by Alan Thornhill
Australia’ s economic growth appears to have been surprisingly strong in the early months of this year.
Indeed the Statistician put it at 3.1 per cent in the 12 months to the end of March – and said trade had played a leading role.
The Prime Minister, Malcolm Turnbull, later made that an election issue later when he said this kind of growth does not happen “by accident.”
These developments make new research, that the National Australia Bank published today, particularly interesting.
For the bank states, quite bluntly, that our iron ore trade has been “riding an unsustainable wave.”
If that is true, the Prime Minister’s carefully crafted, but still merely implied claim, to have produced that growth, takes a hit.
Mr Turnbull conceded later that there are risks associated with both government and opposition forecasts.
The reality is that forecasts – there are always risks with forecasts I think everyone understand that.
“The further out you go, the more speculative those assumptions are.
He was replying to a reporter in Ulladulla.
“What will the iron ore price be?
“What will the foreign exchange rate be?,” Mr Turnbull asked rhetorically.
The bank, itself, avoided stepping into the current election campaign, contradicting Mr Turnbull directly.
But what the NABt does say is deeply disturbing to people who worry about Australia’s economic future, especially as iron ore has long been a very big item in this nation’s trade accounts.
It says that:” After trending lower across 2015, iron ore prices staged a short-term volatile rally in early 2016 – returning close to US$70 a tonne in late April.
“This coincided with a rapid increase in Chinese futures market trading volumes on the Dalian Commodity Exchange – with may indicate a temporary speculative bull market.
“Subsequent tighter regulation on the DCE brought prices back nearer to US$50 a tonne.”
Then the NAB adds:-
- This rally occurred against a backdrop of stronger Chinese steel market conditions – with demand recovering thanks to a rebound in construction activity (the sector that accounts for over half of China’s steel demand). Steel prices rose faster than input costs between February and April, driving steel maker profitability to its highest level in almost seven years.
- We argue that the rebound in construction is not sustainable, with policy changes that have relaxed purchase requirements, looser credit and the poor performance of alternative investment options re-inflating the property bubble that had somewhat deflated across 2014 and 2015.
- The short-term boost to profitability should not be allowed to overshadow the significant long-term challenges that China’s steel industry needs to address. Excess capacity in China’s steel sector exceeds 300 million tonnes (around three times the 2015 output of Japan, the world’s second largest steel producer).
- Medium term trends for steel – both in China and globally – appear subdued. Expectations that China’s steel consumption will continue to decline in coming years will be a major constraint on iron ore demand, while sub-trend economic growth elsewhere provides little opportunity for China’s declines to be offset. Over the medium term, we expect prices to settle at around US$40 a tonne.
by Alan Thornhill
That was quite a trick.
The Australian economy grew by 1.1 per cent in the first three months of this year.
And by 3.1 per cent over the year to the end of March.
What is particularly remarkable about these seasonally adjusted figures, produced by the Statistician today is that this growth, which was boosted by our exports, was achieved, as the prices we were getting for them were falling.
Quite sharply, in fact.
Indeed the Statistician also reports that our terms of trade dropped by 11.5 per cent over the year, including a 1.9 per cent fall in the March quarter itself.
So how did we do it?
Overwhelmingly, by selling quite a lot more of the stuff that we do produce well.
Mining products, for example.
The Bureau notes that their value rose by 6.2 per cent in the quarter.
And our household consumption spending rose by 0.4 percentage points in that time.
Impressive figures, certainly.
Especially for uncertain times, like the present.
But we shouldn’t read too much into them.
And they can bounce around quite around quite a bit.
So we shouldn’t be too surprised if we find our political leaders differing a little in their views of these developments.
by Alan Thornhill
Labor has revealed its plan to save the Great Barrier Reef and protect the 70,000 jobs it supports
The Opposition Leader Bill Shorten did so in a joint statement he issued today with his environment and climate change spokesman, Mark Butler.
They described the reef as “Australia’s greatest natural asset.”
And they said: “The Great Barrier Reef is the largest coral reef ecosystem on earth and one of the best known marine areas in the world.
The reef attracts more than two million visitors each year, contributes $5.7 billion to the economy, and supports approximately 70,000 jobs, they added.
“All of this is at risk if serious action is not taken to protect it,” they added.
“The Great Barrier Reef is an environmental treasure Australia holds on trust for the world.
A Labor Government will make protecting the Reef one of our highest priorities,” they said.
