Wednesday, February 29, 2012

Treasury has a problem with women?

Yes. It acknowledges it, and it's making plans
Treasury building 1970s Canberra. National Archives, Creative Commons
Treasury has a problem with women.

Australia’s number one economic department believes it doesn’t value them enough as workers, in part because it doesn’t properly value the skills they have to offer.

The department has an institutional bias toward valuing “conceptual and analytic skills over coordination and people skills,” its boss said yesterday. And it makes “unconscious assumptions about the capacity and credibility of people with commitments”.

Martin Parkinson, head of Treasury since he replaced Ken Henry early last year, is determined to change things. He told a gathering of senior public service executives that although at least half of Treasury staff were women none were near the top of the tree.

He had kept hoping things would gradually change as more new women joined the department, but it “wasn’t happening”.

“We had come up with some ad-hoc responses - encouraging part-time work, facilitating access to childcare and so on.” But they appeared not to have addressed more fundamental problems relating to the department’s culture.

“What the consultations revealed was that some aspects of our culture were the
source of our strength, while other aspects of the same culture were presenting barriers to women’s progress. In particular, there were some unrecognised biases at play.. These included some institutional biases toward a homogenous leadership style, biases toward conceptual and analytic skills over coordination and people skills,” Dr Parkinson said.

Treasury has adopted a long-term target of making 40 per cent of its senior executive service women with a milestone of 35 per cent by 2016. It was “not a quota, but a sincere and realistic attempt to bring about long-term change in the culture”.

Dr Parkinson acknowledged that men with family responsibilities and strengths in people skills skills would also benefit...

He said among the problems facing Australia were the fragmentation of the media associated with the rise of narrowcasting, or “egocasting” where consumers increasingly heard only views that reinforced their own.

There was “a sense of dissatisfaction in the community, which seems incommensurate with what the figures say about our comparative economic and social performance and outlook”.

“Intriguingly, some Australians sound as though they live in Greece,” Dr Parkinson said.

In today's Sydney Morning Herald

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Monday, February 27, 2012

Okay, so who would be in my unity ministry?

I posted this in 2010.

At the time commenter David said it was: a pretty savage demotion of Gillard.

Actually, I would only change one thing. I think I was too hard on Julie Bishop. She looks better now than she did then.

Here we go.

Tim Madden, ABC News Online

My dream team:

Human Services - Brett Mason

Tourism - Warren Truss

Resources - Martin Ferguson

Agriculture - Christine Milne

Attorney General - George Brandis

Arts - Joe Hockey

Water - Nick Xenophon

Climate Change & Environment - Greg Hunt

Innovation & Industry - Kim Carr

Broadband & Communications - Paul Fletcher

Infrastructure & Regional Development - Robert Oakeshott

Finance - Wayne Swan

Housing - Mathias Cormann

Families & Community Services - Craig Emerson

Indigenous Affairs - Peter Garrett

Ageing - Sharman Stone

Sport - John Alexander

Health and Disability - Bill Shorten

Trade - Julia Gillard

Foreign Affairs - Stephen Smith

Industrial Relations - Tony Abbott

Education & Social Inclusion - Andrew Leigh

Veterans Affairs - Julie Bishop

Defence Support - Ian Macfarlane

Defence - Greg Combet

Immigration and Population - Penny Wong

Consumer & Corporate Regulation - Barnaby Joyce

Financial Services - Bernie Ripoll

Treasurer - Kevin Rudd

Cabinet Secretary - Tony Windsor

Prime Minister - Malcolm Turnbull
About right?

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Sunday, February 26, 2012

#respillsongs, they're trending on Twitter


Six months in a leaky caucus #respillsongs

Still haven't found who I'm voting for #respillsongs

Rudd on the tracks - Bob Dylan #respillsongs

Tears in Kevin - Eric Clapton #respillsongs

Monday Ruddy Monday #respillsongs

Manic Monday. #respillsongs

"I see Rudd" #respillsongs

Down Among the Dead Men #respillsongs

I can get no (satis)factions #respillsongs

Peter Garrett serenades Caucus with "Short Memory" #respillsongs

You're so vain, you probably think this party's about you, don't you.@latikambourke #respillsongs

No Joy Division here "Rudd will tear us apart..." #respillsongs

"Rudd, Rudd Whine" #respillsongs

Am I ever gonna see you face again #respillsongs

(Tell me why) I don't like Monday's #respillsongs

I will come for you at night time (Washington Time) #respillsongs

The fool on the hill #respillsongs

Julia's got a gun #respillsongs

Murder on the Caucus Floor #respillsongs

Can you Feel the Knives Tonight #respillsongs

Don't Cry For Me Albanese #respillsongs

Dancing Crean #respillsongs

"Do you really want to usurp me?" #respillsongs

Against All Odds #respillsongs

While My Electorate Gently Weeps #respillsongs

"Imagine there's no Kevin" #respillsongs

Apocolypse Now - The full soundtrack #respillsongs


Saturday, February 25, 2012

You've got to hand it to our banks - Stevens on profits

And we do, see below

Australia’s big banks have a friend in Reserve Bank governor Glenn Stevens.

Appearing before the parliament’s economics committee Mr Stevens defended their rights to not fully pass on cuts in the Reserve Bank cash rate and to add on rate rises of their own.

“I do not think there is any question that relative to the cash rate the costs of some term funding in wholesale markets has risen, there is no doubt,” he told the Sydney hearing. “If your costs increase then you want to recover that in the price of your product - any business does.”

Lending rates were “roughly” where they should be even after the unilateral increases imposed by the big banks in February. The Reserve had expected some slippage when it cut rates in December. The governor had been “a little surprised” it had been fully passed on.

“We are still making the calls as to where monetary policy ought to be - there is just a small bit of slippage in part of the transmission mechanism,” he told the committee... “I do not think that is going to really, from our point of view, going to cause us a huge headache at this stage.”

Asked whether Australian banks were making unusually large profits by the standards of other Australian companies and banks overseas Mr Stevens said if he “had to choose between unprofitable ones and profitable ones I would chose the latter.”

“Are they too profitable? Our assessment is that, if you look at the rates of return on equity in our banks over a lengthy period of time - say 20 years - they are good, but they are actually broadly in line with the listed company sector in general in Australia.”

Australian businesses more broadly were either doing very well or very badly.

“There are probably very few sectors who themselves are experiencing average performance,” Mr Stevens said. “Some are quite clearly weak relative to the historical average while others are much stronger. We are acutely conscious history may offer limited guidance in assessing the net impact.”

The Bank had not intervened to bring down the high Australian dollar and did not plan to.

