by Alan Thornhill
Australian investors will be better protected against corporate crime, under tough new laws that the Federal government will introduce later this year.
The Financial Services Minister, Chris Bowen, who made the announcement, said corporate crooks will face big fines and longer jail sentences, under new laws.
He said they would will be easier to catch, too, because corporate crime prosecutors will get new powers to listen to their private telephone conversations and intercept their emails.
Mr Bowen was blunt, when he was asked if corporate crime is a serious problem in Australia.
He said the Australian Securities and Investments Commission, which prosecutes this kind of crime, had alerted him to a “noticeable trend.”
That was “…often an increase in a firm share price before market sensitive announcements are made.”
Mr Bowen, though, refused to comment directly on high profile cases, that are still before Australian courts.
He said the new penalties, which include up to ten years’ jail would be among the toughest in the world.
Mr Bowen said, too, that they would compare well with those in the United States.
He also said the Australian Securities and Investments Commission, which prosecutes these offenders, would be given access to telephone and other electronic interception powers.
“These changes will ensure that ASIC is properly equipped to investigate and prosecute serious corporate misconduct, ” Mr Bowen said.
This kind of misconduct had the potential to cause significant harm to the economy and investors, Mr Bowen added.
At present, fines for individuals, who indulge in this kind of cheating, are limited to $22,000.
That will rise to eikther $500,000, or three times the amount at stake in the particular crime.
“Whichever is the greater,” Mr Bowen said.
The new maximum for corporate offenders will be $5 million, or three times the amount at stake in the particular crime.
A penalty of 10 per cent of the offending corporation’s annual turnover will also be available.
“To ensure compliance and increase deterrence, the maximum term of imprisonment for these offences will be increased from five to 10 years,” Mr Bowen said.
At present, the Telecommunications (Interception and Access) Act restricts the use of telephone and other interception techniques to investigations of “serious offences.”
Mr Bowen said that law would be changed, to class market crimes and insider trading as “serious offences.
“This will enable ASIC to obtain direct evident of inside information, such as the content of conversations, rather than simply relying on circumstantial evidence, such as the mere existence of suspect telephone conversations, Mr Bowen said.
He said the government would bring the new laws into effect later this year.
by Alan Thornhill
The price of innocent summer pleasures have been rising almost as fast as capital city temperatures.
Fruit prices, for example, leapt by 15.9 per cent, over the final three months of last year, as bad weather hit many orchards, leaving shops short of fruit.
And that traditional summer break at the beach was more expensive than ever, with the price of domestic holiday travel and accommodation jumping 6.6 per cent, in the same time.
Even staying home, feeling sorry for yourself was expensive, too, with beer prices rising 2.1 per cent, in the three months leading up to Christmas.
There were offsets, though, with petrol prices falling 2.8 per cent, as the Aussie dollar put on a little muscle.
Computer prices fell by 7.1 per cent and the price of pharmaceuticals dropped by 5.3 per cent.
Overall, though, the Statistician reports, Australia’s prices rose by 0.5 per cent in the December quarter.
Following the 1 per cent rise chalked up in the September quarter – and an earlier rise of 0.5 per cent – that took Australia’s annual inflation rate to 2.1 per cent.
Sadly, for home buyers though, Australia’s underlying inflation rate was even higher at 3.6 per cent.
The Reserve Bank looks at these “underlying” rates, not the raw CPI figures, when it reviews Australia’s interest rates, as it will next Tuesday.
And as that rate is still above the 3 per cent that the Reserve Bank is prepared to tolerate, another round of rate rises can be expected next month.
by Alan Thornhill
Another round of interest rate rises became a virtual certainty today, when the Australian Bureau of Statistics reported that the nation’s inflation rate is rising.
The Consumer Price Index rose by 0.5 per cent in the final three months of last year, to produce an annual headline inflation rate of 2.1 per cent.
That’s up from 1.3 per cent in the 12 months to the end of September.
The Reserve Bank aims to keep Australian’s inflation rate in a 2-3 per cent range, over the course of a business cycle.
However, it uses what it calls an underlying inflation rate, not the bureau’s raw CPI figures, to make its calculations.
And, on that measure, Australia’s inflation rate – at 3.6 per cent – is already above the bank’s target range.
The fact that if fell slightly – from a revised 3.7 per cent – at the end of the September quarter won’t help homebuyers avoid another rate rise.
As the private forecaster Access Economics noted earlier today, a point above the Reserve Bank’s tolerance line is not a good starting place, as an economic recovery gets under way.
