by Alan Thornhill
Malcolm Turnbull directly challenged Australia’s big banks today, saying they should pass on the rate cut the Reserve Bank announced earlier this week in full, or explain why.
So far the banks have been passing on about half of the 0.25 per centage point cut.
That has left families with $300,000 mortgages some $20 a month out of pocket.
The Prime Minister said Australia had needed a period of economic transition after its huge mining construction boom.
“That’s why we have the big trade export deals, the big deals, the big free trade deals,” he said.
However the shadow Treasurer, Chris Bowen disagreed.
He said the government was simply “chest beating” on the rate cut.
So, this is a Government which is being exposed for a lack of economic leadership, for a lack of economic plan,” Mr Bowen said.
He said the government had no plan to increase investment in the non-mining sector, to ensure that we have jobs for the future. “
Malcolm Turnbull and Scott Morrison are simply not up to the job,” Mr Bowen said.
by Alan Thornhill
The Reserve Bank today cut its cash rate by 25 basis points, to its lowest level ever, just 1.5 cent.
Explaining the decision, the bank’s Governor, Glenn Stevens said: “the global economy is continuing to grow, at a lower than average pace.
“Several advanced economies have recorded improved conditions over the past year, but conditions have become more difficult for a number of emerging market economies.
“Actions by Chinese policymakers are supporting the near-term growth outlook, but the underlying pace of China’s growth appears to be moderating, “ Mr Stevens said.
He noted that: “commodity prices are above recent lows.”
However he added: “…this follows very substantial declines over the past couple of years.
“Australia’s terms of trade remain much lower than they had been in recent years.
“Financial markets have continued to function effectively.
Mr Stevens said: ” Funding costs for high-quality borrowers remain low and, globally, monetary policy remains remarkably accommodative.
“In Australia, recent data suggests that overall growth is continuing at a moderate pace, despite a very large decline in business investment,” he added.
“Other areas of domestic demand, as well as exports, have been expanding at a pace at or above trend.
“Labour market indicators continue to be somewhat mixed, but are consistent with a modest pace of expansion in employment in the near term.
“Recent data confirm that inflation remains quite low.
“Given very subdued growth in labour costs and very low cost pressures elsewhere in the world, this is expected to remain the case for some time.
“Given very subdued growth in labour costs and very low cost pressures elsewhere in the world, this is expected to remain the case for some time,” Mr Stevens said.
The Bureau of Statistics reported that Australia’s inflation rate, on the Consumer Price Index, stood at just 1 per cent in the 12 months to the end of June.
That is well below the bank’s target range – of 2 to 3 per cent inflation – over the course of a business cycle.
by Alan Thornhill
A submarine led recovery?
That’s not advocated in any respectable economic text book.
Yet it is precisely the path the Federal government is taking us down.
At a cost of some $800 million over 10 years
Money the Productivity Commission says might well have been better spent elsewhere.
The government’s decision to build our new subs in Australia is being accompanied by the slow spread of what might well be called a ”barbed wire broadband.”
That is one based on copper wire, rather than the then superior fibre to the node system, that Labor was proposing when the two choices were first offered.
The slower copper wire system, that Malcolm Turnbull pushed, also ended up costing more than the snazzier Labor model.
Even though the man who is now Prime Minister said it would be substantially cheaper
And the man appointed to run it, has since described the Turnbull alternative as a “colossal mistake.”
However, as Mr Turnbull’s lieutenant, Christopher Pyne, has since explained “Australians don‘t need a faster internet.”
So that’s alright, then.
The government has its explanations.
Mr Pyne, for example, also says it will make Australia “a defence hub.”
But the Productivity Commission won’t have a bar of it.
It notes that building a sub in Australia means that it will cost 30 per cent more than simply buying one overseas.
While necessarily based on hypothetical data, because of time differences, its example reveals that the effective rate of assistance provided to Australia’s submarine industry might well exceed that provided to tne nation’s vehicle industry and its textile, clothing and footwear indsustries, while those payment were s their respective peaks.
The commission also notes that paying more to have the subs built in Australia without getting sufficient value in return diverts productive resources such as labour, capital and land away from more efficient uses that need less assistance. .