Mr Shorten said the government has no credible plan to protect the reef.
“Only last week, it was revealed that the Turnbull Government intervened to censor Australia being mentioned in the report on the impact of global warming on World Heritage Areas,” Mr Shorten said.
“The best way to help the Reef and to boost tourism and economic growth is to take serious action on climate change, to face the challenge and show leadership,” he added.
Mr Shorten said a Labor government would work with the Queensland Government and stakeholders to implement the recommendations of the Great Barrier Reef Water Science Taskforce report.
He said our plan “will be implemented in close consultation with the Queensland Government and all other stakeholders, with the Environment Minister taking a direct leadership role in its implementation.
“Our plan to protect this delicate ecosystem has three pillars covering research, management, investment and preservation,” Mr Shorten said.
Elaborating on various aspects of Labor’s plan, Mr Shorten said of science and research.
“We will improve science and research and monitoring of Reef issues to ensure the protection and sustainability of the Reef is based on the latest, specialised science.
“This includes directing the CSIRO Marine to conduct Reef-specific science, including climate research, supported by a $50 million targeted funding boost.
“Direct Environmental Investment: Integrated direct investment to improve, water quality, land management, agricultural and environmental impacts.
Reef Management: Improve Reef management architecture and incentives to fix the fragmented and uncoordinated approach that has for too long characterised Reef management and conservation.
by Alan Thornhill
The Prime Minister, Malcolm Turnbull, told voters tonight that growth is necessary for Australia.
He said that is fundamental.
And – taking care to appear Prime Ministerial – Mr Turnbull said his government had a plan to achieve growth that would produce new jobs and prosperity.
The Opposition Leader, Bill Shorten, responded by saying that fairness is needed for growth.
And he said the government’s plan to give big foreign companies $50 billion worth of tax cuts over the next 10 years is not fair.
He said a well educated population, with access to good health care, is essential.
The two leaders were speaking in the second of their debates in the current election campaign, leading to national elections on July 2.
Tonight’s debate was the first to be televised publicly.
The first was carried only on pay television.
Although both leaders were criticised tonight for not giving enough detail about their policies, both would probably be reasonably happy with their performances.
Both managed to avoid embarrassing mistakes.
And both stuck to carefully considered strategies.
Mr Turnbull sought to re-assure those who share his philosophies and to convince doubters that voting for a reckless spending Labor government on July 2 would be just too risky.
And Mr Shorten, who realises that he is less well known than his rival, took care to present himself as a moderate responsible leader, who will advance thoroughly thought out policies, in this campaign which still has five weeks to run.
by Alan Thornhill
The Prime Minister, Malcolm Turnbull, announced new measures today to protect the Great Barrier Reef and other Australian tourist attractions.
He also said he had not been told in advance of plans by the Federal police to raid a Labor party office and homes in Melbourne searching for leaked material, about the woes of his troubled National Broadband network.
The broadcaster, David Attenborough, who recently completed a series of programs on the Great Barrier Reef, said later that it is mad to think that unlimited growth is possible in a finite world.
Mr Turnbull, who will face elections on July 2, said that before European settlement rainwater had sunk into Australian soils, and had been cleaned naturally before it reached the sea.
But he added: “As there is more development, you get more runoff.
“You get more nutrients in the water.
“And you see what’s called the wrack, the weeds, you see along the foreshore there and a deterioration of the quality overall.
He was speaking in the Tuggerah Lakes district, a series of three interconnected lagoons, on the New South Wales central coast.
Mr TurnbullHe said the government’s new policy: “… means installing more and better pollutant traps so that large, as you know, large bits of rubbish don’t float into the lakes.
Mr Turnbull said that – as they had developed their communities – European settlers had allowed water to rush through, rush down drains and storm water pipes, far too quickly.
“So the key is to slow it down< Mr Turnbull said. He said: "... one of the big priorities of the Great Barrier Reef, for example - is to build swales *along streams. (my dictionary says swales are "... low tracts of land, especially ones that are moist or marshy. The term can refer to natural landscape features or a human-created ones It says artificial swales are often designed to manage water runoff, filter pollutants, and increase rainwater infiltration). “So when the run-off comes off fields, particularly with fertilisers, instead of rushing straight into the water-course, it is slowed down, settles and sinks into the ground and is then naturally cleaned through the environment,” Mr Turnbull said. He also confirmed that his Communications Minister, Senator Mitch Fifield, had known about the Federal police investigation into the NBN leaks some months ago but did not tell him. “...yes, that’s right,” Mr Turnbull said when questioned on the matter. “I think it’s entirely appropriate,” he added.
