Feds moving in on shonky mortgage brokers

Shonky mortgage brokers will soon face tough new Federal legislation, that is now being drawn up to protect the public.

The Superannuation and Corporate Law minister, Senator Sherry, says the predatory practices of these fringe operators will not be tolerated.
He says that most of Australia’s mortgage brokers  – and home lenders – do act in the best interests of their customers.

“But, as in any industry, there will be shonky practices,” he warned.

‘We know that some brokers and lenders at the outer fringes of the market engage in inappropriate and predatory practices that may add to, rather than reduce, financial stress,” he said.

Sherry said the government is working hard to stamp out what he called “shady practices.”

He noted that Western Australia has already introduced what he called “broker specific legislation.”

This includes a licensing regime.

But Sherry said different laws in different States would not solve the problem.

“We now have eight sets of legislation across the country,” he said.

Sherry said this had increased compliance costs and produced legislative gaps.

He said the States had agreed in principle, last March, to transfer the power to regulate this industry to the Federal government.

Sherry said he welcomed that.

“One single, simpler national regime for regulating mortgages and brokers is the only logical solution,” Sherry said.

He said, too, that much work had already been done, to prepare for this change.

“This will ensure that the regulation is effective and efficient,” he said.

“That it will protect consumers, while allowing the mortgage market, including broking, to operate with minimal compliance costs.”

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W.A.’s boom sees that State’s wage growth double Australia’s

Average weekly earnings in Western Australia leapt by 10.5 per cent in the 12 months to the end February, to hit $1,260.10 a week.

That more than doubles the comparable a rise of 4.8 per cent for Australia as a whole.  That rise, though, still took the nation’s  average earnings to $1,124 a week.

These figures will have many young Australians booking the first available flight for Perth, especially as the Reserve Bank governor, Glenn Stevens, said the high demand for WA’s resources, that is coming from China and India, is likely to be sustained.

It is that demand which has led directly to WA’s wage breakout.

But are explosive growth rates, like those now evident in WA, economically healthy?

There are good reasons to wonder about that.

Wage figures, that the Statistician released on Wednesday, had already shown that Western Australia was on the verge of a wage breakout.The Statistician reported then that the labour price index, in this resource rich State, rose 5.9 per cent, in the 12 months to the end of March.

The bureau, itself, regards this  index as its preferred measure of earnings growth.

But even on that index, wage growth in WA is Australia’s highest.

And an annual growth rate of 10.5 per cent, in average weekly earnings, is not a figure that can be ignored.

So what should we make of it?

One argument is that it’s not a worry, if it is backed by increased productivity.

And the State’s iron ore mines are, certainly,  highly productive.

If, however, this AWE growth is just an early reflection of the higher prices now set for iron ore, it might well be a good reason to worry.

The Reserve Bank has already warned that Australia’s rising terms of trade could leave the country awash with money and facing a serious new threat of inflation later this year.

Perhaps WA is just showing us how that might happen.

The growth, in Australia’s wage cost index, over the past year, was much more modest at 4.1 per cent.

On almost any measure, though, Western Australia is booming.

Replicated nationally, WA’s wage cost  and average weekly earnings growth would both give the Treasurer, Wayne Swan, major headaches.Figures, like these, point straight to higher inflation and higher interest rates.

And Sandgropers aren’t parking their big pay packets, either.

They are proudly displaying their new wealth, on the State’s roads.

Car sales, in Western Australia, are currently running 41.1 per cent above the State’s long term average.

West Australians are presently buying an average of 10,356 new vehicles a month.

They are eating well, too. West Australians boosted their food budgets by 2 per cent in March.

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Lib’s message clouded

The opposition still appears divided, in its continuing attack on the Federal budget.

And, as the one time Liberal leader, the late Bill Snedden, once said “in politics, division is death.”

The Liberals have been in opposition, this time, for just six months.

So it’s still early days.

But they will not win credibility, until they get their message straight.

Once again, the apparent division is over Brendan Nelson’s promise to cut the fuel excise by 5 cents a litre.

Nelson said at the weekend that all of his promises would be and are “fully costed.”

But his Treasury spokesman, Malcolm Turnbull, confessed that his party is not in a position to do that, while it is in opposition.

Admirable honesty, perhaps.  But it looks like a mixed message, nevertheless.

