Let's not pretend this is about jobs, okay? Mining as an employer

Employment in mining has shot to a record high, but the industry remains a pint-sized generator of jobs.

Detailed employment figures released yesterday show an extra 14,400 mining jobs were created in the six months to to May, roughly offsetting the number of mining jobs lost in the previous twelve months.

By contrast the construction industry piled on 40,000 jobs, the transport industry 24,000 jobs, health and aged care another 24,000 and agriculture 22,000.

Some of the extra jobs in these industries would have been related to mining. Most would not.

Employing just 179,400 Australians, mining is outranked by all but one of the 19 industry groupings used by the Bureau of Statistics. Even "arts and recreation," employing 193,400 Australians, is a greater provider of jobs...

Australia's top employer, health and aged care now provides jobs to 1.2 million Australians, retail remains in second place, employing 1.18 million and construction moves into third place employing a record 1 million Australians.

Manufacturing continues to shrink, employing a record-low 972,000 Australians in May - just 8 per cent of the workforce. Mining employs 1.6 per cent nationwide.

Only in Western Australia is mining a significant employer, providing 6 per cent of that state's jobs. In NSW it employs less than 1 per cent, in Victoria less than half a per cent.

The figures lend weight to a claim by Treasury boss Ken Henry in evidence to a Senate committee last month that mining did not "save Australia from recession".

"It is true that Australia avoided a recession," he told the committee, "but the Australian mining industry actually experienced quite a deep recession - in the first six months of 2009 it shed 15 per cent of its workers. Mining investment collapsed, mining output collapsed."

Sensitivity analysis conducted by the Herald/Age finds that even given the small number of mining workers polled in the employment survey there is a 95 per cent or greater probability that mining employment did fall in that time and rose afterwards.

Mining employment has returned to the peak reached in November 2008 before the full force of the financial crisis, and on a trend basis is at an all-time high.

Coal mining employs 36,700 Australians, oil and gas 17,800 and metal ore mining 56,700. Around 28,000 Australians work in exploration.

The figures show that while Australia's unemployment rate has fallen from a high of 5.8 per cent to 5.2 per cent, the number of Australians out of work for more than a year has continued climbing.

Some 115,000 Australians had been out of work for a year or more in May, almost double the number at the start of the crisis.

The Australian Council of Social Service expects the number to keep rising.

"Long-term unemployment is a delayed indicator of an economic downturn and so we expect the figure to increase, said chief executive Clare Martin.

“People who have been out of the workforce for many months or years often require intensive assistance to move back to work."

ACOSS called for a paid work experience program for long-term unemployed people to them back into mainstream employment.

“Australians also need an adequate income while they look for work, said Ms Martin. "A single unemployed person gets just $231 per week which barely covers the costs of essentials."


Our biggest employers...

Health and care - 1.2 million
Retail trade - 1.18 million
Construction - 1.0 million
Manufacturing - 972,000

Our smallest...

Real Estate and rental - 197,400
Arts and recreation - 193,400
Mining and exploration - 179,400
Electricity, water & gas - 136,300

ABS 6291.0.55.003

Published in today's SMH and Age 


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Without stimulus our home building industry would be...

NSW owes what remains of its residential construction industry to government stimulus.

Bureau of Statistics figures released yesterday reveal the second-worst March quarter for housing construction since in the 40 years such records have been kept.

Work started on just 3672 private houses in the quarter, fewer than half the 8843 started in Victoria and a long way below the 6000-plus totals common earlier in the decade.

Work began on only 2050 units, also well down on the totals of more than 5000 common earlier in the decade. Only 88 house conversions got under way.

"The industry is being kept afloat by the roll-out of public housing," said Aaron Gadiel, chief executive of the developer lobby group Urban Taskforce Australia.

Stimulus-funded public housing accounted for an unprecedented 2442 starts, a leap of more than 400 per cent, and by far the busiest quarter on record.

Nationally public sector housing starts jumped 73 per cent while private starts remained unchanged...

"The good news is public sector dwelling starts are expected to stay high for a while yet," said Commonwealth Bank economist Michael Workman. "The Federal Government has committed to higher levels of social and defence housing as part of its stimulus program."

"But the response of the private sector is painfully slow. Most of the recent lending for housing has contributed more to lifting prices, especially in the high demand inner-city suburbs, rather than expanding supply where required."

Mr Gadiel said it was apt that these figures came out as the Local Government and Shires Association announced councils were "banding together" to
fight state government efforts to limit their taxes on new homes.

"Councils seem to believe that each new levy they impose can be funded from endless developer profits without hurting buyers," he said.

"That’s a key reason why NSW has suffered record low levels of residential development for each
of the last four years, while Victoria has boomed."

Separately released Residex figures show Sydney house prices climbing a further 1.6 per cent in April to be 17 per cent higher over the year.

The typical Sydney house price stood at $657,500 and the typical unit price $459,500.

Melbourne house prices climbed faster, gaining 22 per cent over the year to push up the price of a typical house to $582,000 and a unit to $445,000.

Published in today's SMH and Age


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Update: Peter Dutton is still ahead on his BHP shares

Coalition frontbencher Peter Dutton bought BHP on Tuesday May 4 - two days after his leader said the RSPT would kill the mining industry "stone dead".

It closed that day $38.59

Tonight it closed $39.24

That's annualised growth of 14%

Earlier story here.

