by Alan Thornhill
Labor has targeted tax breaks enjoyed by Australians on high incomes, in the Federal budget revisions that it announced today.
The Opposition Leader, Bill Shorten, the Shadow Treasurer, Chris Bowen and Shadow Finance Minister, Tony Burke, said these would include negative gearing and capital gains tax concessions on property purchases.
They said they were advancing a budgdet repair plan “which is fair.”
But many will not agree.
In a joint statement the three Labor leaders said: “Labor has been announcing budget repair measures over the last two years to improve the budget and support our investments in schools and Medicare.
“Today we are announcing a $10.1 billion improvement to previously-announced budget measures, as a result of 2016-17 Budget update.
“This includes boosts to our negative gearing and capital gains reforms, and VET-FEE HELP loan caps.
“Labor’s announced savings from these measures now total $122 billion over the medium term,” they added.
Then they said: “Labor is today announcing a further $6.1 billion in budget improvements through measures that better target the Private Health Insurance (PHI) rebate, reduce wasteful spending and better target family payments.
These measures have been designed to limit the impact on the household budgets of low and middle income families.
They saiid the savings would include:-
*$3.0 billion from better targeting the PHI rebate over the medium term, by continuing the Government’s 2016-17 threshold freeze and removing the rebate from natural therapies.
*Reforming Industry Growth Centres, saving $0.5 billion over the medium term.
*Re-directing DFAT spending to other budget priorities, including the abolition of the Innovation Xchange which focussed on purchasing bean bags. This saves $0.4 billion over the medium term.
by Alan Thornhill
The Prime Minister, Malcolm Turnbull, is trying to steer the election campaign back to where it started.
That is with his attempt to restore peace in the building and construction industry.
And in a speech to the American Australian Association & US Studies Centre last night, Mr Turnbull also argued that Australia’s increasing involvement with Asia is making this country’s reliance on America more important than ever.
He said the government had launched an unusually long –eight week – campaign for re-election “in order to break the deadlock between the House of
Representatives and the Senate over two critical pieces of legislation relating to industrial relations.
“and one of those is the restoration of the Australian Building and Construction Commission,” Mr Turnbull said.
That aim had – previously – been hardly mentioned during the campaign, which has now passed its half-way mark.
But, last night, Mr Turnbull declared that the course he had chosen is: “the only way we can get the rule of law restored to the construction sector.”
He said the sector employs one million people.
“ and the restoration of law to that sector is a vital economic reform, and part of our economic plan to secure our prosperity.”
“the only way we can get that passed is through this double dissolution and getting the numbers collectively in the House and the Senate to pass that law and restore rule of law through a joint sitting of the parliament,” Mr Turnbull said.
“ That’s our commitment,” he added.
Mr Tunbull also paid tribute to a previous Liberal Prime Minister, John Howard, who attended last night’s function.
He said: “John understood that the United States is the irreplaceable anchor to the global rules-based order – an order built upon shared political values and common economic and security interests.
“The truth of his insight has been affirmed by every subsequent Prime Minister of Australia.
“Earlier this year I visited and thanked our men and women serving alongside US forces in Afghanistan, in what is now the longest commitment in our military history.
“And also our forces in Iraq, where we are together with the United States and other allies jointly pushing back, rolling back the brutality and barbarity of Daesh or ISIL.
“And not a day, truthfully not a minute, goes by without our intelligence agencies working together – saving lives – in the fight against terrorism.
“Our ANZUS alliance and broader relationship is anchored in a history that is even deeper and richer than many of us realise,” Mr Turnbull concluded.
by Alan Thornhill
Australia’ s economic growth appears to have been surprisingly strong in the early months of this year.
Indeed the Statistician put it at 3.1 per cent in the 12 months to the end of March – and said trade had played a leading role.
The Prime Minister, Malcolm Turnbull, later made that an election issue later when he said this kind of growth does not happen “by accident.”
These developments make new research, that the National Australia Bank published today, particularly interesting.
For the bank states, quite bluntly, that our iron ore trade has been “riding an unsustainable wave.”
If that is true, the Prime Minister’s carefully crafted, but still merely implied claim, to have produced that growth, takes a hit.
