Superannuation fund members will soon start seeing better benefits as technical reforms – now under way – progress.

The industry and the government both believe the new systems – and clarifications – contained in the reforms will cut costs and boost benefits.

However the Senate could still block one key proposal.  That is to use Medicare’s powerful computing systems, as a financial services clearing house.

The Federal Superannuation Minister Chris Bowen said the Opposition has threatened to use its numbers in the upper house to do just that.

However the Parliament has now passed financial market supervision reforms, which the government proposed.

Mr Bowen said these would “enhance the integrity of Australia’s financial markets.”

The superannuation industry welcomed this news, praising the government, in particular, for extending consumer protection to superannuation borrowing arrangements.

This was done by declaring that these borrowings are financial products under the Corporations act.

Though technical in nature, the Australian Superannuation Funds Association, said this would help to curb the industry’s costs and the savings would be passed on to fund members.

Mr Bowen also welcomed an announcement by three of Australia’s largest superannuation fund managers, AAS, Pillar Administration and  Superpartners, that they would accept a common set of computer protocols, to cover the movement of data and money between funds.

“This agreement will make it easier and more efficient to transfer money between funds,”
Mr Bowen said.

That, too, would result in lower costs for fund members, he added.

A Reserve Bank heavy, Philip Lowe, has a fresh way of looking at Australia’s job market.

“….it is important to remember,” he says,”that one of the least productive things a society can do is leave large numbers of people at home who actually want to work.”

That cue from Mr Lowe, who is the bank’s Assistant Governor (Economics),  gives us a clearer look at the latest job market figures.

Yes.  Unemployment rose by 10,700 last month. And  the nation’s seasonally adjusted unemployment rate rose slightly to 5.3 per cent, from 5.2 per cent the previous month.

The Statistician’s labour force figures also show that 615,900 Australians were still out of work last month.

Mr Lowe was urging those who attended a seminar in Sydney, earlier this week, to remember that Australia must become more productive, if it is to keep a lid on inflation. That is, it must produce more.

So Mr Lowe would have been pleased, as he studied the bureau’s latest figures, to see that Australia’s male labour force under-utilisation rate is, once again, trending down.

That rate, for women, is also flattening, after rising sharply last year.

So what, really, is happening right now, in Australia’s job market?

Thousands of Australians were shifted to part time work, after the global economic crisis struck.

That helped them keep some income, at least.

However there are now some signs that move to part time work is being reversed, as Australia’s economy recovers.

In fact, the bureau reports 11,400 Australians actually found full time work in February.

That was offset, though, by a fall of 11,000 in part time employment.

A small, overall, improvement, perhaps.

This movement, though, is still positive.

So was that Mr Lowe smiling?

Surely not.  He’s an economist.

Australia’s housing finance figures might well be ringing alarm bells.

The Bureau of Statistics reports that home finance commitments fell steeply in January, both in terms of the number of home building starts financed and the amount lent to help people buy homes.

These figures, of course, are still affected by Federal government moves to wind back its stimulus spending.

So it may take some months yet for clear trends to appear.

Even so, the bureau reports that a bare $21.2 billion was lent in January to finance home purchases, a 3.3 per cent fall from the December level.

Indeed, the bureau’s figures now show that lending to build new homes has now fallen for three successive months.

The Housing Industry Association says recent rate rises are curbing activity in Australia’s housing market.

The Reserve Bank has  raised rates in four of the past five months.

The Association senior economist, Ben Phillip, said the situation now calls for care.

“The Reserve Bank must take stock of the impact that higher interest rates are having on the new home market,” Mr Phillips said.

The bank, itself, is aware of the problem, noting that spending on housing will have to be increased, over the medium term, if the demands of Australia’s strongly rising population are to be met, without fresh pressure on both house prices and rents.

The bank’s Assistant Governor, Phlip Lowe, acknowledged these risks, in a speech he gave to a seminar in Sydney.

(see next story)

Kids staying at home longer?

House bursting at the seams?

Don’t worry.  You are not alone.

The Reserve Bank knows of your problems.

Indeed, it fears that these trends could push house prices – and rents – even higher

Its Assistant Governor, Philip Lowe, spoke at some length about these issues, at a seminar in Sydney today.

He noted that the number of houses being built in Australia over recent years had been below average, even though the nation’s population has been growing strongly.

That had meant house prices had been rising and rental vacancy rates had been very low.

Mr Lowe spoke of other, less obvious, trends, too.