“Interest rates will head up alongside the Australian and global recoveries, as they should,” Access director Chris Richardson said.
The Reserve Bank board will meet next Tuesday to review the bank’s marker rate, which now stands at 3.75 per cent.
Mr Richardson said that rate would probably hit 5 to 5.5 per cent by the first half of next year.
Other information, also released today, confirms that another rate rise, as early as next month, is now even more likely.
The Westpac Bank reported that its leading indicator, which points to the likely pace of economic activity over the coming three to nine months, surged in November.
by Alan Thornhill
Chris Richardson is speaking more frankly about the need for Federal spending cuts, than Kevin Rudd.
The Prime Minister has been delivering a rather obtuse message over the past week, warning that Australia’s productivity must rise over the years ahead, to offset the challenges that Australia’s rapidly ageing population will present to the Federal budget.
That baffled many people because productivity is a technical economists’ word meaning the relationship between output and industrial units of things like labour and capital.
Mr Richardson, a former Treasury official, who now guides the private forecaster, Access Economics, would, certainly knows that. But the many of the people he might meet, on his bus to work, would not.
Access, though, clearly endorses growing calls for cuts in Federal spending, saying they will be needed in both this year’s Federal budget and the next, noting that the first will come before the next Federal election and the second afterwards.
Make no mistake.
If the Federal government does make big cuts in its spending this year, as Access recommends, your family’s finances will be affected too, one way or another.
In the private forecaster’s latest Business Outlook, published today, Richardson says this all comes down to a single word.
Richardson has been around Canberra long enough to know that this word will set off alarms.
He would remember, too, that Sir Humphrey Appleby, of the Yes Minister series, defined “a courageous decision” by any government, as as one that will cost it the next election.
The forecasster’s message, on Federal spending, was blunt.
“There is a big need to save taxpayers’ money, because longer term Federal finances are skint,” it said.
In a string of speeches delivered around the nation, in the week leading up to Australia Day, Mr Rudd, virtually accepted that.
And, while he isn’t saying much about spending cuts, his government has, in fact, already started to rein in its spending.
It has done that very quietly.
The cuts also go well beyond the gradual phasing out of its stimulus package, which is already well under way, as the Federal Treasurer, Wayne Swan, has noted.
Some changes go right to the heart of the system.
Australians, who believe they might be entitled to some payments from Centrelink, for example, could once arrange a private meeting with an adviser from this welfare agency,to find out precisely what their entitlements are.
Now, people seeking that agency’s advice, are told to go to its website, instead, to review their situation.
That’s no easy task, for a 63 year old Italian woman, who is not all that familiar with English, let alone the internet.
The government will have no shortage of ideas, though, if it does decide to cut spending in its May budget.
That’s because a Razor Gang, headed by the Federal Finance and Deregulation Minister, Lindsay Tanner, has been working quietly on proposed spending cuts, since last September.
Access says the Federal opposition, too, has responsibilities, when it comes to Federal spending cuts.
“…it is always…easy to argue for spending cuts in in general and to disagree with them in the particular,” it warns.
“So let’s hope that Canberra’s New Year resolution, on both sides of the Hill, is for a little extra courage, it adds.
What else, then, does Access see ahead?
- A “mild” recovery this year, rather than a “wild” boom, for one thing.
That might dampen hopes in some places, like Western Australia, where the local newspaper is already predicting a return to roaring times, in the near future.
- Access says, too, that Australia will benefit from a resurgence in China, which chalked up very strong growth last year.
But there will be a price, in the form of greater exposure to China, if anything goes wrong there.
“If China sneezes, Australia will catch pneumonia,” Access says.
- Recovery in the retail sector will be muted, Access says, noting that Australia’s shopkeepers have already benefited greatly, from Federal stimulus spending.
- It says, too, that business will continue to be restrained by the banks, as they struggle to overcome setbacks suffered in the global financial crisis.
- It warned also that Australia’s interest rates would gradually return to more normal levels, as the Australian economy gradually recovers.
More at www.accesseconomics.com.au
by Alan Thornhill
Australia’s married women do most of their paid work in their twenties and forties.
This is confirmed in research by Dr Lixin Cai, which the Productivity Commission has just published as part of its visiting academics program.
Economists have known for years that married women have been making ever bigger contributions to both Australia’s national economy and their own families’ finances for decades, by increasingly taking jobs outside their homes.
But detailed research on this important social and economic trend has been scarce.
That has meant that successive governments have found it hard to draw up appropriate policies to deal with this major social phenomenon.
Lixin Cai’s works will help to plug the gaps.
