We're working, but differently

The Age

We are becoming a nation of service providers. Manufacturing, until ten years ago Australia’s biggest employer, is a shadow of its former self. In the year to August it has shed 53,800 workers, 30,000 in the past three months.

New detailed labour force figures show “health care and social assistance” is both Australia’s biggest employer and second fastest-growing employer, taking on 44,500 extra workers in the past year, eclipsed only by “accommodation and catering” which took on 44,600.

What the new growth industries have in common is that they don’t “make things,” to use the language beloved of politicians.

They are also predominantly female.

In the past year 101,500 extra jobs have been found for women, only 38,900 for men.

The biggest loser - “agriculture, forestry and fishing” which shed 63,000 jobs in the year to August - is predominantly male.

The only clear exception to the trend is mining, a male-dominated industry whose labour force has surged 14 per cent in the past year - more than other sector... But in absolute numbers it is still not able to offer that many jobs. It put on an extra 27,800 workers in the year to August, well down on the number put on in public administration and safety and finance and insurance.

Even after stellar growth, mining employs just 2 per cent of Australia’s workers. Health care and social assistance employs 12 per cent, retail sales 11 per cent, education and training 7 per cent, and the finance industry 4 per cent.

All of these big employers provide services.

The exceptions are manufacturing - which employs 8 per cent of Australia’s workers, down from 9 per cent a year ago - and construction which employs 9 per cent and piled on an extra 31,700 in work associated with the mining boom.

Both men and women who lose jobs are finding it harder to get new ones. The average time out of work for a man has climbed from 41 to 45 weeks in the past year. The average time out of work for a woman has climbed from 31 to 42 weeks.

Long-term unemployment is climbing again. The number of people out of work for a year or more climbed 15 per cent to an 8 year high of 133,100.

A Westpac survey released yesterday found households increasing concerned about jobs.

The number of households worried about unemployment climbed 8.5 per cent in September after climbing 2 per cent in August. Concern about unemployment is up 44 per cent over the year.

“Until this month it was the managers and
professionals who became the most worried about jobs,” said Westpac chief economist Bill Evans. “The first to become more worried about jobs was the labourers and machinery operators and this, in part, may have be due to the unwinding of the stimulus programmes such as building the education revolution.”

“Since August concern has spread, which is not surprising given that reports of job shedding are spreading to the retail and the finance sectors.”

“Both the level of unemployment expectations and the rate of change in expectations are now giving a strong signal that households are already under stress and that an interest rate hike is not called for.”

Published in today's SMH and Age


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Poetic justice. Pay restraint for RBA governor

TOP DOGS

Commonwealth Bank chief executive Ralph Norris: $8.6 million

Reserve Bank governor Glenn Stevens: $1.05 million

APRA Chairman John Laker: $800,000

ACCC Chairman Rod Sims: $700,000

Treasury Secretary Martin Parkinson: $503,220

Prime Minister Julia Gillard: $366,366

Treasurer Wayne Swan: $288,865

US Fed chairman Ben Bernanke: $214,000

Australian dollars. Bloomberg, Remuneration Tribunal, annual reports

The government’s million dollar man, our highest paid public servant, will get to keep his pay for as long as he is in the job. But his successors won’t be so lucky.

Treasurer Wayne Swan revealed yesterday he had stripped the Reserve Bank board of the power to set its governor’s pay, handing the authority instead to the remuneration tribunal.

But a side letter to the board from special minister of state Gary Gray guarantees governor Glenn Stevens can keep his $1.05 million per annum package until his term expires in September 2013.

The Reserve Bank board decided on a “sizable” $239,000 boost in governor Stevens’ pay as the financial crisis unfolded in late 2008 but didn’t tell the Treasurer until nearly a year later. A furious Mr Swan wrote back that in future he expected the bank to “discharge its powers with an emphasis on ensuring salaries are adjusted to be in line with community expectations”.

The quarter million dollar boost amounts to most of Treasurer Swan’s entire $288,865 salary... Mr Stevens takes home five times as much as the head of US federal reserve and twice as much as the heads of the Treasury and prime minister’s department. Prime Minister Julia Gillard earns $366,366 - around one third the governor’s package.

Asked to justify the increase at a parliamentary hearing in August Mr Stevens said: “I am not sure I can help much there. I do not set my own pay. The board set it.”

“They took their decision, and I take what I am given, like anyone else in the country.”

Mr Swan believes the increase weakened the ability of the governor to speak out excessive pay rises and was out of step with government moves against high executive salaries.

In an interview with Bloomberg News published yesterday he said he had “put in place a set of arrangements that mean future decisions taken about those salaries will be in the context of other salaries paid to comparable people in the public sector”.

"I have taken that action so that when the board takes its decision, it takes its decision within a framework set by government."

Prime Minister Gillard endorsed the Treasurer’s action saying she would “absolutely agree with the words of the deputy prime minister”.

The change was gazetted a month ago. At the same time the special minister of state wrote to the Bank board saying Mr Stevens could keep his salary while he remained in the job.

His successor’s salary will be in a band set by the tribunal. board have the power to determine the exact salary paid to the governor within that band.

In July Mr Swan introduced a “two-strikes rule” that gives shareholders the right to vote on a motion to spill a company’s board if its remuneration report receives a no vote of 25 per cent or more at two consecutive annual meetings.

Although large by the standards of his contemporaries overseas Mr Stevens salary package is approached by other heads of statutory authorities. The Future Fund annual report reveals its highest paid executive takes home between $925,000 and $939,999. The remuneration recently lifted the salary package of the head of the Australian Prudential Regulation Authority John Laker to $800,000 and those of the heads of the Securities and Investments Commission and the Competition and Consumer Commission to $700,000.

The tribunal said one the factors it took into account was the need for comparability with the salary of governor Stevens.

Published in today's SMH and Age


Letter From Donald McGauchie to the Treasurer - 18 September 2009


Letter From the Treasurer to Donald McGauchie - 15 September 2010


Letter From Jillian Broadbent to the Treasurer


Gittins


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Inflation is not what it was - that's official

Inflation no longer stayed high in the June quarter, as had been believed.