“I am not saying we would never do it, but we have not done so to date,” the governor said. “We do continue to ask ourselves whether what is happening in the currency makes sense. I would observe that the most recent bout of strength is happening at a time when the terms of trade have actually peaked and have started to come down. That is a bit odd, but we will see what happens.”

The “palpable fear” before Christmas that Europe was on the brink had lessened over summer.

“The anxiety has not gone away altogether, but the worst has not happened. Financial markets, while hardly brimming with confidence, have recovered somewhat over the past couple of months,” Mr Stevens said.

In today's Canberra Times, Sydney Morning Herald and Age

From Christopher Joye:

RBA Governor "volunteers" estimate of taxpayer subsidy of banking system

This is just the annual subsidy associated with the retail deposit guarantee.

(You need to multiply several basis points by just under one trillion dollars. If you take, say, 5 basis points, and you multiply by $1 trillion, you get $500 million per annum.)

It does not reflect the fiscal subsidy provided through the RBA's liquidity facilities, which are many and varied, the too-big-to-fail credit rating upgrade the major banks recently received, or the benefit of the Commonwealth's willingness to explicitly guarantee wholesale debts (or funding) during crises. But here is an interesting Q and A...

"Mr BUCHHOLZ: I am fine with profitability, but it is hard to argue that it is okay for us to be about profitability and at the other end of the spectrum try to create the argument of, 'Boo hoo, we're doing it tough; we have to move on a different trajectory of monetary policy.' How does the government bank guarantee work? I probably did not even say that correctly, but how does that guarantee work?

Mr Stevens: There is a guarantee for deposits in effect. Nobody remarked on the fact that the cap was wound back from $1 million to $250,000 only a couple of weeks ago. That passed without comment or drama, which is good.

Mr BUCHHOLZ: There were probably other things on some of the political leaders' minds.

Mr Stevens: There appears to be other news around, yes. As to how it works, it is technically called a financial claims scheme. Should a bank fail, you would get your money very quickly up to that capped amount. The $250,000 covers almost all people, at an individual level. In effect it functions a bit like a guarantee. At a technical level, without going into too much detail, if some institution is put into administration by APRA then the financial claims scheme would come into operation. The banks assets would be recovered in the wind-up to pay out the creditors, but in the interim the scheme would step between the depositors and the wind-up process and say to the depositors, up to the $250,000 cap, 'Here is your money, so you can go and buy your groceries.' You would almost certainly always get your money, but it might take quite a long time. People need it quickly, and the whole point of this was early access up to that cap. That is how it would work. Then the scheme would recover those funds from the wind-up of the institution. It is extremely unlikely that the scheme would fail to be repaid in that process.

Mr BUCHHOLZ: Has the RBA put a value on that for the banks? Do they pay for it?

Mr Stevens: No financial institution that has the financial claims scheme applicable—which is all deposit takers, not just large banks but all ADIs—pays for it. They do not pay a fee for it.

Mr BUCHHOLZ: Has the RBA put a price on it—on the value of that security or insurance?

Mr Stevens: We have worked out what the fee should be, but we have not done a formal calculation of that. I suspect that if you did do a calculation you would end up with a small number of basis points.

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Friday, February 24, 2012

Gillard: "I worked damn hard as Kevin Rudd's deputy to try and keep the government running"



RBA Grilling. What did Stevens say?

Tweeted as the governor spoke:

The palpable fear that Europe was on the edge of some sort of event has lessened over summer #rba #stevenshearing #auspol

“Perhaps a little surprisingly” our Nov and Dec rate cuts were initially fully reflected in retail rates #rba #stevenshearing #ausecon

Words to the effect: The behaviour of the banks does not harm the operation of monetary policy
#rba #stevenshearing #ausecon

“Very few sectors are experiencing average performance” #rba #stevenshearing #ausecon

Stevens being asked the banks’ interest rate question: #rba #stevenshearing #ausecon

Even after the bnaks made their recent adjustments, rates are roughly where we would want them to be. #rba #stevenshearing #ausecon

STEVENS: “I had anticipated banks would not pass on end of year rate cuts.” #rba #stevenshearing #ausecon

STEVENS: If I had to choose between profitable and unprofitable banks I would choose the later. #rba #stevenshearing #ausecon

STEVENS: Over last 20 years banks profits roughly in line with listed companies. #rba #stevenshearing #ausecon

STEVENS: If it is really really profitable here, other players will want to find some way of getting their hands on those profits. #rba #stevenshearing #ausecon

STEVENS: Our 10 per cent saving rate is likley to remain five years into the future. It’s big, but not too big. #rba #stevenshearing #ausecon

STEVENS: 10 per cent shavings rate is the new normal. #rba #stevenshearing #ausecon

STEVENS: Retail was going to suffer anyway - changed shopping pattens. It’s not all the high savings rate. #rba #stevenshearing #ausecon

STEVENS: We can’t fight the global phenomenon that is pushing up the exchange rate and changing our economic structure #rba #stevenshearing #ausecon

STEVENS: I doubt any type of policy can fight what’s happening. #rba #stevenshearing #ausecon

STEVENS: We haven’t intervened to hold dollar down. I am not saying we never would, but we don’t foreshadow it. #rba #stevenshearing #ausecon

STEVENS: Does what’s happening to currency make sense. The most recent strength when commodity prices down does seem odd. #rba #stevenshearing #ausecon

STEVENS: I am not really convinced foreign investors have taken a negative view of Australia’s sovereign risk (when asked) #rba #stevenshearing #ausecon

STEVENS: Mr Argus and others have their own views. But there is not a serious perception of sov risk. High appetites for Aust gov debt. #rba #stevenshearing #ausecon

STEVENS: If people say this in the newspaper one can’t deny that that’s their view. #rba #stevenshearing #ausecon

STEVENS: Playing a dead bat on Coalition questions re productivity, Fair Work Act #rba #stevenshearing #ausecon

STEVENS: Overall wages are okay, we don’t really want them to accelerate from here. #rba #stevenshearing #ausecon

STEVENS: We expect a small lift in productivity, following structural adjustment #rba #stevenshearing #ausecon

STEVENS. Bank rates. Banks want to maintain profits, any business does. #rba #stevenshearing #ausecon

STEVENS: “When people say bank costs have risen, that is true. Every business tries to recover costs. #rba #stevenshearing #ausecon

GUY DEBELLE: Australian banks pay about the same as comparable banks overseas for money. #rba #stevenshearing #ausecon

GUY DEBELLE: But Australian corporates can borrow cheaper than Australian banks, even though lesser credit rated. #rba #stevenshearing #ausecon

