by Alan Thornhill
The Treasury Secretary, John Fraser, warned last night that government spending has reached very high levels.
It said it has been estimated that this spending will reach 25.9 per cent of economic output in 2015-16.
Mr Fraser said this assessment was made last December, at the time of the Federal government’s Mid-Year Economic and Fiscal Outlook publication (MYEFO).
Speaking in Sydney, he added:” There have only been four other periods since 1970 when this ratio has exceeded 25 per cent.
“Three of these are associated with economic recession and deficit blowouts – during the early 1980s and the 1990s, and of course just after the GFC.”
Mr Fraser said it’s important that Australia retains “its top credit rating.”
He said Australia about one of only 10 countries in the world to have a triple-A rating from all three major ratings agencies.
But he said that is not at risk.
In fact the agencies assessing the Federal government’s situation last December had been “quite impressed” with its progress towards a budgetary balance.”
But Mr Fraser said that, increasingly, “…we need to frame a Budget over the four years of the forward estimates.”
“ If anything, the forward estimates now seem to be a little more important.”
Mr Fraser said:“There have only been four other periods since 1970 when the government spending to output ratio has exceeded 25 per cent.
“Three of these are associated with economic recession and deficit blowouts – during the early 1980s and the 1990s, and of course just after the Global Financial Crisis.
Mr Fraser added that:“We are a rich country in so many ways and we can look forward to sustained economic growth if we have the right attitude and policies.”
Then he added:“A stronger long term fiscal position will go hand-in-hand with other policies to lift our growth and living standards.”
by Alan Thornhill
Many pensioners will be hit hard by changes he Federal government is planning to the assets test Labor says.
In a statement today, The Shadow Minister for Families and Payments, Jenny Macklin,said new data, released today shows the true cost of Malcolm Turnbull’s changes to the pension assets test, which will cut the Age Pension for 330,000 elderly Australians.”
She recalled that the legislation to change the pension assets test and cut part-pensions passed the Parliament in June 2015 under what she called “a dirty deal between the Liberals and the Greens.”
“In total, about 330,000 part-pensioners across Australia will have their cost of living increased because of the Liberals’ pension cuts,” she said.
“We now know exactly where these cuts will hit hardest when the Turnbull Government’s changes to the assets test kick in from 1 January 2017,” Ms Macklin said.
“The data shows the electorates where the most people will lose part of their pension, and the electorates where the most people will lose their entire pension,” she added.
“Pensioners all across the country are going to have their household budgets cut by the Liberals”
“These cuts will be particularly felt in regional Australia and the suburbs of Melbourne and Adelaide. ”
“In total, about 330,000 part-pensioners across Australia will have their cost of living increased because of the Liberals’ pension cuts. “
“Tony Abbott may be gone for now, but Malcolm Turnbull has done absolutely nothing to change his unfair policies,” she said.
“ Tony Abbott’s pension cuts are now Malcolm Turnbull’s pension cuts.”
“Cutting the part-pension shows how out of touch the Liberals are,” Ms Macklin said.
“ They are hurting struggling pensioners while doing nothing to crack down on the outrageous tax avoidance by multinational companies making billions of dollars. “
“Mr Turnbull needs to explain why he thinks it’s fair for Australian pensioners to have their cost of living increased while some massive multinational companies pay little or no tax. “
“Under the Liberals, multinational companies get a free kick, and Australian pensioners get kicked in the guts. “
“The Abbott-Turnbull track record for pensioners is nothing short of dreadful,” Ms Macklin said.
“First they tried to cut pension indexation – a cut that would have meant pensioners would be forced to live on $80 a week less within ten years. “
“Then they cut $1.3 billion from concessions which help pensioners with the cost essential services like electricity, water and public transport.”
“Then they did a deal with the Greens to cut the pension for 330,000 part-pensioners by changing the assets test.
“The Liberals also want to increase the pension eligibility age to 70, meaning Australia would have the oldest retirement age in the developed world,” Ms Macklin said.
“…now Malcolm Turnbull wants to slug Australian pensioners with a 15 per cent GST, hitting households by up to $4,000 a year and reducing the living standards of Australian pensioners,” she added.
“Only Labor is standing up for Australian pensioners by opposing cuts to the pension and any increase to the GST,” Ms Macklin said.
The government has not yet replied to these charges, which Ms Macklin made in a statement today.
by Alan Thornhill
The Federal Treasurer, Scott Morrison, insisted that he is taking Australians on “the safe road” to a balanced budget when he published his Mid Year Economic and Financial Outlook document today.