Pity the investors that took note of what Coalition frontbenchers said rather than what they did.


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Want to be landlord? Dive in

Australians are diving into negatively geared property even as the Reserve Bank signals that another interest rate rise could be just weeks away.

New finance figures from the Bureau of Statistics show that while lending to buy homes in which to live slipped a seasonally-adjusted 10 per cent in the first four months of this year, lending to real estate investors climbed 11 per cent.

In the past year lending to investors surged an exceptional 30 per cent nationwide, and by an extraordinary 44 per cent in Victoria.

"These investors aren't concerned about interest rates," said BIS Shrapnel analyst Angie Zigomanis. "They can see prices rising and real estate looks a safer bet than the stock market."

While some of the new real estate investors were taking money out of the stock market, most were using money they had been keeping on the sidelines.

"You've got people who have still got their jobs and have been fiscally conservative and potentially money is burning a pocket," he said.

"If you stick money in a term deposit it faces tax... A lot of people are averse to putting it in the share market given how it's been going, and residential property has bottomed out and been climbing for 12 months. That's given people confidence to jump back in."

Mr Zigomanis said the clincher for some would have been the government's decision not to move against negative gearing in response to the Henry Review.

The latest Tax Office figures show a record 1.2 million investors claimed they spent more money on their rental properties than they earned in 2007-08. One in every 10 taxpayers owned negatively-geared property.

On average they claimed losses of $10,640 each, and $26,500 for high income earners on more than $250,000 a year.

Reserve Bank figures released yesterday show that in other respects we are being more careful with our money. Credit card cash advances are down 5.5 per cent over the year and the proportion of Australians withdrawing cash from their own bank's ATM rather than another bank's has climbed to a record 62 per cent.

Minutes of the Reserve Bank June board meeting suggest it will leave rates on hold next month but consider lifting them in August in response to inflation figures to be released late July.

The minutes identify international developments and the outlook for inflation as the key drivers of rates and unusually nominate the July figures as the one to watch.

Reserve Bank deputy Governor Ric Battellino told a Sydney conference he was unconcerned about household debt, noting that it stayed steady relative to disposable income since 2006.

"In my experience foreigners never ask about government debt in Australia, or corporate debt for that matter. It is not hard to understand why, as both government and corporate debt in Australia are low by international standards," he said.

While foreign debt had climbed as a proportion of GDP, as a proportion of total financing foreign liabilities had not grown since the 1980s.

Claims house prices were high relative to household incomes failed to differentiate between city and regional salaries.

"If you look at house prices relative to the incomes of the people living in those areas then the prices in the cities are quite reasonable," he told the conference.


Investors rush rental properties

Four months to April 2010 compared to four months to April 2009

NSW up 20%
Victoria up 44%
Queensland up 32%
Western Australia up 33%

Australia up 30%

ABS 5671.0

Published in today's SMH and Age

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How profitable? Possum on why we can't stop mining.

His incredible piece is here. Read and wonder.

Some highlights:

"In 2008/09, the Australian mining industry had a EBITDA/Revenue ratio of 43% while the worlds largest forty mining companies had a comparable estimate of 30%...

"Our profits and our resources are simply too good an opportunity to pass up – even if the profit margins involved in Australia are seriously reduced. When the noisy miners say that their capital is mobile, they are dead right – their capital is indeed mobile, but in exactly the same way that every other mining firm’s capital is mobile, including the capital of the worlds largest forty miners...

"Big Dirt walking away from Australian investment will be their loss, not ours – because someone else will simply take their place.

Big Dirt – welcome to capitalism."


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Want to be on TV? Just say you hate the mining tax.

From Crikey:

An email from Kate Cunningham of Plush Films

She is making TV ads:


"Plush Films have been asked to film a series of television commercials showing how this proposed new mining tax will affect not only the mining industry and the people it employs, but also the industries and people indirectly employed through mining.

I want to find the most people that would be happy to either:

. Read the script in entirety for a 30 second spot.

. Read a line that is part of a 90 second script, that might be something like: "...long term damage to the communities, families...." or "....investment and industries that do so much for this country.....""....Hurt mining and you're hurting Australia....." ".....Thank you...." and/or perhaps just be included in another spot

. Just say their name e.g. " Kate Cunningham, Secretary, Leichhardt" and this would be included in a commercial that has a professional voice over artist delivering the script.

I'm looking for all sorts of people and situations....Families....engineers in mining or site office environs......big caterpillar trucks......communities......all sorts people and places that will be impacted by the trickle down effect of this tax.

Kind regards,

Kate Cunningham"


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Goodbye Autumn, we loved you. Winter's good too. (Canberra photos)

The Senate courtyard, as seen by Bella's iPhone:

Thanks Bella. PS: Canberra is paradise - don't pass it on!


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Wait 30 seconds, find a new job. What could be wrong with that?

By the way it's a shortage of people, not capital, that will hold back the mining industry

Australia is creating new jobs at the breathtaking pace of one every 30 seconds, piling on an extra 140,000 in the first five months of this year, confirming talk of a "V-shaped" recovery and driving unemployment down to the interest-rate sensitive zone of 5 per cent.