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.
by Alan Thornhill
A new Morgan Poll once again puts Labor in front, but the pollster adds that if a federal election were held today, the result would probably be too close to call.
Gary Morgan, the Executive Chairman of Roy Morgan research, said it could well result in a hung Parliament.
He said that in early May ALP support was up 1 per cent at 51 per cent.
The Coalition’s support fell 1 per cent, to 49 cent on a two-party preferred basis.
“ This is the best result for ALP since Malcolm Turnbull became Prime Minister in September 2015,” he added.
Significantly the Roy Morgan confidence level also fell, slightly, to its lowest level ince Mr Turnbull became Prime Minister.
It showed that only with 39.5 per cent of Australians believe that Australia is ‘heading in the right direction’ while 41.5 per cent believe the country is ‘heading in the wrong direction’
This week’s Morgan Poll on Federal voting intention was conducted over the last two weekends, April 23-24, and April 30 and May 1, 2016, with an Australia-wide cross-section of 2,951 Australian electors.
by Alan Thornhill
The Turnbull government may be facing the rare prospect of a defeat in Federal parliament which could lead to an early election.
This prospect has arisen because the government of Prime Minister Malcolm Turnbull does not control the Senate and he is anxious to set up a building industry watchdog, the Australian Building and Construction Commission Bill.
This is one of a number of bills on which debate between the two houses of parliament, the House of Representatives and the Senate is deadlocked.
Control of the Senate is currently shared by the Labor party, the Liberals and Nationals, the Greens and various micro parties.
The micro-parties and independents would probably be wiped out if voting reforms that the government is also proposing area adopted.
For that reason – if no other-a fierce and messy debate on these plans has been predicted this week -and – in fact – it has already begun.
The Treasurer, Scott Morrison, was severely embarrassed yesterday when he was forced to admit in parliament that that cuts he had flagged earlier, for this year’s budget are no longer likely to be realised.
This led Labor members to suggest that his position is now untenable.
MrMorrison is now saying that individual tax cuts – which he has previously flagged – will not be possible until the budget is in better shape – he Morrison has dashing hopes he had previously raised, in that area. Now, he is saying that only tax cuts for business are still on the cards. Mr Morrison regards them as a tangible “growth dividend.” That is Treasury-speak for economic growth and higher employment rates.
So some opposition members are now wondering if the Treasurer is engaging in the traditional pre-budget game of expectation management, where gloomy predictions are seeded before delivering a bretter than expected outcome on budget nigh, to to sighs of relief.
However the shadow treasurer Chris Bowen sees the government’s mixed messages on tax changes with glimpses of a higher offset by loweri aand now earlier cuts in tax rates as evidence that Mr Morrison lacks authority.
“It took Joe Hockey two years to crash and burn,” Mr Bowen told Parliament.
It’s taken Scott Morrison six months.”
“When it comes to economic policy and tax reform, the last three years have been a waste, with the government promising three more years of the same.”
He said it was time Mr Morrison “considered his position”.
The comments followed media reports that the Treasurer has told colleagues that a lack of “fiscal headroom” made tax cuts for individuals impossible at present.
This is despite the fact htat Mr Morrison wasg among the most vociferous advocates of returning “bracket creep” to taxpayers who through wage inflation had drifted into higher taxation brackets.
The government effectively surrendered the scope for large-scale tax reform once it pulled out out of lifting the GST – a measure it was understood Mr Morrison was more inclined towards than Prime Minister Malcolm Turnbull.
On Tuesday, Mr Morrison attacked Labor’s proposed halving of the capital gains tax discount on housing, arguing it would inhibit rather than encourage investment.
Confusion over the finalisation and release of the tax package had seen it flagged for April, then in the budget, and then both, although a government source said it was merely a matter of keeping release options open allowing budget details to be reported in the days leading to it.
But the date of the budget itself remains in play
Weathercoast by Alan Thornhill
A novel on the murder of seven young Anglican Christian Brothers in the Solomon Islands.
Available now on the iTunes store.
Alan Thornhill is a parliamentary press gallery journalist.
Private Briefing is updated daily with Australian personal finance news, analysis, and commentary.
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