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Monday 9th May 2016 - 6:36 pm
Comments Off on The major parties:their “weaknesses”

The major parties:their “weaknesses”

by Alan Thornhill

Each of the two major parties will take an important weakness into the July 2 elections.

For the Liberals, it came with the choice of tax cuts for the rich.

With Labor, it came along with the decision to fight this election campaign on what its leader, Bill Shorten, calls “fairness.”

The result, at this stage, is too close to call.

The latest Ipsos poll, published in the Sydney Morning Herald today, puts the government and the opposition running neck and neck at 50 points each, on a two party preferred basis.

But it does show that Malcolm Turnbull is still more popular, personally, than his rival, Bill Shorten.

The Liberals took a calculated risk, when they decided that the personal income tax cuts, which are central to their re-election policy, should go to the well-off.

The plan, which follows the example of former US President George Bush, is being promoted as a way of advancing economic efficiency.

But cynics dismiss it as yet another case of the well-off “looking after their mates.”

If voters agree Mr Turnbull would lose the July 2 election.

His Treasurer, Scott Morrison, explained in his budget speech that the government would:”“…back … average full-time wage earners by preventing them from moving into the second highest tax bracket.

“From 1 July this year, we will increase the upper limit for the middle income tax bracket from $80,000 to $87,000 per year,” he said.

“Those earning average wages – full-time or otherwise – should stay in the middle income tax bracket,” he said.

“This will stop around 500,000 taxpayers from facing the 37 per cent second top marginal tax rate in each and every year,” Mr Morrison added.

But critics said $80,000 a year is well above average wages in Australia.

What, though, of Bill Shorten’s alternative, based on “fairness?”

“Too expensive” his critics proclaim.

The Treasury Secretary, John Fraser, is not among them.

However he has been having a close look at Australia’s economic prospects, and he is drawing attention to what he calls a “transition” in China.

He says our best customer, which has been buying a lot of coal and iron ore from us, is rapidly changing into a consumer society.

Mr Fraser says there will be “opportunities for Australia in this transition.”

But will we be ready to grasp them?

It is possible to spend too much time arguing about fairness.

And it is an elusive concept.

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Sunday 8th May 2016 - 3:52 pm
Comments Off on The economy:according to the experts

The economy:according to the experts

by Alan Thornhill

Analysis

More jobs?

More rate cuts?

What, really, are Australia’s economic prospects?

These are questions are critical, now that the Prime Minister, Malcolm Turnbull has visited government house, seeking the Governor General’s approval for an early double dissolution elections on July 2.

Puzzling ones, too, as this election will be held against a background of falling prices.

Deflation.

Not the inflation that most of us have come to know well.

So this will be a rare experience.

We will need the best possible information.

A chance to look behind what our politicians are telling us, in a fiercely fought election campaign.

Fortunately, the experts who have the best access to that information are much more generous in sharing it than they used to be.

They include people like the Reserve Bank’s Glenn Stevens, and the Secretary to the Treasury, John Fraser.

Of course, having good information, provides no guarantee that people will be right, in their conclusions.

A former Treasurer, Paul Keating, pointed that out quite forcefully, in a current book by Kerry O‘Brien, called Keating.

He was speaking there of the troubled times, in the late 1980s following the global economic crisis.

But it’s just as worthwhile consulting the experts now, as it was back then.

Even though they are still careful to avoid saying anything which might be regarded as politically partisan.

So what are they saying, now?

Mr Stevens issued statements, on Tuesday and Friday last week, explaining why the Reserve bank had cut its marker interest rate by 25 basis points, to a new low of 1.75 per cent.

Friday’s 66 page statement goes into some detail.

(And it is just the right length for downloading onto your Ipad, if you haven’t done so, already).

It notes, for example, that we appear to be spending more than we earn, at present.

“Growth in consumption is forecast to be maintained at a pace that is a little above average despite only modest growth in wages,” it concludes.

There is lot more like that on Australia’s present – and likely future – economy, in the Reserve Bank’s latest statement on monetary policy.

You’ll find it at www.rba.gov.au.

John Fraser, the Treasury Secretary, also had some interesting things to say last Friday, when he appeared before the Senate Economics Legislation Committee, to comment on the 2016-17 Budget estimates.

He noted, for example, that there “will be opportunities for Australia” in the current transition from a commodities based economy, to something much broader.

If you’d like to grab some of those opportunities, for your business or yourself, the Treasury website is also worth a visit.

You can see it at www.treasury.gov.au.

Even if all you want is a little help in deciding how you will vote on July 2.

Friday 6th May 2016 - 9:56 am
Comments Off on Bill Shorten speaks of Labor’s plans

Bill Shorten speaks of Labor’s plans

by Alan Thornhill

Analysis

Bill Shorten revealed much about Labor’s plans for fighting the July 2 elections, when he delivered his budget reply speech in Federal parliament last night.

These include mobilising money held in superannuation funds to advance major public transport projects, such as the Melbourne Metro, the Western Sydney rail line and Perth’s Metronet.

His speech also cleared the way for the Prime Minister, Malcolm Turnbull, to visit the Governor General, to seek his permission to call the early election.