After an extra 36,400 full-time jobs were created in May, 26,900 of them brand new jobs and 9,400 by converting previously part-time positions, Australia's official unemployment rate fell to 5.2 per cent. When calculated to several decimal places it is 5.154 per cent, perilously close to the 5 per cent rate, identified by the Treasury as "full employment" beneath which inflation will grow and interest rates climb.

Treasury official David Gruen told a Senate committee last week it had been "a longstanding practice" to regard full employment as 5 per cent, adding there was "a reasonable band of uncertainty around that number".

"With the best will in the world, we cannot really tell whether it is 5 per cent or anywhere in the range, say, from about 4.75 to 5.25 per cent," he told the committee.

"It is not that the economy cannot generate lower rates of unemployment; it is just that if you do go below the full employment rate... inflation starts to rise and you end up in a situation which is inconsistent with the Reserve Bank’s mandate, and so they act."

Shadow Treasurer Joe Hockey seized on the news saying that while the low unemployment rate was "excellent" the government should cut its deficit faster and that "further increases in interest rates will be laid squarely at the feet of the Rudd government".

BT economist Chris Caton said the Reserve Bank was now "just one uncomfortably high inflation reading away from the next rate hike".

Commonwealth Bank economist Michael Workman said there were already signs of skills shortages and wage pressures and that while Australia went into the last mining boom with an unemployment rate of around 7 per cent it was going into this one from just 5 per cent.

The Australian dollar shot up half a cent on the expectation of higher rates and also strong economic news from China.

Queensland, Victoria and NSW are responsible for the bulk of the new jobs created so far this year with Western Australia well behind as its unemployment rate was driven down from 5.1 to 4.1 per cent suggesting it is finding it hard to attract workers.

In trend terms NSW remained steady at 5.4 per cent, but a surprising drop in the number of residents looking for work pushed the seasonally adjusted rate down from 5.7 to 5.2 per cent.

Detailed Bureau of Statistics records suggest 326,000 Australians became workers in May - 110,000 of them previously unemployed and 216,000 previously not even looking for work, more than replacing the 317,000 who retired or dropped out. Hours worked surged 2.9 per cent.

Prime Minister Kevin Rudd said Australia's unemployment rate was now half that of the United States and half that of much of Europe.

His government achieved the result "in the face of massive criticism of debt and deficit etcetera".


Where are the new jobs?

Since December, unemployment rate

Queensland 47,000 5.5%
Victoria 34,500 5.4%
NSW 25,100 5.3%
Western Australia 18,000 4.1%
South Australia 10,500 5.3%
Tasmania 3800 6.0%

6202.0 May 2010, Seasonally adjusted

Published in today's SMH and Age


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Peter's post:






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"Resource companies will leave Australia only when there are no more minerals and energy to extract"

Ian Verrender, who is less polite than I am, in today's Herald:

"Enough is enough. If one more person looks me in the eye and talks about sovereign risk and the new resources tax, I swear I'll strangle them.

Let's get it straight. Even by the loosest definition, modifying the tax system in the manner proposed by the federal government does not in any way endanger the national ability to repay debt.

Nor will it endanger the ability of resources companies to meet their commitments.

And that, dear reader, is the definition of sovereign risk.

As with many developed nations, Australia has become more exposed to sovereign risk as the global banking system was bailed out with taxpayer funds, the consequences of which are playing out at this very moment in Europe.

In our case, taxpayers underwrote $100 billion of offshore borrowing for our big banks, lifting our risk profile.

But raising the rent for a bunch of tenants profiteering on the back of resources they do not own does not increase sovereign risk. It is simply an owner exercising ownership rights...

Joseph Goebbels, the master of propaganda, noted: 'If you tell a lie big enough and keep repeating it, people will eventually come to believe it.'

And so we have the current scare campaign, being waged by a sector of the economy that has suddenly found itself in the midst of a boom, the likes of which it could never have imagined possible, not even in the wildest dreams of the most optimistic of speculators, less than a decade ago.

Earnings have grown in spectacular fashion, at a pace few have scarcely believed. And there is almost universal agreement this trend will continue.

The old cumbersome state-based royalty system, calculated on the volume of dirt rather than dollars, has meant that the overall profit share from mining has turned dramatically in favour of resources companies. For the proof, see the bottom line of their annual accounts.

Not surprisingly, with the stakes so high, truth has been cast aside. The ever more hysterical arguments from industry spokesmen are so intellectually bankrupt, so bereft of reason, they defy description.

The truth of the matter is this. The big resources companies certainly pay large licks of tax. But they do not want to pay more. They want to capture the windfall gains for themselves, for the executives to pay themselves ever bigger bonuses and their shareholders ever greater returns.

That is a perfectly understandable and legitimate argument. That is the essence of capitalism. That is what companies are supposed to do. That is what executives are paid to do. It also is the reason Xstrata is headquartered in Zug, Switzerland, a nation not ordinarily known for its mining potential.

But you won't get too far using that logic in argument such as this.

And so, from the industry's viewpoint, the focus is on employment, while the profit side of the equation has been cleverly shoved into the background. Listen to the rhetoric. They don't refer to a Resources Super Profit Tax. Instead it has been modified to the far more politically charged Resources Super Tax.

The other great lie in this debate is the notion that the new tax is retrospective. Look up the definition. Don't worry, I'll do it for you.

'1. Directed to the past; contemplative of past events'.

