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by Alan Thornhill
So Joe won’t be sacked.
The Prime Minister is adamant about that.
Tony Abbott declared, in a radio interview last week, that Joe Hockey will still be Treasurer, up to the time of the next election.
What Mr Abbott did not say, though, is that Mr Hockey will be relieved of a key duty.
The Social Services Minister, Scott Morrison, is to be top salesman, for Tuesday night’s budget.
This decision, by a Prime Minister who once, famously, declared that “no one – “however smart, however well-educated, however experienced … is the suppository of all wisdom” is a clear slap down for the Treasurer.
After all, Mr Hockey has still not convinced Australians, at large, that his first budget, last year, was what Australia needed.
So why let him loose, on the public, again?
But the show must go on.
And Mr Morrison, is to be the star.
Still, all this is very strange.
Let’s lift the curtains a little, to see what is happening.
Mr Hockey’s first budget, last year, was based on a false, but powerful analogy.
That is a comparison between family finances and the national budget.
His message was, apparently, simple.
Paraphrased, it goes something like this.
“We all know if we spend too much, we will get into trouble.
“Labor spent too much and now we have to clean up the mess.
“So we have to cut back on our spending.
“Austerity is necessary.”
Many find that message is hard to accept, from a comfortably proportioned man, who likes his cigars.
But is it well based?
If it was, Australia would certainly have lost the high international credit rating, that it won under Labor.
But it hasn’t.
In fact in a world flushed with money, that isn’t all that sure about where it should go, Australia is still has its high spot among the world’s safest places to invest.
Could Keynes have been right, after all?
John Maynard Keynes, the greatest economist of them all, declared during the Great Depression of the 1930s, that governments could – and should – spend a little more to get economies moving, when thing are slow.
As they are again now, though not as slow as they were back then.
The Reserve Bank confirmed that, last week, in its latest statement on monetary policy.
It declared then that Australia’s economic growth is not only below trend, but likely to stay that way for longer than even it had expected, as recently as February.
The bank’s recognition of this grim situation was – undoubtedly – behind its decisions to cut official interest rates, to a new low of just 2 per cent.
In making these decisions – in February and May – the bank defied the risk that its cuts might simply stoke the Sydney home price boom.
That has seen home prices in the Harbour City soar by an average 14.5 per cent over the past year and leap by as much as 42 per cent in some suburbs.
But the bank knows – as well as anyone – that rate cuts – alone – won’t restore economic growth.
With both investment – and consumer spending – still low – a little pump priming will be necessary to restore both economic growth – and government finances – to robust health.
That should start with Tuesday night’s budget.
But Joe Hockey, the man – and his austere message – are now so closely associated, that they can’t be separated in the public mind.
That’s why Scott Morrison got the role.
Our Scott is, undoubtedly, a tough man.
One who gets things done.
The man who “stopped the boats.”
But none of that will matter, if Tony doesn’t realise that his pre-budget dance is, essentially, a two-step.
If he doesn’t also ease back on the austerity – and allow a little pump priming ahead, Australians will see grim times, of low growth and rising unemployment, extending well into their futures.
That is not an ideal picture, for a government facing an election in less than 18 months.
The remedies, required now, go well beyond a switching the leading man, in its Budget sales play.
by Alan Thornhill
The Reserve Bank made a bold bid for growth today, with its second interest rate cut for the year.
Today’s cut, like the first in February, was of 25 basis points.
And it took the bank’s marker rate to a new low of just 2 per cent.
If passed on in full, the move would save a borrower with a $300,000 mortgage around $47 a month in repayments.
The decision put aside fears that another rate cut – now – might simply stoke Sydney’s home price boom.
Those prices have already risen by 14.5 per cent, over the past year.
And price rises in some hot spot suburbs have been even higher.
Those in Homebush – for example – have topped 40 per cent over the past year.
But a survey of business expectations, published on the eve of the Reserve Bank Board’s critical meeting today, confirmed that Australia’s business leaders are very worried about their prospects for the rest of this year.
The Dun & Bradstreet survey concluded that: “while general conditions in Australia remain sound, it has become clear to many businesses that 2015 will not be the year when the economy breaks out from its inertia.”
Business leaders, clearly, have been looking for a boost, from somewhere.
And today the Reserve Bank provided it.
The Federal government helped, with a reminder at the weekend, that foreign investors, generally, are not allowed to purchase existing homes in Australia.
