by Alan Thornhill
As Julia Gillard attended the launch of Holden’s new low emission Cruze model today, a new report showed that Australian manufacturers have been hit by falling profits and rising wages.
The report, published by the Bureau of Statistics, also confirms that factory owners are far from alone, in that sticky situation.
It confirmed that Australia’s construction sector saw a sharp fall in profits – and rising wages – in the final three months of last year.
Retailers, too, were squeezed between weak sales and low prices.
The Bureau, itself, said Australian companies, broadly, had seen their profits fall in the December quarter while their stocks and wage bills rose.
The Business Indicator figures, that the Bureau produced, are particularly important, because they are the first official industry figures to reflect the impact of the floods which hit Queensland in December.
”This publication presents the first significant economic impact of this and the floods in other States….” the Bureau said.
However the Bureau also warned that Queensland’s miners, in particular, had responded more slowly than usual to the survey on which these figures are based.
So the figures should be used ”with caution,” the bureau said.
In other developments today, a separate report showed that the interest rate rises, which occurred last November, dented housing affordability in most capitals.
And a third study warned that Australia should expect a ”patchy” recovery over the course of 2011.
The Housing Industry Association reported that home affordability fell by 5.5 per cent in Sydney in December, while there were falls of 2.6 per cent in Melbourne, 3.4 in Adelaide, 1.4 per cent in Hobart and 3.5 per cent in Canberra.
Home loan affordability, though, rose by 0.5 per cent in Brisbane and by 0.1 per cent in Perth.
The report, which warned of a patchy recovery, was produced by the Australian Industry Group.
Meanwhile, Ms Gillard said the turbo diesel version of the new Cruze would be Australia’s most fuel efficient locally produced vehicle.
by Alan Thornhill
Julia Gillard is urging Australians to remember that climate change ”is real.”
She has to. That’s the key point in persuading the nation to accept her new carbon tax.
Politically, though, that will be a hard sell.
Especially with Tony Abbott parading before television cameras at service stations, predicting that petrol prices will rise by 6 cents a litre, or more, with the new tax , saying, too, that it will also produce bigger power bills.
The coal industry is chipping in, too, with predictions of mine closures and job losses.
Wayne Swan is not trying to hide the worst of it.
The Treasurer is saying, bluntly, that there is no ”cost free” way to tackle climate change.
So do we need to, really?
Scientists strongly support the Prime Minister’s assertion that climate change is real.
Indeed, we may have seen some evidence of that recently, in our floods.
That has not yet been assessed, scientifically. But we do know that – as global temperatures rise – more water is absorbed into the atmosphere, from the sea. So extra rain can be expected.
What happens, now?
Essentially, the Prime Minister has just taken the first step, announcing that a price will be placed on carbon. That price is still to be negotiated.
She confirmed, also, at the weekend that there would be a compensation package, to help Australian families deal with the impact of that price.
Her plea, at this point, is wait. These things will be negotiated reasonably. There is no cause for alarm.
Politically, those are not easy ideas to sell. Fear is a natural human response to sweeping, imminent change.
Julia Gillard wants us all to believe that the figures Tony Abbott and his colleagues are pushing, are mere ”speculation.” Abbott is predictng an extra 6 cents a litre on already sky high petrol prices, along with an extra $300 a year, on your electricity bills.
While the Prime Minister might be right about that, her approach, at this point, also has its problems.
Mr Abbott will, certainly, be tempted to say:”Well, perhaps the price rises might be even bigger.”
How could Julie counter that?
Predictably, the coal industry is also warning that setting a carbon price, as the first step to establishing a carbon trading scheme, is a pointless exercise, anyway.
Ralph Hillman, of the Coal Association, says such a scheme in Australia would not reduce carbon emissions, but simply move them offshore.
Ms Gillard has a hard road ahead.
by Alan Thornhill
Australia’s miners, farmers and industry leaders are, frankly, worried about the carbon price proposals, that Julia Gillard has just announced.
The miners, represented by Mitch Hooke of the Minerals Council, warn that the government must flatly reject proposals, made by the Greens, that would compromise the effectiveness of Australia’s export sectors.
The President of the National Farmers’ Federation, Jock Laurie, noted that the proposals exclude farmers, but said they won’t insulate rural producers from higher fuel and electricity prices.
And Heather Ridout, of the Australian Industry Group said the devil, as always, would be in the detail of the government’s plan.
“The sharp end of the debate is yet to come,” Ms Ridout said.
This caution is understandable.
