by Alan Thornhill
Malcolm Turnbull is finding it hard to convince voters that his government is serious about tackling the kind of corporate tax avoidance confirmed in the Panama Papers.
And the Prime Minister did not help his case by giving an apparently confused answer to a reporter’s question on the role his government is actually playing, in this matter.
Meanwhile the Federal Opposition, keen to take whatever advantage it can from this situation, issued a press release today, seeking to do just that.
Its Shadow Assistant Treasurer Andrew Leigh, said the reply Mr Fraser had given conflicted with one a senior tax official had given, to a parliamentary committee.
Mr Leigh noted that that Mr Turnbull had said Australia is “leading the charge globally in going through the Panama Papers”.
Mark Konza had told parliament’s Economic Reference Committee that Australia is part of an international leadership group, that is tackling the matter.
“…I don’t want to say we’re leading, but we’re batting above our weight,” Mr Konza had added.
However Mr Leigh said Mr Turnbull had gone well beyond Mr Konza’s, relatively modest position, when he replied to the reporter’s question.
Mr Konza, Deputy Commissioner, International, ATO, had said only that “ What we are doing is we are taking a, we are part of a leadership group at the OECD.
“ I don’t want to say we’re leading, but we’re batting above our weight,” the tax official had added.
Mr Leigh said:” A Government that has slashed 4,700 ATO jobs and watered down tax transparency laws cannot be trusted in clamping down on tax avoidance.”
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
by Alan Thornhill
The Reserve Bank sees stronger economic growth ahead – though not just yet.
In a revision to its latest statement on monetary policy published today, the bank said that – as expected – the Australian economy had grown at a “below average” pace over the year to September 2015.
It said this had been “the starting point” in calculating its latest forecasts – which include 3-4 per cent growth in the 12 months to the end of June 2018.
The Bank said that:“over the next few years, growth is expected to remain around its current rate, which is slightly below its decade average.”
But it expects things to pick up after that.
It added that:”Activity continued to shift from mining to non-mining sectors of the economy.”
“Services sector output grew by around 3½ per cent over the year to September, while goods-related output grew only modestly.”
The bank also noted that:” Mining investment continued to decline sharply, although this was partly offset by contributions from resource exports.”
“ Net service exports also made a significant contribution to growth, partly reflecting the effects of the exchange rate depreciation.”
“ Non-mining business investment was little changed over the year.”
The bank also said that dwelling investment continued to grow strongly
and consumption growth picked up to be close to its decade average.
But it added: “ Public demand grew at a below-average pace over the year.”
The bank also said:“The forecasts for iron ore and coal prices are lower, reflecting a weaker outlook for Chinese steel demand and an expectation that there will be only a limited reduction in global supply from high-cost miners, particularly those in China.”
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 Bureau of Statistics reported today that we borrowed $21 753 million in November to finance the purchase of new homes we intend to live in.
This seasonally adjusted figure was 2.4 per cent above the comparable result for October.
The Bureau also reported that, on the same basis, our borrowing for personal finance, rose by 0.9 per cent to $6 848 million.
Borrowing for commercial finance also rose – by $1.1 per cent – to $45 886 million
Lease finance, though, was a weak spot, falling 3.9 per cent to $586 million.
However a graph published by the Bureau, still showed that our personal finance borrowing fell sharply, between May and November last year.
by Alan Thornhill
The US Federal Reserve’s decision to raise interest rates – by 25 basis points – is being hailed as the end of the global economic crisis.
Fed Chair Janet Yellen said it ended an “extraordinary period” in which the bank sought to revive the US economy.
It was the first rise ordered by the Fed for nine years and follows seven years of economic crisis.
For much of that time the Fed has kept US marker interest at or close to zero.
The US decision will put pressure on Australia’s Reserve Bank to raise its marker rate – of 2 per cent – early in the New Year.
The Fed’s decision follows the longest period of weakness in the US economy since the Great Depression of the 1930s.
It has been long awaited.
But there are still doubts about whether the US economy was ready for this step.
However Fed officials are confident.
They say an improved economy was ready for a rate hike.
