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
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 Prime Minister, Malcolm Turnbull, told coalition MPs today that an early Federal election might well be a “live option.”
He also signaled in Federal parliament later that he is prepared to fight that election on industrial relations in the building industry, when he declared that his government would again introduce a bill to set up an industrial relations watchdog, the Australian Building and Construction Commission.
The Senate has already rejected a similar bill.
Mr Turnbull also told parliament that he is prepared to construct his government’s policies for economic recovery on the “very strong” base of the construction industry, which directly employs more than 1 million Australians.
Every lever of the government and every lever of our economic policies will be directed towards producing a big performance,” Mr. Turnbull declared.
An election had not been expected until September, when the present government’s three year term is due expire.
However it could be delayed until 2016.
The Prime Minister also welcomed remarks the Reserve Bank Chairman, Glenn Stevens had made slightly earlier, when he said that the bank’s marker interest rate would stay on hold at the historically low rate of 2 per cent for another month, as expected.
The PM said he was not prepared to accept the level of industrial disruption and strikes which had persisted in building and construction, after it had subsided in other sectors of the economy.
These led, eventually, to the appointment of a Royal Commission to investigate the industry.
It has just reported, although the government has kept some volumes of its report secret.
Mr Turnbull also welcomed observations Mr Stevens made about signs of improvements already evident in both the Australian and global economies.
He said, too, that Australia’s economic growth is roughly twice that of Canada, which is also resource based.
Mr Stevens said in his statement that recent information suggests the global economy is continuing to grow, though at a slightly lower pace than earlier expected.
“ While several advanced economies have recorded improved growth over the past year, conditions have become more difficult for a number of emerging market economies, ” he said
:”Commodity prices have declined further, especially oil prices.
This partly reflects slower growth in demand but also very substantial increases in supply over recent years.
“The decline in Australia’s terms of trade, which began more than four years ago, has therefore continued.
Financial markets have once again exhibited heightened volatility recently, as participants grapple with uncertainty about the global economic outlook and diverging policy settings among the major jurisdictions.
“Appetite for risk has diminished somewhat and funding conditions for emerging market sovereigns and lesser-rated corporates have tightened. But funding costs for high-quality borrowers remain very low and, globally, monetary policy remains remarkably accommodative.
In Australia, the available information suggests that the expansion in the non-mining parts of the economy strengthened during 2015 even as the contraction in spending in mining investment continued. Surveys of business conditions moved to above average levels, employment growth picked up and the unemployment rate declined in the second half of the year, even though measured GDP growth was below average.
“The pace of lending to businesses also picked up.”
Mr Stevens said”:”Inflation continues to be quite low, with the CPI rising by 1.7 per cent over 2015.
“This was partly caused by declining prices for oil and some utilities, but underlying measures of inflation are also low at about 2 per cent. With growth in labour costs continuing to be quite subdued as well, and inflation restrained elsewhere in the world, consumer price inflation is likely to remain low over the next year or two.
“Given these conditions, it is appropriate for monetary policy to be accommodative. Low interest rates are supporting demand, while regulatory measures are working to emphasise prudent lending standards and so to contain risks in the housing market.
“Credit growth to households continues at a moderate pace, albeit with a changed composition between investors and owner-occupiers. The pace of growth in dwelling prices has moderated in Melbourne and Sydney over recent months and has remained mostly subdued in other cities.
“”he exchange rate has continued its adjustment to the evolving economic outlook.
Mr Stevens said”’ “At today’s meeting, the Board judged that there were reasonable prospects for continued growth in the economy, with inflation close to target.
by Alan Thornhill
International developments may weigh on Australia’s growth in the months ahead.
That is the conclusion that Westpac economist, Bill Evans, is drawing from the latest edition of the bank’s leading index.
Mr Evans says the index, which the bank compiles with the Melbourne Institute, indicated that the likely pace of economic activity three to
nine months into the future, fell from –0.40 per cent in November to –1.03 per cent in December.
He said:“This is another disappointing result.
“The Index has now been growing below trend for the last eight months.”
“It continues to signal that growth in the Australian economy in the first half of 2016 will be below trend.”
“ Apart from in August 2015, this negative deviation represents the largest deviation we have seen since the second half of 2011,” Mr Evans said.
He said both Treasury and the Reserve Bank are now assessing trend – or potential – growth at 2.75 per cent.
He said Westpac’s current forecast for 2016 entails an annual growth pace in the first half of 2016 of 2.75 per cent, on trend figures.
But the LeadingIndex indicates that this forecast might be “somewhat optimistic,”Mr Evans said.
by Alan Thornhill
Australia may soon be seeing more students from Singapore.
This is part of the adjustment that this country has been forced to make to the collapse in iron ore and coal prices.
We are now looking to expand service industries – like education – instead.
Australia’s Trade and Investment Minister, Andrew Robb, who is now in Singapore to drum up business is well aware of all that.