However he admitted that the nation will still face deficits of $37. 4billion in 2015-16, $33.7 billion in 2016-17, $23 billion in 2017-18, and $14.2b in 2018-19.
Mr Morrison said the journey to budget balance needed to be “safe and careful” with the expected date of a return to surplus pushed back another year to 2020-21.
Using the metaphor of the Christmas car trip, he said he expected a lot of Australians to ask “are we there yet?”.
“We need to take a safe and careful route and one (that) does not put at risk our jobs and growth,” he said.
The government has announced extra spending on its humanitarian program since its May budget.
Its decision to permanently accept an extra12,000 refugees from Syria and Iraq , in particular, will cost $158 million in 2015-16, and $909 million over four years to 2018-19.
Offsetting savings were announced in today’s mini budget.
These will include removing bulk-billing for pathology services and reducing bulk-billing for diagnostic imaging services and MRI services.
This will reduce spending by $197 million in 2016-17 and by $639 million over four years to 2018-19.
There will also be cuts to childcare.
These will include reducing the childcare subsidy for families earning more than $250,000 a year.
by Alan Thornhill
At its meeting today, the Reserve bank. Board decided to leave the cash rate unchanged at 2.0 per cent.
In a statement afterwards the bank’s Governor, Glenn Stevens, said the global economy is expanding at a moderate pace.
He noted that there had been some softening in conditions in the Asian region,.
But Mr Stevens also said there had been “continuing US growth and a recovery in Europe.”
He said:” Key commodity prices are much lower than a year ago.”
Mr Stevens said, this reflected “increased supply, including from Australia, as well as weaker demand.”
He warned:“Australia’s terms of trade are falling.”
Mr Stevens said:“ (the)Federal Reserve is expected to start increasing its policy rate over the period ahead, but some other major central banks are continuing to ease monetary policy.”
Hoowever, her added:“Volatility in financial markets has abated somewhat for the moment.
“ While credit costs for some emerging market countries remain higher than a year ago, global financial conditions overall remain very accommodative,” Mr Stevens said.
“In Australia, the available information suggests that moderate expansion in the economy continues in the face of a large decline in capital spending in the mining sector.”
“ While GDP growth has been somewhat below longer-term averages for some time, business surveys suggest a gradual improvement in conditions in non-mining sectors over the past year.”
“This has been accompanied by stronger growth in employment and a steady rate of unemployment.”
“Inflation is low and should remain so, with the economy likely to have a degree of spare capacity for some time yet.”
“Inflation is forecast to be consistent with the target over the next one to two years.”
“n such circumstances, monetary policy needs to be accommodative.”
“ Low interest rates are acting to support borrowing and spending. While the recent changes to some lending rates for housing will reduce this support slightly, overall conditions are still quite accommodative.”
“ Credit growth has increased a little over recent months, with credit provided by intermediaries to businesses picking up.”
“Growth in lending to investors in the housing market has eased.”
“Supervisory measures are helping to contain risks that may arise from the housing market. “
Mr Stevens said:“The pace of growth in dwelling prices has moderated in Melbourne and Sydney over recent months and has remained mostly subdued in other cities.”
“ In other asset markets, prices for commercial property have been supported by lower long-term interest rates, while equity prices have moved in parallel with developments in global markets.”
“The Australian dollar is adjusting to the significant declines in key commodity prices.”
“At today’s meeting the Board again judged that the prospects for an improvement in economic conditions had firmed a little over recent months and that leaving the cash rate unchanged was appropriate.”
“Members also observed that the outlook for inflation may afford scope for further easing of policy, should that be appropriate to lend support to demand.”
“The Board will continue to assess the outlook, and hence whether the current stance of policy will most effectively foster sustainable growth and inflation consistent with the target,” Mr Stevens said.
For Immediate Release
Statement by Glenn Stevens, Governor: Monetary Policy Decision
At its meeting today, the Board decided to leave the cash rate unchanged at 2.0 per cent.
The global economy is expanding at a moderate pace, with some softening in conditions in the Asian region, continuing US growth and a recovery in Europe. Key commodity prices are much lower than a year ago, reflecting increased supply, including from Australia, as well as weaker demand. Australia’s terms of trade are falling.
The Federal Reserve is expected to start increasing its policy rate over the period ahead, but some other major central banks are continuing to ease monetary policy. Volatility in financial markets has abated somewhat for the moment. While credit costs for some emerging market countries remain higher than a year ago, global financial conditions overall remain very accommodative.