Mr Shorten also promised that a Labor government would restore the $80 billion that the Turnbull government had cut from Australia’s hospitals and schools.

In fact it would “go beyond” that on education, Mr Shorten added.

“Over the next ten years , Labor will spend $37.3 billion to ensure that every school in Australia receives fair funding on the basis of need,” he said.

“We will deliver on the Gonski promise – and go beyond,” Mr Shorten said.

He attacked the budget that the Liberal Treasurer, Scott Morrison, had brought into parliament on Tuesday night, saying overseas shareholders are the only ones who would win, as a result of it.

Mr Shorten also promised that a Labor government would also put “the great Australian dream of home ownership back within the reach of working and middle class families who have been priced out of the market by taxpayer subsidised speculators.”

He said a Medicare card – not a credit card – should guarantee Australians access to the health care they need.

Mr Shorten also said:” Full employment and creating better paid and better-protected jobs is Labor’s economic priority.

“The jobs of the future will be powered by infrastructure and renewable energy,” he said.

“taking real action on climate change will create new jobs, attract new international investment and power our industries and services.

“Of course, advocating climate action is hard, and running a scare campaign against it is easy,” Mr Shorten said.

Mr Turnbull should know – “you’ve done both,” he added.

But delaying action on climate change will be a hit on Australians’ cost of living, a drag on our nation’s economic growth and an attack on our farmers’ way of life,” Mr Shorten warned.

Wednesday 4th May 2016 - 8:12 am
Comments Off on The budget:clearing the decks

The budget:clearing the decks

by Alan Thornhill

Last night’s Federal budget favours the “big end of town” according to the Opposition Leader, Bill Shorten.

The Treasurer, Scott Morrison, concedes that the document he brought into Federal parliament then is not a traditional budget, with easily identified winners and losers.

However, he raised eyebrows by insisting that a modest income tax, for those on high incomes, benefits average wage earners.

But above all, this budget will deliver the one thing the Turnbull government wants most.

That is a clear run to the early election the Prime Minister, Malcolm Turnbull, will almost certainly call on July 2.

The parameters, on which that election will be fought, have now been clearly spelt out.

For Labor, its all about fairness.

The government will make a case for growth and jobs, with the mainly small – and bland – changes it announced in the budget.

And the Reserve Bank asserted its independence – on budget day – by cutting its marker interest rate by 25 basis points, to a new low of 1.75 per cent.

It says the risks of doing that are, at least, lower than those of not doing so.

So what else is the government aiming for, in its budget?

• A deficit of $37.1 billion this financial year.
However, it is also aiming to make big international corporations to pay their full share of tax, on the income they earn in Australia.

• 2.5 per cent economic growth, both this financial year and next.

• A 1 per cent cut in the small business tax rate, to 27.5 per cent.

• Cutting the company tax rate to 25 per cent for all companies, over four years.

Tuesday 3rd May 2016 - 5:32 pm
Comments Off on Testing investors

Testing investors

by Alan Thornhill

Analysis

Falling prices have allowed the Reserve Bank to shave interest rates.

But how well with this fit, with the Federal government’s economic policies?

We don’t know yet, because at the time of writing the Treasurer, Scott Morrison, still had not delivered his budget speech, in which he is expected to spell out those aims, in detail.

But we can say, safely, that the patience of Australian investors will be tested, in the months and years ahead.

The Reserve Bank’s decision today, to lower its cash rate from 2 to 1.75 per cent, is of historic significance, in the management of the nation’s finances.

The bank’s Governor, Glenn Stevens, was frank about the bank’s assessment of the circumstances in which it was made.

He said:” This follows information showing inflationary pressures are lower than expected.

“The global economy is continuing to grow, though at a slightly lower pace than earlier expected, with forecasts having been revised down a little further recently.

” While several advanced economies have recorded improved conditions over the past year, conditions have become more difficult for a number of emerging market economies.”

That’s not what investors are looking for, when they decide where to put their money.

Low risk and the prospect of reliable returns are more attractive, or even just acceptable prospects.

Will Mr Morrison’s budget help to produce happier circumstances of that kind?

Well, Australia is, once again, going through a time of quite basic adjustment.

The minerals boom is over.

Investors must look for fresh opportunities, in this time of adjustment.

They will be available.

But will tonight’s budget be compatible with them?

Perhaps that’s the real question.

Tuesday 3rd May 2016 - 3:57 pm
Comments Off on The Reserve Bank decides

The Reserve Bank decides

by Alan Thornhill

The Reserve bank has cut its cash rate by 25 basis points to 1.75 per cent

In a statement explaining the decision the bank’s Governor, Glenn Stevens, said:”At its meeting today, the Board decided to lower the cash rate by 25 basis points to 1.75 per cent, effective 4 May 2016.

This follows information showing inflationary pressures are lower than expected.

“The global economy is continuing to grow, though at a slightly lower pace than earlier expected, with forecasts having been revised down a little further recently.

” While several advanced economies have recorded improved conditions over the past year, conditions have become more difficult for a number of emerging market economies.

