Browsing articles in "Communications"
by Alan Thornhill
The proposed separation of Telstra’s wholesale and retail arms is long overdue.
Australia’s critically important telecommunications market could never have been seen as competitive, under present arrangements.
That is with Telstra operating as a monopoly wholesaler, as well as the dominant retailer.
The giant’s previous CEO, Sol Trujillo, clearly miscalculated, in coming to the conclusion that only Telstra had the necessary muscle, to set up the $43 fast internet network, that Kevin Rudd sees as a necessary step, in Australia’s modernisation.
Mr Trujillo overlooked the fact that it is governments – and governments alone – that make the rules.
So Telstra found itself yesterday facing an ultimatum from the Rudd government.
That happened when the Communications Minister, Stephen Conroy, declared that Telstra had a choice. It could separate the wholesale and retail arms of its business itself, or the government would do the job for it.
That sent Telstra shares into a steep slide. They close 14 cents down at $3.11.
The Opposition immediately attacked the government – not over the proposed separation – but over its plans for a hard wired high speed broadband network.
Its communications spokesman, Nick Minchin, said the growing popularity of wireless broadband poses a very real threat to the government’s plan.
Senator Minchin said the Australian Bureau of Statistics had reported that the number of Australians who subscribe to wireless broadband had leapt by 51 per cent, over the past six months.
He said Labor had no idea of what the demand for its fixed high speed network would be.
And the Opposition Leader, Malcolm Turnbull, asked the Prime Minister, Kevin Rudd, for a detailed account of business plan for the proposed network.
Mr Rudd said that work had been dome, but he did not disclose its results.
Please visit our sponsor
Related stories:
- Super-speed internet coming
- High speed network gets off to a slow start
by Alan Thornhill
Kevin Rudd and Wayne Swan keep telling us that we are not out of the woods yet.
But just where has the global financial crisis left us, really?
One of Australia’s leading banks has tried to answer that question, in just two pages.
So we thought we would reproduce the main points here.
The National Australia Bank says global growth appears to have stabilised with Asia leading the way.
But it warns that there is also a risk of markets moving ahead of reality.
The bank says it has revised its estimate of global growth in 2009 to 1.4 per cent.
It said Asian growth – outside Japan – had been very strong over the past month.
The bank said it now expects the Japanese economy to shrink by 5.7 per cent in 2009, rather than the 6.5 per cent it had predicted earlier.
It says it now expects Europe, too, to post better results than previously expected. That is a contraction of just 4 per cent for the year, rather than 4.7 per cent.
But its forecast for the United States remains unchanged, at a contraction of 3 per cent.
The bank did say, though, that it now expects both Russia and Eastern Europe to perform even less well this year than it had previously predicted.
It says, too, that Australia’s performance, relative to the rest of the world, remains “remarkable.”
The bank said that is illustrated by confidence levels in this country surging to a six year high.
Related stories:
- Recovery:meet your new customers
- Reserve Bank chief names a date for recovery
by Alan Thornhill
Australia still has a rough economic road ahead, according to the Prime Minister, Kevin Rudd.
Mr Rudd told parliament, on the first day of its Spring session yesterday, that it would be wrong to assume that global economic growth would simply resume, in the months immediately ahead.
He was commenting on the results of the National Australia Bank’s latest monthly business survey, which showed business confidence in Australia has bounced back to a pre-crisis level.
Even the bank, though, was cautious in its assessment of this result.
It said a “closer look” at the data suggests that it might be difficult to maintain this freshly restored momentum.
The bank noted that forward orders had risen, driven by school repairs and the first home owners’ grant.
However it said, both retail and wholesale orders had fallen, as early stimulus measures passed.
The bank also said there are now signs that the global economy is stabilizing.
Mr Rudd warned, though, that major world economies are still not growing.
He said, in these circumstances, there is just one path that Australia can take.
“Productivity. Productivity. Productivity,” the Prime Minister said.
“It is the right strategy for Australia,” he added.
“But this country is by no means out of the woods yet,” Mr Rudd warned.
The Treasurer, Wayne Swan, who also spoke at question time, said the International Monetary Fund and the Reserve Bank had both endorsed the measures the government had taken, to stimulate the Australian economy, after the crisis struck late last year.
