Reserve chief slams big banks

A Reserve Bank chief says Australia’s big banks have damaged consumer confidence.

Ric Battellino, the Reserve’s Deputy Governor, said they did that last November.

The big banks then hiked the rates they charge their housing loan customers by about 40 basis points, even though the Reserve had raised its marker rate by a mere 25 points.

In a speech to economists in Sydney, Mr Battellino said these “substantially higher” rises had proved controversial.

“The size of this increase, and the controversy it created, seemed to have a noticeable impact on household behaviour, ” Mr Battellino said.

Australians have been spending less – and saving more – since then.

Retail trade has been slow.

The housing market, too, has weakened.

Mr Battellino acknowledged these changes.

“ Consumer confidence fell, though to levels that were still above average,” he said.

He said that other factors, too, had contributed to the slide in consumer confidence.

Mr Battellino said the big banks’ rate hike had occurred at a time of heightened instability.

“ Coincidentally, there was a renewed step up in financial market volatility, stemming from the widening government debt problems in Europe,” he said.

“This probably also contributed to households becoming less confident.”

Mr Battellino said the Reserve Bank board had believed, earlier this year, that further interest rate rises would be required.

However that had changed.

Recent mass lay-offs have renewed calls for an early cut in Australia’s interest rates.

BlueScope and OneSteel, have, together, announced 1,400 job cuts and by Qantas has said that it will be cutting 1,000 jobs.

Westpac, too, has been talking of trimming staff, in the face of what its chief, Gail Kelly, calls a “slowing” economy.

Mr Battellino did not refer, specifically, to these developments in his speech.

However he did admit that recent “volatility” in financial markets is “adding to uncertainty about the economic outlook.”

And he added:”It does not look like the challenge (on rates) will become any easier over the months ahead.

We’re still driven by our cars

Despite soaring fuel prices, Australians are still firmly strapped in their cars.

Perhaps surprisingly, Victorians are Australia’s equal heaviest users of private cars,
travelling an average of 14,600 kilometres in them, each year.

Those in the Northern Territory, though, matched that figure.

The Statistician, who has just released the 2010 survey of motor vehicle use, also reports that Queenslanders are not far behind, driving an average of 14,400 kilometres a year.

Motorists in New South Wales travelled an average of 14,200 kilometres a year.

West Australians, who sometimes have vast distances to travel, put an average of 14,000 extra kilometres on their odometers each year.

South Australians, though, are the nation’s most frugal motorists, driving an average of just 11,900 kilometres a year, while Tasmanians manage to chalk up an average of more than 12,000 kilometres.

The Bureau’s figures also suggest that Australia’s traditional love of big cars has not yet been killed off, by high fuel prices.

They showed, for example, that the average fuel consumption, for Australia’s petrol fuelled cars last year was 11.1 litres for each 100 kilometres travelled.

Those on diesel averaged 11.4 litres per 100 kilometres.

Any respectable small car, whether from Japan, Korea, Germany or France, would record much better fuel consumption than that.

The truckies’ protest

The convoy of road warriors still protesting in Canberra has clear aim.

Its organiser Peter Whytcross declares:” “The primary objective is to make the Governor General make the Government stand down.”

However, the protest, which began yesterday, was smaller than expected.

It was also largely peaceful.

Mr Whytcross billed it as “the convoy of no confidence.”

However, a senior Federal minister, Anthony Albanese, dismissed it as “the convoy of no consequence.”

Its political tactics were confused.

Just how these truckies planned to force Australia’s gentle Governor General, Quentin Bryce, to sack the Prime Minister, Julia Gillard, is still unclear.

There are precedents.

Back in 1974 and 1975, rebellious conservative Senators first withheld, then blocked supply, to bring down the Whitlam Labor government.

Although he was just Opposition Leader, back in 1975, Malcolm Fraser managed to persuade the Governor General, at the time, Sir John Kerr, to sack the Whitlam Labor government.

As the truckies don’t have a single seat in the Senate, though, they cannot “make” Ms Bryce to follow Sir John’s example, that way.

So they night have to blockade all roads into the national capital – stopping grocery supplies – to starve Ms Bryce into submission.

The idea, of course, is ridiculous.

But so is the idea that the truckies can force the government to stand down.

Their protest might prove to be superfluous, anyway.

The government’s majority of just one is looking very shaky, right now.

Labor backbencher, Craig Thomson, is trapped in a scandal over credit card payments to an escort agency.

The anti-pokies independent, Andrew Wilkie, is also waiting, none-too-patiently, for the government to introduce pre-set limits on poker machines, as it agreed to do in the post-election deal that won his support for Labor.

So Julia Gillard’s minority government is far from secure, even though, it has not yet reached the mid-way point in its three year term.

The truckies’ protest is aimed – essentially – at the government’s proposed carbon tax and its its ban on live cattle exports.

