Rate rise recedes

A bleak set of job vacancy figures could delay the next rate rise, even though the Reserve Bank is still talking of the need for “restraint” in Australia’s economic management.

The figures, just released by the Australian Bureau of Statistics, reflect what the Treasurer, Wayne Swan, calls a “patchwork” economy.

The Bureau reported that there were 167,800 private sector job vacancies in Australia in May – a fall of 1.9 per cent from the February level, on trend figures.

Public sector job vacancies, on the same basis, rose by 0.6 per cent to 18,200 over the same time.

The Bureau’s split ups paint a broadly dismal picture.

The mining sector was a an exception, though.

The number of job vacancies appearing in Australia’s mines rose by 1,400, on original figures, in the three months to May.

But that rise was offset by a fall in job vacancies, in the manufacturing sector.

It lost 1,400 job vacancies, over the same time.

The big surprise, though, was the retail sector.

Although Australians have been saving more – and shopping less – the nation’s retailers apparently hired an extra 1,700 people, between February and May.

The construction sector, though, lost 700 job vacancies.

That was widely expected.

The Bureau’s figures also show the finance sector losing 2,600 job vacancies and the education sector losing 2,100.

The accommodation and food sector lost 3,400, as worried Australians cut their travel and restaurant spending.

Job hungry young Australians would be wise, also, to disregard the traditional advice, which says “go West young man.”

The Bureau’s figures show that Western Australia lost 3,500 job vacancies in the three months to the end of May.

Australia’s most heavily populated State, New South Wales, lost 1,900.

Victoria lost 6,900.

But the number of vacancies available in the flood and cyclone hit State of Queensland rose by 3,300.

Most economists regard job vacancy figures as an important, but not a top level economic indicator.

Even so, with numbers like these, the Reserve Bank might well find it hard to justify another rate rise, anytime soon.

Protect your tax cheque

Keeping your household accounts up to date?

In today’s busy world, it’s all too easy to slip behind on dreary tasks like that.

But you can very easily slip into debt that way.

You might, for example, have forgotten that you are now earning a little more – and that might affect a Centrelink payment.

Be assured.

Big brother is watching.

More closely than ever, in fact.

The Federal government has just announced that the people at Centrelink and the Tax Office will soon be working together to match data like yours.

They will start doing that – daily -from Friday July 1.

The first day of the New financial year.

You won’t be surprised, either, to find that these public servants, in back offices, will have awesome computer power, at their fingertips.

So what, exactly, will be going on?

Two Federal Ministers have put out a joint statement, to answer that question.

The Human Services Minister, Tanya Plibersek and the Assistant Treasurer, Bill Shorten, said the new initiative is expected “to claw back millions of dollars from welfare recipients who have debts with the Australian Government.”

They estimate that it will raise more than $71 million over four years.

While that’s not much, in a Federal budget, your contribution to it could be a very significant item, in your household budget.

So don’t get caught.

So what happens to those who are?

“Those who are identified as having debts and who haven’t made repayment arrangements with Centrelink may have their tax refunds garnisheed when they lodge their income tax return,” the two ministers warned.

Very embarrassing.

What, though, if your debt is bigger than the tax refund you might, otherwise, have received?

The government says its prepared to be reasonable.

“The Government prefers to work with people and provide them with flexible debt repayment options, rather than having to garnishee their tax refunds,” Ms Plibersek said.

“But if people fail to come to an arrangement to settle their debts, the Government has a responsibility to taxpayers to recover that money,” she warned.

Ms Plibersek said Centrelink customers sometimes incurred a debt with the Commonwealth because they either inadvertently or intentionally claimed a benefit they were not entitled to.

So what has happened in the past?

Mr Shorten said the tax garnishee process had been carried out manually once a year for the past 15 years.

But it had taken a lot of time, within the bureaucracy.

“The automation of this process will free up resources and result in more people being referred to the tax garnishee process, retrieving more outstanding debt on behalf of taxpayers,” he said.

He said more than $27.5 million was recovered from over 43,000 former Centrelink customers’ tax refunds in the 2009/10 financial year through the tax garnishee process.

How safe are our banks?

The French President, Nicolas Sarkozy, has just asked his countrymen and women to accept big losses on loans French banks made to Greece.

He wants to protect the Euro.

Although the Assistant Governor of the Reserve Bank, Guy Debelle, did not refer to these events, in a speech he prepared for a conference in Sydney today, they did make his speech more urgent.