Related stories:
- “There’s worse to come” Rudd warns
- We’re not out of the woods yet:Swan
by Alan Thornhill
Optus is facing court action over its prepaid phone cards.
These are sold by a wholly Optus owned company called Prepaid Services Ltd.
The Australian Competition and Consumer Commission is alleging that this company had claimed that:-
- Certain cards would provide customers with a specified amount of call time when this is not so
- That there would be no other fees other than times call charges when other fees were charged
- That particular call rates would be charged, even though they were unlikely to be achieved.
The ACCC will argue its case before the Federal Court in Perth.
It is making similar charges against another telephone company, B0ost Tel.
The latest action follows other cases the ACCC has taken over pre-paid phone cards, in relation to Tel.Pacific and Cardcall Pty. Ltd.
In the latest case, the commission is alleging that both Prepaid and Boost engaged in misleading conduct and made certain false or misleading claims.
Preliminary proceedings in the case are scheduled to start in Perth on September 4.
Related stories:
- Milking the public
- Credit cards:the coming crunch?
by Alan Thornhill
July 17, 2009
Something odd has been happening with the Aussie dollar lately.
The little Aussie battler has been rising – and falling – with the New York stock market.
That’s not supposed to happen.
Movements in the Dow Jones index, though erratic lately, are usually assumed to reflect perceptions of prospects for the US economy.
So if the US economy appears likely to get stronger, without any matching movement in Australia’s prospects, the $A should weaken, relatively speaking. That’s because because money and resources usually flow to the place where prospects are brightest.
That, though, is essentially, a static analysis.
And an article, just published in the latest Reserve Bank Bulletin, provides a tbeoretical basis, to explain what is actually happening.
It’s well worth reading, if you are involved, even indirectly, in currency trades.
The full article can be found at www.rba.gov.au.
The authors argue that things change in times of “market volatility and uncertainty.”
“In periods of elevated market volatility and uncertainty….the net effect of positive news on the US economy tends to be an appreciation of the $A/$US exchange rate,” they say.
“Empirical evidence suggests that these effecrs are most evident for US data releases pertaining to growth, employment and production,” they add.
“The more pronounced effect in recent years is likely to reflect the abnormally high level of market volatility during the global economic crisis.” they say.
The Reserve Bank economists add that this has led “market participants” to be “extremely sensitive to new economic information.”
That might be something of an understatement, in today’s conditions.
Related stories:
- RBA talks cautiously of some bright signs
- The little Aussie battler takes a beating
by Alan Thornhill
Wealthy executives have been abusing tax breaks that were meant to encourage workers to take a stake in their bosses’
companies.
The idea behind that scheme, which the Keating government introduced in 1995, was to promote industrial harmony in Australia.
The scheme has wide support in Federal parliament, with both the Rudd government and the Coalition, led by Malcolm Turnbull, backing it.
But the Tax Office has reported that wealthy executives, who abused it, have produced a “very serious loss of tax revenue.”
And the Federal Treasury has estimated that the Federal government could raise an extra $200 million in tax, over the next four years, if it closed the loopholes that permit this evasion.
So that’s precisely what the government set out to do, in its budget on May 12.
But it acted hastily and clumsily.
The protests that followed forced the government to make concessions, which have still to be settled.
“We do not mind admitting that perhaps we could calibrate this measure better,” the Assistant Treasurer, Chris Bowen, told parliament.
How, though, did the rorts work?
Mr Bowen said one executive had acquired options, under an employee share scheme, in the 2004 income year.
“The taxpayer did not elect to be taxed up front,” Mr Bowen said.
Instead, he deferred that liability.
“An ATO audit found the extra tax payable from that one individual was over half a million dollars.”
This was not an isolated case.
Mr Bowen said 8 per cent of the wealthy Australians, examined under a Tax Office high wealth investigation had “tax shortfalls.”
He and the Federal Treasurer, Wayne Swan are now promising to produce an issues paper, on how this problem might be fixed. They say they will do so within a fortnight.
We don’t know yet, exactly what that paper will say.
But we can confidently predict that the government sill take a tough line on this kind of evasion.
