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.

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.

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.

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.

“Courage.”

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

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

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.

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.

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.

Although damaged by two recent shocks, Australia’s superannuation funds have been doing their job, according to a new report.

The report, published by the respected assessment firm, SuperRatings, says mid level balanced funds have produced average returns of 6.8 per cent a year, over the past seven years.

But prices had risen by just 2.8 per cent a year over that time.

“This means that “most funds are meeting their long term objectives,” SuperRatings said.

But – as the old song warns – the fundamental things still apply – as time goes by.

SuperRatings acknowledges that reality, saying there is still a basic trade-off between long term returns and short term volatility with super.

The first of the two shocks came when the former Treasurer, Peter Costello cut tax favoured superannuation contribution limits from $50,000 a year to $25,000 in 2007-08.

Australians responded by cutting voluntary contributions to their superannuation funds by 40 per cent.

But there was an even bigger shock to come, with the share market crash.

That left many newly retired people with much smaller superannuation payouts than they had expected.

Once again, Australians reacted angrily, cutting their voluntary superannuation contributions by another 40 per cent.

So can Australia’s superannuation funds,  win back the hearts, minds and voluntary contributions of their clearly disgruntled members?

That’s an important question as they still have a massive $1.2 trillion of Australian retirement money in their care.

Public anger over these shocks remains high.  It will take some time yet to subside, even if all goes well for the industry, in the immediate future.

There is some good news, though.  The Federal government already has a sweeping overhaul of the industry, well under way.

That will certainly raise suspicions, at least initially.  The public  already believes that governments can’t keep their hands off the rules that govern super.  That sits badly with what, after all, is essentially meant to be  a long term investment.

Even the industry’s best friends, though, don’t argue that Australia’s super funds have been as nimble, at times,  as they should have been.

At long last, too, the funds have been  finally chalking up some good numbers, that have – at least partly – offset the terrible ones that came with the crash.

SuperRatings tells the story.

“After experiencing their worst year on record in 2008, with average losses close to 20 per cent, Australia’s major super funds have staged a remarkable recovery in 2009 to post a positive 12.9 per cent return,” it says.

SuperRatings said this was largely due to “a surging Australian share market, “which had produced a record gain in the second half of the calendar year.

So which funds have been the top performers?

SuperRatings gives Commonwealth Bank’s Officers’ Superannuation Fund – a corporate – the top spot, saying its Super-Mix 70 balanced fund had produced average returns of 6.8 per per annum over the past five calendar years.

An industry fund, for Queensland’s building workers, BussQ, took second spot, with a similarly calculated average of 6.5 per cent.

There’s more at www.superratings.com.au

With the cries of angry shareholders ringing in his ears, Chris Bowen flew to Hong Kong yesterday, to promote Australia as a regional financial hub.

The Financial Services Minister had just moved to overturn a string of expensive court cases, by declaring that some shareholders will not have the same rights as creditors, after all when a company goes bust.

He did that, very simply, by announcing that he will seek changes to the law.

Luke Margaretic, who lost $26,000 when the gold miner, Sons of Gwalia, went broke believed he had established that right.

His claim to have been misled, when he invested $20,000 in the miner, shortly before it failed, was critical to his success in  cases that went all the way to a full bench of the High Court.

While that outcome proved controversial in Australia – as it gave at least some shareholders – in certain circumstances -  a higher place in the payout queue – it was not out of line with international standards.

Commenting on the case, as it then stood, the respected legal firm Allens Arthur Robinson said:”The position is broadly the same as applies in England.

“In other comparable overseas jurisdictions, there is no subordination of shareholder claims at all,” the firm added.

That is, shareholders are not necessarily pushed further back in the queue than other creditors, such as, say, local shopkeepers who might also be owed money.

But Mr Bowen, effectively, declared yesterday that he is having no more of this nonsense from cheeky, queue jumping shareholders.

Announcing a new corporate law insolvency reform package, Mr Bowen said the government is still worried about the implications of the Sons of Gwalia decision.

He said that decision has the potential to further increase both  uncertainty and the costs associated with insolvency procedures.

“The decision has also been taken in the light of the decision’s potential negative impact on business rescue procedures,” he said.

“Any direct benefits to aggrieved shareholders arising from non-subordination are outweighed by negative impacts on shareholders generally, as a result of restrictions on access to – and increases in – the cost of debt financing for companies,”
Mr Bowen added.

How’s that for Ruddy jargon?

More simply, Mr Bowen insisted that he was just returning Australia to traditional understandings, when it comes to the rights of creditors and shareholders, after a company goes broke.

He said small businesses, which are owed money, could be hurt if some shareholders get a higher place in queue than they have previously had.

No-one, though, could accuse Mr Bowen of leaving an untidy desk, as he flew to Asia.