PHIL LOWE: Our central forecast has unemployment drifting up to around 5.5%, then drifting down. #rba #stevenshearing #ausecon

PHIL LOWE: Our central forecast has unemployment drifting up to around 5.5%, then drifting down. #rba #stevenshearing #ausecon

PHIL LOWE: It wasn’t long ago IMF talking about ‘1930s moment’ No wonder businesses reticent to hire. #rba #stevenshearing #ausecon

STEVENS: No probelm with @SwannyDPM not attending G20 in Mexico this weekend #rba #stevenshearing #ausecon

STEVENS: We are not what Mervyn King called “inflation nutters” in that we give no account to economic conditions. #rba #stevenshearing #ausecon

STEVENS: When we got to 4% unemployment it was pretty clear the economy was overheating. #rba #stevenshearing #ausecon

STEVENS: Workers are commuting to the West, even from NZ and Indonesia. #rba #stevenshearing #ausecon

GUY DEBELLE: Spreads vs levels.. #rba #stevenshearing #ausecon

STEVENS: We will publish update on banks funding costs in our Bulletin in March. #rba #stevenshearing #ausecon

STEVENS: Re Securency. I unequivocally reject suggests of a cover up. #rba #stevenshearing #ausecon

STEVENS: Securency. The allegations published in the press were “quite surprising”. #rba #stevenshearing #ausecon

STEVENS: There seems to be a view the banks have to do whatever the RBA DOES, THEY DO NOT. #rba #stevenshearing #ausecon

STEVENS: Bank profitability is within the pack. Some industries earn more, some less. #rba #stevenshearing #ausecon

STEVENS: Some years things are tough for banks (Subtext: It’s not a licence to print money.) #rba #stevenshearing #ausecon

STEVENS: I personally suspect smaller institutions do better out of the deposit gurantee than large ones. #rba #stevenshearing #ausecon

PHIL LOWE: In time even businesses that are cautious in their behaviour will want to hire again. #rba #stevenshearing #ausecon

PHIL LOWE: Banks have got used to double digit credit growth, and that’s not going to continue. #rba #stevenshearing #ausecon

PHIL LOWE: The real estate industry also has got used to double digit credit growth, it won’t continue. #rba #stevenshearing #ausecon

STEVENS: Merchant fees have come down. #rba #stevenshearing #ausecon

STEVENS: I am not keen for RBA to be jawboning banks to accept a sub-market rate of return. #rba #stevenshearing #ausecon

STEVENS: (Words to the effect) If we did it banks we might be asked to dictate to other businesses the prices they could charge. #rba #stevenshearing #ausecon

STEVENS: There is a gender imbalance in the study of economics, an interesting phenomenon. #rba #stevenshearing #ausecon

STEVENS: I think we are still making the calls as to where monetary policy should be. There is just “a small bit of slippage in the transmission mechanism”. #rba #stevenshearing #ausecon

STEVENS corrects one of his answers re Securency. #rba #stevenshearing #ausecon

Here's the complete transcript. Thank you Hansard!

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Thursday, February 23, 2012

Rudd. The day the seed was planted in June 2010, as seen by my mobile phone:

The children with Kevin Rudd and Therese Rein at the top are: Nicholas (born 1986), Marcus (born 1993) and Jessica.

I wrote:

We all looked at our shoes, not making a sound - not even a camera click - desperately willing him to go on.

It was like a prayer meeting.

We applauded at the end.

Commentator Taylor:

The poor kid at the back has a haunted look that I'm sure I will forever associate with Julia Gillard.

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No WorkChoices, Goldilocks wages. Who'd have thought?

Where wages are growing

Wage growth over the past decade, excluding bonuses


Western Australia 51%
Queensland 46%
Northern Territory 45%
Australian Capital Territory 45%
Tasmania 45%
South Australia 44%
NSW 44%
Victoria 43%


Mining 55%
Electricity & water 53%
Construction 52%
Education 50%
Professional services 48%
Public admin & safety 48%
Health & welfare 45%
Finance 45%
Manufacturing 43%
Transport 43%
Real estate 43%
Arts & recreation 41%
Wholesale trade 41%
Admin and support 41%
Media, telecommunications 40%
Retail trade 38%
Accommodation 34%

ABS 6345.0 December quarter 2001 to December quarter 2011

Wages are growing at a ‘Goldilocks’ pace - faster than inflation, but not fast enough to concern the Reserve Bank.

The latest index from the Bureau of Statistics shows wages grew 1 per cent in the December quarter and 3.6 per cent over the year - faster than the inflation rate of 3.1 per cent, but not fast enough to push the rate higher.

Wages have grown quickly where workers have been needed and far more slowly where they have not.

Over the past decade wages have climbed 55 per cent in the mining industry, yet by a far more sedate 34 per cent in the troubled accommodation and domestic tourism industry, suffering as a result of the high dollar.

West Australian wages climbed 51 per cent; Victorian and NSW wages a more tranquil 43 and 44 per cent.

The top four states for wage growth were the mining states of Western Australia, Queensland and the Northern Territory plus the Australian Capital Territory which benefited from the expansion of government during the first phase of the mining boom...

After a year of relative government austerity the ACT has dropped to the bottom of the pack with wage growth of 2.9 per cent. Western Australia remains on top with growth of 3.9 per cent. Victoria and NSW are now not too far behind with 3.6 and 3.8 per cent.

Manufacturing and finance sector wages grew by an above average 1.2 and 1.1 per cent over the past quarter. ANZ economist Craig Michaels said while in normal circumstances that might concern the Reserve Bank, the weak employment outlook in those sectors was set to reign in wage growth.

The employment department’s internet job vacancy index improved in January, climbing 1.9 per cent. The biggest increases were in jobs for machinery operators and drivers and sales workers.

Job vacancies climbed 3.4 per cent in
Victoria, 0.8 per cent in NSW and 1.3 per cent in Western Australia. Over the past year job vacancies have shrunk 15 per cent in Victoria, 16 per cent in NSW and expanded 13 per cent in Western Australia.

In today's Canberra Times, Sydney Morning Herald and Age

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Monday, February 20, 2012

Super. Great if you're already well off

Roughly half of the $15 billion in tax breaks for superannuation contributions goes to the top 12 per cent of income earners, according to new research to be presented to the Senate this week.

The Australian Council of Social Service says the other half goes to bottom 88 per cent, with those at the very bottom getting nothing, even after proposed reforms.