Either way, this smacks of a lack of co-ordination, between Nelson and Turnbull.

Nelson is seen, in political terms, as a dead man walking.

Most analysts expect that his leadership will not survive much longer.

The reality, though, is that voters have long memories.  If they decide, now, that the Liberal party is hopelessly divided, many people might well keep that opinion, even if Turnbull does become leader.

Especially if Turnbull is seen as the main source of that division.

The Liberals are polling badly, at present.  But public attitudes have not yet been set in stone.

Indeed, most voters want the opposition to perform well.

It is the opposition, after all, that is meant, in Don Chipp’s immortal words, to “keep the bastards honest.”

That’s the way democracy is supposed to work.

And it isn’t happening, yet.

Brendan Nelson was applauded in Federal parliament last night when he declared:”watching petrol prices does not bring them down.”

This was, of course, a direct attack on the Federal government’s policy of maintaining close surveillance of fuel prices throughout Australia.

Dr Nelson, who was delivering his reply to the budget the Federal government brought into parliament on Tuesday, also suggested direct action.

“So, tonight I propose a cut in fuel excise of 5 cents a litre,” he said.

Once again, his backbenchers roared with approval

“This is a modest,but meaningful way of helping all Australians,” he said.

“Families, small businesses, pensioners and working people, (are) so dependent on their cars.”

Nelson said the cut he proposed would also help to curb Australia’s inflation, as petrol prices are a major factor in food and other prices.

The idea is not entirely new.

The Republican candidate in the US presidential elections, John McCain, has proposed a broadly similar idea, although he is not proposing to make it permanent.

Hillary Clinton, too, is supporting the idea of a gas tax holiday in the United States.

But the Democrat front-runner Barack Obama, has not endorsed the idea.

And the US proposal has been savagely attacked by the American economist, Paul Krugman.

Krugman described it as robbing the US Treasury, to support the reckless use of a finite resource.

Burning more fuel could only increase pollution, too.

Dr Nelson admitted that his proposal would cut Federal revenue in Australia by $1.8 billion a year.

And there is, of course, quite a lot that governments can do, by way of building hospitals, roads and schools, with that kind of money.

The brutal reality, though, is that this proposal has no hope of realisation, at least until 2010.

Critics will, no doubt, dismiss it as cheap populism.

And they might well be right.

But Dr Nelson certainly had to do something to boost his sagging leadership.

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Stevens raises the spectre of inflation

The Reserve Bank Governor, Glenn Stevens, gave young students a graphic picture pf the ravages of inflation last night.

He was delivering a lecture at the University of Sydney, in which he compared Australia’s economy in the 1970s with that of the present.

“The difference in inflation rates between the two decades is particularly striking,” Stevens said, before offering a little self-deprecation.

“Being a central banker, I suppose I would say that,” he added.

“But I think it is too easy to forget the corrosive effect that high inflation had on the economy in those days (the 1970s).”

Stevens said the seeds of Australia’s high inflation – which peaked at 17.6 per cent then – had been sown in the late 1960s.

And they had taken root in the early 1970s.

“From 1970 to 1979, the average rise in the CPI was 10.7 per cent a year,” he said.

Stevens said that meant that the value of Australian money had fallen by 60 per cent, over that time.

The Reserve Bank has made no secret of its fears of a resurgence in Australia’s inflation, which now stands at 4.2 per cent.

Indeed, it has now raised interest no less than 12 times, consecutively, to curb the growth of inflation.

The Treasurer, Wayne Swan, says he also cast the budget, which he brought into parliament earlier this week, to restrain inflation.

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Wall Street provides a postive lead

Australian traders will start with a positive lead from Wall Street today.

The Dow Jones rose 66.2 points overnight, Australian time, to 12,898.38.

The S&P 500 also rose, gaining 5.62 points to close at 1,408.66, while the NASDAQ composite rose 1.58 points to 2,496.70.

Oil futures eased, though, dropping $US1.92 a barrel to $US123.88.

US traders were encouraged by good news on America’s inflation, with a report showing that it is slowing.

The fall in crude oil futures also produced a positive reaction.

Surging food and oil prices have been worrying US traders.

However analysts said US markets still remain volatile.

And some doubted the inflation report, noting that both food and energy prices have been surging in the United States.