His Corporate Law Insolvency Package, which does much more than just settle queue jumping arguments, was just one of a slew of announcements that he made before leaving.

Mr Bowen also announced refinements to Australia’s prudential regulation of both companies generally and financial service providers, in particular.

All the details are at www.treasury.gov.au

Australia’s rapidly ageing population will make faster productivity growth a necessity, the Prime Minister Kevin Rudd says.

He made the declaration yesterday, in a pre-Australia Day speech, that he delivered in Melbourne.

Developing a theme he clearly means to take to the next Federal election, later this year, Mr Rudd said Australia had chalked up strong productivity growth in the time of the Hawke and Keating governments.

But that growth had eased in the time of the Howard government, Mr Rudd said.

He based much of his speech on a still to be released report, that is to be called Australia to 2050:Future Challenges.

Mr Rudd said the report, which his Treasurer Wayne Swan, will publish soon, would analyse the long term challenges Australia would face in the first half of the new Century.

He said the nation’s population would grow from its present 22 million, to 36 million by then.

Mr Rudd said, too, that in 1970, Australia had 7.5 people of working age for every person aged 65 or over.

But by 2050, there would be just 2.7 working people for every person of the present retirement age.

“Unless we make big changes, we will either generate large, unsustainable budget deficits into the second quarter of the century, or else we’ll need to reduce government services – including health services – as the needs of an ageing population become greater,” the Prime Minister said.

Australia must take decisive action to drive productivity growth forward – to improve living standards, to deliver better services while keeping the Budget on a sustainable footing, and to improve Australia’s international competitiveness.”

Mr Rudd said the Government had already begun investing in the key drivers of productivity in its first two years in office.

He said it had done that by:-

• investing in record levels of long-term nation-building economic infrastructure – more than $18 billion worth of investments, including in roads, rail and ports
• implementing an education revolution, doubling the investment in Australian schools over the next five years, and increasing overall real investment in education by over 50 per cent;
• investing in business innovation, including innovative manufacturing and helping businesses use technology to work smarter and faster wherever they are, through the high-speed National Broadband Network, and

• implementing microeconomic reforms to cut red tape for business and build a seamless national economy.

Fuel prices are still a big item in most family budgets.

So how can you reduce the costs of essential car travel?

Converting your car to LPG is one way.

The figures stack up well.

Currently, a litre of unleaded petrol will cost at least 124.7 cents in Sydney.

But LPG is selling for prices as low as 57.9 cents a litre, in the same market.

In real life, though, the comparisons are never quite that simple.

Fuel consumption, for example, is slightly higher in LPG vehicles, than in conventional petrol powered ones.

Besides, there’s the cost of the conversion, itself, or the purchase of a new LPG vehicle to consider.

And new vehicles, already equipped for LPG, do cost more than their petrol powered counterparts.

But there are offsets, which you shouldn’t forget.

In both cases, the Federal government is offering a $2,000 grant, to get you behind the wheel of a vehicle that runs on liquid petroleum gas.

Why?

According to a new report, it wanted to help families, like yours, with fuel costs.

It also wanted to promote cleaner fuels.  And LPG is better for the environment than petrol.

Australians responded enthusiastically, even though LPG tanks, which are bigger than petrol ones, can take up a lot of space in a car.

The report, by the National Audit Office, says  almost 227,000n grants were made under the scheme between August 2006 and June last year.

And the cost, of almost $452 million, was well above the government’s own estimate, of a likely bill of some $305 million, for this period.

The Audit Office says 93 per cent of applications for the grant are approved on the first application – and even more are approved, once initial problems with the paperwork are sorted out.

You can apply either through Centrelink or your local Medicare office.

Could Australia’s long housing bubble burst?

That’s not likely.  Especially as the nation’s population is still rising faster than new homes are being built.

Yet very few people, in this country, are giving that risk the slightest thought.  Even though the recent collapse of the US housing bubble, produced disastrous consequences.

It played a significant role in the stock market crash of September 1998.

That – combined with unrealistic expectations – at the highest level – in US banking and financial  circles – led directly to a stock market collapse and a global financial crisis.

All of this suggests that the Federal government should proceed very cautiously with new recommendations that are now before it.

These include simplifying Australia’s tax system for foreign investors.

This recommendation – and many others – are contained in a report that the Federal government ordered, as part of its plan to make Australia a powerful hub, in world finance.

The Australian Financial System Forum, which prepared the 166 page  report, specifically rejected the idea of offering broad tax cuts, to attract foreign investment.

But it said tax measures, which affect expenses on funds borrowed from parent banks abroad should be reviewed.

The government welcomed the report, promising that it would be considered, along with a broader  tax review, conducted by  the Treasury Secretary, Ken Henry.

The Liberal Party has supported moves to make Australia an international financial hub for years.

Australia’s financiers, based largely in Sydney, now manage one of the world’s biggest pool of funds.