Some drivers are making big sacrifices, to press their case.

One said the fuel, to take his rig from Port Hedland, to the national capital and back, would cost $3,500.

But the truckies won’t be allowed to blockade Parliament, as its Spring sittings resume.

Any attempt to stop traffic into, or out of Government House, the Governor General’s official residence in the lakeside suburb of Yarralumla, would also attract a swift police response.

However local authorities do expect morning peak hour traffic in the nation’s capital to be severely disrupted, with long delays, everywhere.

Shock tactics – like these – thrive in uncertain times.

They are well worth watching.

Historical lessons, to be drawn from the Great Depression, show that.

The radical politics, that arose then, led straight to World War II.

The truckies, themselves, deserve respect.

There is something distinctly uncomfortable, though, about their tactics.

Professional lobbyists are alarmed.

The Australian Trucking Association, the National Road Freighters’ Association and the National Farmers’ Federation have all quickly distanced themselves from the convoy of no confidence.

The – still rumbling – global financial crisis is – of course – at the heart of the present unrest.

The convoy is just one symptom.

Australians new habit of saving more and spending less is another.

But these are risky times.

Job cut shock

A chill swept through the Australian economy today when Australia’s biggest steel maker, BlueScope, announced that more than 1,000 jobs would be cut at plants in the Illawarra and near Melbourne.

This closely follows the loss of 400 OneSteel jobs in South Australia and Westpac’s announcement that it, too, is considering staff cuts, to trim costs in what the bank’s Chief, Gail Kelly, called a slowing economy.

These announcements have renewed calls for:-

- a cut in interest rates

- more structural assistance for Australian manufacturing and

- more pressure on China to raise what one union leader called its “artificially low” exchange rate.

Meanwhile one worker, who will lose his job, declared that he was “shell shocked” by BlueScope’s announcement.

There will be 800 job cuts at Bluescope’s Port Kembla steelworks and 200 at its Western Port steel mill at Hastings, near Melbourne.

The announcement seized Federal parliament.

The Opposition Leader, Tony Abbott, opened question time by asking why the government was proceeding with a job destroying carbon tax, at such a time.

The Prime Minister, Julia Gillard, noted that Bluescope had said, specifically, that its decision was not related to the proposed carbon tax.

Instead, the company blamed the strong Australian dollar, high raw material prices and a weak global steel market, saying these persistent factors had forced it to abandon its plans to continue exporting steel.

As the Opposition pressed its questioning, Wayne Swan accused it of “grubby politics,”

The Treasurer said jobs had been the Government’s “top priority” from day one.”

He said 750,000 jobs had been created, since Labor came to power.

The government had earlier announced that special measures would be brought forward, to help both the steel workers, who face losing their jobs and the local economies that will be hit. (See separate story)

Employers, too, were troubled by Bluescope’s announcement.

Heather Ridout, the chief executive of the Australian Industry Group, said her organisation had been warning for some time that “the resources boom has not been going to plan.”

“Indeed, manufacturing as a whole is enduring many of the same pressures as BlueScope,’ Ms Ridout said.

These included weak demand, fueled by global uncertainty, rising interest rates, higher labour costs and a high Australian dollar, she added.

Help for sacked steel workers

The Federal government is advancing assistance for steel workers in the Illawarra and Victoria.

The Prime Minister, Julia Gillard, made the announcement after Bluescope Steel announced that it would sack about 1,000 workers, at Port Kembla and Westernport.

Bluescope, Australia’s biggest steelmaker, had just announced a loss of $1.18 billion loss, for the 12 months to the end of June.

Ms Gillard said her government would introduce a new “advance facility” into its Steel Transformation Plan (STP).

This would provide further support for Australian jobs and to help ensure the future of the Australian steel industry.

“This new facility will allow eligible participants to draw down an advance of their future entitlements under the STP in order to address short-term cash flow issues and help the industry become more efficient and sustainable.,” Ms Gillard said. 

“It will allow BlueScope to bring forward into 2011-12 up to $100 million of the payments nominally allocated to it under the STP,” she said.

BlueScope would need to exercise its right to activate the advance facility in time for funds to be drawn by 30 June 2012, Ms Gillard added.
 
Several conditions were attached to the offer.

These included provisions requiring that:- 

• Any de-activation of the Port Kembla blast furnace No. 6 and metal coating line No. 5 at Western Port must be in a manner which will enable them to be reactivated in the event of a sustained improvement in steel markets that enables profitable sales to resume.
 
• Any workers which BlueScope makes redundant must be paid all their legal entitlements in accordance with applicable workplace relations legislation, modern awards and the National Employment Standards and any applicable industrial instrument.
 
•  BlueScope must commit to continuing as a significant employer in the Illawarra region over the term of the Steel Transformation Plan.
 
• BlueScope must remain committed to steel production in Australia.
 