They point to “solid” consumer spending, a rebounding housing market and stronger business fixed investment.
The Fed also took careful note of a healthier labor market in which the unemployment rate has tumbled to 5 per cent.
That is just half the level seen in the early stages of the crisis.
Janet Yellen has few doubts.
“The first thing that Americans should realise is that the Fed’s decision today reflects our confidence in the U.S. economy,” Yellen said in a press conference after the Fed action.
Even so the US decision will be watched apprehensively in Australia, particularly in the building industry, which has been one of the few strong performers in recent times.
There will be relief, though, that Janet Yellen has already announced that any future rate rises in the US will be gradual.
US Investors welcomed the Fed’s decision, seeing it as recognition of increasing strength in the world’s biggest economy.
Their enthusiastic response saw the Dow Jones index rise 224 points overnight – Australian time – to 17,749.
That pointed also to the prospect of a strong start to trading on the local market.
The $A was trading at 72.6 US cents early today,
by Alan Thornhill
Consensus on tax reform proved elusive when the Prime Minister, Malcolm Turnbull met State premiers and Territory leaders in Sydney today.
The State and Territory leaders went into the meeting of the Council of Australian governments seeking reversal of the $80 billion cuts to their health and education spending that flowed, ultimately, from the unpopular 2014 Federal budget.
Mr Turnbull, for his part, was seeking more stable revenue flows, as the mining boom subsided.
That led to the Federal Treasurer, Scott Morrison, ordering the Federal Treasury to model the likely impact of possible changes, including several that would include a higher Goods and Services Tax.
Although the Opposition has been warning that Mr Turnbull wants to impose a 15 per cent GST on “everything” in place of the present 10 per cent, a 12.5 per cent rate is now starting to look more likely.
But the Coalition remains determined to curb the big Federal deficits it inherited from its Labor predecessor,
Mr Turnbull opened today’s meeting by thanking the Premiers and Territory leaders for what he called “very collaborative discussion we had last night.”
He said:“We all understand that Australia’s economy is transitioning from an enormous mining construction boom.”
And added:”We recognise that we’ve seen a high rise in our terms of trade and as was always going to happen that has now subsided.
I think we all recognise that to ensure our continued prosperity we do need to be more competitive, more productive and more innovative.
However the COAG leaders did agree to keep on examining options for tax reform.
They also accepted a March deadline on their discussions.
”Mr Turnbull said after today’s meeting “there are many different options.”
“There are many different approaches and… ultimately what we need is a tax system for the 21st century.”
The Tasmanian Premier, Will Hodgman, said he was looking forward to putting some concrete proposals on the table by the proposed deadline of March next year.
Mr Hodgman said his focus was not to increase the tax burden.
“We believe that the better and more appropriate approach is to ensure that we use this discussion, which also has a very important element of understanding the inefficiencies in our systems,” he said.
ACT Chief Minister Andrew Barr said there are still some fundamental issues in the tax system that need to be addressed ahead of the looming deadline.
“Importantly, out of today was recognition from states and territories as well as the Commonwealth that this is a shared challenge,” Mr Barr said.
“But it’s one that the clock is ticking on and we can’t have another meeting like today in March.
“We have to start making decisions.”
by Alan Thornhill
At its meeting today, the Reserve bank. Board decided to leave the cash rate unchanged at 2.0 per cent.
In a statement afterwards the bank’s Governor, Glenn Stevens, said the global economy is expanding at a moderate pace.
He noted that there had been some softening in conditions in the Asian region,.
But Mr Stevens also said there had been “continuing US growth and a recovery in Europe.”
He said:” Key commodity prices are much lower than a year ago.”
Mr Stevens said, this reflected “increased supply, including from Australia, as well as weaker demand.”
He warned:“Australia’s terms of trade are falling.”
Mr Stevens said:“ (the)Federal Reserve is expected to start increasing its policy rate over the period ahead, but some other major central banks are continuing to ease monetary policy.”
Hoowever, her added:“Volatility in financial markets has abated somewhat for the moment.