A new seasonally-adjusted measure of inflation released yesterday by the Bureau of Statistics shows that instead of staying firm at 0.9 per cent in the June quarter as had been reported, the underlying measures of inflation slipped back to a less worrying 0.6 per cent.

The annual underlying result was a touch lower at 2.55 per cent instead of the previously-reported 2.70 per cent.

The readjustment knocked more than a cent off the Australian dollar pushing it down to 102.10 US cents, its lowest close in a month.

The futures market pushed up the implied probability of a double rate cut next month from 63 t0 72 per cent.

“The new numbers suggest there was about 0.15 percentage points less inflation in the Australian economy than previously estimated,” said HSBC economist Paul Bloxham. “Quarterly inflation was well inside the target band in June, rather than above it. I think we will see the Bank on hold for the rest of the year"...

From the September quarter CPI release due in October the Bureau will publish seasonally adjusted inflation figures alongside the headline figures. It has identified seasonality in 64 of the 90 expenditure classes whose prices it measures. It will also remove from both measures an erratic part of the so-called “deposit and loan index” - the fourth biggest component of the consumer price index.

The changes should make the CPI easier to interpret and easier to forecast.

Published in today's SMH and Age


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Our GST. Expensive, clunky, too low

The goods and services tax is expensive to collect, leaks revenue and is tying up the courts.

In what he calls a “judicial” review of the tax federal court judge Richard Edmonds has told a conference in Melbourne that after eleven years it has “failed to meet the generally accepted hallmarks of tax reform” and has in many ways made things worse.

“If only for that reason it should be on the agenda of the tax forum proposed for next month,” he told the national division of the Tax Institute.

His call for a review of the GST came as independent MP Tony Windsor said the summit should consider increasing the GST from 10 to 11 per cent.

Justice Edmonds said it cost the Tax Office $1.36 to collect each $100 of GST revenue, well above the average of 94 cents for other revenue.

The High Court had before it obscure questions such as whether Italian mini ciabatta was a cracker or a bread.

“If it is a cracker, then it is subject to GST; if it is bread, it is GST-free"... he said. The federal court has had to adjudicate on whether cancelled Qantas tickets constitute a service and theHigh Court has had to consider whether a deposit paid to a carpet retailer was a service.

Referring to claims by the former Treasurer that the GST would make the system simpler Justice Edmonds said “the fact that such an issue could finish up being agitated in the High Court makes a mockery of Mr Costello’s prophecy.”

Mr Windsor said a one percentage point increase in the GST could eliminate a range of nuisance taxes.

"I think that the simplicity of that argument is telling, you can eradicate some of these things we don't want,” he said.

Henry Review member Greg Smith told a conference in Canberra the GST was expensive to collect at the 10 per cent rate but would have a lower average cost if the rate was lifted.

Published in today's SMH and Age


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We've pulled back! We're now merely unconfident

Growing confidence that interest rates are not going up has pulled Australian consumers back from the brink.

The Westpac Melbourne Institute consumer sentiment index bounced 8 per cent in September after sliding 12 per cent in the previous two months.

At 96.9 points the index remains below the level at which optimists balance pessimists. had the index slid further instead of bounced this month it would have moved into territory last seen in the financial crisis.

The telephone survey of 1200 Australians was conducted last week as the Reserve Bank announced it would keep interest rates on hold and the national accounts showed the economy returning to growth.

“It shows just how important interest rates are to households,” Westpac chief economist Bill Evans said. “Since early May the Bank has been threatening to raise rates... As recently as August it was widely reported that the Board discussed a further rate increase. However, as a result of escalating global turmoil and evidence of a slowdown at home the Bank is no longer making such a threat.”

A decision by a number of banks to cut their fixed rate mortgage rates might have also “comforted anxious households”.

Coalition voters recorded the biggest jump in confidence, lifting their assessment of the future 15 per cent from recessionary to global crisis levels. Labor voters perked up 6 per cent, moving well into confident territory.

Treasurer Wayne Swan said the rebound reflected “rising incomes, strong investment, solid consumption, low unemployment and an economy that continues to outperform the rest of the developed world”.

“Of course, we know consumers have become more cautious,” he added.

The proportion of consumers believing bank deposits are the safest place for savings has climbed to its highest point since the economic troubles of 1975.

But at the same time opinion about whether now is a good time to buy a house has jumped 14 per cent.

“Consumers still harbour doubts that the financial crisis is truly over,” said CommSec economist Savanth Sebastian. “But the interest rate cuts are enticing potential buyers. Hits to the Commonwealth bank home loan website have jumped as potential home buyers once again do the maths to work out borrowing amounts and loan repayments.”

Separate figures show new home starts down 4.7 per cent in the June quarter with private home starts down 2.1 per cent.

Published in today's SMH and Age


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Carbon tax? We're looking for coal as never before

A wave of confidence has pushed coal exploration to a record high as opposition leader Tony Abbott has told parliament the carbon tax will close mines.

Bureau of Statistics figures released yesterday show a record $207.2 million was spent exploring for coal in the June quarter, head and shoulders above the previous high of $122 million set in the December quarter when Julia Gillard announced plans for the tax.

The record spending is more than double that of the previous June quarter when a decision by the Rudd government to delay an emissions trading scheme meant a carbon tax was not in prospect.

It reflects official forecasts for a 33 per cent lift in thermal coal prices in the year ahead and a 52 per cent lift in coking coal prices.

Mr Abbott told parliament the carbon tax would damage thermal coal mines in the Hunter Valley and close coking coal mines in northern Queensland....

The surge in exploration for coal helped drive total minerals exploration to a new record high of $907 million in the June quarter, up from $650 million three months before.

Spending on iron ore exploration jumped 49 per cent in the quarter to a new record high of $214.7 million. The number of metres drilled climbed from 2 million to 2.9 million, a new record high.

Published in today's SMH and Age


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News Limited, carbon tax and the NSW government

"They wouldn't print it if it wasn't true"

Today's Financial Review has the story:

How to cook up a carbon tax story

Michaela Whitbourn

Four days after the Gillard government released details of its carbon tax policy on a cold Sunday in July, NSW Premier Barry O'Farrell's office was presented with an attractive plan.

