Scammers are about – and the watchdog is barking.

The Australian Securities and Investments Commission is making a big noise, to warn of the dangers..

In a statement released today, ASIC said clients of online stockbroking firms should urgently review their account security.

Why?

Well, the Commission says that “during regular surveillance” it has “become aware of several stockbroking account intrusions involving unauthorised access and trading.”

ASIC is urging on line traders to take urgent action.

Specifically, it says that “as soon as possible” traders should:-
*…ensure their computer virus software is up-to-date;

*…change their passwords and

*…check their transaction history.
It says traders should take these steps regularly.

“If you become aware of any unauthorised trading on your account, you should contact your stockbroker immediately,” ASIC says.

This will help to ensure that any further unauthorised activity can be prevented.

ASIC says it already is working with online stockbroking firms to help those whose clients who have been hit.

It says it is also also “working with other authorities” to identify and catch the scammers.

“And Australia is very important to China,” he replied.

Given the huge difference, in the size of our respective economies, that remark surprised me.

It shouldn’t have.

On reflection I realised that China needs our iron ore and coal, to boost its economy, just as we need its business.

Our conversation soon turned to other things.

 As our train passed through Glenrowan, I told my new friend the story of Ned Kelly, who was killed there. 

The Chinese gentleman was fascinated.

He said he couldn’t wait to get to Melbourne, to Google Australia’s most famous outlaw.

Despite this friendly exchange, Treasury sees possible trouble ahead, in the now critically important relationship between Australia and China.

As regular readers will know it referred – very circumspectly – in a recent report, which has not received anything like the attention it deserves.

That report said:“The economic centre of gravity is shifting with the re-emergence of Asia and the integration of one third of the world’s population into global markets

It warns that this economic shift has profound implications for international geopolitical relationships

“In particular, Australia will operate in a global and regional environment where leading powers have very different political systems and operating assumptions.”

“Moreover, Australia is operating in the historically unique environment where its primary economic and security relationships do not coincide,” the report warns.

Put more bluntly, the Treasury is warning that Australia could find itself trapped between its security needs, which depend on the US alliance and trade, which now rests, very much, on our biggest customer , China.

Especially, as will no doubt have noticed, this dilemma became, that much more urgent, over the weekend.

That happened when the US President Barrack Obama, in the words of The Sydney Morning Herald “unveiled a strategy for a leaner US military focussed on countering China’s rising power, while signalling a shift away from large ground wars.”

This shift will involve basing at least 2,500 US troops in Australia.

While this is not a US push to contain China, there is a very real risk that the Chinese government will see it that way.

China might also perceive Australian involvement in such a containment strategy.

This emerging dilemma will, at the very least, require careful diplomacy, of the highest order, on the part of the Australian government.

There is absolutely no room for mistakes, of any kind, in this delicate situation.

The report, based on a Strategic  Review of the Treasury, also identifies four key themes as central to its external environment.

These were: -

- globalisation, the development of emerging market economies, and changes in global economic and political influence;

-  the domestic economic policy agenda: growth, productivity and stability;

-  the broader domestic policy agenda: demographic change and sustainability; and

-  advances in technology and communication, and higher expectations of government.

The report says the international economic and political outlook over the medium term will be characterised by a volatile international economic environment and the increasing economic and political importance of emerging economies.

“The economic centre of gravity is shifting with the re?emergence of Asia and the integration of one third of the world’s population into global markets,” it adds.

It says this economic shift has profound implications for international geopolitical relationships

These would be “driven by a more multipolar distribution of influence,” the report says.

“As a medium sized, open economy located in the Asian region, the changing global economic and political environment will bring significant policy opportunities and challenges for Australia,” it adds.

“In particular, Australia will operate in a global and regional environment where leading powers have very different political systems and operating assumptions.”

There would be few current signs of convergence, and differing views on the provision of public goals,  such as economic stability and environmental protection.

“Moreover, Australia is operating in the historically unique environment where its primary economic and security relationships do not coincide,” the report warns.

So it is calling finance industry leaders to Canberra this week, to discuss new laws to protect customer privacy.

News reports say the private details of millions of Vodaphone customers have been available to unauthorised people, through a company website.

These include home addresses, driving licences and credit card details,

One expert described this as “a major breach” of the company’s privacy obligations to its customers, and said it exposes them to criminal activity.”

A Federal Minister, Brendan O’Connor, whose responsibilities include Home Affairs, Justice and Privacy, avoided direct reference to Vodaphone in a statement on privacy obligations that he has just issued .

But he was blunt.

“Under the Privacy Act, financial institutions are required to protect consumers’ private information, including details they use to assess a customers’ eligibility for banking products,” Mr O’Connor said.

And he vowed that the present laws would be tightened.

