by Alan Thornhill
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.
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
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.
by Alan Thornhill
Malcolm Turnbull and Bill Shorten meet again tonight for the second of their pre-election debates: ABC
Barrack Obama visits Hiroshima ABC
More than 100 leading scientists say the Rio Olympics should be moved or postponed over the Zika outbreak BBC
by Alan Thornhill
Barnaby Joyce’s imminent rise, to the post of Australia’s Deputy Prime Minister, is producing some apprehension in the nation’s capital, Canberra.
Not least on the issue of decentralisation.
Mr Joyce’s promotion became inevitable last week, when his National Party colleagues chose him to succeed the party’s previous leader, Warren Truss, who is retiring.
The National Party, now the junior partner in Malcolm Turnbull’s coalition government, was once called the Country Party.
And Mr Joyce retains its strong rural and regional focus.
That is reflected in his attitudes to decentralisation.
So no-one in Canberra was particularly surprised when plans to decentralise government scientific and other work to the Great Southern region, near Albany in Western Australia’s Great Southern region, Northam in that State’s Wheatbelt, or even to Tasmania, seemed to take on new life, with the announcement of Mr Joyce’s new job.
He doesn’t actually become Deputy Prime Minister, of course, until he takes the oath of office.
That is scheduled for Thursday this week,at Government House in Canberra.
Those looking for differences between Mr Joyce and Mr Turnbull, won’t have too much trouble finding them.
Mr Turnbull is, after all, a free-trader, right to the soles of his highly polished shoes.
There is something of a protectionist about Mr Joyce.
He would not shrink from a direct intervention in a market, if he believed that to be valuable.
All this is illustrated, clearly enough, in his attitude towards decentralization.
But he is clever about it.
Earlier this month, while announcing the relocation of three research organisations from Canberra to regional Australia, he said:”I have accepted proposals from three Canberra-based research and development corporations to increase their regional presence, which will boost jobs and growth in Dubbo, Wagga Wagga, Toowoomba and other areas.
“As well as being home to vibrant farming communities, these regions also have some of the best agricultural universities and research facilities in the country.
“It is logical that strong links should exist between the RDCs, universities and farmers on the ground in each industry.
“Being geographically closer to the industries they serve will strengthen their relationships and help the RDCs better understand their individual industry’s needs.”
There are limits to this kind of thing, of course.
Valuable knowledge, built up over years, in a sophisticated city like Canberra, which offers a wide range of educational and medical services, can be lost if a key scientist, chooses to leave a particular project, rather than accept a particular transfer.
And that whole process can become economically expensive, if adopted for political, rather than industrial reasons.
There are some fine questions of balance, here.
by Alan Thornhill
Malcolm Turnbull declared that his new cabinet “combines youth, new talent, and experience” as he announced its membership at a press conference in Sydney today.
The truth, always, is a little more complicated.
The reshuffle that the Prime Minister had announced, just months before the next Federal election, was not his choice.
It was forced on him by the resignation of a minister, Stuart Robert, who had held the Human Services Portfolio.
Until Labor pursued him relentlessly in Federal parliament.
It alleged Mr Stuart had used his public office to promote the interests of a company that donates generously to the Liberal party.
And that he did so while on a private visit to China.
Meanwhile the Opposition Leader, Bill Shorten, was cheered enthusiastically at a Labor conference, also in Sydney.
That happened as he explained new tax policies meant to make new home purchases more affordable for young Australians.
Beyond that there was a sense, in the conference room, that Labor’s fortunes might have changed.
And that it might now have at least some chance of defeating the government in the forthcoming elections, even though it has been trailing the Coalition in the polls for several months.
But who has found a place in Mr Turnbull’s new Cabinet?
The Prime Minister congratulated Barnaby Joyce and Fiona Nash on their respective elections as Leader and Deputy Leader of the National Party, the junior partner in his Coalition government.
And he said:” Barnaby Joyce will consequently be sworn in as the Deputy Prime Minister and he will retain his portfolio of Agriculture and Water Resources.
“His Deputy, Senator Fiona Nash, will be sworn in as the Minister for Regional Development, Regional Communications and Rural Health.”
Mr Turnbull also said:” I’m appointing Andrew Robb as a Special Envoy for Trade between now and the election so that he can support Steven in the transition into the new portfolio and ensure that Andrew’s remarkable range of international contacts will be introduced to his successor.
Darren Chester will take on Warren Truss’s responsibilities for infrastructure and transport. Darren will make a formidable contribution in this portfolio.
He has been one of the younger stars in the Parliament and recognised as such for a long time.
Mathias Cormann will retain his responsibilities that he’s taken on in an acting capacity but he’ll retain them formally as the Special Minister of State in addition to being the Finance Minister.