ACOSS will the Senate economics committee the proposed government contribution to the super funds of low-earning Australians would merely cut their tax penalty for putting money into super from 15 per cent to zero, leaving untouched the tax benefit for high earners of 32 cents in the dollar.

“We spend more on super tax concessions for high income earners than it would cost to simply give them the pension,” said ACOSS tax policy officer Peter Davidson.

“It’s all the more wasteful because they are likely to save for their retirement anyway. High income earners are unlikely to need either the pension or tax incentives.”

ACOSS will propose a flatter system of support in which all super contributions are taxed at the worker’s marginal tax rate, offset by a rebate paid into their super fund at the end of each year.

One option modelled by the Council would give a 100 per cent rebate for the first $300 of contributions... followed by a 20 per cent rebate for additional contributions up to $8000 per year.

ACOSS says the proposal would be revenue neutral and would make 80 per cent of super fund members better off.

“It would be simple. Employers already know their employees’ marginal tax rates and already deduct tax. This tax would come out of super fund contributions, not wages,” Mr Davidson said.

“The proposal has losers, and they will complain. The problem is that the people who best understand the system are the high earners and their advisors who benefit from it the most. The 80 per cent who would benefit from the change understand super the least.”

Superannuation minister Bill Shorten has assembled a group experts to advise him on ways to ensure the move from 9 per cent to 12 per cent compulsory super will further disadvantage low income earners.

ACOSS will also be ask the government to limit the “rort” that allows workers aged over 55 to churn their income through super funds, making concessionally taxed contributions which they then withdraw as untaxed benefits.

“We would limit the concession to contributions that actually increased balances. Right now tens of billions are churned through funds for no other purpose than reducing tax,” said Mr Davidson.

In today's Canberra Times and Sydney Morning Herald

ACOSS on Superannuation

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Friday, February 17, 2012

Mining. Good for restaurants - RBA deputy

Café and restaurant owners in Melbourne and Sydney can rest easy. They’re not missing out on the benefits of the mining boom.

The Reserve Bank’s Philip Lowe used his maiden speech as deputy governor yesterday to point to “a chain that links the investment boom in the Pilbara and in Queensland to the increase in spending at cafés and restaurants in Melbourne and Sydney”.

Day-to-day the transmission mechanism could be hard to see.

“It starts with the high terms of trade that have pushed up the Australian dollar,” Dr Lowe told the Committee for Economic Development of Australia. “In turn, the prices Australians pay for many manufactured goods are, on average, no higher than they were a decade ago, despite average household incomes having increased by more than 60 per cent.”

“The stable prices for many goods, combined with strong disposable income growth means there is more disposable income to be spent on services in the cities and towns far from where the resources boom is taking place.”

At the same time the high dollar was hurting the manufacturing, tourism and education sectors, as well as some parts of agriculture and more recently some business services sectors.

The net effect was hard to judge... The Bank was “carefully examining every piece of data that comes in for insight”.

Asked whether the mining boom would be transitory, leaving Australian industry hollowed out, Dr Lowe said he could make a plausible case that the mining boom would be “very long-lasting”.

“The process of development of those very large and populous countries of Asia is going to take many many decades and Australia has the resources to supply those needs over many decades. If that is the case, the Australian economy has to go through some structural adjustment and it will be quite long lasting.”

“My sense is that from an overall perspective we are not losing the skills that that will make us competitive in the medium term.”

Moves by the big banks to push up interest rates independently of the Reserve did not threaten its ability to wield monetary policy. It targeted the overall level of rates charged rather than its cash rate and could keep adjusting the cash rate until it got the overall level it wanted.

By and large Australia was well served by the media in its reporting of economic issues. But reporting on Asia was not as strong as it should be. Second-tier data out of the United States was “breathlessly reported” but Chinese industrial production data was hard to find.

In today's Canberra Times, Sydney Morning Herald and Age

RBA Speech by Philip Lowe - 16 February 2012

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Jobs. Things aren't good, yet

Don’t get too excited, yet.

Officially employment surged in January after going sideways (falling slightly) throughout 2011.

The jump of 46,300 jobs in January sounds good, but is doing little more than reversing a slide of 35,700 jobs in December (revised down from a slide of 29,300).

The truth is jobs growth is a lot less spectacular than it now looks and a bit better than it did look.

Using smoothed trend figures and going back to the start of the financial year the Bureau of Statistics believed 11,900 jobs were created in seven months, not enough to stop the number of people identifying as unemployed climbing 19,000.

The more important point is that these are small numbers in the context of the total number of Australians in work - 11.4 million.

Employment is continuing to go sideways. The mid-year budget update foresaw that total growing 1 per cent, around 114,300 jobs. Seven months into the financial year we have scarcely scratched the surface.

The Bureau says the trend rate of jobs growth right now is 1700 jobs per month. At that rate it would take five years to accumulate extra the jobs forecast for this financial year. The unemployment rate would steadily rise from 5.1 per cent to the upper fives.

Maybe jobs growth will take off. But we can’t be sure that it has taken off yet.

The Reserve Bank is as unlikely to be persuaded that the labour market spluttered into life in January as it was that jobs growth really stopped in 2011.

A good figure is better than a bad one, but it is unlikely to dissuade the Reserve Bank from cutting rates next month if that’s what it is minded to do in order to offset private bank rate increases.

In Thursday's BusinessDay

Official figures showed a boost in employment of 46,300 in January pushing down Australia’s unemployment rate from 5.2 to 5.1 per cent.

But the jump largely reversed a seasonally adjusted dive of 35,700 jobs in December.

On a trend basis employment inched ahead just 1700 in the past month, well short of the 5600 per month that would be needed to meet the forecasts in the government’s mid-year budget update.

Employment minister Bill Shorten said he expected upward pressure on unemployment in future months.

But he said the January figures showed employment at a record high and unemployment much lower than in many parts of the world, something that “might even give a 24-hour siesta to the opposition’s negativity”.

Treasury executive director David Gruen told a Senate committee the labour market was “clearly weaker in 2011 than it was it was in 2010”. He expected an improvement this financial year, but jobs growth would still not be fast enough to keep pace with population growth.

NSW gained 10,900 jobs in seasonally adjusted terms in January but continued to lose jobs in trend terms.

The NSW unemployment rate was close to the national average at 5.2 per cent. Tasmania had the highest unemployment rate at 7 per cent, Western Australia the lowest of any state at 4.2 per cent, and the Australian Capital Territory the lowest in the nation at 3.7 per cent.

