Shares – and the $A – tumble

Australian shares were sold off today, as shaky trade on Asian markets rattled investors.

That wiped another $23 billion off the value of Australian shares, following a $30 billion slump the previous day.

The benchmark S&P/ASX200 index fell 76.5 points, or 1.5 per cent, to 4964.3.

This took the index below 5,000 points for the first time since April 22.

Banks and miners were hit.

Investor confidence was shaken by a wild ride in Tokyo, where the Nikkei dropped 3.5 per cent, at one point, before rising to end 0.9 per cent higher.

The Prime Minister also moved to settle local nerves, that were shaken, too, by Ford’s announcement on Thursday that it would close its Australian factories from October 2016.

Ms Gillard said: “Our economy has come out of the global financial crisis strong.

“We’ve got economic growth.

“We’ve got low inflation, low interest rates, relatively low unemployment, and strong public finances.”

But the $A fell sharply today, as global movements, that analysts are now calling “a currency war,” took hold.

It fell to an 11 month low of 95.94 US cents, before rising to 96.81 US cents later in the day.

HSBC said the earlier fall reflected Australia’s entry into the global “currency war.”

Central banks in several countries have printed billions in cash to push their currencies lower.

The Reserve Bank also moved to push down the $A, when it cut its marker interest rate by 25 basis points last month.

The $A had been trading above parity with the US, when that action was taken.

Farmers meet to map out a future

Almost 100 agricultural experts will meet in Canberra today, to try to map out the future of farming in Australia.

They will discuss supply chain issues, in particular.

The meeting will attempt to fill out the Blueprint for Australian Agriculture, first developed by the National Farmers’ Federation.

So far, some 4,000 farmers – and other people connected to the agricultural sector – have contributed to the plan.

The National Farmers Federation said today’s forum, the first since the Blueprint’s launch in February 2013, aims to seek agreement on the key priorities within the Blueprint, and turn these into tangible actions for the sector.

Representatives from across the sector, including farmers, commodity groups, transporters, input providers, retailers, the banking sector, educators and Government are attending the forum, which is taking place at Manuka Oval, Canberra from 8am to 5pm today.

Ford Australia to close

Economic reality rocked Australia’s industrial base today when Ford announced that it would cease manufacturing in this country from 2016.

That will involve the loss of some 1,200 jobs.

Sales of Ford’s key local product, the Falcon, have been in terminal decline for years.

As a result, Ford has been producing no more than 30, 000 cars a year at its local plants, in Geelong and Broadmeadows.

The two other local producers, Holden and Toyota, each produce about three times that number.

So Ford could not take advantage of the economies of scale.

It was also hit by the high $A dollar, which cut the price of the foreign cars, that have been flooding into Australian showrooms.

And Ford Australia continued to produce a big six cylinder car, years after rising fuel prices forced local motorists into smaller fours.

Australian taxpayers have lost heavily, through financial support to the local car industry over the years.

This has cost some $1.1 billion over the past 12 years.

However the Prime Minister, Julia Gillard, made no secret of the fact that she was disappointed by Ford’s decision.

But she said: “The Australian and Victorian Governments are working together to do everything we can to look after the interests of the Ford workforce, the automotive supply chain and the communities of Geelong and Broadmeadows in Melbourne.”

Ms Gillard said the extra $34 million, which has already been promised to Ford, will still be delivered, to help these workers.

She said she expects that Ford, itself, will also make a substantial contribution to that fund.

What was Joe really saying?

Paying tax was once thought to be “optional.”

That was back, not so long ago, in the rip-roaring days of tax avoidance.

In the 1970s.

Your reporter remembers them well.

But it was the rich who were ripping and the rest who were roaring, because they had to pay other people’s tax.

I covered a court case in Perth, in those times, which clearly showed that an athletic tax avoider had paid almost as much, for his daring scheme, as he would have had to pay in tax.

In the wash-up, of course, this man had to pay twice.

His high priced advisers weren’t about to refund his money.

And the Tax Office still had an unsatisfied claim.

Part of Joe Hockey’s speech, to the National Press Club in Canberra, bears examination against this, still recent, history.

The man who could well be Treasurer, after the September 14 elections said:

“The Coalition will also foster a more cooperative relationship between taxpayers and the Australian Taxation Office.

“We all have to pay our fair share of tax.

“But the relationship with the ATO does not have to be adversarial and should be based on mutual respect.