He said that, on average,  more Australians are now living in each house and more money is being spent on renovations, rather than new buildings, now.

“Obviously examples of this are the trend towards young adults staying in the parental home longer and a rise in the number of people sharing accommodation,” Mr Lowe said.

“In a sense, as a society, there has been a trade off between quality and quantity.

“In particular, we have chosen to build bigger and better appointed dwellings, rather than more dwellings,” Mr Lowe said.

Mr Lowe said if strong population growth continues over an extended time, Australia might have to devote a bigger share of its gross domestic product to housing in future.

“If this does not happen further adjustment in housing prices and rents is likely to occur,” Mr Lowe warned.

We’ll all  be out shopping again soon – this time with our own money.

The economists at  Access Economics, who have just published new retail forecasts, are confident about that.

Naturally they admit that our spending has been boosted over the past year by stimulus measures, such as tax breaks,  subsidies and low interest rates, which left extra money in many budgets.

However they say those times are now rapidly  passing , to be replaced by new growth, based on a stronger job market.

“Ultimately,” they say,”spending growth is regulated by income growth.”

Th Access economists say, too, that job growth is the “bedrock” of consumer spending.

Access noted that almost 200,000 jobs had been created in the five months to January.

It said, too, that about half of those new jobs had been full time.

“A greater sense of security makes for a more confident consumer,” Access said.

Its work is backed by other economic research.

The National Australia Bank, for example, is reporting that business confidence has returned to the surprisingly strong levels of last November.

That means business confidence is now back at levels not previously seen since May 2002.

And the ANZ bank said the number of job ads, appearing in Australia, had leapt by 19.2 per cent in February.

The ANZ said the nation is now “enjoying solid employment growth and reduced unemployment.”

However it warned that “a record 30.2 per cent” of all Australian jobs are now part time or casual.

The bank’s chief economist, Warren Hogan, said this represents “a significant degree of spare capacity or underemployment.”

Access has reservations, too.

It says, for example, that there are still “plenty of factors which will stop retail sales from being spectacular.”

These would include further interest rate rises, which would slow growth in house prices and ultimately affect consumer confidence.

These rate rises would eat directly into shoppers’ incomes, Access said.

Women’s votes have never been more important to Australia’s political parties than they will be in the Federal elections due later this year.

And the Federal Opposition Leader, Tony
Abbott, has put in a high bid for them, with a six month paid parental leave scheme, which he has just announced.

It would see parents paid the equivalent of their current salary, up to an annual rate of $150,000, for a period of six months.

The new scheme, which would be funded by a 1.7 per cent levy on big business, leaves Labor’s rival scheme in the shade.

Labor is merely offering  women 18 weeks’ pay at minimum wage levels.

This means parents could get up to $75,000, under the Coalition’s scheme, against just $9,800 under the government’s plan, which still has to go to the Senate.

Mr Abbott estimates his tax on Australia’s 3,200 firms earning more than $5 million a year would net $2.7 billion.

He said he did not expect big business would be pleased with his plan.

“I don’t expect anyone to cheer about having to pay more but I expect that even people who operate in big business think of themselves as citizens as well as business people,” Mr Abbott told reporters.

He was right about that.

Several business leaders including Peter Anderson, chief executiveChamber of Commerce and Industry attacked his idea.

“Imposing additional costs like these on the business community is not fair because the benefits to business are uneven and are far less significant than the benefits to the mums and dads who are going to be taking the maternity-paternity leave,” Mr Anderson said.

Two government ministers, Jenny Macklin and Tanya Plibersek, ridiculed Mr Abbott’s announcement, dismissing it as “a thought bubble.”

“His sham policy has no detail, no costings and no timeline,” the two ministers said.

“Australian families need certainty on paid parental leave to plan for the future,” they added.

“This is yet another backflip on parental leave from Mr Abbott,” the two ministers said.

“As a minister in the Howard government he campaigned for years against paid parental leave, saying it would be introduced ‘over his dead body.’”

Mr Abbott’s announcement was timed to coincide with International Women’s Day.

Despite real progress, over recent decades, the long held goal of equal pay, for Australian women, remains as elusive as ever.

The latest figures, from the Australian Bureau of Statistics, show the average weekly earnings of the nation’s women are still barely two thirds those of its male workers.

Want to get more from your super?

If so, you might be wise to look at an industry superannuation fund, instead of one of the commercial funds.