“As you know, Mal Brough informed me earlier today that he did not wish to be considered for a position in the new executive line up given the fact that the police investigations are continuing and will continue at least for some months, as he understands.”
Senator Scott Ryan will be sworn in as the Minister for Vocational Education and Skills.
Now this ministry was previously, has been held by Luke Hartsuyker and he is not featuring in the National Party’s ministerial line up on this occasion.
‘I want to thank Luke for his contribution in that portfolio.
“He also has made a great contribution to the Coalition in opposition as well and we worked very closely together when I was the Shadow Communications Minister and he was the Shadow Minister for Regional Communications.
“He’s a great parliamentarian, a great coalitionist and he will be missed.”
“Alan Tudge will be sworn in as the Minister for Human Services.
|“Dan Tehan will be sworn in as the Minister for Defence Materiel and the Minister for Veterans’ Services.|
“Senator Concetta Fierravanti-Wells will be appointed and sworn in as Minister for International Development and the Pacific.
“This is a very exciting promotion for Connie and recognises her extremely successful and very important work as the Assistant Minister for Multicultural Affairs.
“Senator Matt Canavan from Queensland will be sworn in as the Minister for Northern Australia.
“He will work closely with the senior minister in that portfolio, Josh Frydenberg and the Cabinet Minister.
“This is a policy area of Northern Australia, of northern development which is absolutely central to Australia’s growth and future prosperity.
Mr Turnbulll said the changes ‘in the Assistant Minister ranks would be:-
Keith Pitt will serve as the Assistant Minister to the Deputy Prime Minister.
Craig Laundy will become the Assistant Minister for Multicultural Affairs.
Jane Prentice will be the Assistant Minister for Disability Services working with Christian Porter.
Angus Taylor will serve as the Assistant Minister to the Prime Minister with special responsibility for Cities and Digital Transformation. These are two key whole of government areas and they will be taken, continued to be driven through my leadership and my department in the future.
Dr Peter Hendy will serve as Assistant Minister in the Finance portfolio supporting Mathias Cormann and also as Assistant Cabinet Secretary.
Senator James McGrath will continue to serve as my assistant minister but will take on additional duties supporting Peter Dutton as Assistant Minister for Immigration.”
The Prime Minister said his new team would be sworn in on Thursday morning.
by Alan Thornhill
The Federal government’s plans for tax reform – including the GST – are likely to be released gradually over coming months.
The Prime Minister, Malcolm Turnbull made this clear in an interview with an Adelaide radio station early today.
He said the full extent of the reforms would “of course” be revealed on Budget night in May.
However Mr Turnbull added the government might make some announcements before then.
There have been persistent reports that the government is considering increasing the goods and services tax from its present rate of 10 to 15 per cent and broadening its Impact, possibly to include food.
The government has refused either to confirm or deny these reports.
That led the Opposition Leader, Bill Shorten, to criticise the government for what he calls its “lack of transparency” on the issue.
T ax reform is likely to be a major issue at the next Federal elections.
The present government’s term expires in September.
But the election to choose a replacement could be delayed until 2016.
Mr Turnbull warned Coalition MPs early this week that an early election could also be “a live issue” in certain circumstances.
That has left some, particularly those in marginal electorates, very nervous.
They point out that any increase in the GST would be unpopular and warn, too, that Mr Turnbull has left himself little time to convince voters that such a change is necessary, if he does decide to go down that path.
by Alan Thornhill
The Federal Treasurer, Scott Morrison, insisted that he is taking Australians on “the safe road” to a balanced budget when he published his Mid Year Economic and Financial Outlook document today.
However he admitted that the nation will still face deficits of $37. 4billion in 2015-16, $33.7 billion in 2016-17, $23 billion in 2017-18, and $14.2b in 2018-19.
Mr Morrison said the journey to budget balance needed to be “safe and careful” with the expected date of a return to surplus pushed back another year to 2020-21.
Using the metaphor of the Christmas car trip, he said he expected a lot of Australians to ask “are we there yet?”.
“We need to take a safe and careful route and one (that) does not put at risk our jobs and growth,” he said.
The government has announced extra spending on its humanitarian program since its May budget.
Its decision to permanently accept an extra12,000 refugees from Syria and Iraq , in particular, will cost $158 million in 2015-16, and $909 million over four years to 2018-19.
Offsetting savings were announced in today’s mini budget.
These will include removing bulk-billing for pathology services and reducing bulk-billing for diagnostic imaging services and MRI services.
This will reduce spending by $197 million in 2016-17 and by $639 million over four years to 2018-19.
There will also be cuts to childcare.
These will include reducing the childcare subsidy for families earning more than $250,000 a year.
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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