That is the $1.2 trillion, built up over recent years, in the nation’s compulsory superannuation system, that Paul Keating launched.

However  Australia’s finance industry is still relatively isolated from those of other world financial hubs, like New York, London and Hong Kong.

As the Forum’s report notes, there are clear advantages for a country like Australia, which still relies heavily on the primary production, of its mines and farms, in acquiring access to a bigger, more broadly based, pool of savings.

But as the global financial crisis, itself, also shows, there are risks, too.  The most obvious is exposure to  reckless speculation.

And recent evidence, given by men regarded as the brightest of the world’s financiers,  to the US Financial Inquiry Commission, shows  all too clearly, just how stark this risk is.

Jamie Dimon of JP Morgan Chase, for example, was asked at that Commission, what he thought had caused the meltdown that led to the global financial crisis.

He replied, simply, that a  financial crisis “happens every five to seven years.

“We shouldn’t be too surprised,” he added.

No great illumination there.

Then there was Lloyd Blankfein, of Goldman Sachs, who compared the latest crisis to a hurricane, that nobody could have predicted.

Blankfein also warned that the US Congress should not press too hard for reform.

“We should resist a response…that is solely designed around protecting ourselves from the 100 year storm,” he said.

Does this kind of weak analysis, from such men, justify the huge salaries and bonuses that both  are still being paid, so soon after their reckless behaviour – and that of others like them – led the world’s financial system to the brink of collapse?

Clearly,  even the global financial crisis, which has produced much misery and despair, has not yet been able to temper the idea that greed is good, in the minds of these masters of the universe.

Australia’s relative isolation from the worst of the greed that produced the collapse has, undoubtedly, played a part in protecting this country  from the worst effects of the global crisis.

We should, certainly, pursue whatever benefits that a bigger role in world financial affairs might offer this country.

But recent events show, beyond any shadow of doubt, that this must be done carefully and judiciously.

The risks, too, remain stark.

Australians are now better dressed – and shod – than they were in the months following the stock market crash.

New figures, from the Australian Bureau of Statistics, tell the story.

They show that retail sales surged in November, rising by 1.4 per cent, on seasonally adjusted figures,  during the month, with sales in clothing and shoe stores leading the way.

This follows a pattern, established earlier, with Australians starting to spend again, in the nation’s coffee shops, as the economic  recovery started.

Regular readers will remember that as the latte led recovery.

That has now broadened.

Consumer confidence also bounced back, with the Roy Morgan organisation reporting that it a  7.4 per cent jump, in the week to January 2.

On seasonally adjusted figures, the Bureau said, spending on clothing, footwear and personal accessories rose by 2.5 per cent in November.

Our homes are looking brighter, too, with spending on  household goods rising by 1.7 per cent during the month.

But coffee – and a meal out – still haven’t lost their attraction.

The bureau said this kind of  spending in coffee shops, restaurants and take-away food bars, rosey another 1.1 per cent in November.

But the big stores are capturing much of the
new business.

The bureau also says that, on current price, original figures, Australia’s chain stores and other large retailers saw a 4.4 per cent rise in their sales during November.

But smaller retailers saw their sales, overall, fall by 0.2 per cent, in the same time.

Other figures, that the Bureau also released yesterday, confirm that Australia has not yet escaped the grip of the global economic crisis.

They show that Australia’s exports fell by 2 per cent during November.

However, the nation still recorded a smaller trade deficit, as imports also fell, by 3 per cent.

The Federal Trade Minister Simon Crean said, though, that he had been encouraged by an 8 per cent rise in Australia’s exports to the European Community.

Australians are still prepared to spend heavily on big ticket items, even though there have been signs that consumer confidence has weakened recently.

This is confirmed in fresh data on home building approvals and new car sales.

Naturally, a few stimulus packages  help, especially at a time of global economic crisis.

And the Federal government’s stimulus packages boosted both car and home sales, with extra help for first home buyers and a tax break for business people buying new vehicles.

As the Federal Treasurer, Wayne Swan, pointed out yesterday, both of those measures have now been removed.

The Statistician  reported yesterday that home building approvals, throughout Australia, rose by 5.9 per cent in November.

That was well above expectations.

And industry figures showed that new vehicle sales last month were 15 per cent higher than those of December 2008.

So Mr Swan was upbeat, when he met reporters in Brisbane.

“Economic stimulus has seen Australia protected from the worst impacts of the global recession,” he said.

“…in particular you can see that in the new car sales data that’s out today – 940,000 new car sales over the year, and in the month of December we had record new car sales,” Mr Swan added.

“..what that points to is the impact in particular of the Small and General Business Tax Break, which concluded at the end of last year,” he said.

” Our stimulus peaked in the middle of last year – and this year the stimulus is gradually withdrawn as the economy gradually recovers.” he said.