It said it would be enforcing this, long neglected, law more tightly in future, along with others limiting foreign purchases of Australian farms and agricultural businesses.
That announcement helped to clear the way for today’s rate cut.
by Alan Thornhill
Joe Hockey says the Federal government is planning “a strong – five pillar economy – for Australia.
Addressing financiers in New York early today, the Federal Treasurer said:” I can report to you that Australia is open for business and is getting on with the job of future proofing the nation.
“Australia’s plan is for a strong five pillar economy.
“An economy based on manufacturing, agriculture, mining, education and services.
“…it is this diversity that gives us strength.” Mr Hockey added.
His address was entitled “The Next Wave of Global Economic Growth.”
He warned, though, that:” the Global Financial Crisis had ilustrated how quickly an integrated global market can disassemble.
“The loss of wealth and the loss of jobs was more immediate and graphic than anything we have witnessed in living memory,” Mr Hockey said.
However he added:” … the rebuild has begun.
Despite the anxiety there is recognition that globalisation has provided more economic growth and wealth than we have ever witnessed before.
It has provided remarkable opportunities for our economies, to stretch beyond the confinement of our borders, and tap into new and exciting markets.
In short, modern globalisation has created jobs and wealth on a scale previously unimaginable,” Mr Hockey said.
by Alan Thornhill
Farmers have backed the Harper Review’s call for an ‘effects test’ meant to rebalance power between them and large supermarkets.
The Chief Executive Officer of the National Farmers Federation, Simon Talbot, said its “… report to government is an important step toward reforms that will underpin Australia’s competitiveness for the next 20 years.
“The Harper Review is an important opportunity to improve competitiveness, increase returns to the farm gate and ensure transparency across the supply chain,” Mr Talbot said.
“The Final Report recommends a number of sound, evidence-based settings that move us toward those goals.
“The NFF has for some time sought amendments that focus on protecting competition across the supply chain. Ineffective competition legislation can have a particularly detrimental effect on farmers and the agricultural sector,” Mr Talbot said.
“That’s why we have supported the establishment of an ‘effects test’ to address the issue of misuse of market power.
“If used to replace the existing purpose test, an ‘effects test’ could shift the onus of consideration from a company’s purpose in undertaking conduct to the effects that conduct has had on any given marketplace,” he added.
“Other recommendations in the report include the removal of cabotage, which would improve access to coastal trading – easing pressure on our roads and making Australian exports more competitive.
“We strongly support the move, and believe it will go a long way towards reducing coastal shipping costs for farmers.
“We look forward to working with our members and government to ensure Australian farmers get the most from these reforms,” Mr Talbot said.
by Alan Thornhill
Anxiety levels among Australian shoppers have risen again, causing consumers to cut their purchases of many “non-essentials.”
This is reflected in the latest issue of the National Australia Bank’s quarterly Consumer Anxiety Index.
Its findings, for the first three months of this year, show that worries about government policy are now the prime cause of anxiety among shoppers.
This follows a short-lived easing in anxiety levels in the final three months of last year.
The bank said worries over government policies have now overtaken the cost of living as the single biggest cause of consumer stress.
But it said concerns had risen in all categories except health.
The NAB’s Chief Economist Alan Oster said: “Government policy is now the single biggest cause of anxiety for consumers, just ahead of cost of living, while job security continues to cause the least stress.”
The NAB’s study also found:-
* Anxiety rose and was most pronounced among self employed, lower income earners and consumers living in Victoria and Queensland.
* The anxiety gap between young women and men closes.
* Professional workers reported a significant fall in anxiety.
* Consumers living in Tasmania, NSW, the ACT, rural towns and the bush and part time workers were the only other groups to report lower anxiety.
The bank said that with overall anxiety increasing, consumers are allocating a bigger share of the household budget to paying off debt, utilities and medical bills, while cutting back on many “non-essentials.”
These include entertainment and many household items.
“In terms of their overall household financial position, however, not having enough to retire, being able to provide for the family’s future and meet medical costs were causing the greatest concern” Mr Oster said.
by Alan Thornhill
Joe Hockey hinted today that the government is likely to cut Australia’s corporate tax rate.
Speaking in a radio interview, the Treasurer said international competition made considering that option necessary.
“As we know, companies are often engaged in economic activity offshore.
“And we are seeing significant leakage from multinational corporations.
“Not only searching for places where they may not pay tax, but, quite incredibly, other countries are cutting company tax rates to try and get them to relocate to their jurisdictions.