A new report, admittedly funded by the industry superannuation network, raises some interesting points.

The industry funds, of course, were started by Australia’s unions.

So you would have to be eligible, to join a particular fund.

However many workers who are eligible to join one of these funds have not done so.

In fact, the report says, more than 4 million Australians workers, who would be eligible, have joined a commercial fund instead.

And, it adds, each of them is paying hundreds of dollars a year in commissions, mostly for financial advice that they do not receive.

These payments are known in the trade as trailing commissions.

Industry funds do not charge commissions of this kind.

Does this matter all that much?

Yes it does, the report says.

“Fees and commissions paid by retail fund members could cost someone on average wages more than a year’s  salary over their working life,” it concludes.

Then it adds”The more you pay for super. the less you get.

“On average, for each additional 1 per cent paid in fees, members of the largest public offer funds lost almost 1.5 per cent in net returns.

“Since 1996, more than $40 billion has been lost from Australian workers’ super accounts, due to their accounts being silently milked by commissions,” the report says.

The entire superannuation industry is being overhauled at present, with the Federal government working on a raft of new reforms.

This follows the payout shocks that many older Australians suffered after the stock market crash.

The report, though, strongly suggests that those who can shift to an industry fund would be wise to consider doing so, before the new reforms take effect.

How, though, do the industry funds perform, financially?

The report claims that they have done better than the retail funds in nine of the past 10 years.

The Prime Minister, Kevin Rudd, says his government will not increase tax, as proportion of national income.

Mr Rudd renewed this pledge – first made before the 2007 election – in the wake of speculation that the government will have to increase taxes, to meet rising health costs.

However the Prime Minister’s promise may not provide all that much comfort to taxpayers.

Mr Rudd said the costs of his planned hospital funding reforms would be met from the Federal budget.

He added, though, that, any politician who would not acknowledge that Australia’s health costs would increase, over the long term, “is not worth a pinch of salt.”

Despite that tax, measured as a proportion of the overall economy, would not rise.

“That’s what we said before the election.

“That’s what we’ve stuck to since the election.

“That’s what we’ll adhere to in the future,” Mr Rudd said.

He was speaking in a Sydney radio interview.

“We have said consistently that we will not increase tax as a proportion of Gross National Product,” Mr Rudd added.

Consumer confidence is up, despite this week’s widely predicted rise in interest rates.

And the good economic news keeps rolling.

The Roy Morgan organisation reports that consumer confidence rose strongly in the final week of February.

It is now 34 points higher than it was in March last year, when Australians were very worried about the global economic crisis.

The Australian Bureau of Statistics is also reporting a sharp improvement in Australia’s trade.

Australia’s exports rose by 1 per cent in January, while imports for the month fell by 3 per cent.

That meant Australia’s trade deficit fell by almost $1 billion during the month.

Low export prices and strong imports slashed 1.2 per cent from Australia’s economic growth, in the final three months of last year.

However the nation still managed to chalk up 0.9 per cent growth in that time.

And, if sustained, January’s improvement should contribute to further economic growth in the early months of this year.

The Roy Morgan survey showed that 48 per cent of Australians now expect their families to be better off at this time next year.

That was the highest level, seen on this indicator, since October last year.

Only 14 per cent expected their families to be worse off.

The organisation’s chief, Gary Morgan, saw this week’s rate rise, too, as a positive sign.

He described it as :”…a firm sign that the RBA (Reserve Bank) believes the Australian economy is on a sustainable growth path…”

There may be better times ahead.

There are, certainly, signs of that in the latest national accounts.

Private investment, for example, rose by 3.5 per cent in the final three months of last year.

And Australia’s household spending rose by 0.7 per cent, in the same time.

But much of the force, that produced the nation’s 0.9 per cent economic growth in the quarter still came from the Federal government’s stimulus package.

That is reflected in the 10.2 per cent rise government investment, that appeared in the Statistician’s national accounts for the December quarter.

However, a sudden jump in the nation’s terms of trade, during the final three months of last year, must not be overlooked. either.

Australia suffered an 11.2 per cent fall in its terms of trade last year, in the wake of the global economic crisis.

However, that indicator showed a 2.9 per cent improvement in the December quarter.

China’s still strong demand for Australia’s iron ore and coal helped there.

So did growing demand from India.

The Federal Treasurer, Wayne Swan, was also upbeat in his assessment of the bureau’s figures, noting that company profits, too, rose in the final three months of last year.