That’s because it was about bank funding, particularly in Australia.

Or, as Mr Debelle put it:”…I am going to talk about a few interrelated issues concerning the banking system: collateral, funding and liquidity.”

A hot topic, indeed.

And he spoke bluntly.

“The financial crisis brought into sharp relief the liabilities side of a financial institution’s balance sheet, that is, the funding structure,” Mr Debelle said.

“This had previously been somewhat neglected,” he added.

“But the fates of Northern Rock, Bear and Lehmans were clearly affected by the nature of their funding.

“While their funding structure played a significant part in the downfall of those institutions, I would argue the ultimate concern was about the quality of their assets.

“The funding problems were symptomatic of concerns about asset quality,” he said.

This, ultimately, was the theme Mr Debelle developed in his speech.

It isn’t easy reading.

But it is worthwhile.

Especially as Mr Debelle goes to some trouble, to avoid giving pat answers.

Particularly in the light of Wayne Swan’s admission that the still developing Greek financial crisis is “of concern” even in Australia, which is half a world away.

Private Briefing urges its many readers to take the time to study Mr Debelle’s speech in full.

He says, for example, that – in his view – too much attention has been paid to bank liabilities.

“The solvency of any bank first and foremost is a function of the quality and value of its assets,” Mr Debelle says.

“This is, of course, true of any entity,” he adds.

“But it is particularly true for banks because of the implications asset quality has for liquidity and because of the leveraged nature of financial institutions,” Mr Debelle said.

Centro directors rapped

Australia’s company directors have been sharply reminded of their financial duties.

That happened in a Federal Court decision in the Centro case.

Directors of this property investment investment company were found to have overlooked billions of dollars worth of short term debt, when they signed off on the company’s financial accounts in 2007.

Justice Middleton said, bluntly, that this is not good enough.

“The significant matters not disclosed were well known to directors,” the judge said.

“Or if not well known were matters that should have been well known to them,” he added.

The Australian Securities and Investments Commission took Andrew Scott, a former Chief Executive of Centro, and seven other directors to court, seeking civil penalties for their failures.

The court has yet to decide what penalties will apply.

ASIC’s Chairman, Greg Medcraft, welcomed the decision.

He said directors could not simply rubber stamp matters like these.

“Directors are an important gatekeeper for our markets,” Mr Medcraft said.

“The community expects them to take their responsibilities seriously and discharge their duties carefully.”

ASIC would continue to take on the “big and difficult” cases, to protect investors, Mr Medcraft said.

Carbon compensation spelt out

The Federal Treasurer, Wayne Swan, says “the vast majority” of Australian families will be fully compensated for the government’s proposed carbon tax.

He made the comment in a radio interview.

“The vast majority will get that,” Mr Swan said.

He also restated the principles he said the government would follow, when setting the rules for that compensation.

“We will go through all the detail when we publish the final outcomes from our negotiations on the Multi-Party Committee,” Mr Swan said.

“But we are absolutely determined to assist households.

“We’ve made that clear from day one.

“We’ve said that over 50 per cent of the revenue from this price on carbon will go to assist households.

” We understand that Australian households are under financial pressure and it’s very important in this environment to make sure that we provide assistance, not just in terms of tax cuts, but also in terms of additional family assistance and (or) increases in pensions.”

“There are a wide variety of circumstances out there.

“And of course around 3 million households on low incomes will get a battlers’ buffer,” Mr Swan added.

“We think that’s pretty important because if you’re on a low income you do spend a much higher percentage of your income on energy and of course your room to move is so much smaller.

” So we think it’s pretty important to provide that reassurance.

“These principles are very important,” Mr Swan said.

In a separate interview, the Prime Minister, Julia Gillard, predicted that carbon tax settings would be announced within “weeks” not “months.”

Taxing credibility

Your credibility will be – very heavily – taxed before the next Federal elections.

That became clear, in rival declarations the two major parties made – on taxation – over the weekend.

Although that election is still some two years ago, the tax promises are already coming thick and fast.

The Prime Minister, Julia Gillard, is promising tax cuts to compensate Australians for a carbon tax that she still hasn’t spelt out.

And the Opposition Leader, Tony Abbott, declares that tax cuts are in the Liberal party’s DNA, but admits he can’t say how he would pay for them.

In a television interview, Ms Gillard said:” I want to tackle climate change by putting a price on carbon pollution that polluters will pay, and then use that money to assist Australian families.”