The new tax applies to future earnings. It does not impose penalties or an impost on past earnings and cannot be considered in any way retrospective.

But the argument has been twisted: because it applies to projects that are already in operation, this somehow means it is retrospective.

Apply that argument to personal income tax. If a pay rise catapults you into a higher tax bracket, try arguing that you shouldn't have to pay because you've had the same job for years and that it should apply only to new employees.

The reason the new tax applies to existing mines, particularly the Pilbara iron ore deposits being exploited by BHP Billiton and Rio Tinto, is that they yield fabulous riches to the operators. Development costs were written off decades ago when iron ore prices were a mere fraction of current levels.

Well-funded fear campaigns, bolstered by arguments such as these, have become regular events over the years within the mining industry.

The gold tax was supposed to wipe out gold mining in Australia, leaving thousands unemployed as miners rushed offshore. Indigenous land rights legislation in the wake of the Mabo decision was going make Australia a laughing stock.

In both cases, the threatened mining exodus failed to eventuate.

Why? The answer is simple. Australia has world-class resources. It has first-class infrastructure. It has a highly educated population. It has a transparent government and efficient bureaucracy. It is located geographically within the fastest growing economic region on earth.

Resource companies will leave Australia only when there are no more minerals and energy to extract.

The federal government could be accused of many things in this debate: naivety, poor presentation, insufficient consultation.

And while Ken Henry's resources super profits tax is ''elegant'' from a structural and economic viewpoint, you have to wonder why on earth the federal government simply didn't extend the resources rent tax that has been operating for decades on our offshore petroleum industry.

Politically, that would have been far simpler to sell. And we might have had a debate based on logic rather than fear."


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A "V-shaped" economic recovery?

So far, here.

When Governor Stephens speaks of a "V" shaped recovery, he is correct - so far. Australia recorded just one quarter of negative growth during the economic crisis. On the graph it is a deep V. But there's no guarantee it will stay that shape.

In the March quarter economic growth was positive - we were at the top-right tip of the V. But the unsettling truth is that were it not for an extraordinary 11.6 per cent jump in government stimulus construction spending that quarter growth would have been negative. We would have been looking at a W.

And although not many are game to say it out loud, it gets worse. Stimulus programs are finishing. Treasury says it will subtract one percentage point from economic growth this year. And the troubles overseas are just beginning to touch our shores.

We are at the top of a V, for now.


Published in today's SMH

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Consumer confidence is plummeting, but...

...Labor voters are as happy as Larry

Consumer confidence is plummeting with the latest slide - the third in three months - blamed in part on the budget and the proposed resource super profits tax.

As high as 117 in March the Westpac Melbourne Institute index is now just 101.9 on a scale where 100 means pessimists balance optimists.

"While the fall in May was largely due to the Reserve Bank’s decision to raise rates that month, the fall in June seems to reflect a mixture of concerns about deteriorating conditions abroad, financial market turmoil and uncertainty around the proposed resource tax," said Westpac economist Matthew Hassan.

Westpac found the most recalled news items during the month concerned the budget and tax. The perception was negative with the number of people feeling bad about the news outweighing the number who felt good.

But their were very sharp differences according to the way people vote...

The survey found Australians planning to vote Labor feel the most confident of any deomographic group with an index number of 120, meaning optimists outweigh pessimists 20 per cent.

Australians planning to vote for the Coalition feel the least confident of with an index number of 90, meaning pessimists outweigh optimists by 10 per cent.

The gap between the confidence of Labor and Coalition voters is amongst the widest on record.

Australians are now far less likely to believe that now is a good time to buy a house than at any time since the depths of the financial crisis with the balance of optimists versus pessimists sliding from 146 to 95 in a year.

"We are reigning in our exuberance," said CommSec economist Savanth Sebastian. "We are now barely more confident that a year ago and the slide in the share market hasn't helped."

Separately released figures show home loans sliding for the ninth time in ten months with the number of loans to owner occupiers falling to its lowest point in almost a decade.

Just 46,300 Australians borrowed to buy houses in April, down from a recent high of 64,600 in September.

In NSW loan approvals were down 30 per cent on September. Nationwide approvals were down 28 per cent.

Against that trend investment loans are climbing and are now 26 per cent higher than a year ago.

Concerns about share prices and international conditions are weighing heavily on consumers with only 11 per cent believing the share market is "the wisest place for savings" and the assessment of overseas conditions the worst since the financial crisis.

"The proportion of Australians recalling international news is actually higher than in the crisis," said Mr Hassan. "It's the highest since the Asian economic crisis of 1997 and 1998."

Overwhelmingly Australians believe the bank is the safest place for savings with real estate and paying down debt the next highest categories.

Surprisingly for Australians who are increasingly negative, the proportion of people believing that "now is a good time to buy a major household item" high with 58 per cent answering yes and only 28 per cent answering no.

Optimists about buying cars also far outweighed pessimists, possibly reflecting good car prices flowing from the cut in tariffs in January and the recently high Australian dollar.

Published in today's SMH and Age


Consumer Sentiment June 2010


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Wednesday column: No way back, no way out - the miners don't want a deal

I've come up with a way out - something designed to give the mining companies what they say they want while giving the government what it wants.

But there's no point. The mining companies don't really want what they say they want. Not yet. Not by a long shot. Not while there is a chance of toppling the government.