The national political editor at Sydney's The Daily Telegraph wanted to run a front-page story on Friday, claiming the tax would drive NSW commuters to switch from public transport to cars.

The Premier's communications director, Peter Grimshaw, swung into action, say documents produced in state parliament through a request by the Labor Party.

Mr Grimshaw fired off an email at 9.39am on Thursday, July 14 to government staffers including O'Farrell's policy director and his chief of staff, copied to the Premier.

"The 'Tele' is very keen to do a story for tomorrow's paper on the impact of the carbon tax in relation to Public Transport v Cars, with the theme being there will be an incentive for people to use cars under Gillard's plan," he wrote.

"If we have any figures/modelling he thinks he can get a big run on this tomorrow . . . Can we pull together any info/figures asap that would back up this case."

There was a hitch. The Department of Transport had been working on a note for the Transport Minister that came to a different conclusion.

By 2.18pm, Mr O'Farrell's policy director Matthew Crocker had seen the note – including some "not so helpful quotes" – which said the tax would have little effect on commuters.

Federal Opposition Leader Tony Abbott's policy director Mark Roberts was more helpful. He emailed Transport Minister Gladys Berejiklian's chief of staff and advisers later that day with a "gold mine of attack points!" on the possible effect of the tax on Sydney Ferries.

The Transport Department, in contrast, advised the government the carbon tax would have no "measurable effect" on transport choices. It would increase prices by less than 1 per cent.

At 3.10pm, Mr O'Farrell's office sent the Telegraph figures it said were NSW Treasury's first advice on the impact of the carbon tax on public transport fares.

The front-page story on Friday July 15 said the tax would push up fares by up to $150 a year, increasing weekly multi-pass tickets from $57 to $60 a week by 2013 –a 3.5 per cent rise, six times higher than the 0.5 per cent estimated by federal Treasury.

The tax would "increase passenger fares by up to 3.6 per cent," Mr O'Farrell said in a media release at midday that day.

He feared Sydney commuters would "turn away from public transport".

Hours earlier, the Transport Department confirmed "the figures quoted do not come from Treasury...

Continued at afr.com

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The Coalition's cheat sheet. What to say about carbon tax

Leonore Taylor has the background.

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The election was a year ago. Hockey's auditors are still under investigation

The Coalition has set the scene for a new row over costings at the next election threatening to walk away from the planned $25 million official costings unit and use a private accounting firm instead.

Shadow Treasurer Joe Hockey made the threat as The Age learned the accountants who costed his policies last time remain under an ethics investigation.

Geoff Kidd and Cyrus Patell of WHK Horwath in Perth agreed in an unpublicised deal with the Coalition in 2010 to cost its policies making no inquires about “the reasonableness of otherwise of the assumptions used”. The Coalition presented their work as an audit.

The Treasury subsequently found errors of differences of opinion about approach used amounting to $11 billion.

The Institute of Chartered Accountants received a formal complaint from Sydney University accountancy professor Bob Walker within days of the election on August 23 2010.

In May this year Institute chief executive Graham Meyer apologised for the nine-month delay in handling the compliant blaming “the complexity, the availability of material, the availability of witnesses, the availability of tribunal members, a whole range of factors”.

Three months later, and twelve months after the complaint was lodged the Institute’s formal position is that the pair remain under investigation... and that it will make a statement when the process is complete.

But professor Walker said yesterday he hadn’t heard from the Institute since February.

“I emailed the chief executive in November and received a reply from his personal assistant saying he was overseas and would get back in touch on his return”.

“He replied in February saying the Institute was conducting an investigation and I would be informed when it was finalised. He also reminded me of my duty of confidentiality to the principals of WHK Horwath now trading as Crowe Horwath.”

“Since then I have heard nothing”.

The Institute is self-regulating. It is able to fine, expel or suspend members for breaches of its professional standards. There is no outside body to complain to. Mr Kidd is a former Western Australian chairman of the Institute.

Mr Hockey said yesterday he would use a private accounting firm again rather than submit to the proposed new Parliamentary Budget Office unless its rules were changed.

The government’s bill requires the Office to immediately publish on its website any costings it conducts for political leaders during election campaigns. Confidential costings are allowed only outside the campaign period.

Mr Hockey told parliament the requirement would give oppositions no control over the timing of release of their policies and “no prerogative to change a policy if the costing turns out to be substantively different from what was expected”.

The government is insisting on the clause saying it is in line with the existing requirement for Treasury to publish its election costings on-line as soon as they are complete.

But the rule has forced both sides of politics to shun the costings process when in opposition by submitting policies late or not at all.

Mr Hockey’s threat has the backing of shadow cabinet. Treasurer Wayne Swan said the Coalition wanted to keep Australia in the dark about how it would fund a $70 billion black hole.

Published in today's Age

Statement from the Institute of Chartered Accountants in Australia

26 August 2010

The Institute of Chartered Accountants in Australia (the Institute) has received a complaint about a matter that involves publicly raised allegations regarding the conduct of two members with accountancy firm, WHK Horwath, Perth.

The Institute has commenced an investigation which involves an opportunity for the members to respond to the allegations.


Professional Conduct Process

As a professional organisation, membership of the Institute is based on meeting the highest standards of professional conduct and performance. The Institute treats matters that bring the profession into disrepute very seriously.

Issues arising from members’ conduct are investigated under the Institute’s By-laws and relevant cases are referred to the Professional Conduct Tribunal for determination.

Based on legal advice, specific commentary cannot be provided while matters are considered for investigation or for the duration of any subsequent Tribunal hearings. All information relating to complaints lodged with the Institute and produced during the investigation process is confidential.

To ensure the privilege of professional membership is upheld the Professional Conduct Tribunal has the power to impose sanctions on individual members who act inappropriately.

The ultimate sanction that can be imposed is exclusion from membership and withdrawal of the right to use the Chartered Accountants designation. Other sanctions include suspension, reprimand, fines or the requirement to undertake additional professional training.