And, addressing his party’s Federal Council, Mr Abbott said:”Tax cuts are in our DNA.

“Real tax reform means lower, simpler fairer taxes.

“It doesn’t mean robbing Peter to pay Paul.”

The only hint Mr Abbott offered, about how he would pay for his tax cuts, was a promise to introduce “smaller government.”

He said oppositions do not have the capacity to cost their policies precisely.

Ms Gillard countered by offering Mr Abbott the services of Treasury officials, to cost his promises.

She said:”… I’m prepared to make available to Mr Abbott officials from Treasury to work with him in the coming week to cost whatever he says he wants to do in tax so that we can see what it means and the billions of dollars that it would cost.”

Amid all this, it is hardly surprising that millions of Australian voters are still bewildered.

At this stage, neither of the major parties is offering a sceptical public nearly enough to make a firm decision on their respective merits.

The Treasurer, Wayne Swan, sought to fill that gap, in his weekly economic note, listing, once again, the patterns of job growth and reform, that he says the Labor government has brought.

Mr Swan also gave a sneak preview of the issues he will be studying over the next two years.

He said:”I’m looking forward to discussing the challenges facing our nation at the 2011 Economic and Social Outlook Conference in Melbourne on Thursday.

“I’ll be talking about three of the big factors that are transforming our economy

“The rapid economic growth of Asia,

The ageing of our population, and

“The transition to a clean-energy future.

“Our comprehensive reform program seeks to address these shifts, and position our economy to get through some difficulties now, then make the most of the tremendous opportunities in the years and decades ahead,” he said.

We’re $12.6 billion better off

Australians found themselves $12.6 billion better off in the first three months of this year.

Even though they borrowed $22.5 billion in that time.

These figures, on the finances of the nation’s household sector, have just been published by the Australian Bureau of Statistics.

This follows the Reserve Bank’s observation that Australians have been saving more and spending less, in the wake of the global economic crisis.

This has left Australia’s retail sales looking weak.

The Bureau reported that Australians contributed $19.9 billion to the reserves of their life insurance and pension funds in the first three months of 2011.

They also put an extra $10.2 billion into their bank and other deposit accounts.

Assets in what the Bureau called “other accounts receivable transactions” also rose by $5.1 billion in that time.

Our debts, though, are still high.

The Bureau reported that Australians personally owed a total of $1.496 trillion at the end of March.

We repaid a total of $6.2 billion to banks and other lenders, in the first three months of this year.

We also paid $2.5 billion to government, in tax and other debts, in the same time.

Australians have been saving heavily for their retirement, over recent years.

And the Bureau reports that our net equity in the reserves of our pension funds stood at $1.2 trillion, at the end of March.

This is recognised as one of the biggest funds, anywhere in the world.

Australians suffered heavy financial blows, though, when the global financial crisis struck in 2007.

Those close to retirement were hit hardest, as the value of the shares held by their superannuation companies, fell sharply.

Fears of further shakeouts, in still unstable world markets, is certainly a factor in the present drive to save more and spend less.

Exit fees to be banned

Australia’s banks won’t be able to charge exit fees on new home loans after Friday next week.

That follows a Senate vote, supporting a Federal government bill to ban the fees, which Wayne Swan described as “unfair.”

The Treasurer told Parliament that he had been “stunned” by the Coalition’s decision to oppose the bill.

The shadow treasurer, Joe Hockey, said some smaller, non bank, lenders could be hurt by the proposed ban.

The opposition moved to have the bill disallowed in the Senate.

But its motion was defeated when the Greens and the Independent Senator Steve Fielding voted with the government.

Mr Swan was jubilant.

“Getting rid of exit fees is a victory for Australians,” he said.

“…it removes one of the biggest roadblocks preventing families from getting a better banking deal,” Mr Swan added.

Your correspondent has had a bitter experiences with exit fees.

He took out a home loan, several years ago, shortly before mortgage interest rates peaked, above the 17 per cent mark.

When the rates started to fall again, he had to pay a $4,000 exit fee, to escape.

But he still came out ahead.

Wild days, those.

Mr Swan said banks – and other home lenders – would have to win the loyalty of their customers in future.

That would require good service and competitive lending rates.

He said the ban should be seen as part of the government’s “comprehensive package of reforms” in this area.

Other measures had included:-

*investing $20 billion in mortgage backed securities

*encouraging credit unions to make home loans and

*fast tracking legislation to get Australians better deals on their credit cards.