In today's Canberra times and Sydney Morning Herald

For another view, one that takes one month's seasonally adjusted change literally, here's Prime Minister Gillard in parliament yesterday:

"Today we see statistics that I believe that Australians will take pride in when they look around the world and see how many nations and how many working people—millions of them—are suffering with unemployment. Let me repeat: today the unemployment rate went down; 46,000 jobs were added to the economy in January. This is at a time when the number of people who were looking for work—the participation rate—went up. This means we saw over 15,000 people who were looking for work find a job. That is a remarkable thing. Just think about it: over 15,000 Australians who were without the benefits of work have found a job."

And Wayne Swan, Sunday:

"On Thursday, we learnt that more Australians are in work today than at any time in our history. That’s more Australians than ever bringing home a pay packet to their families, gaining the opportunity of a better life and a brighter future. It’s a fantastic achievement for our nation, particularly given the current state of the global economy. This news was unfortunately overshadowed in the media by reports of job losses at a number of companies. Obviously any job loss is a huge blow for those affected, but it’s important not to lose sight of the bigger picture – the fact that overall 46,300 more Australians gained work last month and the unemployment rate fell to 5.1 per cent."

And Prime Minister Gillard Sunday:

When I've got the unemployment results on Thursday and saw our economy create 46,000 jobs in January, that's the kind of thing I'm focussed on.

Oh my.


. Bill Mitchell - Mixed news with little to be happy about

. Tim Colebatch - Jobs. It's a zig-zag pattern

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Thursday, February 16, 2012

We were feeling better, until Westpac whacked us

Consumer confidence has lifted. The Westpac Melbourne Institute survey finds twice as many families believe it is a good time to buy a major household item as believe it’s bad. But the survey was conducted last week ahead of Friday’s decisions by Westpac and the ANZ to push up mortgage rates.

The survey came as the Commonwealth Bank reported a half-year cash profit of $3.576 billion, up 7 per cent from the year before. The result gives the Commonwealth a return on equity of 19.2 per cent - way above the 15 per cent typical of other Australian banks and the 5 per cent typical of banks overseas.

Treasurer Wayne Swan told parliament the Commonwealth had made the money “despite global volatility in global financial markets”.

“It shows they are hugely profitable,” he said.

“My belief and the belief of the government is that the banking system should work for all Australians, for every customer, for every worker, for the shareholders, for the broader community and the whole economy,” he said referring to the Commonwealth’s decision on Monday to lift its standard variable mortgage rate 0.10 points to 7.41 per cent, giving it the second-highest rate behind Westpac’s 7.46 per cent.

The decision will help restore a 0.10 point dipin the bank’s net interest margin from 2.31 per cent to 2.21 per cent.

Commonwealth Bank chief executive Ian Narev told a Sydney media conference that before the bank lifted rates Monday “writing a new home loan was not profitable”.

“I expect and welcome scrutiny,’’ the newly-appointed chief executive said... ‘‘What is critical in our mind is that that scrutiny is had on the facts and not against abstract concepts. Some of the sides, in particular the shareholders and deposit-holders, their voices have been lost a bit in the debate.’’

The Commonwealth’s 19.2 per cent return on equity saying profitability was “appropriate for an institution of this size at this time”.

Internationally a 5 per cent return on equity is more common, although Canadian banks average 15 per cent.

Mr Narev sought to distance the Commonwealth from the other major banks saying he had no plans for redundancies and no plans to move workers offshore.

“We don't have a different view from any of our competitors on the need to be as productive as we can be, we do have a different view on how to achieve that productivity in a sustainable way,” he said.

The ANZ has announced plans to cut 1000 jobs and Westpac 400.

The consumer confidence survey shows 54 per cent of Australian families believe now is a good time to buy a major household item, more than double the 26 per cent who thought the time was bad.

The results reflect the high Australian dollar and also the two successive Reserve Bank rate cuts in November and December.

The Bank’s unexpected decision not to cut rates this month appears to have dimmed confidence with those responses collected after the Tuesday announcement some 4 per cent less positive than those collected before.

Confidence among mortgagee holders is 7 per cent lower than among households who rent.

The overall confidence index jumped 4 per cent to 101.1, a level where optimists just outnumber pessimists.

In today's Canberra Times, Sydney Morning Herald and Age

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Wednesday, February 15, 2012

Rate rises. Two hold out

Australia’s largest credit union CUA has joined the Bank of Queensland in refusing to follow the big four banks in lifting mortgage rates.

The decision opens up a wide gap between its standard variable mortgage rate of 6.72 per cent and the most expensive rate charged by Westpac of 7.46 per cent. The saving from switching a $300,000 mortgage from the standard Westpac rate to the CUA would be $142 per month.

Treasurer Wayne Swan appealed to customers to consider switching saying there were “better deals on offer out there, including a number of deals which are much lower than what’s on offer from the big four”.

The saving may not be as great as the comparison suggests because many Westpac customers were on a discounted rate and may not get such a big discount with another lender.

“Our banking reforms - like banning mortgage exit fees on new loans - are all about putting the power back in the hands of consumers so they can more easily ditch any bank that tries to take them for a ride,” Mr Swan said... “These reforms were opposed by Joe Hockey and the Liberals, who sided with vested interests over Australian families.”

In parliament shadow treasurer Joe Hockey stepped up his attack on the banks referring to almost 2000 jobs to be lost at ANZ, Westpac, Macquarie, Suncorp and other institutions and asking what they said about the industry.

Prime Minister Gillard replied she wanted to make it clear how she felt about the decisions announced by the ANZ. “I think the combination of putting up your interest rates, then announcing job losses, and then seeking to blame both of those decisions on someone else is reprehensible,” she said.

ANZ was the first of the big four banks to increase its rates independently of the Reserve Bank, announcing an increase of 0.06 points Friday. On Monday it announced it would be shedding 1000 jobs.

On Friday it will announce a first quarter profit expected to be steady at $1.45 billion. The Commonwealth Bank will today report a first half year profit expected to be $3.49 billion, up 4.9 per cent. On Thursday Westpac will announce a first quarter profit expected to be $1.55 billion.

The Australian Bankers’ Association acknowledged public concern about the rate rises yesterday saying it understood why people were surprised by the moves.

‘‘For over ten years banks moved in step with the Reserve Bank of Australia and that created the reasonable expectation that the RBA cash rate was the only factor determining bank funding costs and the interest rates banks charged,” said chief executive Steven Munchenberg. ‘‘Unfortunately, the global financial crisis has shown that this is not the case.’’

Reserve Bank assistant governor Guy Debelle told a conference in Sydney bank funding costs jumped sharply in the second half of last year.

In today's Sydney Morning Herald

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No need for finance, we're waiting for a sign - business

It’s not just the Reserve Bank that’s sitting on its hands.