“A binding Code of Conduct will be an integral part of the new credit reporting regime, helping to provide better protection for consumers and better guidance for business,” Mr O’Connor said.

“The Code will encompass more specific rules around access to clients’ personal information, data accuracy and complaint handling than is currently possible to include in legislation,” he added.

Mr O’Connor said Thursday’s  meeting would “contribute to the development of the industry-led Code.

It would  provide an open forum for interested parties to discuss any issues that worry them.

“The round table meeting will take place at Parliament House, Canberra on Thursday, 10 February 2011, Mr O’Connor said.

“Credit reporting agencies that collect, store and disclose consumer information, finance companies, and consumer and privacy advocates are invited to attend.”

The Government is already preparing draft legislation to implement its response to the Australian Law Reform Commission report

And draft provisions relating to comprehensive credit reporting would soon be finalised and referred to the Senate Finance & Public Administration Committee for inquiry and report.

“This meeting will provide a valuable opportunity for stakeholders to express their views on the credit reporting matters and to make significant progress toward an industry-agreed Credit Reporting Code of Conduct,” Mr O’Connor said.

But he added:”Any Code of Conduct developed by industry will need to be approved by the Australian Information Commissioner before taking effect.”

Does it stand analysis, though?

What, exactly, does Mr Abbott mean, for example, when he says in the fifth paragraph of his speech,  “we want to help you through your struggles.”

That’s comforting.  But will: “all my trials Lord, soon be over?”

Probably not.

Mr Abbott has been very successful, in this campaign, in setting up shibboleths, or  terrifying straw men, that seem to pose great dangers to the nation.

Debt. Government spending. Great big new taxes.  People smugglers. These are his prime suspects.

Each is worth a cool, close look.

Oddly, perhaps, the Reserve Bank Governor, Glenn Stevens – a man who should know – isn’t at all worried about government debt.

He  insists that Australia has absolutely no foreign debt problems.

That view is backed by Treasury figures, showing that Australia’s foreign debt, measured against the country’s output, or gross national product, will peak at 6 per cent. That is very low, by current international standards.

So what about government spending?  This did rise, after the global financial crisis.  The government responded with substantial stimulus packages, to avert recession. That worked, but there were problems, most notably with the home insulation program, as some reckless installers used aluminium foil coated batts in ceiling spaces, causing house fires.

Great big new taxes? The government got itself into trouble, when it tried to impose a super profits tax on the mining industry, arguing that big miners, with large profits, should pay something for the resources they are extracting.  Mr Abbott placed less emphasis, though, in his speech on the quite substantial lift in the company tax rate he is proposing, for bigger companies, to fund his paid parental leave scheme.  Labor is already calling this ” the Coles and Woolies tax,”  predicting that it will lead to higher grocery prices. It has a point.

People smugglers?  Even at the current rate of boat people arrivals, it would take those wicked people smugglers 20 years, to  assemble a decent crowd at an AFL stadium. Is this really a danger to the nation?

Some people, including Tony Shepherd, the chairman of infrastructure company Transfield Services think not.

Speaking at a recent conference, on plans both major parties now have to restrict immigration and stop the flow of boat people, Mr Shepherd said:”This is a terrible debate.

”I’m amazed that Australia is even having it.

”A few thousand boat people coming out, they’ve got the gumption to go out in a leaky boat, cross the Timor Sea and come here – I would have thought that was a fair qualification.”

Now there’s a robust view.

A dream we all share.

Very saleable, too.

Indeed, it is one of the main hooks the banks use to encourage us to use their services.

So it should be no surprise to find that Australia’s bank chiefs, themselves, value this dream, very highly.

Naturally, that includes those at the very top.

The Productivity Commission noted, earlier this week, that Australia’s top 20 CEO’s must struggle by, on an average salary of just $10 million a year.

Australia’s top bankers would certainly be in this very select group.

Tom Wolfe called their counterparts, in the United States, the Masters of the Universe, in his  highly prescient 1987 novel, The Bonfire of the Vanities.  Twenty two years later, they became the very people whose reckless greed came close to wrecking the global financial system, with catastrophic results.

Australia’s bankers, certainly, have been more restrained.  They stopped writing the word “Yes” on their walls, many years ago.

But their ideas of their own worth are similar.

That led them yesterday, to issue a statement praising the Productivity Commission, for rejecting the idea of caps, on their salaries and those of  other top executives, in this country.

David Bell, chief executive of the Australian Bankers’ Association, said:”The community is fortunate  to have an economic research organisation that can produce quality work in a very difficult public policy environment.”

We couldn’t agree more.  Indeed, we are constantly amazed by the wisdom of those who agree with us.

That, of course, is not yet certain.

But, with a crisis package worth $10.4 billion – against what, originally, was to be a $22 billion surplus, there appears to be a strong chance that borrowing won’t be needed.