“After falling for four consecutive quarters, the gross operating surplus of private, non financial corporations rose by 4.8 per cent in the December quarter,” Mr Swan said.

“The private sector is looking increasingly well placed  to pick up the slack as the Government’s fiscal stimulus is progressively withdrawn over coming quarters,” the Treasurer added.

So – barring unforeseen events – the future is now starting to look at least a little brighter.

That, however, is a very substantial qualification.

The Greek Prime Minister, George Papandreou, says his country’s situation with debt is now so bad, that it is like being in a war.

That declaration, of course, is aimed primarily at his country’s own population.

Greeks have not been at all eager to embrace the restraints that are necessary, to put their country onto  a more sustainable path.

Global markets, though, are still very nervous – and the results of a major default are unpredictable.

And such events could well have major repercussions for Australia.

The Australian economy grew by 0.9 per cent in the December quarter and 2.7 per cent in 2009.

This followed a rise of 0.3 per cent in the previous quarter.

But growth of some 4 per cent is needed to absorb each year’s school leavers into the nation’s workforce,

Figures released by the Australian Bureau of Statistics today show that the Federal government’s stimulus package – reflected in a 10.2 per cent surge in government investment – was the main reason for the quarter’s relatively strong rise.

However private investment also rose by 3.5 per cent in the final three months of last year.

Household spending rose by 0.7 per cent.

A fall in Australia’s net exports, though, restricted growth in December quarter.

Import growth, of 7.7 per cent in that time, was far greater than the nation’s export growth of just 1.7 per cent.

Manufacturing surged by 5.1 per cent in the final three months of last year in seasonally adjusted volume terms,  while wholesale trade rose 3.6 per cent .

Final consumption spending rose by 0.9 per cent in the quarter and 3.2 per cent over the year.

Australia’s terms of trade rose by 2.9 per cent in the final three months of last year.

But they were still down 11.2 per cent over the year.

The Bureau also reported that real net disposable income rose by 1.2 per cent in the December quarter.

However it was still 1.2 per cent over over the year.

New South Wales was the nation’s powerhouse last year, chalking up 5.2 per cent growth in State final demand.

That was exceeded only by the ACT, which saw 7.6 per cent growth on the same indicator.

Victoria saw 4 per cent growth, Queensland recorded a contraction of 1.1 per cent, South Australia chalked up 5 per cent growth, Western Australia 3.3 per cent, Tasmania contracted by 0.3 per cent and the Northern Territory experienced a 6.3 per cent contraction.

Prepare for further rate rises.

That’s the message the Reserve Bank wants home buyers to take from its announcement of yesterday’s 25 basis point rise.

In that  announcement, the bank’s Governor, Glenn Stevens, said it is now appropriate for Australia’s interest rates to be closer to their historical averages.

“Today’s decision is a step in that process,” Mr Stevens added.

He said  Australia’s interest rates are still “lower than average.”

The latest rise, though, is the fourth in five months.

The Housing Industry Association said these rises, together, mean that first home buyers now have to find an extra $216 a month, on average, to get into their homes.

The latest rise took the Reserve Bank’s target rate to 4 per cent.

Australia’s banks and other lenders are expected to pass it on in full.

However the Treasurer, Wayne Swan said Australia’s banks would have “absolutely no justification” for any bigger rises.

He said bank margins had already returned to pre-crisis levels.

Mr Swan said families with a typical $300,000 home loan would have to “stump up” another $50 a month, as a result of yesterday’s rate rise.

Most analysts expect two more increases, of a similar size, in the not too distant future.

That would mean many home buyers would have to find another $100 a month.

Thousands of Australian families will be placed under severe financial pressure, as that happens.

Those whose main  breadwinners are still working part time, will be particularly vulnerable.

Thousands of Australians were shifted from full to part time work, when the global economic crisis struck.

However thousands of Australians, who would like to move back to full time jobs, are still working part time.

Mr Stevens said Australia’s underlying inflation rate had eased, as expected, from its peak in 2008.

But he said now that the risk of a serious economic contraction in Australia has  passed, less monetary stimulus is needed.

The Reserve Bank raised its target interest rate by 25 basis points to 4 per cent today, even though building approvals, throughout Australia, plunged by 7 per cent in January.

This followed three consecutive interest rate rises late last year.

The building industry had warned that approvals for unit and semi-detached housing in Victoria plunged by 29.1 per cent in January.

However the Reserve Bank Governor, Glenn Stevens, insisted that the latest rise is necessary.