The latest NAB business survey shows an extraordinary two-thirds of Australian businesses reported no need for finance in January, the highest proportion since the question was first asked in 2008.

The jump from 64 per cent of businesses requiring no credit to 67 per cent in the monthly survey rendered less relevant the subsidiary question of whether credit was easy to obtain. The survey found conditions broadly unchanged with an increases in the proportion of borrowers finding loans harder to obtain offset by an increase in the proportion finding them easier to obtain.

“There must be a lot of businesses sitting on their hands,” said CommSec chief economist Craig James. “Either firms aren’t keen to take on debt, internal sources of funding are healthy, or firms don’t want to take on new projects.”

“It is not as if confidence has totally dried up,” Mr James said. “It’s that businesses would prefer to hold fire at present, no doubt waiting to see how the European situation and domestic political situation play out. It appears the caution expressed by consumers is infectious, with businesses also seemingly blinded by the headlights of oncoming traffic.”

ANZ economist Dylan Eades said the survey showed the economy tracking sideways... with the Reserve Bank rate cuts and improvement in offshore markets apparently failing to significantly lift growth prospects.

The survey shows deteriorating conditions in the wholesale and construction industries, offset by improvements in mining. The net business conditions index inched up from zero to two percentage points above zero, slightly above its long term average.

Westpac senior economist Andrew Hanlan said a pronounced divide was developing with conditions “positive for Western Australia, very weak in Tasmania and close to zero for the other states.”

In today's Sydney Morning Herald

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Monday, February 13, 2012

Short memories. We kept the banks afloat, and this week they'll...


One bank takes the heat, then another

December 2009: WESTPAC lifts rate 45 points instead of Reserve Bank’s 25. Cites the price of bananas. Other banks follow.

November 2010: COMMONWEALTH lifts rates 45 points after the Reserve lifts 25. Other banks follow.

November 2011: NAB cuts rates only 20 points after Reserve cuts 5 points.

February 2012: ANZ lifts rates 6 points after Reserve Bank leaves rates flat. Westpac follows, others consider positions.


Westpac 7.46% (from 7.36%)
ANZ 7.36% (from 7.30%)
Bank of Queensland 7.36% (no change)
Commonwealth 7.31% (decision imminent)
National Australia Bank 7.22% (decision imminent)
Reserve Bank 4.25% (steady)

Standard variable mortgage rates, Reserve Bank cash rate. February decisions

Borrowers are in for further pain this week with the Commonwealth and National Australia Banks each expected to launch separate reviews of their mortgage and business rates ahead of announcing multi-billion dollar profits.

Westpac and the ANZ defied the Treasurer and lifted variable rates 0.10 and 0.06 percentage points late Friday despite a decision by the Reserve Bank to hold its cash rate steady.

On Wednesday the Commonwealth Bank will report a first half year profit expected to be $3.49 billion, up 4.9 per cent. On Thursday Westpac will announce a first quarter profit expected to be of $1.55 billion and on Friday the ANZ will announce a first quarter profit expected to be steady at $1.45 billion.

The ANZ has asked to meet finance union representatives today amid fears it is preparing to unveil details of planned jobs cuts.

Treasurer Wayne Swan warned the Commonwealth and NAB to consider the consequences of moving saying they could lose business to other lenders offering rates “a full percentage point lower.”

"Just as many angry Westpac and ANZ customers would have been looking very closely over the weekend at other lenders offering rates a full percentage point lower than ANZ and Westpac’s, so too does any other bank that follows suit risk seeing their customers walk out the door," he told The Age.

Westpac’s decision to announce its rate hike Friday “as the 6pm news was rolling” would offend a lot of people.

But when asked what he could take, Mr Swan said “Let’s be very clear, we have not in this country over the last 25, 30 years regulated interest rates”.

Shadow Treasurer Joe Hockey said Mr Swan’s “soft lettuce” response gave the Commonwealth and National Australia banks licence to move as well.

Mr Swan said it was “up to Mr Hockey to explain this week why he opposed our ban on mortgage exit fees and sided with the big banks over Australian families”.

The National Australia Bank is now pricing mortgage rates an unusual 0.24 points below Westpac, almost the equivalent of an official Reserve Bank rate cut worth $48 per month on a $300,000 mortgage.

Although it has promised to continue to offer the lowest rate among the big four, NAB has not ruled out lifting rates to take them closer to the other three... A spokeswoman told The Age Sunday that as part of its commitment to having the lowest rate it “regularly monitors competitors' rates."

The Commonwealth Bank said rates were “continually under review”.

CLSA banking analyst Brian Johnson said the Commonwealth and NAB would “likely lift standard variable mortgage rates by a similar margin”. The loans they sold through mortgage brokers now barely covered the cost of capital.

ANZ Australian chief Phil Chronican said his bank’s 0.06 point increase wasn’t enough to cover costs. “Six points certainly doesn’t in any sense recover the margin pressure we’ve had, but we also needed to be mindful that customers were going to look at other banks,” he said.

The ANZ’s meeting with the Finance Sector Union today comes amid speculation it will be the most aggressive of the majors in cutting jobs. The union has previously claimed as many as 900 ANZ jobs are at risk.

An ANZ spokesman said the bank regularly met the union and had “nothing to announce at this time”.

Consumer group Choice pointed to the “coincidence” of the big four announcing bad news in turn. Westpac was the first to announce an outsized rate increase in 2009, the Commonwealth in 2010, the NAB the first to announce an incomplete cut in 2011, and the ANZ the first to announce an extra hike in February.

“It might be random, it might be telepathy, it might be by design, but it confirms too many preconceptions,” said campaign director Christopher Zinn.

AMP Capital chief economist Shane Oliver said the rate hikes would pressure the Reserve Bank to cut its cash rate next month in an attempt to bring retail rates back down. The Reserve targeted retail rather than professional rates.

In today's Sydney Morning Herald and Age


Michael West - Banks: deep pockets, short arms and shorter memories

Michael West - Reserve kept Bankwest afloat: litigator

Mark Bouris and Christopher Joye - Scrap the big four’s ‘protected species’ status

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Sunday, February 12, 2012

Thanks Whitney, you did good.