The Prime Minister said the Government would finalise the legislative design of the new facility in consultation with relevant industry stakeholders.
 
Ms Gillard said the Australian steel industry is facing a unique set of challenges, including a high Australian dollar, continued weak domestic demand, higher raw material prices and excess supply in international steel markets.  
 
Given these unique circumstances, in July this year the Government announced the STP which will provide assistance worth $300 million over five years from 2012-13.
 

Are you getting ahead?

Are you getting ahead, financially?

New figures show that many Australians are.

They show average weekly earnings, in this country, rose by 4.4 per cent in the 12 months to May.

That was for the ordinary time earnings of adults with full time jobs.

That’s well above price movements.

Prices rose by just 3.6 per cent, in the 12 months to the end of June.

These, very raw, figures were both produced by the Australian Bureau of Statistics,

The Bureau reports that the average ordinary time wage, for adults working full time, was $1,305.60 a week, in May.

For those in the private sector, the comparable figure was $1,278.30 a week.

On the same basis, public sector workers were earning $1,400.80 a week.

A few words of caution, though.

Estimates of average weekly earnings, in both public and private sectors, tend to be heavily influenced by the very high wages of relatively few workers, at the top of the tree.

So if your wage is just a little below these figures, don’t despair.

Most other people’s are, too.

The Bureau says the total average weekly earnings figure for all Australians was $1,019.30 a week, a rise of 3.9 per cent over the year.

That includes people who are working part time.

The CPI figure can be misleading, too, as a reflection of the prices Australians pay.

Spending patterns vary greatly, throughout the community.

And what you pay, naturally, depends very much on what you buy.

The latest figures expand the picture reflected in other figures the Bureau released earlier this week.

These showed that miners, real estate sales sales staff have enjoyed Australia’s biggest private sector pay rises over recent months, with average rises of 0.9 per cent in the June quarter.

The public sector workers who did best in that time were health care and social assistance workers, who won a 1 per cent rise.

Perhaps surprisingly, though, workers in Australia’s wholesale sector who have had the biggest rise – of 4.7 per cent – over the past year.

The Australian Bureau did not explain how that had happened.

Over the year, education and training workers also had above average rises, of 3.9 per cent.

These comparisons are based on original figures, produced by the Bureau.

Wages:Who’s making money?

Miners, real estate sales sales staff have enjoyed Australia’s biggest private sector pay rises over recent months, with average rises of 0.9 per cent in the June quarter.

The public sector workers who did best in that time were health care and social assistance workers, who won a 1 per cent rise.

Perhaps surprisingly, though, workers in Australia’s wholesale sector who have had the biggest rise – of 4.7 per cent – over the past year.

The Australian Bureau of Statistics did not explain how that had happened.

Over the year, education and training workers also had above average rises, of 3.9 per cent.

These comparisons are based on original figures, produced by the Bureau.

Overall, though, the Bureau reported that, in trend terms, private sector wages rose by 0.8 per cent in the June quarter and 3.8 per cent in the 12 months to the end of June.

Public sector workers are lagged slightly, over the year, with a 3.7 per cent rise.

But they showed signs of catching up with a 0.9 per cent rise in the June quarter.

Both sectors, though, stayed ahead of inflation, at 3.6 per cent, on the Consumer Price Index.

However the people a former Labor minister, Clyde Cameron, once called fat cats, are not doing so well, now.

Those in the ACT, where employment is dominated by the Federal public service, managed only a bare 0.2 per cent wage rise in the June quarter.

That was Australia’s lowest.

Victorians did best, with a 0.7 per cent rise, in that time.

Rate cut more likely

Two weak indicators – just released – suggest that the Reserve Bank might be forced to cut rates soon, to spur the economy.

The latest Westpac-Melbourne Institute’s leading index has hit its lowest level in 22 months.

And a survey of small business, conducted by the Australian Chamber of Commerce and Industry (ACCI) showed that trade and confidence, in this sector, are continuing to fall.

Westpac’s Chief Economist, Bill Evans, said the index is now pointing to an annualised growth rate of about 2.5 per cent.

Economists believe growth of about 4 per cent is needed if each year’s school leavers are to find jobs.

Mr Evans said Westpac now expects Australia’s unemployment rate to rise steadily to about 5.5 per cent in the first half of next year.

It presently stands at 5.1 per cent.

Mr Evans said:”…economic activity is being diverted away from services and manufacturing to mining and mining construction, which are not intensive users of labour.”

He warned,, too, that Australians are now likely to save even more and put off buying new homes.

This suggests that there will be a “subdued outlook for sales” outside the mining sector, Mr Evans said.

However he added:”Mining investment will remain a strong offset to these forces.”

The latest ACCI survey showed that the conditions facing small business operators are at their lowest level since March 2009.

It showed, too, that profits in the sector are continuing to shrink.