Mr Turnbull conceded later that there are risks associated with both government and opposition forecasts.
The reality is that forecasts – there are always risks with forecasts I think everyone understand that.
“The further out you go, the more speculative those assumptions are.
He was replying to a reporter in Ulladulla.
“What will the iron ore price be?
“What will the foreign exchange rate be?,” Mr Turnbull asked rhetorically.
The bank, itself, avoided stepping into the current election campaign, contradicting Mr Turnbull directly.
But what the NABt does say is deeply disturbing to people who worry about Australia’s economic future, especially as iron ore has long been a very big item in this nation’s trade accounts.
It says that:” After trending lower across 2015, iron ore prices staged a short-term volatile rally in early 2016 – returning close to US$70 a tonne in late April.
“This coincided with a rapid increase in Chinese futures market trading volumes on the Dalian Commodity Exchange – with may indicate a temporary speculative bull market.
“Subsequent tighter regulation on the DCE brought prices back nearer to US$50 a tonne.”
Then the NAB adds:-
- This rally occurred against a backdrop of stronger Chinese steel market conditions – with demand recovering thanks to a rebound in construction activity (the sector that accounts for over half of China’s steel demand). Steel prices rose faster than input costs between February and April, driving steel maker profitability to its highest level in almost seven years.
- We argue that the rebound in construction is not sustainable, with policy changes that have relaxed purchase requirements, looser credit and the poor performance of alternative investment options re-inflating the property bubble that had somewhat deflated across 2014 and 2015.
- The short-term boost to profitability should not be allowed to overshadow the significant long-term challenges that China’s steel industry needs to address. Excess capacity in China’s steel sector exceeds 300 million tonnes (around three times the 2015 output of Japan, the world’s second largest steel producer).
- Medium term trends for steel – both in China and globally – appear subdued. Expectations that China’s steel consumption will continue to decline in coming years will be a major constraint on iron ore demand, while sub-trend economic growth elsewhere provides little opportunity for China’s declines to be offset. Over the medium term, we expect prices to settle at around US$40 a tonne.
by Alan Thornhill
That was quite a trick.
The Australian economy grew by 1.1 per cent in the first three months of this year.
And by 3.1 per cent over the year to the end of March.
What is particularly remarkable about these seasonally adjusted figures, produced by the Statistician today is that this growth, which was boosted by our exports, was achieved, as the prices we were getting for them were falling.
Quite sharply, in fact.
Indeed the Statistician also reports that our terms of trade dropped by 11.5 per cent over the year, including a 1.9 per cent fall in the March quarter itself.
So how did we do it?
Overwhelmingly, by selling quite a lot more of the stuff that we do produce well.
Mining products, for example.
The Bureau notes that their value rose by 6.2 per cent in the quarter.
And our household consumption spending rose by 0.4 percentage points in that time.
Impressive figures, certainly.
Especially for uncertain times, like the present.
But we shouldn’t read too much into them.
And they can bounce around quite around quite a bit.
So we shouldn’t be too surprised if we find our political leaders differing a little in their views of these developments.
by Alan Thornhill
Exports are pushing Australia’s economic growth, which rose 1.1 per cent in the March quarter and 3.1 per cent through the year.
These seasonally adjusted figures were published by the Bureau of Statistics today.
The Bureau said the Australian economy is moving from mining based investment to production.
It said too that new engineering construction had fallen for the tenth consecutive quarter.
But mining production had grown by 6.2 per cent.
The Bureau also said mining related products significantly contributed to the 4.4 per cent growth in exports.
Service based industries were the other contributor to growth with Finance, Retail trade, Accommodation and food services, and Arts and recreation all increasing.
The Bureau said this is consistent with the steady growth in service to households.
However it added broad based price falls were evident across the economy this quarter.
This was shown in the Consumer Price Index (CPI) which fell 0.2 per cent.
The GDP price deflator, which shows the overall price movement in the Australian economy, fell 0.6 per cent in the March quarter.
The terms of trade fell 1.9 per cent in the March quarter and fell 11.5 per cent through the year.
by Alan Thornhill
The value of construction work done in Australia fell by 3 per cent in the March quarter, according to figures published by the Bureau of Statistics today.