“ While credit costs for some emerging market countries remain higher than a year ago, global financial conditions overall remain very accommodative,” Mr Stevens said.
“In Australia, the available information suggests that moderate expansion in the economy continues in the face of a large decline in capital spending in the mining sector.”
“ While GDP growth has been somewhat below longer-term averages for some time, business surveys suggest a gradual improvement in conditions in non-mining sectors over the past year.”
“This has been accompanied by stronger growth in employment and a steady rate of unemployment.”
“Inflation is low and should remain so, with the economy likely to have a degree of spare capacity for some time yet.”
“Inflation is forecast to be consistent with the target over the next one to two years.”
“n such circumstances, monetary policy needs to be accommodative.”
“ Low interest rates are acting to support borrowing and spending. While the recent changes to some lending rates for housing will reduce this support slightly, overall conditions are still quite accommodative.”
“ Credit growth has increased a little over recent months, with credit provided by intermediaries to businesses picking up.”
“Growth in lending to investors in the housing market has eased.”
“Supervisory measures are helping to contain risks that may arise from the housing market. “
Mr Stevens said:“The pace of growth in dwelling prices has moderated in Melbourne and Sydney over recent months and has remained mostly subdued in other cities.”
“ In other asset markets, prices for commercial property have been supported by lower long-term interest rates, while equity prices have moved in parallel with developments in global markets.”
“The Australian dollar is adjusting to the significant declines in key commodity prices.”
“At today’s meeting the Board again judged that the prospects for an improvement in economic conditions had firmed a little over recent months and that leaving the cash rate unchanged was appropriate.”
“Members also observed that the outlook for inflation may afford scope for further easing of policy, should that be appropriate to lend support to demand.”
“The Board will continue to assess the outlook, and hence whether the current stance of policy will most effectively foster sustainable growth and inflation consistent with the target,” Mr Stevens said.
For Immediate Release
Statement by Glenn Stevens, Governor: Monetary Policy Decision
At its meeting today, the Board decided to leave the cash rate unchanged at 2.0 per cent.
The global economy is expanding at a moderate pace, with some softening in conditions in the Asian region, continuing US growth and a recovery in Europe. Key commodity prices are much lower than a year ago, reflecting increased supply, including from Australia, as well as weaker demand. Australia’s terms of trade are falling.
The Federal Reserve is expected to start increasing its policy rate over the period ahead, but some other major central banks are continuing to ease monetary policy. Volatility in financial markets has abated somewhat for the moment. While credit costs for some emerging market countries remain higher than a year ago, global financial conditions overall remain very accommodative.
In Australia, the available information suggests that moderate expansion in the economy continues in the face of a large decline in capital spending in the mining sector. While GDP growth has been somewhat below longer-term averages for some time, business surveys suggest a gradual improvement in conditions in non-mining sectors over the past year. This has been accompanied by stronger growth in employment and a steady rate of unemployment.
Inflation is low and should remain so, with the economy likely to have a degree of spare capacity for some time yet. Inflation is forecast to be consistent with the target over the next one to two years.
In such circumstances, monetary policy needs to be accommodative. Low interest rates are acting to support borrowing and spending. While the recent changes to some lending rates for housing will reduce this support slightly, overall conditions are still quite accommodative. Credit growth has increased a little over recent months, with credit provided by intermediaries to businesses picking up. Growth in lending to investors in the housing market has eased. Supervisory measures are helping to contain risks that may arise from the housing market.
The pace of growth in dwelling prices has moderated in Melbourne and Sydney over recent months and has remained mostly subdued in other cities. In other asset markets, prices for commercial property have been supported by lower long-term interest rates, while equity prices have moved in parallel with developments in global markets. The Australian dollar is adjusting to the significant declines in key commodity prices.
At today’s meeting the Board again judged that the prospects for an improvement in economic conditions had firmed a little over recent months and that leaving the cash rate unchanged was appropriate. Members also observed that the outlook for inflation may afford scope for further easing of policy, should that be appropriate to lend support to demand. The Board will continue to assess the outlook, and hence whether the current stance of policy will most effectively foster sustainable growth and inflation consistent with the target.
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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