Are ETFs for you?

Have you thought of using Exchange Traded Funds?

Or wondered what they are?

A new report, compiled by the Australian Securities and Investments Commission, might help, either way.

ASIC says ETFs  can provide a convenient and low-cost way for investors to diversify and receive returns close to the performance of market indexes or other assets.

Its report says this can often be done with lower fees than traditional managed funds.

“ But while standard, ‘physical’ ETFs generally invest in the underlying investments they are designed to track, ‘synthetic’ ETFs also use derivatives, such as swap agreements, to achieve similar outcomes,” ASIC says.

“Benefits to investors of synthetic ETFs may include access to new and varied asset classes and low performance ‘tracking error’,” it adds.

“ Downsides include increased complexity and counterparty risk,” ASIC said.

Still puzzled?

Try the MoneySmart website.

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Watchdog drops bribery probe

Australia’s corporate watchdog has dropped its investigation into allegations that several former Reserve Bank officials acted improperly, in a case involving claims of bribery.

The Australian Securities and Investments Commission said it would not proceed with the allegations involving Securency, which prints currency for many countries.

It made its announcement in a formal statement, recalling that the Australian Federal Police had investigated the allegations, before reporting to ASIC on the matter.

“In line with its normal practice, ASIC has reviewed this material from the AFP for possible directors’ duty breaches of the Corporations Act and has decided not to proceed to a formal investigation,” the commission said.

The Commission said it would be making no further comments on the matter.

Those who had been under scrutiny included:-

?Former RBA deputy governor and former chair of the Australian Prudential Regulation Authority, Graeme Thompson, who chaired NPA and Securency and who allegedly approved highly irregular company behaviour that fuelled bribery.

?RBA assistant governor Frank Campbell, who as NPA director was privy to information about company corruption and bribery in 2007, which he and his board did not refer to police.

?NPA managing director Chris Ogilvy, who also sat on Securency’s board and who was party to highly irregular corporate behaviour, including the payment of secret commissions via inflated contracts.

?Former Reserve Bank assistant governor Les Austin, who was a director of Securency and NPA.

The referral to the Australian Securities and Investment Commission had marked a major shift in the probe of RBA firms Note Printing Australia and Securency, which allegedly paid millions of dollars in kickbacks to win foreign banknote contracts.

ASIC did not say why it had dropped its investigation.

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Your broadband:the best deal promised

The Federal government says final approval of the separation of Telstra means that Australians will get the best possible deals on their communication services.

The Prime Minister Julia Gillard said that approval, by the ACCC is  “a major landmark for the nation’s telecommunications industry.”

“This means for the first time in Australia’s history, telecommunications providers will compete on a level playing field,” Ms Gillard said.
“Consumers are set to benefit from this competition as retailers compete evenly and fiercely to give customers the best and most innovative services, at the best price,”  she added.

“By structurally separating Telstra, the Government has finally fixed the wrongs of past governments.

“Telstra was structured and sold in a way that was bad for consumers, bad for competition and bad for the economy.

“For consumers, this means the Government has secured the best outcome for their telecommunications services by locking in maximum competition – now and into the future,” Ms Gillard said.

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The Prime Minister, Julia Gillard’s, New Year’s Message

The Prime Minister, Julia Gillard’s,  New Year’s  Message

The New Year is a time to look with gratitude on the good things of the last 12 months and look forward with confidence to the year that stretches before us.

It’s a time for new hope and new beginnings.

Perhaps a personal resolution like spending more time with family or a big life decision like starting a university or TAFE course or opening a business.

Whatever the New Year holds for you, I trust it will be a safe and happy one.

Let’s also remember that the 1^st of January is the anniversary of Australian nationhood.

So let’s also resolve to make this great country of ours even stronger.

Yes we’ve achieved remarkable things in our nation’s journey.

But I firmly believe that even better days lie ahead.

Together let’s make 2012 a year of which every Australian can be proud.

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How to get more

Economic growth is possible in a finite world – if we increase productivity.

But what does that mysterious, economists’ word,  really  mean?

Getting more blood out of a stone, perhaps, by working smarter, not harder.

Frustration with the way we are expected to work is very common  and – all often – thoroughly justified.

Your correspondent has some experience with this, as joint author of a book on productivity, called “Because no Bastard Ever Asked Me.”

The anecdote, which led to that odd title, was  of a production worker,   Bob,  who worked in factory making  washing machines.

But too many of those washing machines were so unstable that they “walked” around laundry floors.

In desperation, Bob’s boss had hired consultants, to find out why.

As the consultants watched machines moving down the production line, Bob’s boss heard Bob, mutter “another bad one.”

Bob did that  once or twice more.

So the  boss asked him if he could identify machines that would “walk” before they left the factory.

“Yes,” Bob said.

“They have rough metal under the rim of their bowls.”

“We have had this problem for for a long time,” the boss replied.