“One measure that will help change the culture of the tax office is to appoint people with business experience to senior posts.

“The new Commissioner, Chris Jordan, is a breath of fresh air in this regard and the Coalition welcomes his appointment.

“But for too long the tax office has developed an insular and inward looking culture that has put it at odds with taxpayers, particularly in relation to its overly aggressive interpretations of tax laws.

“Taxpayers are not the enemy.

“They should be respected.

“I have previously announced that the Coalition would expand the number of Second Commissioners of Taxation, from three to seven, with appointments of “outsiders” who have market place experience to the executive group, which sets the strategic direction of the tax office.

“A second step is to reduce the complexity and increase the certainty of tax law.

“In areas like self-assessment and compliance we can do better.

“But when dealing with tax payers the ATO has everything in its favour,” Mr Hockey said.

That’s a long quote.

But these words are important.

Some will, certainly, be wondering if they can, once again, avoid paying their full share of tax.

Others will be saying that Mr Hockey is weak, and giving sly signals to his rich mates.

Words often have more than one meaning.

One thing, though, is certain.

If the Tax Office is, indeed, “overly aggressive” in its interpretation of tax law, that would be a consequence of a non-too-pleasant history.

Perhaps, as Mr Hockey says, it is time for everyone to be more reasonable.

However there is another side to this story.

Dr Martin Parkinson, the Treasury Secretary, warned Australians this week that they might have to pay more tax, to keep the level of public services they expect.

And the words of the American jurist, Oliver Wendell Holmes, still sound a clarion call.

“I like to pay taxes,” he said.

“With them I buy Civilization.”

Slow payers squeeze business

Waiting longer for your bills to be paid?

You are not alone.

A new survey, by Dun & Bradstreet, shows that Australian businesses are now, typically, waiting almost eight weeks for their bills to other companies to be paid.

The firm’s latest Trade Payments Analysis shows the average invoice payment time rising to 55 days during the first quarter of 2013.

This figure is up from a national average of 52 days in the previous quarter and 53 days a year earlier.

In New Zealand the average payment time is just 43 days.

D&B says this is putting extra pressure on Australian businesses.

It said 56 per cent of businesses expect cash flow will be an issue for their operations in the quarter ahead.

The D&B survey also showed that some big companies are among the worst offenders.

“…those companies employing more than 500 employees were taking 58 days to settle their accounts in Q1,” the analyst said in a statement.

The study also showed that most invoice payments in Australia are being paid late.

Almost half – 48 per cent – were settled between one and 30 days beyond standard 30 day payment period.

Only 38 per cent were paid on time.

“The state of late payments in Australia is a handbrake on business activity at a time when greater investment and productivity is needed,” Dun & Bradstreet’s CEO Gareth Jones said.

“While we’re seeing more positive signs for consumers, in terms of a strong sharemarket, rebounding house prices and lower debt balances, businesses expectations remain low,” he added.

“In this environment, a slowing cash flow cycle further hits businesses. Their ability to spend money and invest in the growth of their business, and by consequence the economy, is limited when they’re kept waiting for payments.

D&B said late payments are impacting a business’s ability to cover its own costs of operation.

We know that 90 per cent of small businesses failures are caused by poor cash flow,” Mr Jones said.

Paid parental leave? Look again

Women’s groups are urging both major political parties to revise their paid parental leave schemes.

They set out their concerns in a statement just issued.

The National Foundation for Australian Women warned that schemes which create disincentives for women to return to work and stifle workplace innovation in the business sector will not be of long-term value.

This coalition of women’s organisations has compared the schemes offered by the Coalition and the Labor Party.

It found that while the Coalition’s proposal to increase paid parental leave to 26 weeks at a maximum of $75,000 is more generous, it had several shortcomings.

The women’s groups said it:-

* Does not factor in relationships to existing company entitlements, which many women still enjoy in addition to the current 18 week government-funded PPL.

* Removes employer involvement and connection with PPL.

* Provides an incentive for employers to minimise female employee income below the $150,000 threshold.

* Encourages women to stay at home and disengage with the workforce – in particular those on salaries just below the $150,000 threshold.

* Pegs the payment to the women’s salary and fails to acknowledge that women who are the highest income earner or the family’s chief breadwinner may be keen to return to the workforce more quickly.

* Has the potential to reduce other corporate tax.

