Shares – and the $A – tumble

Australian shares were sold off today, as shaky trade on Asian markets rattled investors.

That wiped another $23 billion off the value of Australian shares, following a $30 billion slump the previous day.

The benchmark S&P/ASX200 index fell 76.5 points, or 1.5 per cent, to 4964.3.

This took the index below 5,000 points for the first time since April 22.

Banks and miners were hit.

Investor confidence was shaken by a wild ride in Tokyo, where the Nikkei dropped 3.5 per cent, at one point, before rising to end 0.9 per cent higher.

The Prime Minister also moved to settle local nerves, that were shaken, too, by Ford’s announcement on Thursday that it would close its Australian factories from October 2016.

Ms Gillard said: “Our economy has come out of the global financial crisis strong.

“We’ve got economic growth.

“We’ve got low inflation, low interest rates, relatively low unemployment, and strong public finances.”

But the $A fell sharply today, as global movements, that analysts are now calling “a currency war,” took hold.

It fell to an 11 month low of 95.94 US cents, before rising to 96.81 US cents later in the day.

HSBC said the earlier fall reflected Australia’s entry into the global “currency war.”

Central banks in several countries have printed billions in cash to push their currencies lower.

The Reserve Bank also moved to push down the $A, when it cut its marker interest rate by 25 basis points last month.

The $A had been trading above parity with the US, when that action was taken.

What was Joe really saying?

Paying tax was once thought to be “optional.”

That was back, not so long ago, in the rip-roaring days of tax avoidance.

In the 1970s.

Your reporter remembers them well.

But it was the rich who were ripping and the rest who were roaring, because they had to pay other people’s tax.

I covered a court case in Perth, in those times, which clearly showed that an athletic tax avoider had paid almost as much, for his daring scheme, as he would have had to pay in tax.

In the wash-up, of course, this man had to pay twice.

His high priced advisers weren’t about to refund his money.

And the Tax Office still had an unsatisfied claim.

Part of Joe Hockey’s speech, to the National Press Club in Canberra, bears examination against this, still recent, history.

The man who could well be Treasurer, after the September 14 elections said:

“The Coalition will also foster a more cooperative relationship between taxpayers and the Australian Taxation Office.

“We all have to pay our fair share of tax.

“But the relationship with the ATO does not have to be adversarial and should be based on mutual respect.

“One measure that will help change the culture of the tax office is to appoint people with business experience to senior posts.

“The new Commissioner, Chris Jordan, is a breath of fresh air in this regard and the Coalition welcomes his appointment.

“But for too long the tax office has developed an insular and inward looking culture that has put it at odds with taxpayers, particularly in relation to its overly aggressive interpretations of tax laws.

“Taxpayers are not the enemy.

“They should be respected.

“I have previously announced that the Coalition would expand the number of Second Commissioners of Taxation, from three to seven, with appointments of “outsiders” who have market place experience to the executive group, which sets the strategic direction of the tax office.

“A second step is to reduce the complexity and increase the certainty of tax law.

“In areas like self-assessment and compliance we can do better.

“But when dealing with tax payers the ATO has everything in its favour,” Mr Hockey said.

That’s a long quote.

But these words are important.

Some will, certainly, be wondering if they can, once again, avoid paying their full share of tax.

Others will be saying that Mr Hockey is weak, and giving sly signals to his rich mates.

Words often have more than one meaning.

One thing, though, is certain.

If the Tax Office is, indeed, “overly aggressive” in its interpretation of tax law, that would be a consequence of a non-too-pleasant history.

Perhaps, as Mr Hockey says, it is time for everyone to be more reasonable.

However there is another side to this story.

Dr Martin Parkinson, the Treasury Secretary, warned Australians this week that they might have to pay more tax, to keep the level of public services they expect.

And the words of the American jurist, Oliver Wendell Holmes, still sound a clarion call.

“I like to pay taxes,” he said.

“With them I buy Civilization.”

What went wrong:Treasury chief explains

Some key Treasury forecasts had held up “reasonably well” Dr Martin Parkinson said today.

However Dr Parkinson, who is Secretary to the Treasury, was careful not to include its revenue forecasts, in this assertion.

Addressing business economists in Sydney, he said: “As you know, and has been much commented on of late, the past few years have been a challenging period for economic and revenue forecasting.”

“Yet, despite considerable global volatility and structural changes domestically, the Budget forecasts for the volume of economic activity and employment – the real economy – have held up reasonably well over this period.”

