereux seeking “a clear statement” on Holden’s future
In October 2013, the total number of owner occupied housing finance commitments rose 1.0 per cent:ABS
The Federal Treasurer, Joe Hockey, says the Mid-Year Economic and Fiscal Outlook will be released next Tuesday, at the National Press Club.
|Aud To Usd||0.9092||N/A||N/A|
|Bhp Blt Fpo||36.820||+0.050||+0.14%|
|Nat. Bank Fpo||33.170||0.000||+0.00%|
|Anz Bank Fpo||30.780||+0.030||+0.10%|
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