For further information about the Institute's disciplinary process please visit http://www.charteredaccountants.com.au/A116936841

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We're putting it on plastic, but differently

THE WAY WE SHOP NOW

EFTPOS purchases: up 19%
Debit card purchases: up 18.9%
EFTPOS withdrawals: up 4%
Credit card purchases: up 1.9%
Electronic transfers: up 1.3%
ATM withdrawals: down 1%
Credit card cash advances: down 9%
Writing cheques: down 15%

Reserve Bank, July on July

We are abandoning credit cards but embracing plastic as never before. New Reserve Bank figures show the average credit card balance slipped $28.50 in July, the biggest mid-year slide since records began 17 years ago.

But our love affair with plastic grows stronger by the month. We reached for debit cards a record 204 million times in July, up 18.9 per cent on the year before. We reached for credit cards 131 million times, up only 1.9 per cent.

These days we fairly rarely use credit cards to borrow cash, fronting up to banks for cash advances 2 million times in July, down from a peak of 3 million in 2007. By contrast we swiped cards at retail EFTPOS terminals a near-record 226 million times, up from 181 million a year earlier. We took out cash as we swiped 21 million times, up from 20 million. We took out cash a further 1.6 million times in solo transactions, unaccompanied by purchases, another record.

“It’s a new conservatism and its here to stay,” said Commmonwealth Securities economist Savanth Sebastian. “We are scouring around for the best ways to keep our budgets in the black.”

“Some of it is concern about the cost of debt. Interest rates don’t seem super-high, but they are biting.”

We’re also withdrawing from ATMs less often in a continuing flight from the introduction of fees... We took out cash 70 million times in July, down from 71 million the year before.

We wrote just 21 million cheques in the month, down from a peak of 50 million per month early last decade. We transferred cash electronically 211 million times, up from 208 million a year before.

In separately released forecasts Delloite Access describes the financial year just past as “disastrous” for retailers - the worse in 20 years.

“Income growth was solid enough, though it suffered a major setback from last summer’s floods and cyclone, says Access director
David Rumbens in the report. “But the more important theme has been less willingness to spend, or at least less willingness to spend on retail. The only category showing good performance is so-called other retailing, which includes newsagents and chemists. Elsewhere the landscape is barren with food sales in real terms at the same point as a year ago, while clothing and footwear, department stores and cafes and restaurants have all lost ground.”

“Retailers now face the prospect of going from bad to worse. Share market falls have eroded wealth and seen consumer confidence plummet further. The implications of the financial market volatility and further deterioration of consumer confidence in August are yet to be seen in the retail sales data. When they do appear its unlikely to be pretty. The next few months look like being subdued at best.”

Published in today's SMH and Age


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Employment. What if it hasn't stopped growing?

No wonder we’re having a jobs forum. All through last year the jobs graph headed north - we created 30,150 per month. Since January the graph has been almost flat.

We’ve created just 10,100 all year - 1442 per month nationwide. In the past three months employment has gone backwards. We employ fewer people than we did in May.

If things continue as they have so far this year it will take 29 years - not the promised two - to create the forecast 500,000 new jobs.

Unless the figures are wrong, as they sometimes are.

The ABS itself acknowledges the possibility on page 2 of every monthly Labour Force publication. In August when it reported 9700 jobs lost it said it could only truly be confident there were between 64,300 jobs lost and 44,900 jobs gained.

The lack of precision isn’t primarily a matter of sample size. The problem is that the selected households change. Not every household every month - that would leave the result highly dependent on which households were picked - but slowly, with one eighth of the enormous sample dropping out each month and a new one eighth joining.

Chance dictates that occasionally - no matter how random the process - a highly-employed group will leave the survey to be replaced by a less-employed group, or visa versa. At those times the reported rate of job creation will be held back, or advanced.

It is possible - but not easy - to get a better handle on what has really changed month to month by examining changes only in the employment status of those households already in the survey - around seven eighths of the total...

Although the Bureau publishes the data (“gross flows in matched records”) it doesn’t bulk it up to match the population and it doesn’t seasonally adjust it.

Kieran Davies at RBS Australia has performed the calculations and find that for the past decade the two sets of figures moved together. Until last year when the published figures surged ahead of the matched sample suggesting a group of highly-employed households had been rotated in.

This year the published figures have fallen well behind the matched sample suggesting the highly-employed group has been rotated out and a less-employed group rotated in.

The matched sample suggests in reality we’re still creating around 17,000 new jobs per month - about what we were last year. It isn’t a crisis. The official figures will catch up.

Published in today's SMH and Age


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9/11 How Sandra Sully presented the news in Australia, and how we got it at all

Click on the picture to see Sandra Sully present an unexpected edition of Ten News on the night and her recollections of the night. (You'll have to watch a 15 second ad first.)

Sandra says CNN was the only organisation feeding it live internationally as it happened.

Here's why.

An executive called Paul Cutler was in the control room of CNN International as the attacks happened supervising CNN's multiple outputs - different programs go to different regions, CNN Asia etc.

Someone pointed out the US presenters had cut to traffic camera vision of smoke coming out of the World Trade Centre building. At that stage no-one knew what it was or whether international viewers would be interested.

Paul uttered three words: "Go All Regions"

Instantly every CNN outlet worldwide switched to the New York vision being fed to the US via Atlanta.

Were it not for Paul... Sandra would have seen nothing.

These days he is head of News at SBS TV in Australia, where he told me the story.


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Employment growth stops. Pity about the promised 500,000 new jobs

It may be a sampling error. If not...

Turning down

So far this financial year

Work-ready population: up 26,500
Total jobs: down 13,800

Jobs for men: down 15,500
Jobs for women: up 1700

Full-time jobs: down 39,000
Part-time jobs: up 25,100

ABS 6202.0 June - August, seasonally adjusted

Employment has stopped growing, rendering improbable the budget forecast of 500,000 new jobs and pushing up the unemployment rate as the number of work-ready Australians grows.

Since the start of the financial year the number of Australians with jobs has shrunk 13,800. Around 10,000 jobs were lost in August. By contrast the budget forecasts had employment growing by around 20,000 per month, swelling to 500,000 new jobs after two years.

The budget had the unemployment rate falling from 5 per cent in June to 4.75 per cent by June 2012. Instead in the first two months of the financial year the rate has climbed to 5.3 per cent.