“The global economy is growing,” Mr Stevens said.

“And world GDP is expected to rise at close to trend pace in 2010 and 2011.”

He admitted though that the expansion “is still hesitant in the major countries,”

Mr Stevens said that was  due to the continuing legacy of the financial crisis, which is producing “ongoing excess capacity.”

” In Asia, where financial sectors are not impaired, growth has continued to be quite strong,” Mr Stevens said.

“The authorities in some countries are now seeking to reduce the degree of stimulus to their economies,” he added.

But Mr Stevens also said:”Global financial markets are functioning much better than they were a year ago.

“And the extraordinary support from governments and central banks is gradually being wound back.

“Credit conditions remain difficult in some major countries as banks continue to face loan losses associated with the period of economic weakness.

“Concerns regarding some sovereigns remain elevated.

Mr Stevens said Australia’s domestic economic conditions had been  stronger than expected, last year,  after a mild downturn a year ago.

“Inflation has, as expected, declined in underlying terms from its peak in 2008,” he added.

This had been  helped by the fall in commodity prices at the end of 2008, a noticeable slowing in private-sector labour costs during 2009, the rise in the exchange rate and the earlier period of slower growth in demand.

“CPI inflation has risen somewhat recently as temporary factors that had been holding it to unusually low rates are now abating,” he said.

“Inflation is expected to be consistent with the target in 2010,” he added.

The Reserve Bank aims to keep Australia’s annual underlying inflation rate in a 2-3 per cent, over the course of a business cycle.

The lure of the January sales proved as strong as ever last month, with retail sales throughout Australia rising 1.2 per cent during the month,

This followed disappointing pre Christmas trade, with sales falling by 0.9 per cent in December.

The Australian Bureau of Statistics  reported that Australia’s department stores, clothing and shoe shops and grocery chains all increased their sales in January.

However the nation’s cafes, restaurants and take-away food stores saw their trade fall, during the holiday period.

The bureau also reported today that home building approvals fell by 7 per cent during January.

This followed removal of the Federal government’s stimulus subsidy, for first home buyers.

However the Housing Industry Association reported, earlier this week, that home sales, by Australia’s volume builders, rebounded by 9.5 per cent in January.

The association took this as a sign that upgraders and investors are re-entering the nation’s housing market.

The Reserve Bank board, which is meeting today to review Australia’s interest rates, will take all of  these figures into account.

It’s decision is to be announced at 2.30 this afternoon.

Although car and house sales have been strong, easing price pressures might save Australia from another interest rate rise today.

At this stage, though, that is still far from certain and we will all have to wait until 2.30 this afternoon before we will know for sure.

That’s when the Reserve Bank plans to release the results of a review of Australia’s interest rates, that its board will conduct early today.

Either way, figures that the Australian Bureau of Statistics has just published are sure to weigh heavily on the board’s deliberations.

These include the bureau’s balance of payments figures and business indicators for the December quarter.

Other figures, published by the Housing Industry Association, are also likely to be influential.

They showed a 9.5 per cent rebound in the sales of Australia’s large volume residential builders in January.

The association’s chief economist, Harley Dale, said a sustained improvement, of this kind, would suggest that a recovery, driven both  by people upgrading  – and investors – would be “achievable.’

The Federal government’s now discontinued subsidy for first home buyers has been driving the market for some time now.

The bureau’s balance of payments figures showed some mixed results.

They revealed, for example, that Australia’s current account deficit rose by $2.7 billion, or 19 per cent, in the quarter to almost $17.5 billion.

That is expected to detract 1.3 percentage points from Australia’s economic growth in the December quarter, on a  volume measure.

The bureau’s figures also showed that Australia’s net foreign was almost $648 billion at the end of December.

That represented a rise of 2 per cent over 2009.

Detailed figures, in the Statistician’s bulletin, also suggested that new vehicle imports had  been particularly strong during the quarter.

But one figure, in the Statistician’s bulletin, stood out.

A technical indicator, called the implicit price deflator, fell by 2.1 per cent in the December quarter.

This suggests that Australia’s imports, in the December quarter, will have a significant impact on other price pressures in the economy.

The strength of the $A, over most of the December quarter, helped there.

The Reserve Bank aims to keep Australia’s inflation in a 2-3 per cent range, over the course of the business cycle.

It looks at pressures, like these, very closely, when it reviews Australia’s interest rates, as it will do today.