Consumer prices in the US rose by just 0.2 per cent in April, on official figures.

This rise was lower than most economists had predicted.

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Budget brings out the bull in Turnbull

Is Kevin Rudd really practicing “voodoo economics” as  Malcolm Turnbull says?

Hardly.

Turnbull, who is now the opposition’s treasury spokesman, displayed  great forensic skill  in Federal  parliament yesterday, when he  placed that charge, saying the government had brought in  a “typical Labor, big taxing, big spending budget.”

It was great political theatre.  These words will that stick in the public mind.

But the facts don’t support the charges.

The detailed budget papers, prepared by the Federal Treasury, show that total government revenue, in the coming financial year, will be equivalent to 25.4 per cent of  Australia’s gross  domestic product.

So the government will take a 25.4 per cent slice of the national pie.

The Howard government took a 26.2 per cent slice, in its final year in office.

In fact the Federal government’s slice hasn’t been below 26 per cent since 2001-02, when it was 25.5 per cent.

The budget papers also show that the Federal government expects to spend $292,470 million in the new financial year.

A lot of money, certainly.

Almost 4.3 per cent more than it will spend this financial year, in fact.

In raw cash terms, though, Australia’s gross domestic product, in the new financial year, is expected to be a startling 9.25 per cent higher than this year’s.

So the slice of the national pie, that the government expects to spend in the new financial year, will actually shrink.

Mr Turnbull is still learning. At this early stage, reasonable people might be prepared to cut him a little slack.
Especially as Turnbull’s ability to ad-lib, in difficult circumstances, is  impressive.

Superior, certainly, to that of his leader, Brendan Nelson, who floundered yesterday, when he was asked a perfectly predictable question, on the budget.

A radio reporter  had asked Nelson whether the new cut off points, for the baby bonus and other middle class welfare, were appropriate.

Nelson said he would “have to look at the fine print” of the budget.

It wasn’t a great reply.

Politicians, too, are expected to do their homework.

Especially as Turnbull had already said the cut off points were about right.

Opposition is hard.

But oppositions do have a  big job . As the late, lamented Don Chipp was fond of saying, that is “to keep the bastards honest.”

There are clear lessons, for the opposition, in all of this.

Get some good economists, who do understand the arcane world of budget calculations, for example.

And listen to them.

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Country people”left out” Truss

The National Party leader, Warren Truss, says country people have taken a “$1 billion hit” in Labor’s first budget.

He said Labor had stripped more than that amount in just three key areas, regional development, communications and agriculture.

Truss said that the Rudd government had saved $436 million by abolishing the Regional Partnerships and Growing Regions programs.

But it had put back just $176 million into regional development.

And existing agricultural development programs, worth $334 million, had been replaced with measures worth just $220 million.

And nearly all of those related to climate change.

Truss also said Labor had scrapped the Opel contract, which would have provided fast broadband to all Australians.

That program had been worth $959 million.

Labor, now, was merely promising to extend the previous government’s Broadband Guarantee, at a cost of $271 million.

Road and rail funding, in rural Australia, had also been slashed.

He said Labor’s first budget had demolished much of the good work Coalition governments had done for country people, over the past 12 years.

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Budget to attract overseas investment:IFSA

Australian governments have talked, for decades, about making Australia a financial hub for the South East  Asian region.

The Treasurer, Wayne Swan, pushed the idea, yet again, in his budget last night.

What’s more, though, he also did something practical about promoting that prospect.

Richard Gilbert, of the Investment and Financial Services Association, welcomed his initiative.

“IFSA is delighted that the Rudd government has expanded on its election promise to halve the rate of withholding tax on certain distributions from Australian managed funds,” he said.

“Crucially, the budget has delivered a progressive reduction in the withholding tax rate from 30 per cent to a ‘flat and final’ 7.5 per cent, from 1 July 2010,” Gilbert added.

“The clear message to the world is that the new Labor government is serious in working  to enable Australia to continue to develop as a major financial services centre in the region,” he said.

Gilbert said, too, that Swan’s broad budget strategy “places Australia on a sound, longer term footing, with a focus on economic growth, lower inflation and productivity improvements in the context of a challenging global and domestic environment.”

This is very close to the reaction the Prime Minister, Kevin Rudd, would have hoped for, in response to Labor’s first budget.

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