Westpac is now forecasting an unemployment rate of 5.75 per cent by mid next year - a completely percentage point higher than the May budget forecast.

The Bureau of Statistics figures show in the past six months employment growth has limped along at an annualised pace of less than half a per cent, well below the rate of population growth. The budget had forecast 1.7 per cent per year for two years.

Without jobs growth at the rate forecast the budget’s revenue forecast and projected return to surplus are in doubt.

Men have borne the brunt of the downturn, losing 15,500 jobs in two months in which female employment held firm, climbing 1700...

The female result would have been bouyed by the creation of 30,000 temporary jobs in July and August to work on the census. Although many were taken by people who already had would, previous ABS estimates suggest about 5000 would have gone to people out of work. Those jobs will vanish in September.

Around 39,000 full-time jobs disappeared in July and August, replaced by 25,100 part-time jobs.

Employment minister Chris Evans described the downturn as “a slight weakening.” Separately indigenous employment minister Mark Arbib reaffirmed the Treasury forecast of 500,000 new jobs over two years.

Basking in the good but dated economic growth figures for the three months to June released Wednesday Treasurer Wayne Swan attacked the media and the opposition for focusing on negatives, saying “the glass is more than half full, it is not half empty”.

Queensland and NSW continue to have the worst unemployment rates in Australia of 6.2 and 5.4 per cent. Victoria and South Australia enjoy rates of 5.1 per cent and Western Australia 4.4 per cent.

Credit Suisse consultant Sean Keane said 2011 was shaping up to be the worst year for jobs growth since 1992. “We have created just 23,000 new jobs this year,” he wrote to clients. “That trend will leave the labour market with its worst annual result in 20 years.

“It’s a reality check for those people who thought the growth figures meant the economy was shooting the light out,” said CommSec economist Savanth Sebastian. “Businesses are cautious and more circumspect about future hiring.”

HSBC economist Paul Bloxham said firms may have been “overzealous” in taking on workers late last year.

“After the chronic labour shortages just prior to the financial crisis many firms were probably overly keen to hire workers when they saw the next investment boom coming and so we had labour hoarding. This seems to be being unwound.”

A reanalysis of the raw employment survey data by RBS Australia economist Kieran Davies suggests the downturn may not be as severe as the published figures indicate.

He said examining changes in the status only of people already in the monthly survey, employment seemed to have advanced 29,000.

Published in today's SMH and Age


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We're back. And when the mines start moving it will be even better.

The Australian dollar has soared and the futures market has scaled back bets on interest rate cuts after a surprising surge in consumer spending in the June quarter relegated Australia’s March quarter economic downturn to a blip.

Australia’s gross domestic product surged a bigger than expected 1.2 per cent in the three months to June led by reconstruction activity in Queensland, a bounce back in manufacturing and much faster than previously believed consumer spending.

Mining contributed not at all to the rebound, being held back by the delays in reopening mines.

As as added bonus the March quarter dive in GDP - previously believed to be 1.2 per cent - was yesterday revised back to a more mild 0.9 per cent, making economic growth positive over the first six months of the year and taking annual growth to 1.4 per cent.

While better than expected in recent Reserve Bank forecasts, the result is still well below the May budget forecast of 2.25 per cent for 2010-11 in year on year terms putting pressure on the projected early return to surplus...

Treasurer Wayne Swan said it was too early to tell whether the surplus would remain in tact, but said the figures were “a report card which ticked the box which says that the Australian economy is resilient and well positioned to deal with the challenges ahead domestically and internationally”.

On a state by state basis Queensland led the nation with a huge 3.5 per cent growth in state final demand in the quarter as businesses, governments and householders spent up to rebuild after the floods. Victorian demand grew at about the national average at 0.6 per cent while NSW demand was anemic, climbing at just 0.2 per cent, held back by a collapse of 11 per cent in housing construction and 2.3 per cent in business investment. Tasmania was the weakest state, going backwards 0.5 per cent.

The biggest surprise was a very healthy growth in inflation-adjusted consumer spending of 1 per cent in the quarter and 3.2 per cent over the year, well in excess of the inflation-adjusted retail sales which have been growing at just 0.3 per cent and 0.6 per cent.

Mr Swan called on the media and the opposition to stop focusing on the dismal retail environment and focus instead on the new places money was being spent.

“If you had been listening to the public debate over the last six months you would have sworn consumers weren’t spending anything, well consumers have been spending,” he told a Canberra press conference. “They’ve had good solid growth in their income, they’ve been rebuilding their balance sheets, but they’ve also been out there spending, just differently and perhaps more wisely.”

Spending grew strongly on recreation, culture and education - activities mainly not covered in the retail sales figures - and also on hotels, cafes and restaurants which are.

The Australian dollar jumped two-thirds of a cent on the news closing at 106.06 US cents, up from 105.39 US cents.

The futures market cut the implied probability of a 0.50 point rate cut at the next Reserve Bank board meeting from 62 per cent to 39 per cent as it became clear the economy was stronger than had been believed.

Shadow treasurer Joe Hockey dismissed the GDP as dated, saying “the fact of the matter remains that consumer confidence is flatlining, business confidence is flatlining, and it needs leadership from Canberra”.

Ahead of the news Reserve Bank governor Glenn Stevens told an audience in Perth the economy was “ uneven and patchy” buffeted by “waves of positive and negative sentiment sweeping global markets”.

In considering rates the Bank had “judged it prudent to sit still”.

Published in today's SMH and Age


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The softly-spoken good news. Our power bills are no worse:

Six years of spending

Rising share of wallet

2003-04, 2009-10

Housing costs 16.1% 18.0%
Restaurants and cafes 2.1% 2.6%
School fees 1.0% 1.6%
Childcare 0.54 0.72
Internet connection 0.3% 0.6%
Pay TV connection 0.3% 0.4%
hairdressing 0.16% 0.19%

Steady share of wallet

Transport 15.6%
Household fuel and power 2.6%
Alcohol 2.6%

Shrinking share of wallet

2003-04, 2009-10

Household furnishings 5.8% 4.7%
Clothes and shoes 4.0% 3.6%
Petrol 3.36% 3.09%
Tobacco products 1.3% 1.0%
Fixed phone charges 1.86% 1.19%
Mobile phone charges 1.0% 0.98%
Bread 0.67% 0.57%
Milk 0.6% 0.5%
Books 0.45% 0.38%
Newspapers 0.30% 0.22%
Pokies and lotteries 0.09% 0.07%

ABS 6530.0, Share of total household expenditure

You wouldn’t believe it to listen to our politicians, but household fuel and power bills eat up no more of our wallets than they did six years ago. And petrol eats up less.