Their behaviour makes sense on two levels. Most simply, no-one likes paying more tax. Company directors are required to maximise after-tax returns. But more profoundly, if Australia's proposed super profits tax can be stopped before it starts it won't be mimicked worldwide. Governments far more cash-strapped than Australia's are waiting to see what happens. If Rudd wins, India, Canada, Peru, Chile and the nation that's hosting the World Cup might follow, making mining less profitable all over.

But still incredibly profitable. The Treasury official who consulted with Australia's miners David Parker told a Senate committee last week that some of the projects whose numbers he examined had "a payback period of less than six months... that is, they return all their capital in less than six months - and they have an internal rate of return in excess of 400 per cent".

Treasury believes that if all of such a project is worth doing, so too would 60 per cent of it after that government had imposed itself as a 40 per cent partner. The (smaller) investment would be recouped just as quickly at just as sharp a rate of return.

So what's the miners (stated) gripe? It is that the government isn't actually planning to put up 40 per cent of the costs as a genuine partner would. It is promising to come up with them in time by subtracting them from future tax payments (or the tax payments of other mines owned by the same company).

To the extent that it delays coming up with the 40 per cent it will compensate the miners it eventually pays by giving them interest, calculated at the government bond rate.

Ken Henry says the bond rate is the right one because what the government is offering is mathematically the same as a AAA rated government bond.

It is not called a bond because then the government would have to deal with Barnaby or Andrew Robb or someone firing up a debt truck and going on about the debt that will be left to our children (notwithstanding the quick payback period of many mines).

But Henry reckons it is the same and any half-decent financial institution can make it so. As he put it to a group of economists last month, "the people we call financial engineers can translate theory into practice at the speed of light".

It is not particularly difficult financial engineering. The Bendigo Bank will advance me money against the proceeds when I eventually sell my house and is prepared to wait.

But Andrew Forrest of Fortescue Mining has told the stock exchange a government guarantee is "of little value to banks and project financiers".

"Who believes that companies could fund 40 per cent of an investment on the strength of some future unbudgeted government tax credit," he asks.

I'm suggesting the government short-circuit the argument and set up a company that would do just that.

For a fee this off-balance sheet government authority will come good with 40 per cent of a mine's development costs upfront, relying for the bulk of its income on the tax receipts the government will send its way when they arrive and borrowings at the government bond rate.

The bonds it issues would be popular. Amongst banks and super funds there's a shortage of AAA-rated investments.

Miners may well choose not to use the authority and avoid paying the fee. The big ones are awash with cash and wouldn't need it. But they wouldn't be able to claim they couldn't get finance.

In reality this complaint matters little to most miners (although if it does matter I have solved their problem).

What worries them much more is a higher average tax rate that would still leave them extraordinarily profitable and spread worldwide.

And given that that is the point of the super profits tax it is hard to see how the government can satisfy them. And in any event it is hard to know who to satisfy. Many of the mining companies scarcely talk to each other let alone like each other. Who would the government reach agreement with? If it found negotiating with the Coalition over the emissions trading scheme impossible it would find this worse. As soon as it gave one company what it said it wanted another would disown the "deal".

There's nothing fundamentally wrong with what the government is proposing - nothing to negotiate away except the tax itself.

And just as there is a lot at stake for the miners worldwide, there is a lot at stake for government - for the idea of government.

If our government can't pull this off, can't exercise its sovereign right to introduce economic reform in the same way as have other governments when they reduced tariffs, taxed offshore petroleum and taxed goods and services, it will have diminished what is seen as possible.

The Hawke and Howard years will be seen as high water mark for what Australian governments used once to be able to achieve.

There's really no way out and not much of a way back.

Published in today's SMH and Age


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The Tax Office supercomputer that will never quite be

The Tax Office has scaled back the reach of its new $820 million supercomputer after a bumpy start that delayed one million tax returns, sent out return letters without cheques and failed to communicate with other computers because of a misunderstanding about the meaning of negative numbers.

Detailing a litany of mishaps Second Commissioner David Butler has told a Senate estimates hearing that cost overruns and the new need to work on changes flowing from the Henry Review meant the supercomputer would no longer become the "integrated system for everything" originally planned.

Business Activity Statements and superannuation guarantee statements would continue to be run outside the new system in order to give the Tax Office "space to pick up recommendations adopted from the Henry Review, the Cooper review of superannuation and whatever else might come out of that".

Earlier changes to superannuation rules under Howard government had been responsible for $200 million of the $430 million cost blowout.

Commissioned on Australia Day the new computer system had so far sparked 17,000 public complaints, required more than 500 bug fixes and sent unintelligible data to Centrelink...

Mr Butler told Senator Nick Xenophon the Tax Office normally sent 50,000 to 100,000 pieces of information per day to Centrelink.

When a Centrelink client had a loss the new system put a negative sign in front of the amount lost describing it as "for example minus $5000" but the Centrelink system "could not cope with that because it could not cope with a negative figure".

"We had to put a fix in, a change to the system, to turn that to a nil assessment, so it would show zero," he told Senator Xenaphon. "But when we put that fix in place there were some returns in flight through the system. Unfortunately it turned them to nil as well, and it should not have."

The Tax Office will terminate its contract with Accenture to introduce the system and engage a separate consultant, CPT Global to advise on how to make it work during the coming tax season. It has put on an 330 staff more than normal in effort to make the tax season work.