Dr Parkinson then made a concession.

“The same cannot, however, be said of the forecasts of nominal GDP and tax revenue.”

That is an understatement.

The Federal Treasurer, Wayne Swan, promised last year that he would deliver a small surplus, in his 2012-13 budget.

However revenue collections fell $17 billion short of the projections the Treasury made, in last year’s budget.

That was due, mainly, to shortfalls in company tax.

That left Mr Swan with an embarrassing $19.4 billion deficit in 2012-13.

The Treasurer was also forced to admit that the much anticipated surplus would not arrive for another four years.

Dr Parkinson admitted that Treasury’s revenue estimates had left the Federal Government in a difficult position.

“The direct impact of the, now well-known, overestimation in tax receipts is that the Australian Government faces a more difficult fiscal environment than had been anticipated a year ago,” he said.

Then he offered an explanation.

“Today, I want to take you through some of the drivers of recent weakness in nominal GDP growth and the Government’s tax receipts, and consider why the extent of this weakness had not been anticipated,” Dr Parkinson said.

He said these drivers had included:

• the difficulty that we, and other economic forecasters, have had in predicting the future path of global commodity prices, the exchange rate and capital gains and

• the significant structural changes that have taken place since the Global Financial Crisis in the Australian economy and in the Government’s tax base.

Employers urge moderation in the national wage case

The union claim for a minimum wage rise of $30 a week is a threat to small business, the Australian Chamber of Commerce and Industry says.

The Chamber’s Chief Executive, Peter Anderson, sounded this warning today, as this year’s National Wage Case opened before a full bench of the Fair Work Commission.

He described the ACTU’s claim as “a raid on the payrolls of hard working small employers that will weaken business viability, reduce profitability and cost jobs.”

Mr Anderson said policy makers – including the Commission’s 7-member wages panel – must pay due attention to the well-being of two million small businesses employing seven million people.

He said small business owners are under just as much – if not more – cost pressure as lower paid workers.

“Many are themselves low-paid given the low profits and long hours they and family members devote to their business,” Mr Anderson said.

He urged the Commission to award only a modest rise.

Mr Anderson said, too, that carve outs must be allowed for businesses which do not have the capacity to pay wage rises.

The Commission should also authorize employers, specifically, to offset any amount ordered to fund a .25 per cent rise in the rise in the compulsory superannuation levy from July 1.

“Without a specific superannuation wage offset, small business faces a job and soul destroying double whammy on 1st July, with a superannuation levy rise plus an across-the-board wage rise,” Mr Anderson said.

He said the ACCI is proposing a rise of no more than $5.80 a week.

Mr Anderson said that would be consistent with the alarming budget forecast last week of weaker growth and higher unemployment next year.

The right man for the job? Wrong question!

Is the best man for the job actually a woman?

A new report suggests that more women in traditionally male-dominated industries would lead to an improved economy.

The Australian Human Rights Commission calls the report, which it published today, “Women in male-dominated industries: A toolkit of strategies.”

Sex Discrimination Commissioner, Elizabeth Broderick, has the mining, utilities and construction industries in her sights.

She says the underrepresentation of women in male-dominated industries like these is not only undermining gender equality in Australia, but is having negative impacts s on industry performance and our economy.

“The Toolkit was developed to help address this problem,” Commissioner Broderick said.

“This is not merely a report, but an interactive website developed to encourage dialogue, engagement and sharing of approaches about increasing women’s representation in male-dominated industries,” she added.

“It encourages employers, employees, government, community, and unions to think about the contribution women can make and to actively share strategies for attracting, recruiting, retaining and developing women’s skills in traditionally male-dominated fields.”

“In Australia’s general workforce, women represent almost 46 per cent of employees,” Commissioner Broderick said.

“However, in the industries of construction, mining, and utilities, women account for only around 12 per cent, 15 per cent, and 23 per cent of employees respectively.

Recent figures suggest that increasing women’s employment rates could boost Australia’s GDP by 11 per cent,” Commissioner Broderick said.

“Australia ranks fourth in the world in talent shortages and many male-dominated industries are suffering a lack of skilled workers,” she said.

“Encouraging greater women’s participation in these industries is one solution that could go a long way to addressing these skills shortages.”

“Our Toolkit is divided into the areas of attraction, recruitment, retention and development of women’s skills in industries that have traditionally remained dominated by male leadership and employees,” Ms Broderick added.

“Users can work through or contribute to discussion in all four areas or any of the four that are most relevant to them.”