Marie Coleman, who chairs the Foundation, said “… both major parties needed to revise their policies to encourage female work-force attachment, and as well to promote both partners as carers.
She said paid parental leave in Norway, PPL is 47 weeks with 100 per cent pay or 57 weeks off with 80 per cent pay.

“ Only the first six weeks are allocated exclusively to the woman and at least 10 weeks must be taken by the other partner – likely moving to 14 weeks on 1 July 2013,” she said.

“This ‘paternity quota’ enshrines the concept that men and women are equal caregivers for children in workplaces and is backed up by legislation giving the father the right to leave the office by 5.30pm to spend time with their families or to take time off for household and family chores,” Ms Coleman added.

“As a consequence of the social licence given to men in Norway to play an equal role at home and work and a raft of accompanying family friendly policies and legislative instruments, the country has one of the highest workforce participation rates for women in the western world.”

However, Ms Coleman said the situation of young families had not been thought through as thoroughly in Australia.

“On both sides of politics we still have a relatively immature approach to PPL and associated family policies, such as childcare, which will not be best addressed by mandating large companies to pay a levy for what is effectively a large baby bonus.”

“Greater expenditure towards both reducing the effective marginal tax rate on a mother returning to work, and making child care more affordable and available are the NFAW’s top priorities for working mothers,” Ms Coleman said.

What went wrong:Treasury chief explains

Some key Treasury forecasts had held up “reasonably well” Dr Martin Parkinson said today.

However Dr Parkinson, who is Secretary to the Treasury, was careful not to include its revenue forecasts, in this assertion.

Addressing business economists in Sydney, he said: “As you know, and has been much commented on of late, the past few years have been a challenging period for economic and revenue forecasting.”

“Yet, despite considerable global volatility and structural changes domestically, the Budget forecasts for the volume of economic activity and employment – the real economy – have held up reasonably well over this period.”

Dr Parkinson then made a concession.

“The same cannot, however, be said of the forecasts of nominal GDP and tax revenue.”

That is an understatement.

The Federal Treasurer, Wayne Swan, promised last year that he would deliver a small surplus, in his 2012-13 budget.

However revenue collections fell $17 billion short of the projections the Treasury made, in last year’s budget.

That was due, mainly, to shortfalls in company tax.

That left Mr Swan with an embarrassing $19.4 billion deficit in 2012-13.

The Treasurer was also forced to admit that the much anticipated surplus would not arrive for another four years.

Dr Parkinson admitted that Treasury’s revenue estimates had left the Federal Government in a difficult position.

“The direct impact of the, now well-known, overestimation in tax receipts is that the Australian Government faces a more difficult fiscal environment than had been anticipated a year ago,” he said.

Then he offered an explanation.

“Today, I want to take you through some of the drivers of recent weakness in nominal GDP growth and the Government’s tax receipts, and consider why the extent of this weakness had not been anticipated,” Dr Parkinson said.

He said these drivers had included:

• the difficulty that we, and other economic forecasters, have had in predicting the future path of global commodity prices, the exchange rate and capital gains and

• the significant structural changes that have taken place since the Global Financial Crisis in the Australian economy and in the Government’s tax base.

Working smarter works:Swan

Wayne Swan says the key to Australia’s economic success has been working smarter, not just harder.

The Treasurer made the observation in a post budget speech that he gave to Per Capita, in Adelaide today.

“In 1990, Bob Hawke articulated Labor’s vision for Australia,” Mr Swan said.

“We could no longer be content to be ‘the lucky country’.

“We must aspire to be ‘the clever country’.”

Mr Swan said: “Australia punches above its weight in the global economy because we know the key to our success is working smarter, not just harder.

“It’s no coincidence that education is our 4th biggest export, worth over $15 billion annually to our economy.

“It’s no coincidence that students travel across the world to study at Australian universities – about a quarter of a million this year alone.

“And it’s not just our world class universities that set Australia apart.

”We also boast some of the most highly regarded scientific and research institutions in the world – with some great stories to tell.

Like the CSIRO.

“Many Australians wouldn’t know that the wireless technology we now take for granted on our laptops or mobile phones grew out of the pioneering work of the CSIRO on radio astronomy.”

Mr Swan’s remarks, at this time, are no accident.

The government is basing its bid for re-election, on September 14, largely on its plan to spend an extra $16.2 billion on Australian schools, over the next six years, under the Gonski plan.