“Now, what that means is we have a certain amount – a significant amount – of our revenue at risk because of the new global economy,” Mr Hockey said.
However the Shadow Treasurer, Chris Bowen, said the government is “not fit” to conduct a debate on tax reform.
“Australians don’t trust the Abbott Government to deliver fair tax reform.
“Labor will engage constructively in the tax reform debate and lead it,” Mr Bowen said.
“Tony Abbott and Joe Hockey promised “no new taxes” before the election,” he added.
But they had sought to deliver higher taxes including the petrol tax hike, a GP Tax, and an income tax increase for high income earners.
Mr Hockey today launched a discussion paper on tax reform and he is seeking public comment on it.
The deadline for those comments is June 1.
by Alan Thornhill
Nick Xenophon says Christopher Pyne is holding 1,700 scientists “hostage” by threatening to scrap their jobs, if the Senate won’t agree to deregulate university fees.
The key cross-bench Senator also described the Education Minister’s threat as:”toxic reckless politics at its worst”.
And the Opposition Leader, Bill Shorten, who also condemned the threat,described the Coalition as “an anti-science government.”
Senator Xenophon, an independent, was commenting on remarks the Education Minister had made on the ABC’s Insiders program earlier today.
Mr Pyne argued that he had no choice in the matter.
He said the government would have to “seek savings elsewhere” if the Senate rejects his deregulation bill, which is expected to come up for debate on Thursday.
Other opponents, including Labor, have said that removing caps on university fees could lead to university degrees costing $100,000.
Mr Pyne, though, warned Senators not to vote against his bill.
“There are consequences for not voting for this reform and that’s very important for the cross-benchers to understand,” he said.
“The consequences are that potentially 1,700 researchers will lose their jobs.”
But the Senate Opposition Leader Senate, Penny Wong, said the Mr Pyne’s threat to scientific research jobs is a sign the Government is trying to force its changes through parliament.
“Christopher Pyne is holding the nation to ransom by refusing to fund science and research collaboration, refusing to fund it beyond the end of the financial year,” she told ABC News 24.
However Mr Pyne says he is already “contemplating victory” in his fight over university fees, declaring that he “has never left the battlefield.”
by Alan Thornhill
“The only function of economic forecasting is to make astrology look respectable:” John Kenneth Galbraith
The Treasurer, Joe Hockey, says the Intergenerational Report, that he will release later today, will have people falling from their chairs, in surprise.
The Prime Minister, Tony Abbott, says the report ” which has been prepared by experts in Treasury” will “detail the economic challenges that Australia will face over the next 40 years.”
Those “Treasury experts” will, indeed, be looking 40 years into the future, in their report.
They don’t, of course, have any special powers of prediction.
Economists, generally, lack that skill, as Professor Galbraith freely admitted.
However they do have some – less than comforting – words to cover that shortfall.
That small Latin phrase means “other things being equal.”
Which, of course, they never are.
This time, though, they have something extra.
A set of instructions from the government.
Mr Abbott was kind enough to spell those out, at question time in Parliament yesterday, even though some might say he damaged the credibility of the report by doing so.
There were three.
“The first is: what would happen to the budgetary position under the policies that this government inherited?” Mr Abbott declared.
“The second is: what would happen to the budgetary position under the structural reforms that this government proposed last year?
“And the third is: what would happen to the budgetary position under the measures that have already been passed by this parliament?” he concluded.
These were the marching orders the government gave those Treasury experts.
There’s an old saying in the world of inquiries.
Even the government’s harshest critics, in the Labor party, aren’t invoking that one, this time.
What they are saying, though, is that the report that is to be released today, flows from “a Treasurer’s” study not a “Treasury” study.
There is a difference.
And that comment has some power.
It was, after all, the government that set the basic rules, which its “Treasury experts” had to follow, in conducting their inquiry.
Labor has also accused the Prime Minister of trying to gloss over that fact.
But our political leaders would never do anything like that, would they?
That would be misleading.
But the Shadow Treasurer, Chris Bowen, persisted.
‘The Abbott government will today release a politicised Intergenerational Report, designed to salvage is failed, unfair budget,” he declared.
These politicians will say anything, won’t they?
Anyway, remember this.
No matter how surprised you might be, when you see the report later today, stay firmly in your chair.
Falling off it isn’t worth the risk.
Not for this report, anyway.
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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|Nat. Bank Fpo||34.00||+0.12||+0.35%|
|Anz Bank Fpo||32.76||+0.10||+0.31%|
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