“Why didn’t you speak up?”

“Because no bastard ever asked me,” Bob said.

(We still have a few copies of the book. Email me at alanthornhill@netscape.net if you want one).

The Treasurer, Wayne Swan, also argued the case for increased productivity at the weekend, saying the government is pursuing it by:-

• A doubling of the investment in roads, rail and ports over the six years from 2008-09;
• Building the National Broadband Network, which will help drive down costs of doing business;
• A greater focus on skills, training and apprenticeships, including the $3 billion investment in the Budget;
• Putting a price on carbon pollution, which will help shift our economy to clean energy and low-pollution technologies in a way that provides maximum support to productivity growth;
• Promoting innovation through better targeting of tax incentives, and $9.4 billion in spending on science and research;
• Reducing regulatory barriers and business red tape by working with the states on consistent rules and processes, such as uniform occupational health and safety laws and a national occupational licensing system;
• Building on our tax reform agenda, such as cutting the company tax rate to boost competitiveness, and tripling the tax-free threshold to provide workforce incentives; and
• A Fair Work Act built on enterprise bargaining that supports firms’ efforts to be more productive, and balances fairness and flexibility.

That’s the government’s response to the Coalition’s argument that it is wasting taxpayers’ money.

It’s a wordy one,  though.

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ABC fends off Murdoch

The ABC will keep Australia’s international television service, the Australia Network.

The Network supplies non stop television programs to more than 44 countries across Asia, the Pacific and Indian subcontinent.

The Federal government had put the service out to tender.

That attracted a bid from Sky Television, in which Rupert Murdoch has a significant stake.

However the government announced tonight, after a Cabinet meeting, that it had decided that the Australia Network would become “a permanent feature of the ABC. “

The Communications Minister Stephen Conroy admitted that there had been problems.

“The Government was hoping that the tender process for the Australia Network would have been completed in good faith,” he said.

“ However, several leaks have compromised the process and prevented a fair consideration of the bids,” he added.

“The Government believes it is unfortunate that this process did not reach a satisfactory solution, Senator Conroysaid.

“However, in light of the circumstances it is now in the national interest to make a clear decision about the future of the service rather than allowing uncertainty to continue,” he said

“Having reflected upon the process to date, and what the service really needs to provide, the Government has determined that Australia’s international broadcasting service should be delivered by the national broadcaster.” he said.

Senator Conroy described the Australia Network as “a major public diplomacy platform.”

“And, as is the case with comparable operators such as the UK’s BBC World Service and Germany’s Deutsche Welle, the Government believes the service should be provided by Australia’s national broadcaster, the ABC,” he said..

The Senator said this decision provides certainty for the future.

“It also allows the ABC to get on with the job of delivering an outstanding international broadcasting service for Australia,” he said.

“The Government also believes that the ABC is well placed to explore the opportunity to combine the Australia Network with its current international radio service,” Senator Conroy said.

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Very briefly

The Federal Treasurer, Wayne Swan, has blasted the National Australia Bank, which announced today that its home loan customers will get only a 20 basis point cut in their mortgage rates, even though the other big banks are all passing on the full 25 point cut, announced by the Reserve Bank.

“It’s a kick in the guts to working families,” Mr Swan said.

It’s a greedy decision from the NAB and it is not justified in my view by fundamentals,’’ he added.

However, the NAB said its standard variable home loan rate is still the lowest offered by any of the major banks.

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Qantas expected to resume flights this afternoon

Qantas is now expected to start lifting passengers again from 3pm today, but authorities believe it won’t be able to restore full services until Wednesday.

Meanwhile its rival, Virgin, will be providing 3,000 extra seats today, to help clear passenger backlogs.

The Prime Minister, Julia Gillard, described the action of Qantas chief, Alan Joyce, who grounded the airline on Saturday as “extreme” and said her government had acted as quickly as it could to restore the airline’s services.

The government won an order from Fair Work Australia, which Ms Gillard described as “the independent umpire” for a cessation of all industrial action, including the lockout.

The Opposition Leader, Tony Abbott, has accused the government of failing to intervene early enough, in the dispute.

Qantas has said earlier that it would resume services as soon as possible, but there were no passenger flights this morning.

The airline had to wait for clearances from the Civil Aviation Safety Authority.

The lockout left thousands of passengers stranded – and many Federal members wondering if they could get to Canberra, for vital Spring sittings this week.

It also disrupted the travel plans of thousands of Australians, including many who wanted tickets to Melbourne, for the Melbourne Cup tomorrow.

The Qantas lockout followed the airline’s announcement, back in August, that it would cut at least 1,000 jobs.

Efforts to get Qantas planes back into the air resumed, before Fair Work Australia, at 2pm Sunday.

FWA issued its cessation order twelve hours later.

The dispute has further damaged business confidence, particularly in the small to medium enterprise sector, which depends heavily on air transport.

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