In developing the Toolkit, the Australian Human Rights Commission, with the support of the Minister for the Status of Women and FaCHSIA, brought together members of these male dominated industries to gather information on their experience and knowledge.

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Abbott casts a wide net

Tony Abbott tried to be all things to all voters, in his Budget Reply speech to Federal Parliament tonight.

As expected, the man who might well be Prime Minister, after the September 14 elections, promised to abolish both the carbon tax and the mining tax.

He even spoke of a cut in company taxes, when that becomes possible.

But there was no talk of an early return to a budget surplus, or any plan to cut Australia’s national debt.

Let alone detailed costings.

Perhaps the most significant thing Mr Abbott did say is that he would keep the present income tax thresholds.

That is important.

The first $18, 200 of income is now tax free.

That tax free threshold, which came into effect in July 1 last year, is much higher than it used to be.

Until then, we started paying tax when our income hit $6,001.

It would have been electoral suicide, of course, if Mr Abbott had tried to revert to anything like the old tax scales.

Don’t hold your breath, though, waiting for his abolition of the carbon tax to cut your electricity bills.

Firstly because would have to persuade the Senate to do that.

This is a sensitive subject for the Greens.

Besides,despite appearances, the carbon tax wasn’t really to blame for the bigger electricity bills that we have been seeing, since that tax was introduced last July.

The Productivity Commission has reported that – yes – the carbon tax did have some impact.

But it said the main contributor had been the efforts of our electricity suppliers to get back the extra money they had spent on poles and wires.

Some malcontents were even murmuring, back then, about “gold plated” electricity networks.

For all that, this was one of Mr Abbott’s milder speeches.

That was no accident.

The Opposition Leader knew, very well, that it was critical for him to appear, well, Prime Ministerial, as he spoke.

And that is what he set out to do.

A “soft economy” budget:NAB

The National Australia Bank is condemning the budget as “timid,” saying it reflects a “soft economy.”

“What a difference a year makes,” the bank says in its response.

“Gone is the political rhetoric on the importance of gaining international credibility by getting a deficit no matter what.

“Rather, the focus is very much on a fairly timid initial approach that doesn’t see a balanced Budget till 2015/16 or a surplus till 2016/17.

“In short, a Budget that is more in line with a “soft economy” – even if the Government doesn’t describe it as such.

“As set out in Medium Term Fiscal Context, the Budget effectively takes nothing to the economy in the near term (compared to detraction from growth of nearly 1½% this year).

“From a structural viewpoint nearly all of the heavy hitting is from the revenue side and most is done in the out years.

“That said, the Budget is helping to repair some structural problems via scrapping last year’s welfare increases.

The bank said these had included last year’s so called spreading the benefits of the mining boom – around $2.5bn over the estimates, – the baby bonus, increasing the Medicare levy to help fund national disability reform (the largest saving at $11.5bn over the estimates), tightening offshore tax arrangements including Offshore Banking Units (a hefty $4.2bn over the estimates.

The bank said the Government’s economic outlook is broadly in line with recent RBA forecasts, and only slightly stronger than its own.

Swan puts profit shifters in his sights

The Federal government is tightening Australia’s corporate tax laws to stop “erosion” and close “loopholes.”

The Federal Treasurer, Wayne Swan, made that clear in a detailed statement he made on Budget night.

He said the government would accept a series of amendments the Treasury had made on these issues.

Multi-national companies, that evade tax by profit shifting, are squarely in the Treasurer’s sights.

He said: “Protecting the integrity of our corporate tax system will ensure a stable source of revenue to fund vital investments in our economy and community, underpinning a stronger, smarter and fairer Australia.”

Mr Swan said Australia is not alone in making these changes.

“The aggressive tax practices of some multinational and other large companies is an increasing focus of many G20 countries.”

And he is not apologising for the crackdown.

“Businesses that aggressively exploit tax loopholes gain an unfair advantage over their competitors,” Mr Swan said.

“If a few large companies use loopholes to avoid paying their fair share of tax, a greater taxation burden is placed on other taxpayers, like small and medium businesses and individual taxpayers.”

Mr Swan said: “The Commissioner of Taxation has identified a range of aggressive tax minimisation strategies, currently being exploited to take advantage of design flaws, vulnerabilities and unexpected interactions in Australia’s corporate tax laws.”

He said some of these loopholes emerged from Howard Government reforms following the Ralph Review of Business Tax in 1999 and the Review of International Taxation Arrangements in 2006.