This damages Australia’s capacity to get the best possible benefits from the community’s resources.
Its report leaves no room for its readers to doubt about the fact that the commission regards the Federal government’s decision to promote with submarine construction in Australia was a dreadfully dud deal.
So why did it happen?
The commission notes that “iconic” factories were closing and local areas, particularly in South Australia and Victoria, were doing it tough, as a closely fought election, on July 2, approached.
And those who suspect that political, not economic judgements prevailed in this case, won’t get much argument from the Productivity Commission.
by Alan Thornhill
The main appointments Mr Shorten made to his new ministry and cabinet include:-
Deputy Opposition Leader and shadow minster for education Tanya Plibersek.
Shadow foreign affairs minister, and Senate Opposition Leader Penny Wong.
Shadow special minister of state and Deputy Senate Opposition Leader, Stephen Conroy
Shadow Treasurer Chris Bowen
Shadow minister for families and social services Jenny Macklin
Shadow minister for the environment and water Tony Burke
Shadow minister for climate change and energy Mark Butler
Shadow minister for defence Richard Marles
Shadow minister for finance Jim Chalmers
Shadow minister for employment and workplace relations Brendan O’Connor
Shadow Attorney General Mark Dreyfus QC
Shadow minister for immigration and border protection Shayne Newman
by Alan Thornhill
The Federal government says it has “struck a deal” to secure the jobs of South Australian steel workers.
In a joint statement late today, the Prime Minster, Malcolm Turnbull, said his government “is delivering” on its its “election commitment to support South Australia’s steel sector and workers at Arrium .“
He said the Export Finance and Insurance Corporation would provide a loan of $49.2 million for new machinery at the Iron Knob and Iron Baron mines.
This would be done under the National Interest Account.
Mr Turnbull said this would enable Arrium’s OneWhyalla business to process iron ore to export quality and is expected to boost Arrium’s cash flow by more than $200 million over the next five years.
The Prime Minister said this investment would build on his government’s ongoing commitment to support Australia’s steel industry.
He said the measurers already announced included:-
- Using Australian steel across our naval shipbuilding program
- Upgrading 1200 kilometres of rail line between Adelaide and Tarcoola, a project worth approximately $80 million to Arrium
- Strengthening Australia’s anti-dumping system.
Mr Turnbull said his government would continue to work closely with the administrators as they prepare Arrium’s businesses for sale.
by Alan Thornhill
Placating dissidents is risky.
But Malcolm Turnbull was not deterred, a few days ago, when he sent Liberal dissidents a message, from a news conference.
The Prime Minister said “: I am listening very keenly and carefully to concerns that have been raised by my colleagues and of course by other people in the community as well.”
He was, of course, was speaking to a small, but very active group, of Liberal dissidents, who want bigger tax breaks, on superannuation, for their wealthy voters.
The South Australian, Cory Bernardi, who was among the first to speak out on this issue, welcomed the assurance.
The ABC reported that he said Mr Turnbull had been “unbelievably receptive and respectful of differences of opinion on policy issues, including in superannuation.”
But not all are convinced.
Another conservative Senator, George Christiansen, is threatening to cross the floor – and vote against – what he calls a Labor style policy if the government does not drop its proposed $500,000 cap, on tax free superannuation reforms.
The budget contained two main superannution reforms, a $500,000 contributions cap and a $1.6 million pension fund limit.
The Financial Planning Association chief executive Dante De Gori has described these as good measures, but warned confidence in the super system could be eroded by the retrospective effects of the $500,000 contributions cap.
The dissidents do not agree.
One West Australian MP, among their number, says the Liberals would not have lost votes, as they did, in the July 2 elections, if well heeled voters could have been enticed out to polling stations, to hand out how to vote cards.
Ian Yates the Chief Executive of the Council on the Ageing, said “the fact that the Prime Minister and Treasurer are under pressure to reverse sound policy to make super fairer, based on a weak narrative about selected poor election results and fewer well-heeled supporters manning polling booths, would be laughable if it wasn’t so serious.”
He said: ““…superannuation tax breaks cost over $25 billion in foregone revenue.