It had been receiving 5 times as many complaints as normal and had handed out 5233 hardship payments.

Senator Xenaphon sought an assurance tax staff would feel free to give evidence to the independent inquiry being conducted by the taxation inspector general asking Commissioner Michael D'Ascenzo whether he had written an email warning staff not to "disclose any private and personal information to the inspector general".

"If they were issued with a notice from the inspector general, this would not be in breach of the law, would it," he asked. "Will you clarify that your staff, if given and served a notice by the inspector general, can give information of a personal nature to illustrate the difficulties with the new system?"

Mr D'Ascenzo said there was no need to clarify his advice to staff because his admonition had included the phrase "unless you are requested to".

Published in today's SMH and Age 

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At last - some good communication from the government about the RSPT

Here.

Here.

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The pessimist's mug

It's half empty:

There are more good ones here.


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Money only matters when it takes money off the table - incentives aren't what you think they are

This'll take about 10 minutes, but afterwards you won't be the same:




HT: Marek 


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Mining export earnings are beginning to roll (whatever the industry says)

Claims that Australia is uncompetitive for mining have come at an inconvenient time.

Trade figures for April released as Xstrata shelved two of its Queensland mining projects show a dramatic jump in mining earnings - with more in store.

With imports steady Australia's export earnings jumped 11 per cent in April led by a 32 per cent jump in earnings from iron ore and a 35 per cent jump in earnings from coal.

"This is just the beginning,' said TD Securities strategist Roland Randall. "We expect significant trade surpluses over the next twelve months, boosting economic growth and accelerating inflation.

The 32 per cent jump in iron ore earnings was made up of a 29 per cent boost in prices and a 2 per cent increase in volumes. The recorded coal export price climbed 7 per cent as volumes jumped 26 per cent.

The surging prices are only the first installment... of dramatic increases that began flowing from April.

The new iron ore contacts are around 80 per cent higher and the new coal prices 35 to 55 per cent higher.

Many of the new contracts run for just three months instead of the previous twelve leaving scope for further acceleration.

On Tuesday this week Japanese steelmakers granted BHP a further increase of 12.5 per cent to apply from July.

"The massive increases we have had have yet to be passed on to all miners," said Westpac economist Anthony Thompson. "To the extent other miners eventually achieve matching price leaps and have them backdated, the iron ore figures and the trade surplus will face upward revisions."

The Commonwealth Bank is forecasting a return to record-high export prices within months.

"We think the terms of trade will go back to their previous peak early next year and may even go through it," said Commonwealth Bank economist Michael Workman. "Our commodities team are forecasting further increases in the September quarter."

The trade figures mark a dramatic change from those released just one day before in the National Accounts.

Wednesday's accounts painted a bleak picture for exports and dealt only with developments to March. Thursday's trade figures for April push Australia's balance of trade into surplus for the first time in a year and herald the long-anticipated resumption of Australia's commodities boom.

Published in today's SMH and Age 


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Rudd and Swan did a lot to help the banks during the crisis. They asked for more.

Great story in today's Australian:

NAB-ANZ secret merger bid at the start of global financial crisis

EXCLUSIVE: Brett Cleg and Scott Murdoch

NATIONAL Australia Bank and ANZ sought to bring down the four pillars policy through a bold merger in 2008 that preceded the depths of the global financial crisis.

Talks between the Melbourne-based institutions were conducted for several months in the first half of 2008, but efforts to win support from the Rudd government for the controversial move failed.

The Australian has confirmed with several senior sources on both sides of the aborted negotiations that the talks took place.

Under the plan, NAB chairman Michael Chaney would have assumed the role as head of the board at the merged entity.

ANZ chief Mike Smith would have kept that position, most notably because at that time NAB had yet to appoint a successor to former chief executive John Stewart.

According to one well-placed participant, there were "significant social synergies" in the deal given that then ANZ chairman Charlie Goode was due to step down and Mr Stewart's replacement as NAB boss had yet to be finalised.

The push intensified following Westpac Banking Corporation's shock announcement on May 13, 2008 that it would buy NSW regional rival St George Bank for close to $17 billion.

But furious closed door lobbying in Canberra over a period of months made it clear there was little political appetite to accept a rationalisation of the banking sector on such a grand scale.

The situation reached an inflection point at what was seen at the time as a surprise, if not curiously timed, statement by Wayne Swan on June 2 prior to heading to a meeting of Organisation for Economic Co-operation and Development finance ministers in Paris.

In that statement, the Treasurer emphatically restated Labor support for the four pillars policy and soon after gave the House of Representatives Economics Committee the task of "identifying any barriers that may impact on competition in the retail banking and non-banking sectors".

Continued...


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Removing stimulus now would "stall the economy"

The latest national accounts show that despite talk of a mining boom and Australia leading the developed world, if it weren't for government stimulus spending we would be going backwards.

The economy grew 0.5 per cent in the March quarter, a result driven by a further 11.6 per cent jump in government construction spending which by itself accounted for more than all of the economic growth offsetting slides in business investment, private housing investment and exports.

Treasurer Wayne Swan seized on the result to attack Coalition calls for the stimulus to be withdrawn more quickly. "It is keeping tradies in employment, it is keeping the doors of small business open and they voted against it," he told parliament just before leaving for Korea and the G20 of Treasurers and Finance Ministers from the world's leading economies.