Saturday, February 11, 2012

How much more? Westpac sticks it to its customers, sticks it to Swan


With ANZ / With Westpac


$20,000: $0.78 $1.30
$40,000: $1.55 $2.59
$60,000: $2.33 $3.88
$80,000: $3.10 $5.16
$100,000: $3.88 $6.48
$200,000: $7.76 $12.96
$300,000: $11.64 $19.44
$400,000: $15.52 $25.92
$500,000: $19.40 $32.40
$600,000: $23.28 $38.88
$700,000: $27.16 $45.38
$800,000: $31.04 $51.62
$900,000: $34.92 $58.32
$1,000,000: $38.80 $64.80

Standard variable rate, 25 year mortgage


Westpac 7.46% (from 7.36%)
ANZ 7.36% (from 7.30%)
Bank of Queensland 7.36%
Commonwealth 7.31%
National Australia Bank 7.22%
ME Bank 6.74% (members only)

ANZ and Westpac have warned they could again raise mortgage rates without a signal from the Reserve Bank because of continued uncertainty in global money markets.

The two giants yesterday increased mortgage rates - blaming the need to protect profit margins - triggering an immediate backlash from politicians and customers.

ANZ lifted its mortgage rates by 6 basis points, taking its standard variable mortgage rate to 7.36 per cent.

Westpac followed with a more aggressive increase, raising its variable rate by 10 basis points to 7.46 per cent. This gives it the highest borrowing charge among the major banks.

Other banks - both big and small - are expected to push through their own rate rises in coming weeks.

The move comes just days after the Reserve Bank surprised the banking sectors by opting to leave the official cash rates on hold. Major banks had been planning to pass on only some of the anticipated Reserve Bank cuts.

An angry Treasurer Wayne Swan linked yesterday's rate rises to decisions by banks, including Westpac, to cut staff. From time to time, he said, banks "decide they want to give priority to their shareholders over their customers and over their staff".

"We don't dictate what they do with their pricing or what they do with their staffing, but what we can do is put in place a framework that empowers their customers to move down the road and get a better deal," he said.

The ANZ move is expected to add $12 a month to repayments on a $300,000 mortgage, while the Westpac move adds $20. It is understood both banks briefed the Treasurer before going public with their decisions...

Last night, Commonwealth Bank, the nation's biggest mortgage lender, had not changed its rates, although a spokesman said ''rates are regularly reviewed''.

National Australia Bank said it had not changed its mortgage rates. A spokeswoman said it was committed to having the lowest rate of the big banks.

The Commonwealth is charging 7.31 per cent for its variable mortgage while National Australia Bank is discounting at 7.22 per cent.

ANZ's Australian head, Phil Chronican, last night told The Saturday Age he faced a "serious dilemma" in becoming the first bank in four years to increase rates without guidance from the Reserve Bank.

However, he cautioned if funding costs did not subside this could again force his bank's hand.

''We don't know where the cycle is going to go while funding costs continue to bounce around.
''It would be wrong to say this (move) puts an end to anything,'' he said.

Westpac group's Peter Hanlon strongly rejected suggestions the bank was gouging customers.

''What we're doing here is reflecting the costs of funding,'' Mr Hanlon said.

''We want to make sure the bank remains strong, we want to make sure we continue to lend and what we've seen with banks overseas when they run into problems they have to be bailed out by governments,'' he added.

Coalition Treasury spokesman Joe Hockey rubbished the suggestion that customers could take their business elsewhere, saying "it's not going to do any good walking away if down the road one of the other major banks increases their rates".

"This shows the Treasurer is weak. He's been out there this week talking about how hugely profitable the banks are, how they should pass on any interest rate cut in full.

''And now at the end of the week we've got a rise and he simply shrugs his shoulders."

Greens MP Adam Bandt called on Mr Swan to get behind his bill that would require banks to provide so-called tracker mortgages that rise and fall with the cash rate.

'The time for tough talking ? is at an end," he said. ''Wayne Swan should not let ANZ get away with it.''

A Reserve Bank statement released yesterday said that in January banks were paying an unusual 2.50 percentage points above the government bond rate to raise money overseas. But it said in recent weeks the cost had come back 0.30 points.

Most lending rates were close to their medium-term averages. A benign inflation outlook gave the Reserve "scope" to cut official rates should economic conditions weaken materially.

The Reserve knocked its forecast for economic growth in the year to June from 4 to 3.5 per cent on the basis of lower International Monetary Fund forecasts for global growth. It expects growth to slip further later in the year before climbing back towards 3.5 per cent late in 2013.

With smaller banks and credit unions also feeling the pinch on funding, the major banks were again flexing their pricing muscle, CLSA banking analyst Brian Johnson said.

This ''suggests that in the near term, higher bank funding costs will be passed on to borrowers,'' he said.

Published in today's Sydney Morning Herald and Age

Oh my. Remember this?

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Friday, February 10, 2012

Why the ANZ moved

ANZ February Rates Review

ANZ: “The only major bank whose margins shrank in the second half of 2011”

The ANZ has quietly lifted the mortgage rate it charges new customers.

Bank executives will meet this morning to consider formally lifting the rates charged to all variable mortgage customers. An increase of 0.10 percentage points would add $19 to the monthly cost of servicing a $300,000 loan.

But on Monday with minimal fanfare ahead of Tuesday’s Reserve Bank board meeting the bank lifted the effective rate charged to new high-value mortgage customers.

Previously new customers borrowing at least $500,000 were were offered a discount of 100 points off the standard variable mortgage rate, taking the rate charged from 7.3 to 6.3 per cent.

On Monday the discount was cut to 90 points, lifting the rate charged to new customers to 6.4 per cent.

“It means anyone who has applied for a $500,000 loan from Monday will be paying $31 more per month than anyone who borrowed the week before,” said Canstar senior financial analyst Mitchell Watson.

“Existing customers are still paying the same rates so it doesn’t make the ANZ that much money, but it is a sign it is tightening.”

The move comes as the Swiss-based Financial Stability Board expressed concern about Australia’s relatively generous government backing of bank deposits...

Australia has one of the broadest depositor protection schemes in the world. With a cap of $250,000 the scheme is equal to only the United States in terms of protected deposits.

‘‘Although a high coverage level reduces the incentives for depositors to run, adequate controls are needed to ensure a proper balance between financial stability and market discipline,’’ the Financial Stability Board said in a global review.

The ANZ pledged in December to no longer closely follow the Reserve Bank in adjusting rates, considering the question independently on the second Friday of each month.

Evans & Partners banking analyst George Gabriel said of all the big banks the ANZ was under the most pressure to tighten rates.

“It's the only major bank whose margins shrank in the second half of 2011,” he told the Herald.

“Westpac and Bendigo Bank are talking about following the ANZ, but it is the ANZ that needs to move rates the most.”

Mr Gabriel said on balance he thought the ANZ would not move today because it would not want to “expend all its political capital unnecessarily”.