In Australia, the available information suggests that moderate expansion in the economy continues in the face of a large decline in capital spending in the mining sector. While GDP growth has been somewhat below longer-term averages for some time, business surveys suggest a gradual improvement in conditions in non-mining sectors over the past year. This has been accompanied by stronger growth in employment and a steady rate of unemployment.
Inflation is low and should remain so, with the economy likely to have a degree of spare capacity for some time yet. Inflation is forecast to be consistent with the target over the next one to two years.
In such circumstances, monetary policy needs to be accommodative. Low interest rates are acting to support borrowing and spending. While the recent changes to some lending rates for housing will reduce this support slightly, overall conditions are still quite accommodative. Credit growth has increased a little over recent months, with credit provided by intermediaries to businesses picking up. Growth in lending to investors in the housing market has eased. Supervisory measures are helping to contain risks that may arise from the housing market.
The pace of growth in dwelling prices has moderated in Melbourne and Sydney over recent months and has remained mostly subdued in other cities. In other asset markets, prices for commercial property have been supported by lower long-term interest rates, while equity prices have moved in parallel with developments in global markets. The Australian dollar is adjusting to the significant declines in key commodity prices.
At today’s meeting the Board again judged that the prospects for an improvement in economic conditions had firmed a little over recent months and that leaving the cash rate unchanged was appropriate. Members also observed that the outlook for inflation may afford scope for further easing of policy, should that be appropriate to lend support to demand. The Board will continue to assess the outlook, and hence whether the current stance of policy will most effectively foster sustainable growth and inflation consistent with the target.
by Alan Thornhill
As Malcolm Bligh Turnbull prepares to lead his conservative coalition into the last week of scheduled parliamentary sittings for this year, the honeymoon gloss on his Liberal leadership is starting to crack.
It has been real enough.
Over recent weeks, his Liberal-led coalition has consistently been in a position in the polls which suggests that it would easily win a Federal election, if one was held now.
That has been a sharp turn-around from the previous situation, which saw the Labor opposition persistently ahead, over many months.
But the next scheduled election is not due until late next year and – with quite ordinary delays – it could easily be held over until early the following year.
Between now and then Mr Turnbull’s leadership will be thoroughly tested.
There will be a big test this week, when the still new Turnbull administration takes what are – essentially – Tony Abbott’s climate change policies to Paris.
If he has any new ones, in this area, no word of them has leaked out yet.
That would be unusual, for Canberra.
After all, the other international leaders, who will be attending the Paris talks on climate change are not likely to be impressed by policies based on the principle of subsidising big polluters in the hope that they will mend their ways.
Why should they?
Australian leaders are no longer dismissing concern over climate change as “absolute crap,” as Tony Abbott once did.
But it is still seen internationally as a friend of heavily polluting fossil fuels, like coal and petroleum.
So Mr Turnbull could easily find himself branded, even more deeply, this week as yesterday’s man in this area.
It is arguable, at this point, that even some of world’s biggest energy companies are taking the very real threat of global warming more seriously than the Australian government.
For, as the BBC reports, the leaders of 10 of the world’s biggest oil companies have offered their qualified support for a new global treaty on climate change.
The Oil and Gas Climate Initiative, which made this commitment, represents major producers including BP, Shell, Saudi Aramco and Total among others.
Predictably, Green groups are sceptical, saying arsonists don’t make good fire-fighters.
But there would be political risks for Mr Turnbull, too, if he allowed himself to be seen globally as a climate change denier.
It is, also, conventional wisdom in Canberra that “disunity is death” in politics.
Traditionally, that warning has been uttered most frequently, in relation to Labor.
However, there are signs now that it might be applicable to the Liberals, as well.
Tony Abbott, certainly, has not been taking his loss of leadership gracefully.
Nor have his supporters, in the Liberal party’s hard-right, like Cory Bernadi and Eric Abetz.
They, too, could present Mr Turnbull with serious problems next year.
Which, in all likelihood, will be an election year,
by Alan Thornhill
Australians may find it harder to provide for their retirements in future,
The Reserve Bank Governor, Glenn Stevens, mentioned that possibility in a speech he gave to the Annual Dinner of Australian Business Economists in Sydney last night.
He said:“In a low interest rate world, the problems of providing retirement incomes will become ever more prominent.
“The very low level of yields on fixed income assets means that it is very expensive today to purchase a secure stream of future income, which is what someone who is retiring is usually seeking.
“ And there are more of such people, living longer. “
So there will be choices.
Mr Stevens said:“The retiree can of course respond to this by holding more of her portfolio in dividend-paying stocks – accepting more risk.
“She may hope for a dividend stream that is fairly stable from year to year but that tends to grow over time.