In a statement today Mr Robb said he would be seeking both to assess the Australia-Singapore Comprehensive Strategic Partnership and to advance progress with it,
The Prime Ministers of both countries launched the partnership last June.
It marked the 50th anniversary of diplomatic relations between the two countries.
Mr Robb said the new partnership identifies a wide range of initiatives across the economic, foreign affairs, defence and security fronts.
“One of the many initiatives identified was an early review of the Singapore-Australia Free Trade Agreement (SAFTA), which entered into force back in 2003,” he added.
“ The review is scheduled for completion by July this year,” he said.
“Other economic initiatives include expanding two-way investment flows and exploring investment opportunities in sectors such as food, agribusiness and infrastructure in areas like northern Australia.”
Mr Robb also spoke of increasing the flow of skilled labour and visitors; joint tourism cooperation; building additional research and development partnerships and enhancing aviation and maritime connectivity.
“There are also various initiatives to deepen defence cooperation in areas such as military training, exchanges and postings; intelligence sharing, counter-terrorism, organised crime and cyber-crime,” he said.
“A strong focus has also been placed on deepening links between our educational, scientific and research institutions, including new opportunities for students under the New Colombo Plan,” he said.
“There will also be more cooperation between our arts institutions,”Mr Robb added.
He said, too, that a shared strategic perspective and complementary economies are the cornerstones of the Australia-Singapore relationship.
“To me our ambition for deepening our relationship and economic integration should be akin to the close relationship we enjoy with New Zealand,” he added.
Mr Robb said the FTA is an important component of our economic relationship, and the review provides an opportunity to further strengthen our bilateral trade and investment links with our fifth largest trading partner and foreign investor.
“The review of the FTA is timely and consideration is being given to enhancements in areas such as goods trade, services, investment and government procurement,” he said.
“There are significant opportunities to build on our relationship across a range of sectors including in science and research, advanced manufacturing, agribusiness and infrastructure.”
by Alan Thornhill
China’s economy grew by 6.9 per cent in 2015.
That was down from 7.3 per cent a year earlier.
It was also the slowest growth seen in China in 25 years.
by Alan Thornhill
The Prime Minister, Malcolm Turnbull, continues to face rising pressure from critics, who are pressing him for an inquiry into the attitudes of his
Health Minister, Peter Dutton, towards women.
However another senior Minister, Barnaby Joyce, has taken a different line, saying he hopes that politics don’t become “sterile” in the wake of this mounting criticism.
One Federal Minister, Jamie Briggs, resigned from Mr Turnbull’s front-bench last week,after allegations that he had become overly-affectionate towards a female public servant, while both were on duty in a Hong Kong bar.
Mr Dutton was also criticised after he sent a female reporter a text message, in which he described her as “a mad f… witch.”
Critics have been urging Mr Turnbull to order an inquiry to establish who leaked a photograph of the woman who complained of Mr
Briggs’ behaviour to the media, saying this had involved a breach of her privacy.
Mr Turnbull initially resisted, arguing that leak inquiries rarely produced useful results.
However criticism of alleged sexism among senior members of the Turnbull cabinet, peaked the following day, when the Greens joined the critics.
The Greens Leader Richard Di Natale said he would call on Mr Turnbull to “show leadership” “by removing the sexist culture from senior ranks within his Ministry.”
So far, Mr Turnbull has remained silent about his intentions.
He has warned his minsters, though, that he expects them to display the highest standards behavior at all times.
Meanwhile the Acting Leader of the Opposition, Stephen Conroy, has said that Mr Turnbull now has a ready-made list of New Year Resolutions.
He urged Mr Turnbull, firstly, to rule out any increase in the GST.
He should also restore the $80 billion worth of cuts the Abbott and Turnbull governments had made to education and health.
Thirdly he should join Labor by committing to build, maintain and sustain Navy’s future submarines in Australia.
by Alan Thornhill
Tax reforms the Federal government is considering would hit the poor harder than the rich, according to a new report.
The reforms – which include raising the GST to 15 per cent – are to be discussed with State Premiers on Friday – at a meeting of the Council of Australian Governments.
This follows warnings from some of the Premiers that they will face crippling deficits in their State budgets, if they don’t get more Federal revenue.
At the Premiers’ request, the Federal Treasurer, Scott Morrison, has asked the Federal Treasury to model a number of options, including several that would include raising the GST from its present level of 10 per cent.
But the latest report came from the Parliamentary Budget Office.
It says:“the regressive nature of the GST is highlighted by the proportion of income paid in GST as household incomes rise.
“On average those in the lowest income decile are estimated to pay over 12 per cent of their disposable income on GST, or about three times the proportion paid on average by those in the highest income decile.
This disparity primarily reflects the distribution of household saving (as lower income households spend more as a proportion of their income than higher income households.).
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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