The Prime Minister, Julia Gillard, is promising public consultation on the rates at which her new carbon price will apply, from July next year.
But she defended her plan stoutly, when it was announced.
”This is an essential reform
”And it is the right thing to do,” Ms Gillard said.
The Prime Minister promised, too, that every cent the new tax raised would be used to help Australian families and businesses adjust to the challenges of climate change.
The plan comes from a multi-party climate change committee.
Tony Abbott sought to censure Ms Gillard in parliament over it, saying the plan showed that Australians could not trust her, as she had promised, before the last election, that she would not introduce a carbon tax.
The Opposition Leader sought to censure the Prime Minister in parliament, over that ”broken promise.”
But his motion was lost, on a 67-73 vote.
by Alan Thornhill
There were wild scenes in Federal parliament as Tony Abbott sought to censure Julia Gillard over her plan to introduce a carbon tax from July 1 next year.
The Prime Minister did not say how big the tax would be, promising that there would be public consultation on that issue.
However she said the tax would be capped for three to five years, after its introduction.
”This is an essential economic reform and it is the right thing to do,” Ms Gillard said.
She said, too, that every cent raised by the new tax would be used to:-
* help families with household bills
* help business move to clean energy and
* tackle climate change.
The Opposition Leader responded by reminding parliament that Ms Gillard had promised, before the last election, not to introduce a carbon tax.
Mr Abbott urged Parliament to suspend standing orders, so that he could move a censure motion against Ms Gillard.
In the debate that followed, the opposition warned that the new tax would add $300 a year to family power bills and raise petrol prices by 6 cents a litre.
The Speaker, Harry Jenkins, ruled that two opposition MPs be suspended from Parliament, for one hour each, for unruly behaviour.
Ms Gillard fought back, describing the opposition’s warnings as speculation, saying that no rates had yet been set for the new tax.
She said when a wave of change, like that on climate change, came it was better to get on it, than to try to move backwards.
But Tony Abbott pressed his case.
”There has been no greater betrayal of the Australian community,” he said, referring to Ms Gillard’s decision to introduce a carbon price.
Ms Gillard, in turn, said Mr Abbott offered no policies and is ”ultimately, a hollow man.”
Mr Abbott’s motion was lost, 73 to 67.
by Alan Thornhill
Public servants – once called Australia’s ”fat cats” – are still moving ahead of private employees, on pay.
The Bureau of Statistics reports that the averages weekly earnings public sector workers rose by 5.2 per cent in the 12 months to the end of November. last year.
That compares with a rise of just 3.6 per cent for Australians working in the private sector.
In both cases the comparison is based on seasonally adjusted, ordinary time, estimates of the the amounts paid to full time adult workers.
A former Labor minister, in the Whitlam government, Clyde Cameron angered Australia’s Federal public servants, many years ago, by calling them ”fat cats.”
He believed they then enjoyed many privileges, denied to private sector workers, including better job security and superior superannuation entitlements.
Although Australia’s public servants have seen their privileges trimmed in both areas, since then, they are still well ahead, in the nation’s pay stakes.
The bureau reports that last November the average weekly ordinary time earnings of Australia’s adult public sector workers was $1,370.50 a week.
The comparable figure, for private sector workers was just $1,246.80 a week.
The bureau also reports that new private capital spending in Australia rose by 5.6 per cent, on seasonally adjusted figures, between the December quarters of 2009 and 2010.
There was an increase of 20.8 per cent, over that time, in spending on new buildings and structures, but spending on equipment, plant and machinery fell by 7.1 per cent.
by Alan Thornhill
Don’t spend it all.
That message is not coming from an anxious parent, this time, but from the Reserve Bank Governor, Glenn Stevens.
Mr Stevens is referring, of course, to the money that is flowing into Australia at present, from the resources boom.
He says that boom is big enough to be regarded as a historical event.
So why should we be cautious?
”The main thing we don’t know is how long the boom will last,” Mr Stevens told an audience at the Victoria University in Melbourne.
”If the rise in income is only temporary, then we should not respond to it with a big rise in national consumption.
”It would be better, in such a case, to allow the income gain to flow to savings.
”That would then be available to fund future consumption,” he added.
That would help see us through times when trade is not as good as it is now.
”The main thing we know about the current episode is that it is very large,” Mr Stevens said.
”It is being driven by a big increase in demand for key Australian export commodities.”
That demand is coming from China, Japan and India.
Mr Stevens said steel production had doubled in India over the past decade and ”more than quintupled in China.”