Her paper, called Work Choices of Married Women:Drivers of Change, adds much urgently needed detail to previous studies.
It shows, for example, that just 15 per cent of Australia’s married women take full time jobs outside the home, while they have a child under three.
And fewer than 18 per cent do so when they have even one child aged three to five.
Dr Cai’s research also shows that the participation of Australia’s married women in the nation’s workforce falls off rapidly above the age of 56.
Almost 47 per cent of married women, in that age group, do not take paid work outside their homes.
It is that figure, above all, that will grab Kevin Rudd’s attention.
The Prime Minister has been touring the country over the past week, telling Australians that the nation’s rapidly ageing population will put heavy pressure on Federal finances in the years ahead.
He wants all Australians – including married women – to remain financially independent as long as possible. And for most of us, that means staying at work.
So don’t be too surprised, later this year, if the Rudd government offers some nice tax breaks to encourage older Australians to keep working.
Dr Cai’s conclusions may not be revolutionary, but they will be welcomed.
She confirms, for example, that the age of children, education levels, partners’ incomes and proficiency with English, all affect married women’s participation in Australia’s workforce, as do age and health.
Her paper is not always an easy read for those who are not academics. But Dr Cai publishes enough of her sums to allow her peers to tick, or fail, her work.
That must be respected.
There will still be strong public interest,though, in Dr Cai’s conclusions.
That’s because she has much to say about the way married Australian women take full or part time employment, over the course of their life and family cycles.
She reports, for example, that between the ages of 18 and 25, 43 per cent of Australia’s married women have full time employment, while 23 per cent have part time work.
Only 34 per cent in this age group, are not employed. (Some might be studying).
The proportion working full time drops to just 32 per cent, among 26 to 35 year olds, while another 34 per cent have time jobs.
Once again 34 per cent do not have paid work.
Among 36 to 45 year olds, 30 per cent have full time jobs, outside the home, while 45 per cent have part time employment.
Only 25 per cent do not have paid work.
With 46 to 55 year olds, 38 per cent have full time outside jobs, while another 39 per cent are working part time.
Only 23 per cent do not have paid jobs.
See the full report at www.pc.gov.au
by Alan Thornhill
John Howard came to power, many years ago, promising that red tape for small business would be cut in half..
At that time, though, small business operators were generally filing just two tax returns a year. One for their business and a second for personal income.
By the time Mr Howard left office, though, thousands were preparing no less than six tax returns a year, five for their businesses and one personal return.
While most could prepare their own quarterly Business Activity Statements themselves, many sought professional help with their annual returns – both business and private - because of their perceived complexity.
The cost of getting their accountants to fill in those annual returns, though, was high. Accountancy firms thought nothing of charging as much as $2,500, and sometimes more, for this small service.
Predictably, accountants protested loudly, in submissions to the Federal government’s tax review, at a proposal to make annual tax returns not only simpler, but also voluntary in many cases.
The details are not yet clear, as the review’s report, which the Treasury Secretary Ken Henry handed to the government just before Christmas, has not yet been made public.
We can, however, expect the present arrangements for taxing superannuation to be comprehensively overhauled.
At present, superannuation money is taxed at a flat rate of 15 per cent, on its way into a fund.
So people, on very high incomes, can get much bigger tax breaks on super, than others on middle and low incomes.
The government, though, is not likely to agree to the superannuation industry’s request to increase compulsory super contributions from 9 to 12 per cent of salary, in this year’s Federal budget.
The Henry Review is understood to have concluded that the present rate of 9 per cent will provide an adequate retirement income, at least for younger Australians who are now coming up through the system.
It also favours a profit tax, of perhaps 40 per cent, for Australia’s big miners, in particular.
That would, eventually replace State royalties and other charges.
Surprisingly, the miners themselves were not totally opposed to this idea. Although high, that tax would not be imposed at all, when commodity prices were low, because the miners then would be making little, if any, profit.
States like Western Australia, though, bitterly oppose this idea. That’s State’s Treasurer, Troy Buswell, is already fighting hard against it.
The Review has also come up with some novel ideas, such as taxing people who use the nation’s roads at peak periods.
That is based on the idea that if traffic flows could be spread more evenly – throughout the day – there would be less pressure from motorists for expensive new roads.
The Review concludes, too, that Australia’s rapidly ageing population will put heavy – and strongly rising – pressure on Federal finances in the years ahead.
That’s why the Prime Minister, Kevin Rudd, has been touring the country, over the past week, telling Australians that the nation’s productivity must be increased, to meet these demands.
He has stressed, each time, that this means working smarter, not harder or longer.