Appearing before a Senate estimates committee Treasury official David Gruen said if the stimulus was stopped it could "stall the economy"...

Coalition frontbencher Barnaby Joyce had asked why stimulus programs were continuing even though the financial crisis was over.

Dr Gruen replied that they were being withdrawn after keeping the economy afloat by creating almost all of last year's economic growth.

The phased withdrawal should subtract 1 percentage point from economic growth this year.

"You could argue that you would like to see an even bigger turnaround. I think if you make it big enough you will stall the economy," he told Senator Joyce.

"That's the reason for wanting to do this at a measured pace."

Business investment slipped 2.9 per cent in the quarter in part because of the withdrawal of the investment tax break that expired in December. Private housing investment slid 1 per cent in part because of the First Home Owners Boost. Without the remaining stimulus spending on construction at schools and public housing and health facilities the economy would have shrunk 0.2 per cent.

"In this limited arithmetic sense increased government spending has accounted for more than all of the growth in GDP," said BT Group economist Chris Caton. "It underscores the point that stimulus has kept the economy afloat."

In an encouraging sign that the economy will soon be able to wean itself off stimulus the Accounts show that higher export prices pushed up Australia's terms of trade 4.2 per cent in the quarter, with more expected as much higher iron ore and coal prices come into play.

"There is a very strong pipeline of private investment coming down the track which is going to kick in later in the year," the Treasurer said. "The Building the Education Revolution program is an essential bridge in the middle of that."

On the lawns in front of Parliament House Opposition leader Tony Abbott told a protest rally that its buildings were "rip-offs" that had left parents crying with "rage and shame and embarrassment at what is happening at their schools".

"If we come to government what is left of this money will go to school communities for them to spend," he said. "It will not be handed to the bureaucrats to waste."

New South Wales and Victoria are among the fastest growing economies as measured by state final demand, advancing 0.6 and 0.4 per cent. Queensland and Western Australia each contracted 0.5 per cent.

Australia's annual rate of economic growth is little changed at 2.7 per cent.

Published in today's SMH and Age


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How profitable are some of these mines?

Surely not 400 per cent per year

In a Senate estimates hearing the Treasury's lead negotiator with mining companies last night held out hope of exempting sand and gravel and building products from the resources tax saying it had never been expected they would pay the tax.

"In a large measure their prices are set in competitive markets and you wouldn't expect significant rents, David Parker told the committee. "The government said as a starting point for consultation it would be taken that they were in but it was happy for them to drop out if their administrative issues outweighed the social benefit."

"Some of those commodities would actually be better off under the proposed arrangement because they pay royalties which would no longer be paid under the RSPT."

The average profit in the mining sector was 37.1 per cent compared to 11.4 per cent for the economy as a whole.

But some projects had "extraordinarily high returns"...

"Some of the projects we have looked at while going through the consultation process have a pay back period of less than six months and an internal rate of return in excess of 400 per cent."

Treasury official Michael Willcock said the a announcement of the mining tax had so far had only a tiny impact on investment returns amounting to 0.35 per cent of the value of a balanced super fund.

Officials confirmed that the concept of a resources rent tax was market-tested by a research company in April before the government decided in May to announce it as a policy.

The research had uncovered "a low level of community engagement with tax" suggesting an advertising campaign would be necessary.

Tax Office second commissioner Jenny Granger said an assistant tax commissioner was already working full-time on the transition to a resource super profits tax.

Published in today's Age

Photo: BHP


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Could the Reserve Bank have gone too far?

New signs have emerged of a slump in home building and consumer spending as the Reserve Bank has signaled that interest rates will stay on hold for some months to come.

In a statement released after the board voted to keep rates steady for only second time in nine months Bank Governor Glenn Stevens said he viewed "this setting of monetary policy as appropriate for the near term".

Treasurer Wayne Swan declared the statement "welcome relief to the families and businesses who are of course doing it tough."

ANZ economist Katie Dean said it meant the Bank would be "in no rush to move any time soon".

"Indeed it may well stay on the sidelines for an extended period," she added. "The risks from both the European debt crisis and attempts to slow an overheating Chinese economy will not be resolved quickly."

The decision coincided with Australian news of the biggest drop in house building approvals since the introduction of the GST...

In Victoria private house building approvals collapsed 24 per cent in April, falling from 3330 to 2540 - the first time fewer than 3000 approvals have been granted since mid-2009.

"Two things are at work. The government has withdrawn its First Home Buyers Boost and the Reserve Bank has been tightening rates in order to slow the economy. This is the first time it has hit building," said TD Securities economist Roland Randall.

"Property is the most leveraged direct investment held by households and therefore most sensitive to a rise in rates, particularly because Australian mortgages are almost entirely subject to floating rates."

The Victorian collapse was centred around Melbourne where house building approvals slipped a seasonally-adjusted 30 per cent. In regional Victoria they fell 5 per cent. Nationwide, approvals fell 15 per cent with Victoria accounting for half of the decline.

"Now we know why the Reserve Bank feels it can slow things down on the rate hike front," said IPAC Securities economist Adam Carr. "Lending has dropped off a cliff and there are market fears about Europe and China. You can add to that building approvals. The real surprise is that housing approvals that fell rather than apartment approvals."