‘”China’s growth rate moderated furthe”r in the first part of the year, though recent actions by Chinese policymakers are supporting the near-term outlook.

“Commodity prices have firmed noticeably from recent lows, but this follows very substantial declines over the past couple of years.

“Australia’s terms of trade remain much lower than they had been in recent years.

“Sentiment in financial markets has improved, after a period of heightened volatility early in the year.

“However, uncertainty about the global economic outlook and policy settings among the major jurisdictions continues. Funding costs for high-quality borrowers remain very low and, globally, monetary policy remains remarkably accommodative.

“In Australia, the available information suggests that the economy is continuing to rebalance following the mining investment boom.

“GDP growth picked up over 2015, particularly in the second half of the year, and the labour market improved.
Indications are that growth is continuing in 2016, though probably at a more moderate pace. Labour market indicators have been more mixed of late.

“Inflation has been quite low for some time and recent data were unexpectedly low. While the quarterly data contain some temporary factors, these results, together with ongoing very subdued growth in labour costs and very low cost pressures elsewhere in the world, point to a lower outlook for inflation than previously forecast.

“Monetary policy has been accommodative for quite some time. Low interest rates have been supporting demand and the lower exchange rate overall has helped the traded sector.

“Credit growth to households continues at a moderate pace, while that to businesses has picked up over the past year or so.

“These factors are all assisting the economy to make the necessary economic adjustments, though an appreciating exchange rate could complicate this.

“In reaching today’s decision, the Board took careful note of developments in the housing market, where indications are that the effects of supervisory measures are strengthening lending standards and that price pressures have tended to abate.

“At present, the potential risks of lower interest rates in this area are less than they were a year ago.

“Taking all these considerations into account, the Board judged that prospects for sustainable growth in the economy, with inflation returning to target over time, would be improved by easing monetary policy at this meeting,”Mr Stevens said.
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Monday 2nd May 2016 - 12:03 pm
Comments Off on It’s not just iron ore and coal now

It’s not just iron ore and coal now

by Alan Thornhill

Australian wines, lobster and cherries are starting to appear on Chinese tables.

And that’s just the start of it.

The Federal Minister for Trade and Investment, Steven Ciobo, says our Chinese customers are also buying more fresh mangoes, abalone and boneless beef from us as well.

So our trade, with our most important customer, now goes well beyond their traditional purchases of iron ore and coal.

Mr Ciobo wants us to keep all this in proportion.

In a statement today, he merely says Chinese trade data shows “encouraging early signs that the China-Australia Free Trade Agreement (ChAFTA) is delivering for Australian business.

“Between January and March 2016, Chinese imports of Australian bottled wine grew more than 60 per cent compared to the same period 12 months previously, to reach $200 million, as tariffs were cut twice, from 14 per cent to 8.4 per cent,” he added.

He also said:”with tariffs cut, China’s $11.6 million worth of imports of fresh Australian lobster between January and March were triple those of 12 months ago, and exceeded China’s entire 2015 imports of Australian lobster. 

“Milk powder and fresh cherry imports more than doubled.”

Mr Ciobo also said: “Chinese imports of other products – including fresh mangoes, fresh abalone, fresh and frozen boneless beef, various types of cheese, and hay and chaff – grew impressively as ChAFTA cut tariffs and boosted Australia’s competitive position.”

“Imports of Australian manufactures that benefited from tariff cuts – like titanium for pigments, unwrought zinc and various mixed food preparations – also grew strongly.

He said that:”These impressive results occurred alongside the third round of tariff cuts in early 2016 under both the Korea-Australia Free Trade Agreement (KAFTA) and Japan-Australia Economic Partnership Agreement (JAEPA), which are also driving increased Australian exports to these two major markets where protection is being reduced.”

“Through the trifecta of FTAs Australian businesses now have preferential access to all three giant north Asian markets – access that is unmatched by other major advanced economies.”

“This positions Australia to continue to capitalise on the rapid expansion of Asia’s middle classes and their demand for the high quality produce and other goods we can provide.” 

“This means exciting opportunities for Australian businesses and will drive jobs and growth in the Australian economy.”

“With tariffs on Australian products continuing to be cut annually into north Asian markets, these three FTAs will continue to deliver for Australian business for years to come,” Mr Ciobo said.

Monday 2nd May 2016 - 11:03 am
Comments Off on I will cut company tax:Morrison

I will cut company tax:Morrison

by Alan Thornhill

The Treasurer, Scott Morrison, has confirmed that he will be announcing company tax cuts in tomorrow night’s budget.

He told reporters that this is being done to ease Australia’s transition from a mining based economy to one that is more broadly based.

Mr Morrison described the government’s approach as “brave” and said Labor would never have cut company tax.

However he said the government would fund the company tax cut that it is proposing by cracking down on foreign companies that are not paying all that they owe, on their operations in Australia.

He said there would be no increase in the overall tax burden.

Mr Morrison said the tax office now has enough information about the structures of major multinational companies to estimate the additional tax revenue.

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Alan Thornhill

Alan Thornhill is a parliamentary press gallery journalist.
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