The United States, where the crisis began, has not been so lucky.

It will have to go, once again, to foreign lenders, to see it through the present trouble.

Especially as the chairman of the US Federal Reserve, Ben Bernanke, is now advising Congress that heavy government spending – on top of the $US700 billion bail out package -will be needed to keep America out of a deep recession.
And that will be expensive.

Interest rates are low, at present.

However, we can expect that they will rise, as the global economy recovers.

Just where, though, does Australia really stand, in all this?

The truth is that not even the Rudd government itself knows that, at present.

The best estimate will come next month, when the Federal Treasury publishes its regular Mid Year Economic and Financial  Outlook document.

Treasury economists are currently using a lot of electricity, working late into the night on  that paper.

But, even when it is published, the MYEFO, as it is affectionately known, will contain a lot of guess work.

Downturns do terrible damage to Federal budgets.

They cut tax receipts.

They increase spending, on items like unemployment benefits.

And the longer they last, the more damage they do.

But an occasional glimpse into it can be rewarding.

So, even if you don’t know the difference between a Phillips Curve and a Laffer curve, you might find a moment or two spent reading some recent Reserve Bank research, to be well spent.

There is a link to it, on the front page of the Reserve Bank’s website, at rba.gov.au.

We must admit that its title is not immediately inviting.

“Understanding the flattening Phillips Curve” is, perhaps, a little short of grabby.

But it deals with some issues that will have a direct impact, one way or another, on your future.

First things first, though.

The Phillips curve tracks the relationship between the rate of inflation and unemployment .

The trouble, according to Reserve Bank Economists Kenn Kuttner and Tim Robinson, is that “in recent years, inflation appears to have become less responsible to fluctuation in output and unemployment.

“That is, the Phillips curve has become flatter.”

This matters, because it affects the calculations the Reserve Bank makes, when reviewing interest rates.

The paper goes well beyond Economics I. Its calculations and reasoning are, at times, quite dense.

But there are glimpses of reality in it too, which are worth a little thought and reflection.

One is that the rise of China, as an industrial power, has fundamentally changed the way prices are set, in the wider world.

“In recent years, the greater role of China in the world economy has undoubtedly held down the price of imported manufactured goods,” the two economists say.

And they say this “may have encouraged domestic firms to be more productive.”

What do we take from that?

Perhaps that interest rate hikes might not be quite as necessary, in future, as they have been thought to be in the past.

“The first responsibility that we have as a government is to ensure the strength of the Australian economy and the strength and stability of the Australian financial system,” he said after meeting State premiers in Perth last night.

Well, perhaps not quite the first.

Defending the realm usually takes that position.

But let’s not quibble.

Mr Rudd probably put it better, when he had a second go at the reporter’s question.

“This is fundamental,” he said.

“It is fundamental to everything.”

He is, of course, absolutely right about that.

Mr Rudd  explaining why his government has softened its earlier position on Australia’s banks.

Even a week ago, the government was pressuring the banks to pass on any cut in Australia’s official interest rates, in full.

It isn’t, any longer.

That’s because the global financial meltdown is a whole lot worse now, than it might have appeared to be then.

And the dangers are that much greater.

Australia’s banks are, indeed, well governed and well capitalised, as the government keeps telling us.

But that does not mean that they could not be touched, to some extent, by the world’s financial crisis.

The government is right to take one step back, and allow Australia’s banks to protect their position, at this delicate stage, by passing on only part of the interest rate cut that the Reserve Bank is expected to announce next Tuesday.

Lieutentant General Peter Leahy, who retired as head of the army last week, is far from alone, in the services, in pressing for the acquistiion of more high tech, high cost  e quipment.

He sees that as nessary, in view of Australia’s heavy defence commitments overseas, both now and in the future.

However, Treasury economists are warning that Australia’s ability to pay for that equipment still “underpins” future acquisition programs.

Leahy warned, in a weekend interview, that further unrest lies ahead in what he called  these “fractured and troubled” times.

He said that if unrest continued, Australia might well need a bigger – and better equipped – army.

At present, Australian forces in Afghanistan, regularly used Dutch helicopters and Dutch artillery, Leahy said.

Australia would have to think very seriously about providing its own fire support, if those facilities should be withdrawn.

The Treasury economists published their conclusions, in the latest issue of their publication Economic Roundup, which was released yesterday.

Their paper proposed alternative methods of projecting likely defence spending, into the future.

It said these approaches “provide some different ways of thinking about future defence spending trends.”

The economists admitted that defence spending has, actually, been declining, when measured as a proportion of Australia’s growth national product.

But they also said that had only happened because Australia’s economic growth rates had been higher than growth in defence spending.

They warned, too, that defence spending must always be balanced against “fiscal constraints.”