The only comprehensive survey of household spending - conducted once each six years by the Bureau of Statistics - finds domestic fuel and power accounted for 2.6 per cent of our spending in 2009-10, 2.6 per cent in 2003-04 and 2.6 per cent two decades earlier in 1988-89. At times it has been higher - 2.9 per cent was the peak, but for most of the time it has been where it is now - at 2.6 per cent.

Petrol, another necessity about which we complain takes up less of our wallets, accounting for 3.09 per cent of household spending, down from 3.36 per cent.

The imposts are steady or shrinking because our wallets are growing. Household income has climbed 50 per cent since 2003-04; way ahead of prices which have climbed 19 per cent.

We haven’t spent all the extra income, we’ve tucked some away. Spending grew 38 per cent.

Most of the staples cited as causes of concern at the last election are easier to buy. During the pre-election debate Tony Abbott said he was worried about the price of groceries, particularly bread. Bread accounts for less of our spending than it did, sliding from 0.67 per cent to 0.57 per cent; food has slipped from 17.1 to 16.5 per cent.

The big unavoidable expense that is costing us more is housing, whether paid for by a rent or mortgage. Housing now accounts for 18 per cent of total spending, up from 16 per cent six years ago and a new record high...
School fees are also biting harder along with childcare fees.

Other increased spending reflects changed lifestyles. We are spending more of our wallet at cafes and restaurants than six years ago, up from 2.1 per cent to 2.6 per cent. We spend more at hairdressers, more on pay TV and roughly double what we did on internet connections.

Surprisingly we are spending less of our wallets on mobile phone calls as prices come down, and less on fixed phone calls as we make fewer of them. Lower prices mean we are spending much less on clothes and shoes - down from 4 per cent of the national wallet to 3.6 per cent and also much less on household furnishings.

Melbourne residents remain a good deal more likely than Sydneysiders to lash out on clothes and furnishings. In 2009-10 the typical Melbourne household spent 4.1 per cent of its budget on shoes and clothes, the most in the nation. Sydney households spent 3.9 per cent and households in temperate Perth 3.5 per cent. Melbourne households devoted 4.9 per cent of their budgets to furnishings, Sydney households 3.7 per cent.

Much of the difference appears to be the result of housing costs. It takes 20.7 per cent of a Sydney income to pay for expenses such as mortgages and rent, only 17.7 per cent of a Melbourne income, the third lowest in Australia before Canberra and Hobart.

Away from Melbourne housing expenses are even lower. The regional Victorian figure of 15.2 per cent is equal to that in regional NSW and the lowest in the nation.

And we are spending less on vices. Poker machine and lottery expenses have fallen from 0.9 to 0.7 per cent of household income, tobacco products have slipped from 1.3 to 1 per cent. Alcohol remains unchanged at 2.6 per cent, which is coincidentally the same proportion we spend on fuel and power bills.

The Bureau will use the results to update the composition of the consumer price index.

Published in today's SMH and Age


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More reserve. Rate hikes pushed out.

The prospect of an interest rate hike has receded with the Reserve Bank signalling it might hold rates steady for longer than it had expected.

While continuing to express concern about the outlook for inflation the statement released after Tuesday’s Perth board meeting for the first time canvased the possibility that the Bank may not need to raise rates if “softer global and domestic growth work in due course to contain inflation”.

The changed approach takes account of weaker than expected employment and spending.

“Credit growth has declined over recent months and is very subdued by historical standards, even with evidence of greater willingness to lend,” the statement says. “The exchange rate is high. Each of these variables is affected by other factors as well, but together they point to financial conditions being tighter than normal.”

Market watcher and former Reserve Bank staffer Paul Bloxham who had previously been forecasting a rate hike before December wrote clients yesterday saying he now expected rates to stay on hold for the rest of the year.

“It is quite possible the global slowdown may be just what is required to get some of the inflation out of the Australian system,” he told HSBC cleints. “We know they were on the verge of hiking only last month. The question is whether the expected slowdown in the global economy will be enough"...

Treasurer Wayne Swan welcomed the decision to keep rates steady saying it reflected ”a balance between global uncertainty and overall strong economic fundamentals”.

“As the Bank acknowledges, some sectors of our economy are coming under pressure from the high dollar, cautious consumer and volatility in the global economy,” he said.

Financial markets took the decision in their stride, continuing to price in very big interest rate cuts; something the board is not formally considering.

“The board has come a long way in a short time,” said Credit Suisse consultant Sean Keane. “They have now given themselves the wiggle room to move to an outright dovish position, or even to cut rates if need be.”

The Commonwealth Bank cut interest rates on its one and three year fixed home loans by between 0.11 to 0.16 points yesterday in anticipation of lower rates in the year ahead.

Economic growth figures due out this morning (WED) are expected to be positive, but not strong enough to offset the flood and cyclone induced slide at the start of the year.

Published in today's SMH and Age


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Tax wine as beer. Please.

What we pay now:

Tax or excise per standard drink

Bottle from small winery: 0

Cheap wine cask: 5 cents

Full strength beer: 39 cents

Premium wine bottle: 49 cents

What we would pay:

All wine, all beer: 39 cents

Extra tax revenue: $1.5 billion

Cut in cask wine sales: 61%

Cut in total alcohol sales: 9%

Alcohol Taxation Reform, Allen Consulting Group for the Alcohol Education & Rehabilitation Foundation

Taxing wine in the same way as beer would net the government an extra $1.5 billion.

At the same time it would cut sales of cask wine 61 per cent, boost sales of beer, and cut overall alcohol consumption 9 per cent.