Retail spending figures also released as the Bank board met show no spending growth since January. Seasonally-adjusted spending at clothing and department stores actually fell between January and April. Over the year to April clothing sales fell 8 per cent.

"It is clear the cumulative rate hikes have taken their toll and discretionary spending is being wound back," said CommSec economist Savanth Sebastian.

The statement issued after the Reserve Bank board meeting was unusually short and included no discussion of consumer spending or the housing market.

Instead the Governor spoke of concern about the creditworthiness of several European countries and falling international share prices.

While he still expected global growth to be above trend, conditions would need to remain "under review". In Australia high export prices would add to incomes while the wind down of stimulus programs would hold them back.

With interest rates charged to borrowers back to around their average of the past decade there was no need to change for the near term.

Financial markets last night put an 85 per cent probability on rates remaining on hold next month with a 15 per cent probability of rates being cut.

Published in today's SMH and Age 


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Meanwhile, commodity prices...

From the RBA late today.


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Rates on hold!

Statement by Glenn Stevens, Governor: Monetary Policy Decision

At its meeting today, the Board decided to leave the cash rate unchanged at 4.5 per cent.

Since the Board last met, concerns about sovereign creditworthiness in several European countries have been a focus of financial markets. Investors have generally displayed a good deal more caution. As a result, equity prices have fallen and long-term government bond rates have declined outside of the countries most affected by the sovereign concerns. The Australian dollar fell sharply as part of this adjustment. Commodity prices have also softened, though those important for Australia remain at very high levels.

European policymakers have responded by assembling a large package to provide financing for the relevant countries for a period of time, stabilise bond markets and provide liquidity. They have also committed to action to bring budget deficits down and stabilise debt over time.

The effects of these various factors on the world economy will need to remain under review. At this stage, global growth is still expected to be at about trend pace in 2010. Conditions in Europe overall have been relatively weak, and the foreshadowed budgetary tightening will probably mean that this will continue, but growth is becoming more established in North America.

In Asia, growth has continued to be quite strong and may need to moderate in the year ahead.

In Australia, with the high level of the terms of trade expected to add to incomes and demand, output growth over the year ahead is likely to be about trend, even though the effects of earlier expansionary policy measures will be diminishing. Inflation appears likely to be in the upper half of the target zone over the next year.

Consistent with that outlook, and as a result of actions at previous meetings, interest rates to borrowers are around their average levels of the past decade, which is a significant adjustment from the very expansionary settings reached a year ago. Taking all the available information into account, the Board views this setting of monetary policy as appropriate for the near term.


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Reserve Bank to ease off - 2.30 pm

The Reserve Bank is considered certain to leave interest rates on hold for the first time since February when it meets today after clear signs its half a dozen near-consecutive rate rises have hit borrowing and property prices.

PR Data figures released yesterday show "anemic growth" in housing prices of just 0.2 per cent in April, the first month since the depth of the financial crisis in 2008 that seasonally adjusted prices have climbed by less than 0.5 per cent.

In Brisbane, Perth and Darwin prices actually fell. In Melbourne the growth rate halved to 0.8 per cent. In Sydney it was cut by two thirds to 0.3 per cent.

Melbourne house prices had jumped 18 per cent in the year to April, Melbourne unit prices 19 per cent.

RP Data research director Tim lawless said the slowdown had been on the cards for some time.

"We are in a market now with lower auction clearances, weaker home loan approvals, and lower
consumer confidence. Combined with six interest rate rises, and the fact that home values recorded very large gains across key markets since the start of 2009... this is not surprising."

CommSec economist Savanth Sebastian said the "perfect storm" for the housing market was over.

"Interest rates are rising, the government has withdrawn some special grants, the supply of new homes is rising and housing finance has fallen to nine-year lows."

"The market thinks there a couple more rate hikes are on the agenda. We think a pause is in order given the weak data".

Private sector borrowing also grew just 0.2 per cent in April, the slowest growth in five months and well down from the 0.5 per cent recorded in March.

Home loans grew 0.5 per cent, personal loans 0.2 per cent and business loans slipped 0.4 per cent.

Real estate agents expect a jump in the number of properties on the market in the next two weeks as sellers try to get in ahead of declining buyer confidence.

The Real Estate Institute of Victoria is predicting 1210 auction listings in the fortnight, the most on record for this time of year.

"The six interest rate rises totalling 1.5 percentage points are impacting the market," said REIV chief Enzo Raimondo. "Higher stock levels will provide buyers with more opportunity and reduce pressure on prices."

Sales of newly-build homes jumped 28 per cent in Victoria in April, offsetting a downturn in the rest of the nation.

Housing Industry Association chief economist Harley Dale credited the first home buyer top-up grant for new dwellings announced in the state budget but was negative about the market overall saying higher interest rates had "started to take a significant bite out of housing demand".

Other data released ahead of the Reserve Bank board meeting showed company profits up 4 per cent in the March quarter with mining profits up 9 per cent, the first increase since late 2008.

Australia's current account deficit narrowed in the March quarter as export prices jumped 4 per cent while import prices remained little changed.

Macquarie group economist Rory Robertson said he considered the Reserve Bank certain to leave interest rates "on hold" at today's meeting, having succeeded in returning most rates to around their average levels.

Published in today's SMH and Age 


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