The trend figures – which are preliminary – reflect a period of transition in which strong residential construction is still being outweighed by a fall in the amount of engineering work being done, as the nation’s mining boom fades.
The Bureau said the value of residential building work done rose by 2.2 per cent in the quarter.
However the value of engineering work fell by 6.5 per cent.
Overall, the value of construction work done in the March quarter fell by 3 per cent, the Bureau said.
by Alan Thornhill
Malcolm Turnbull sought to reassure West Australians today that high tensile Australian steel will be used in his government’s naval shipbuilding program.
Speaking at the Austal ship building yard at Henderson, Western Australia, Mr Turnbull said this would help to offset job losses that would otherwise come with the nation’s move away from an economy based on a mining boom.
He said: “some of the most sophisticated naval vessels in the world, (were being built) right here in Perth.”
Many had been exported to Amman.
“This yard, Austal ships, has built 250 vessels and 200 of them have been exported,” Mr Turnbull said.
“ This company, Austal, represents exactly what we are seeking to achieve with our defence industry plan,” he added.
“ It sums up the objectives of our national economic plan – jobs and growth, driving advanced manufacturing, exports, technology, jobs and growth,” the Prime Minister said.
At a news conference later, Mr Turnbull denied a reporter’s suggestion that the State’s Liberal Premier, Colin Barnett, had not been invited to the shipyard ceremony today, because he is “on the nose,” politically.
Mr Turnbull said this had simply been because the event was national, not a State one.
He praised the man who has built Austal ships into a successful international business.
“What John Rothwell has done here, as a great leader of Australian industry, as a great ship builder, he has taken Australian technology and created Australian jobs and built a global business,” Mr Turnbull said.
“… I am delighted that we are supporting Austal and they are providing these 19, up to 21 Pacific Patrol Boats.
“ and they’ll be built right here.
“ and we expect the Offshore Patrol Vessels, of course after the first two are built in Adelaide, they will be built here at Henderson as well,” Me Turnbull said.
He is campaigning for re-election in a vote to be held on July 2.
by Alan Thornhill
Each of the two major parties will take an important weakness into the July 2 elections.
For the Liberals, it came with the choice of tax cuts for the rich.
With Labor, it came along with the decision to fight this election campaign on what its leader, Bill Shorten, calls “fairness.”
The result, at this stage, is too close to call.
The latest Ipsos poll, published in the Sydney Morning Herald today, puts the government and the opposition running neck and neck at 50 points each, on a two party preferred basis.
But it does show that Malcolm Turnbull is still more popular, personally, than his rival, Bill Shorten.
The Liberals took a calculated risk, when they decided that the personal income tax cuts, which are central to their re-election policy, should go to the well-off.
The plan, which follows the example of former US President George Bush, is being promoted as a way of advancing economic efficiency.
But cynics dismiss it as yet another case of the well-off “looking after their mates.”
If voters agree Mr Turnbull would lose the July 2 election.
His Treasurer, Scott Morrison, explained in his budget speech that the government would:”“…back … average full-time wage earners by preventing them from moving into the second highest tax bracket.
“From 1 July this year, we will increase the upper limit for the middle income tax bracket from $80,000 to $87,000 per year,” he said.
“Those earning average wages – full-time or otherwise – should stay in the middle income tax bracket,” he said.
“This will stop around 500,000 taxpayers from facing the 37 per cent second top marginal tax rate in each and every year,” Mr Morrison added.
But critics said $80,000 a year is well above average wages in Australia.
What, though, of Bill Shorten’s alternative, based on “fairness?”
“Too expensive” his critics proclaim.
The Treasury Secretary, John Fraser, is not among them.
However he has been having a close look at Australia’s economic prospects, and he is drawing attention to what he calls a “transition” in China.
He says our best customer, which has been buying a lot of coal and iron ore from us, is rapidly changing into a consumer society.
Mr Fraser says there will be “opportunities for Australia in this transition.”
But will we be ready to grasp them?
It is possible to spend too much time arguing about fairness.
And it is an elusive concept.
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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