The plan, tested in economic modelling by the Allen consulting group, will be unveiled at a forum in parliament house today designed to pressure Treasurer Wayne Swan in the leadup to the October tax summit.

Allen Consulting has told the Alcohol Education & Rehabilitation Foundation that taxing wine on the basis of price, while beer is taxed per unit of alcohol means men can use cask wine to exceed health guidelines for “a little over a dollar” while women can drink to excess for 50 cents.

“The existing wine tax arrangements allow individuals who are seeking to consume
alcohol irresponsibly to do so cheaply,” the Allens report says... “Incongruently the regime also applies tax more heavily to individuals looking to purchase quality wines for the purposes of responsible consumption. The consequence is that irresponsible drinkers contribute little to the taxation revenue necessary to address alcohol related harm in the community, whilst responsible drinkers do.”

The change proposed by Allens would double the price of cask wine and lift the price of premium bottles 17 per cent. It would remove the rebates enjoyed by small wineries, which Allens says larger wineries rort, “turbo charging” the wine glut.

The Allens proposals are similar to those put forward by the Henry Tax Review.

Mr Swan rejected the recommendation saying his government would not change alcohol tax “in the middle of a wine glut and where there is an industry restructure underway”.

But the Allen’s paper says the present tax system exacerbates the wine glut by encouraging production “on the basis of volume as opposed to value”.

Alcohol Education & Rehabilitation Foundation chief executive Michael Thorn said the report shows Mr Swan’s argument to be hollow.

“The wine industry itself is trying to drive production from warm climate to cool climate regions because that’s where the value is. A tax system which encourages volume rather than quality slows that down,” he told the Herald.

“We want this discussed at the tax forum. There are no public health sector representatives on the invitation list, so it’ll be up others. It makes sense.”

Published in today's SMH and Age

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What Labor's asylum seeker policy says about Labor

The woman who oversaw it, prime minister Julia Gillard, was for two years Labor's shadow immigration minister. Yes - for two years from 2001 in the wake of the Tampa and the children overboard affair she was responsible for immersing herself in immigration and drawing up policy.

It looks as if she merely skimmed the surface, metaphorically slacked off and concentrated on politics rather than designing policies that would work.

I am thinking about this because she joins a long list of shadow ministers who seem to have used their time as shadow ministers to do bugger all.

I wrote about this in response to the George Megalogenis Quarterly Essay Trivial Pursuit: Leadership and the End of the Reform Era. George's essay was published in November, my response in March.

There are exceptions. Philip Ruddock used his time as shadow immigration minister very wisely. He understood everything. David Connolly used his as time as shadow superannuation minister wisely. He knew everything. So too did Nick Sherry as shadow superannuation minister, which is why he removed. He knew boosting the superannuation guarantee was a bad idea. I imagine Barry Jones really knew everything as shadow science minister.

But these are exceptions.

Too many - most - of Labor's ministers appear to have collected their pay but not worked while they were shadow ministers.

Here's what I wrote for Quarterly Essay:

Rudd may as well have had the attention span of a five year old.

Megalogenis berates Rudd (and Howard) for spending far too much time feeding the media.

And he is right. With Rudd in office, not a Sunday morning passed without an email alert as I left church outlining the preprepared "announcement" for later in the day. Those emails have stopped.

Megalogenis says because there was "no grand narrative" to connect the announcements, the bewildering changes of direction left voters confused.

But the deeper problem is they would have been confused in any event.

All that Rudd's flitting from subject to subject and focus on the polls did was draw attention away from the hollowness at the core of his program.

Looking back it is apparent Rudd never had a coherent program going into the 2007 election.

I found myself forgiving him case by case.

The claimed benefits of the National Broadband Network were recycled selective quotations from a woefully dated document Labor hadn't read.

(I know this because Labor was unable to track down the source when I asked and seemed alarmed when I tried.)

The computers for schoolchildren push showed every sign of being thought up at the last moment (if was certainly announced at the last moment) and was presented without clear supporting evidence that it would help, perhaps because there is no such clear evidence.

The Education Tax Rebate further complicated a tax system Labor later said it wanted to simplify and incentivised parents to do the kind of spending most were doing anyway.

Affordable housing was more of a question than an answer, perhaps because presenting an answer would upset existing homeowners and mortgagees. Social inclusion was an idea in need of definition. The Emissions Trading Scheme was what Howard was having.

Swan's policies were particularly poorly thought out.

His First Home Owner Savings Account was so badly designed it would have delivered the highest benefits to the highest earners. After it was redesigned and introduced, Treasury reported in documents released under the Freedom of Information Act "no-one uses it."

Swan's tax policy, pinched from the Coalition and sold as creating an "incentive to people out there who will work additional hours" had the perverse effect of pushing up the tax penalty for average earners considering extra work more by 4 cents in the dollar.

It was tempting to cut Labor slack. The Howard government had been becoming increasingly becoming erratic and Rudd and Gillard had been leading Labor less than a year.

But Swan had held the Treasury portfolio for three years, Macklin had held portfolios including health, education and social security for a decade.

Labor had had years to assemble policies which would make sense and work and hadn't done it.

In contrast John Howard brought to the 1996 election policies he seemed to have thought about. Freedom to choose your super fund, government support if you took out private health insurance... these were ideas you mightn't have liked, but you could tell where they were coming from.

I date the beginning of the end of serious policy effort to 1998. Two years after its election an energetic Coalition was building the case for replacing the Wholesale Sales Tax with a Goods and Services Tax, working on the detail of who would be hit and how they would be compensated in order to put the idea to a new election.

Leader Kim Beazley and his Treasury spokesman Gareth Evans unveiled their long-awaited response. They would leave the wholesale tax in place, making just three adjustments - fruit juice would become untaxed and caviar and business jets would face a luxury tax. That was it. When you looked behind the symbolism there was nothing, merely the merest pretense of being fit to govern.

Labor continued like that, Howard got worse, and Abbott appears to have applied it as a rulebook for opposition.

Need to address climate change? Promise to put electric wires underground. Need to respond to a natural disaster? Talk about building dams.

I agree with Megalogenis about the violence done to the political process by the mining industry's assault on an elected government mid last year, although I am less sure it would have had an effect if we had known what the government stood for in the first place and had had it patiently explained.