But that forced his Treasurer, Wayne Swan, to remind Australians of the Rudd government’s promise that its total tax take would be no higher – as a percentage of national income -than that of its predecessor, under John Howard.
Few issues, though, are as politically sensitive as tax reform, however well intentioned.
And things don’t always work out, in real life, exactly as intended.
Mr Howard, himself, discovered that. Mr Rudd will, too.
by Alan Thornhill
The Federal Treasurer, Wayne Swan, says the Labor government’s future tax take won’t be bigger than that of its predecessor, the Howard government.
“We remain committed to keeping taxation as a share of GDP below the level the Government inherited,” Mr Swan said.
“And that’s 23.6 per cent of GDP in 2007-2008,” he told an ABC radio interviewer.
The commitment is important, because the Treasury Chief, Ken Henry, said last night that the government’s need for money would rise over the years ahead, as Australia’s population aged.
That was taken as a sign that the government might be planning to raise taxes.
Especially as Mr Henry headed a committee which has just completed a major review of Australia’s entire, ramshackle, taxation system.
The committee’s report, which runs to more than 1,000 pages, was handed to the government just before Christmas.
But it has not yet been released to the public.
Mr Swan admitted, though, that the rapid ageing of the Australian population would put pressure on the nation’s finances.
“Well, I think it’s very clear – and you’ll see this in the Inter-Generational Report which I will release in a short period of time – that the ageing of the population will put pressure on the Budget, and on the economy over the next 40 years.,” the Treasurer said.
“There are currently something like five people of working age for every person aged 65 and over,” he added.
“And in 2050 that will be 2.7.”
“That’s why the Prime Minister has been talking about increasing productivity,” Mr Swan said.
He said that’s what Australians must do to offset the ageing of the nation’s population.
” That’s the way to solve the problem of the ageing population, along with increasing participation,” Mr Swan said.
” It’s making sure that we pay attention to that critical issue of productivity, so we increase our wealth and increase our capacity to support an ageing population, and also make sure we have the right policy settings in place in health and retirement income policy which will support an ageing population,”
Mr Swan said, though, that increasing productivity meant working smarter, not harder.
Older Australians might be encouraged to work longer. But those who wanted to retire would still be able to do so.
by Alan Thornhill
The Federal government has rejected “wholesale reform” in the wake of the global economic crisis.
The Financial Services Minister Chris Bowen made the declaration in a television interview he gave in Hong Kong.
He said such matters were always “a matter of balance.”
But Australia’s response to the crisis had been “very robust.”
“We haven’t had any runs on any regulated financial institutions , Mr Bowen said.
“And four out of the nine AA-rated banks around the world are Australian banks
“So we do take the view that our regulatory systems worked well and that there is not a case for wholesale reform,” Mr Bowen said.
His declaration will surprise many.
The government has, for example, ordered a complete review of Ausrralia’s taxation system.
It also ordered a slew of reports on Australia’s superannuation system, in the wake of big losses thousands of newly retired Australians suffered, over the past year, as a direct result of the stock market crash in September 2008.
The report on Australia’s taxation system, produced by the Secretary of the Treasury, Ken Henry, has now been completed and handed to the government.
But it has not been published.
However four reports, on the rules governing superannuation, have been published.
They are now being considered by the government.
Mr Bowen confirmed, though, that Australia is working with other governments, on changes that may need to be made.
“Of course, we’re working with our colleagues in the G20 on matters of financial and prudential regulation,” Mr Bowen said.
“And APRA, our prudential regulator, is going through the process of reviewing our liquidity requirements.
“We’re doing that in consultation with the financial services sector,” he added.
Mr Bowen said Australlia has both a prudential regulator, the Australian Prudential Regulation Authority and a corportate regulator, the Australian Securities and Investment Commission, with the Reserve Bank keeping an overall watch.
“We find the right balance in Australia, for us, is the twin peaks model , two regulators…” he said.
Alan Thornhill is a parliamentary press gallery journalist.
Private Briefing is updated daily with Australian personal finance news, analysis, and commentary.
Sunday December 8
The Dow Jones index rose 198.69 points (Friday, New York time) to 16,020.20
Australia’s first same sex marriages take place in Canberra, but may over-ruled by the High Court Thursday
ACCC puts a cap on the fuel shopper dockets offered by Coles and Woolworths.
Qantas shares placed in trading halt
|Aud To Usd||0.9132||N/A||N/A|
|Bhp Blt Fpo||36.750||-0.030||-0.08%|
|Anz Bank Fpo||30.990||-0.200||-0.64%|
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