”The current boom looks bigger than any other since Federation, at least….” he added.
But the Reserve Bank chief also warned that Australia had seen other booms in the past .
”And they had all ended – generally – with more or less a total reversal of the earlier rise in the terms of trade…” he said.
To an extent, at least, Mr Stevens’ wish is already coming true.
He has noted previously that Australians are presently saving at higher rates than has been seen in recent decades.
But is that enough?
Mr Stevens apparently thinks not. For he is still urging us to save more.
by Alan Thornhill
Prices are falling in Australia’s shops.
Yes. That’s right. Falling. Overall.
Fruit and vegetable prices are the obvious exception.
But that’s the general picture.
The strong Australian dollar has helped, by making imports cheaper.
Tough competition, from retail sites on the internet, has put fresh pressure on prices, too.
The main cause of those prices falls, though, was lack of demand.
But it’s broader than that.
The National Australia Bank’s quarterly business survey, which has just been released, reports that:”cost pressures (in the Australian economy) remain weak.”
The bank concludes that what we are seeing now is ”mild deflation in retail prices.”
While shoppers generally welcome lower prices, economists approach deflation cautiously.
That’s because it often damages a national economy. Japan was once a prime example. It stagnated, for years.
What, then, is in store for us?
The Reserve Bank and the Federal government insist that the Australian economy will remain strong.
The NAB survey broadly agrees.
But Australian retailers are certainly not happy.
And the NAB also notes that ”business conditions softened noticeably again in the December quarter.”
That was before the Queensland floods.
The bank says it expects business confidence to be damaged again, as the impact of Australia’s recent floods and cyclones hit the economy.
Confidence is now lowest in Queensland – and highest in Western Australia, which has once again become
”Australia’s strongest major state.” West Australians can thank higher iron ore prices for that.
But business confidence in Victoria has fallen sharply.
So far, though, plans for new capital spending in Australia over the coming year are still strong.
Job prospects, over that time, also remain strong, the bank says.
by Alan Thornhill
You will need good advice to get the best out of your superannuation fund.
There are new dangers ahead.
The biggest, perhaps, is complacency.
A new report shows that Australia’s superannuation funds have, mostly, made strong recoveries from the shocking losses that followed the global financial crisis.
Jeff Bresnahan, of SuperRatings, says the value of $100,000 invested in a typical Australian superannuation fund back in 2006 peaked – before the crisis – at $122,405. That happened in October 2007.
It plunged to just $91,770, in February 2009, in the wake of the crash.
By January this year, though, it was back to $116,138.
On paper, that looks like a 95 per cent recovery, in the value of that investment.
It isn’t of course, because these figures ignore inflation.
A good performance, nevertheless.
There’s the rub.
These gains, themselves, suggest that ”…the global financial crisis is slowly moving to the back of people’s minds as they see their super investment returns moving to within 5 per cent of the peak reached in October 2007…” Mr Bresnahan warns.
He is worried.
Many Australians were not really aware, before the crash, that their superannuation funds were investing their money in the stock market.
Those who retired in 2008 learnt that the hard way.
The recovery, since then, has also been largely achieved through investment in the share market.
It is real enough.
SuperRatings also reports that Australia’s big super funds have just chalked up their fifth positive monthly result this financial year with a further 1 per cent gain in January.
Despite small losses in two months, this has left the average Australian, in a balanced fund some 8 per cent better off, since the end of June last year.
That follows – and builds on – the 9.8 per cent gain seen last financial year.
But is the ”balanced option” best for you?
Mr Bresnahan, himself, warns that what is good for one person might not be, for another.
That’s why you need good advice, on your individual situation.
Especially as the entire superannuation industry in Australia is currently being overhauled.
The government is now trying to work out the best ways of introducing the many changes recommended by the Cooper Review.
No-one knows, just yet, what those changes will be.
But they will be sweeping.
So if you, like many other Australians, still have an untidy clutch of small superannuation accounts, that you acquired in your last five jobs, the time has definitely come to consolidate them.
The coming changes will, almost certainly, make it even more urgent than ever for you to keep a close watch on the money in your super fund, so that you will know, at all times, how it is being invested.
It is, after all, your money. And it will finance your retirement.
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.
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|Qbe Insur. Fpo||10.820||-1.180||-9.83%|
|Rio Tinto Fpo||66.170||-0.360||-0.54%|
|Nat. Bank Fpo||33.170||0.000||+0.00%|
|Bramb Ltd Fpo||8.860||-0.420||-4.53%|
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