Within days of the ministerial reshuffle that followed the election I asked one of the winners who had received a portfolio they sought what they wanted to achieve in the job.

I didn't get a direct answer, merely talk about handling the responsibility well. I was disappointed, but not surprised.

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Let's see, there's a carbon tax, a mining tax... we'll invest 82 billion

Judge the mining industry by what it does

Australia’s mining industry is gearing up to invest as never before, its concerns about the carbon tax apparently no constraint.

The latest capital expenditure figures show the mining industry spent a record $47.2 billion on machinery, buildings and structures the year to June and plans to boost that to $82.1 billion in the year ahead - an increase of 74 per cent.

Across all industries the Bureau of Statistics has recorded plans for new investment of $148.8 billion this financial year, 6 per cent more than was reported three months ago, and almost certainly an underestimate.

If actual investment exceeds intended investment by the usual margin, investment in 2011-12 could hit $160 billion, up 35 per cent on 2010-11.

Even manufacturers plan to lift investment in 2011-12 despite some job losses and complaints about the high dollar. The Bureau says manufacturers will invest $13.1 billion this financial year, up from $12.2 billion last year.

The figures were released as around 2000 BlueScope Steel workers gathered in Wollongong in protest at the company’s plan to to shed more than 1000 jobs...

"There are significant macroeconomic issues affecting steel and manufacturing," Australian Workers Union national secretary Paul Howes told reporters said after the meeting. "But there is also chronic mismanagement of this company.”

The investment intentions figures are often at odds with the public statements of industry leaders because they are collected directly from chief financial officers who simply report the plans under way.

Treasurer Wayne Swan said they showed great faith in the future of the Australian economy.

“I’ve just come back from Asia and I can tell you that international investors have faith and want to invest here because of our very strong fundamentals, despite the fact that many people are in that patchwork economy.

The figures provide a geographical snapshot of a two-speed economy showing investment growing very strongly in Queensland and Western Australia and going backwards in every other state.

A key input into the calculation of Australia's gross domestic product they suggest next Wednesday’s June quarter figure will be positive, largely reversing the slide in the March quarter that followed the Queensland floods and cyclone.

Separate retail figures show spending on a downward trend in NSW and South Australia and climbing in Victoria, Western Australia and Queensland.

National spending rebounded 0.5 per cent in July after sliding 0.6 per cent in May and 0.1 per cent June. Over the year to July spending failed to keep pace with inflation, climbing just 1.4 per cent.

Published in today's SMH and Age


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Locking up asylum seekers costs how much?

Here's John Menadue in The Drum, May 17:

Counting the cost of immigration detention

Next year (2011-12) the Government will spend $709 million in asylum seeker detention and related costs. This is up $147 million on this year (2010-11) and amounts to about $90,000 for every asylum seeker that comes to Australia.

The abolition of mandatory detention of asylum seekers, which means mainly boat people, could save between $150 and $425 million per annum.

In chiding the Chinese about their human rights, Julia Gillard said that ‘we believe (in human rights) … it is us. It’s an Australian value.’ How can she say this when we have 6,819 asylum seekers in detention in Australia who are entitled to our legal protection and hopefully, our compassion?

They have this human right because in 1954 the Menzies Government brought into Australian law the Refugee Convention of 1951 followed by the protocol of 1967...

Australia is quite exceptional with its mandatory detention policy.

Over 80 per cent of those in detention in Australia will be recognised anyway as genuine refugees.

It varies over time, but the Australian Parliamentary Library advises that in most years 70 per cent to 97 per cent of asylum seekers come by air. It was 84 per cent in 2008-09 and 53 per cent in 2009-10. Yet very few of them are detained. In March this year, 6,507 boat arrivals were in detention, but only 56 were unauthorised air arrivals. With so many coming by air, many of whom are Chinese, it is noteworthy that they are living in the community. Somehow we remain fixated on the relatively small number of boat people...

Continued here

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We need more GST - Greg Smith

The goods and services tax will have to climb above 10 per cent over time and there will be no way of avoiding the topic at the October tax summit, according to one of the architects
of the Henry tax review Greg Smith.

Professor Smith told a Tax Institute forum in Sydney the review had sidestepped a ban in its terms of reference on recommending changes to the GST by recommending instead “an alternative the GST which was the GST without invoices”.

“Now that was a little bit naughty, our recommendation 55, but that’s life. The same thing is going to happen at the forum isn’t it? People are not going to worry too much about the constraints,” he said.

The idea the GST rate could not be lifted beyond 10 per cent without the agreement of all Australian governments was “rubbish”.

“No law can constrain a future government; it’s a basic principle of western democracy, well established. You just pass a law saying notwithstanding the law that says all states must agree to a change, the rate is now 15 per cent.”

“I am not saying you should ignore the states, but the idea that you need their consent is nonsense.”

Current budget projections have income tax takings climbing $55 billion by 2014-15, an increase that dwarfs almost every other tax people talk about...

“That’s the thing that amazes me - it completely dwarfs the $6 billion per annum mineral tax and the $8 billion carbon tax.”

“A person on $60,000, their average tax rate will go from 20 to 22 per cent squeezing household disposable income. And then in another two years we will start racketing up the superannuation guarantee taking some more from household income.”

“The income tax will grow $55 billion while the GST grows only $12 billion. We will see the tax system swing from consumption to income before our very eyes.”

Although a higher GST would be needed to take pressure off income tax and fund state responsibilities such as schools and hospitals it would require a selling job of which governments no longer seemed capable.

Professor Smith said when he worked for Treasurer Paul Keating during the 1980s tax summit and for John Howard during the introduction of the goods and services tax the government spoke to the entire community.

“This isn’t being done now. We are just announcing things and saying that’s what leadership is, we are crashing through,” he said.

When the report of the Henry review was delivered to Treasurer Wayne Swan in December 2009 Professor Smith expected it to be released within few weeks.

“We did expect certain things would be ruled out, that’s natural, but we were expecting a public debate before things were overtaken by political decision making processes,” he said.

“We missed out, and maybe there will be a return that in the summit or forum as it is called over two days.”

Published in today's SMH and Age


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