“ It certainly seems that many Australian listed corporates feel the pressure from shareholders to deliver that, even some whose earnings are inherently volatile.”
Then he presented a question.
“Can the corporate sector realistically promise growing dividends over a long period? “ Mr Stevens asked.
And an answer.
“Not without being prepared to take the risk on investment in new products, processes and markets.
“How much of that risk an older shareholder base will allow boards and managements of listed entities to take is an important question.
“Overall, in a world where a higher proportion of the population wants to be retired and living (even if only in part) off the return on their savings, those returns are likely, all other things equal, to be lower.
“ Part and parcel of the same adjustment may be higher real wages for the smaller proportion of the population that is working.
“These changes, driven by demographics, may require some adjustment to our collective thinking about what is ‘normal’, not just for rates of return on assets but also for returns to labour,” Mr Stevens said.
by Alan Thornhill
Colin Johns, of Transformer Services, hired a mature age worker last year, under the Federal government’s Restart Program, which now offers wage subsidies of up to $10,000.
Senator Michaelia Cash, who launched improvements to that program, at the Canning Vale markets near Perth today, said it is yielding great benefits for both job seekers and employers.
Mr Johns agrees with the Federal Employment Minister.
“It’s been great for our business,” he said today.
The gentleman we hired really hit the ground running.
“He knows how to solve problems, coach other employees and look after our customers,” Mr Johns said.
“And I am personally very pleased to have been able to give a mature aged worker a chance to stay in the workforce and earn an income.”
Senator Cash said employers will now be able to get the$10,000 subsidy, available to those who take on a mature age worker, as Mr Johns did, over 12 months, instead of the 24 month period that previously applied.
She said too that:“The Government understands that there are mature-aged Australians with an enormous amount of knowledge and experience to offer employers.
“The reforms that came into force yesterday will incentivise businesses to employ this very experienced, yet often overlooked workforce,”Senator Cash said.
Restart offers employers up to $10,000 in wage subsidies to help with recruitment and related costs when they hire an eligible job seeker aged 50 or over.”
by Alan Thornhill
Industry has welcomed the Federal government’s broad acceptance of the recommendations of the Murray Committee’s review of Australia’s financial system.
Kate Carnell, Chief Executive officer of the Australian Chamber of Commerce and Industry said the reforms it recommends would strengthen growth and jobs.
“The set of balanced reforms announced today will help deliver a stronger, more competitive and resilient financial system to underpin greater business investment and personal retirement savings,” Ms Carnell said.
She said business could be seen as the engine room of the economy and the financial system as its fuel pump.
“And we need to keep it finely tuned for the best performance,” she added.
”The government has set out a clear plan for strengthening the resilience and effectiveness of Australia’s financial system to help underpin stronger business growth and job creation.
“We welcome progress on long awaited proposals and urge the Parliament to support this important reform agenda, including ensuring robust capital adequacy for banks,” Ms Carnell said.
“The Australian Chamber noted earlier this year that merchant service fees were the largest component of bank fee growth for the second year in a row.
“This highlights the importance of action to improve regulation of banking fees,”she added.
We are pleased to see Treasurer Scott Morrison’s statement that future credit card surcharging will need to pass a type of ‘fair dinkum test’ and urge the government to extend similar reforms to bank interchange fees.”
“Business welcomes the Government’s intention to secure crowd sourced equity funding legislation through the Parliament by the end of 2015.
“This will give greater scope to widen its focus to crowd sourced debt funding, which done correctly would also be very positive for small business growth and start-ups.”
John Osborn, the Chamber’s Director of Economics & Industry Policy, said: “A more open and competitive superannuation system with greater choice for employers and employees will foster innovation and deliver better value for businesses and consumers.
“The current default superannuation fund rules are outdated and not in keeping with the demands of a modern and competitive finance industry. This includes forcing default fund selection though a Fair Work Commission process and the treatment of employees covered by agreements,” he added.
“Currently, an employee who is subject to an enterprise agreement cannot redirect contributions to a personally nominated fund. It no longer seems appropriate or necessary to supress personal choice and we cannot ignore the broader competition implications of limiting the ability of people to vote with their feet.”
“We welcome the government’s commitment for the Productivity Commission to examine this issue more closely. Super funds already require approval by the Australian Prudential Regulation Authority – the body with the expertise to assess product suitability – and whatever comes from the Productivity Commission’s process must keep duplication to an absolute minimum.”
“We continue to support the proposal that requires superannuation fund trustee boards to have a minimum of one-third independent directors – including an independent chair – and believe this strikes the right balance for superannuation governance,” Mr Osborn concluded.
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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