“The spectre of re-regulation always hangs over banks. France has just introduced 0.1 per cent financial transactions tax. It’s not wise to antagonise the Treasurer without a good reason.”

The National Australia Bank promised this week that its rates would always be lower than the other big three for the duration of the year. Bank of Queensland said yesterday it would hold its rates steady until the next Reserve Bank board meeting regardless of what the other banks did.

“It’s great to see Bank of Queensland really throwing down the gauntlet to the big banks to do the right thing by their customers,” Treasurer Wayne Swan said. “Our reforms are all about putting the power back in the hands of consumers so they can more easily ditch any bank that tries to take them for a ride.”

Consumer group Choice called on the big four banks to back up their decisions about home loan rates with evidence, publishing the reasons for any changes.

“If it’s good enough for the Reserve Bank to release the minutes of its board meetings, it’s good enough for banks who seek to go it alone,” campaign director Chris Zinn said.

In today's Canberra Times, Sydney Morning Herald and Age

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How the high dollar hurts


For 20 years from 1985 to 2005, the Aussie dollar averaged US70c. Now it is hovering around $US1.05. At that level, the question is: does it make sense for any firm to export manufactured goods from Australia?

It's not just Alcoa, Toyota or Holden. It's any firm that exports from Australia, or competes with imports. In the currency of global trade, producing in Australia is now 50 per cent more expensive than in the past. That applies to cars, computer games, university courses or tourism.

Between 1985 and 2005, the Aussie floated between US50c and US90c. If it got too high, firms would tighten their belts, grit their teeth and wait for it to fall. This time it's different.

The dollar is now far above its old levels. Some say it could go higher. Many, most, believe it is now up there to stay. This is not just a cyclical high, it's a structural shift. And it has wrecked good business plans that had assumed a dollar in the range it used to live in.

The destruction is going on all around us. Since the global financial crisis began, Bureau of Statistics figures show, a net 127,000 manufacturing jobs have been wiped out across Australia. One in every eight manufacturing jobs has gone already. Far more than that are under threat.

Treasury, the markets and the Reserve Bank tell us the Aussie is set to remain high far into the future, maybe for decades. It may not stay at today's level, but it will stay well above the zone it lived in before the minerals boom began. This is an epochal change, which will change Australia.

Why does the level of the dollar matter? Suppose you're a manufacturer in Clayton making plastic thingos. There's a big global market, but you're competing with manufacturers in China, Korea, everywhere.

Suppose it costs you $A10 to produce a kilo of thingos... With the dollar at US70c, that makes your costs $US7 a kilo. Suppose the world price is $US9 a kilo, then you're making a decent profit from exporting.

But with the dollar at $US1.05, suddenly your costs have jumped to $10.50 a kilo, yet the global price is only $9. To export thingos now costs you money, serious money. If you think the dollar is going to stay that high, you either somehow cut costs dramatically, or give up the game.

And that's not all. Suppose your Chinese rival can produce thingos for $US5 a kilo. When the $A was US70c, his costs in $A were marginally higher than yours; you could hold him off at home. But with the Aussie at $US1.05, his costs are now less than $A5 a kilo. He can undercut you and take away your local contracts. If you think the $A will stay up here, you don't just give up exporting - you give up manufacturing.

This is a crisis that will bring many well-run firms to their knees: not because they are inefficient, but because costs beyond their control have made them uncompetitive. It is a crisis that, if the dollar remains high as forecast, will cost hundreds of thousands of manufacturing jobs.

But seeing our politicians arguing is like watching two bald men fighting over a comb.

Julia Gillard and Wayne Swan always trot out the line that Labor understands that there are people and firms who are doing it tough. OK, but what are you are going to do about it?

Tony Abbott says he wouldn't have a carbon tax. Wow. A carbon tax might add about 1 per cent to the cost of manufacturing in Australia. The higher dollar has added about 50 per cent. What are you going to do about that?

One option is to do what others do: get the central bank to drive the dollar down. That's possible. They can do that by printing money - but that's the recipe for inflation.

There's two other ways, both unpalatable: invest overseas, as China does, or stop wage growth, as Germany once did.

Our best chance was the mining tax. A 40 per cent tax on superprofits in all mineral sectors, as originally intended, would have sharply slowed mining industry growth, reducing the upwards force on the $A and allowing other industries more room to grow. But Tony Abbott said no, Labor backed off, and even its emasculated tax is yet to pass Parliament.

In the crisis, our politicians and policy advisers have failed the test - unless you think ''do nothing'' is the correct answer. This change will leave many victims in its wake.


Manufacturing industry leader Heather Ridout is in no doubt the high dollar is stifling her members’ businesses, but she says it isn’t just making Australia unattractive compared with Asia.

“We are losing competitiveness against the United States,” she says. “I was talking to a company today that has found a 30 per cent differential in wage costs between the US and Australia. That’s at the prevailing exchange rate. It would make sense to move their operations to the United States.”

Whereas during the global financial crisis Australian manufacturers didn’t think about moving offshore, believing the crisis would pass, she says now they believe the high dollar is here to stay.

“They held on to their workforce during the GFC. They did deals to reduce hours, people took all their holidays, people went on training courses, you name it, gardening leave,” she says. “But now there is a certainty things won’t return to how they were. The reality is dawning, and the implications aren’t great for Australia.”

Ms Ridout nominates the apparently permanently elevated dollar as the biggest threat to manufacturing in living memory, certainly bigger than the reduction in tariffs - which happened gradually - and bigger than the rise of China as a competitor.

Australian Workers’ Union boss Paul Howes yesterday blamed the Reserve Bank for the high dollar saying the Bank signed a ‘‘death warrant’’ for manufacturing on Tuesday when it left its cash rate on hold. The dollar jumped more than 1 US cent to 108 US cents within minutes.

“The Alcoa aluminium plant in Geelong can be incredibly profitable if the dollar sits at 104 or lower,’’ Mr Howes said. ‘‘But when you’re sitting near 110 and when there are no signs of it coming down, when the Reserve Bank is basically trying to sign a death warrant on Australian manufacturing industry; yes, these jobs are under threat.’’

Ms Ridout who joins the board of the Reserve Bank on Valentines Day said it wasn’t fair to blame the Bank for the high dollar, when so much else was propping it up.

“United States official interest rates are set at zero for the next couple of years, European authorities are lending at 1 per cent. Our rates are higher but the Reserve’s decisions won’t much change that. Our triple-A credit rating is pulling in money and high commodity prices are boosting demand for dollars.”

“Our members are fighting back - some are boosting research and development - but I can’t guild the lily. Things will not be the same.”

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