“Middle and lower earners, the majority of whom are women, have to pay more in taxes – both now and in the future – to pay for super tax breaks that largely benefit high-income men,”Mr Yates said.
Several other bodies also vowed to fight the dissidents’ campaign when Mr Turnbull softened his stance on the matter last Sunday, after declaring in the recent election campaign that the government’s position on the matter was “ironclad.”
Perhaps the most significant of those declarations, for the government, was that from GetUp, which said it is ready to fight on this matter.
Especially as it showed, before the election that it has some skills, in this area.
by Alan Thornhill
Thinking of starting a new small business?
You are not alone.
A new survey, that the National Australia Bank published today, shows that one Australian in three shares your ambition.
The bank says this shows that the start-up culture is alive and well, in this country.
So what did the survey find?
The key conclusions, according to the bank, were:-
- Around 1 in 3 Australians would like to own their own business with young Australians clearly the most aspirational (nearly 1 in 2)
- Over 1 in 2 men and 41 per cent of women say they have “good” to “excellent” levels of entrepreneurship
- The most popular new businesses are cafés and retail, followed by IT and personal services
- Most budding entrepreneurs would go it alone or with their spouse or partner
- Around 40 per cent of budding entrepreneurs and 75 per cent of existing business owners need or needed less than $50,000 to get their business off the ground
- Over 1 in 3 aspirational and existing business owners would be keen to be part of “community” of other entrepreneurs
The NAB’s Executive General Manager for Micro and Small Business Leigh O’Neill said a healthy start-up sector is critical to fostering a new wave of growth for the Australian economy.
“Small businesses are so important to creating future jobs and economic growth, and understanding their motivations and needs means we can help support the right ecosystems for growth,” Ms O’Neill said.
“We’ve got a huge community of budding entrepreneurs eager to get their ideas off the ground, and it’s clear that they need more than money.”
The release of the research coincides with the launch of NAB Startup, a service that allows aspiring small business owners to become operational quickly, with guidance on setting up an ABN, ACN, business and domain name registrations, as well as website creation and invoicing functionality.
“We see plenty of small business owners juggling full time jobs while setting up their new ventures.
“They have huge amounts of excitement and energy, but very little time, so they need things to be simple, quick and connected,” said Ms O’Neill.
“Services like NAB Startup, our new unsecured $50,000 QuickBiz Loan and digital marketplace for small business Proquo, help entrepreneurs get their business ideas off the ground more quickly and connect with other small businesses.”
The full survey ‘The Lure of Entrepreneurship – Australia’s Start-up Culture’ in available at www.news.nab.com.au.
by Alan Thornhill
The Reserve Bank is waiting for fresh information, before it decides whether to cut interest rates again, as it did in May.
The bank clarified its position in the minutes from its July 5 Board meeting which it released today.
It said growth in Australia’s major trading partners appeared to have remained slightly below average over recent months.
This was in line with earlier forecasts.
“ GDP growth in China appeared to have eased further, which was continuing to affect economic conditions throughout the Asian region,” the bank added.
It said, too, that: “monetary policy remained very accomodative across the major economies.”
That was expected to remain so given that inflation was below most central banks’ targets.
However, the bank added, this was despite improvements in labour markets leading to full employment in several large advanced economies.
It said: “ GDP growth in China appeared to have eased further, which was continuing to affect economic conditions throughout the Asian region.
“Monetary policy remained very accommodative across the major economies.
And it is expected to remain so given that inflation was below most central banks’ targets, despite improvements in labour markets leading to full employment in several large advanced economies, the bank added
It said: “the United Kingdom’s vote to leave the European Union had led to considerable financial market volatility, which had since settled.
“Financial markets had functioned effectively throughout the episode and borrowing costs for high-quality borrowers remained low.
Any effects of the referendum outcome on UK and global economic activity remained to be seen.
In any event, the referendum result implied a period of uncertainty about the outlook for the United Kingdom and the European Union. In the absence of significant financial dislocation, the staff’s central case was that this uncertainty was expected to have only a modest adverse effect on global economic activity.
Commodity prices had generally increased since the previous meeting. At the time of the present meeting, the Australian dollar (in trade-weighted terms) was around the levels assumed in the forecasts at the time of the May Statement on Monetary Policy
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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