Related stories:
- Crackdown on share tax breaks in doubt
- Chasing bills:a new aggression
by Alan Thornhill
Australia’s big four banks are taking a serious risk by holding out on the latest interest rate cut.
Their argument, that this is necessary, because they now face higher costs raising the money they lend, is not convincing.
Even the usually mild-mannered Treasurer, Wayne Swan, says he has seen little evidence of that.
And an independent expert supports him.
Sean Cornelius, of Infochoice, told the ABC radio program PM last night, that in Novenber 2007, the average variable home loan interest rate charged by Australia’s banks, was 1.82 percentage points above the Reserve Bank’s target rate.
Now, though average margin that banks charge has blown out by amost 1 percentage point, Mr Cornelius said.
The big four banks, effectively, operate as a government protected banking cartel.
That has its advantages.
Australia’s banks, after all, have remained strong and solvent, when many in the United States, England and several other countries have not.
Mr Swan has clearly lost patience with Australia’s big banks.
So severely, in fact, that he told Fairfax radio, late yesterday, that they deserve “a good kick up the bum, occasionally.”
That’s not parliamentary language.
But it will resonate with the public.
“They (the banks) have to justify their position in the court of public opinion,” Mr Swan added.
There has been little sign, so far, though that the banks will step forward, either singly or together, to explain themselves clearly to the public.
In present circumstances, keeping quiet, as the banks have been doing, is not necessarily a good idea.
The government is arguing, very strongly, that it is doing all it can, to help Australians cope, as the global economic crisis hits the nationnal economy.
It is saying, too, that the banks should be playing their part, in that national effort.
This is powerful talk.
So if the banks do, in fact, have a good case for holding back, on the benefits of the latest rate cut, they would be wise to state it, very clearly.
So far, they are not doing so.
And no business, no matter how big or how dominant, can afford to ignore public opinion.
Related stories:
- Expect a big rate cut – and more spending – but no more tax cuts
- Banks face fierce rate cut pressure
by Alan Thornhill
As we all know, visitors can sometimes reveal deep secrets.
They don’t usually mean to betray their host’s confidence.
They just don’t realise, all too often, just what they have done.
A visiting World Bank economist, Vikram Seth had just such a moment last week.
“In my experience,” Mr Seth told Private Briefing over lunch, “stimulus packages can quickly become pro-cyclical, rather than counter cyclical.”
Like all economists, Mr Nehru talks in riddles, at times.
But his meaning was clear enough, in context, at the time.
(Your correspondent had hardly touched his wine, at that stage).
Mr Nehru was saying that government spending, meant to boost a flagging economy, all too often actually inflates an already recovering one.
Of course, as Shakespeare put it, this is “a consumation devoutly to be wished,” in the world’s present circumstances.
The US Fed chief, Alan Greenspan, has, of course, predicted that America’s recession could be over by late this year, or early next year, if that nation’s banks can be fixed by then.
At present, though, Mr Greenspan is as a voice crying in the wilderness.
But Australia’s Treasurer, Wayne Swan, did admit in Parliament, late last week, that the Federal government’s response to the global economic crisis, which erupted suddenly last September, had been “swift.”
And even the government’s critics admit that it has also been bold.
The main critic, Malcolm Turnbull, has also argued that an approach based on tax cuts would have been much more effective.
But the Prime Minister, Kevin Rudd, disagrees with the Opposition Leader.
Mr Nehru, though, has identified a risk that neither has said much about, at least so far.
The government’s stimulus packages does contain substantial plans for infrastructure spending.
There has been much talk of many of these projects being “shovel ready.”
Most, though, are not.
And if the government is still spending heavily even on, perhaps worthwhile, infrastructure projects, like new roads, bridges and rail links, that spending could well, in Mr Nehru’s words, prove to be pro-cyclical.
That is, it might well boost inflation, when the economy is already recovering.
If that happened, the consequences could well be serious.
And we all saw, last September, just how quickly an economy can turn.
Related stories:
- China:we can still hope
- Rudd announces a new stimulus package
Alan Thornhill is a parliamentary press gallery journalist. Private Briefing is updated daily with Australian personal finance news, analysis, and commentary.