Peter Martin Economics

Friday, December 11, 2009

Westpac - its just like a bank that... Here's the ad reworked:

HT: Mumbrella

Meantime the bank has removed from its website another ad featuring its moved-on retail chief Peter Hanlon.

Related Posts

. Westpac's week - so far

. Westpac digs deeper

. Now Westpac treats its staff like idiots

Read more >>

Westpac said it wasn't the jetstar of Banking. Then Jetstar fought back

HT: Mumbrella

Related Posts

. Westpac's week - so far

. Westpac digs deeper

. Now Westpac treats its staff like idiots

. The mating call of the banks

Read more >>

Perhaps the NSW Premier doesn't understand too much

What's dumb about the Premier's jobs press release?

Hint - she has highlighted the relevant sentence in bold:

091210 Premier Welcomes Employment Data

Related Posts

. The trend, the trend...why does the Bureau keep pushing forward the trend?

Read more >>

Unemployment is turning down already

According the Bureau's flawed "trend"

In any event the underlying news IS really, really good

An extraordinary surge in hiring has seen 100,000 new jobs created in three months, more than half of them in Victoria, pushing Australia's unemployment rate down well below 6 per cent and raising the prospect unemployment has peaked .

Australia's new unemployment rate of 5.7 per cent contrasts with 6.5 per cent in New Zealand, 7.8 per cent in the United Kingdom, 10 per cent in the United States, and 19.3 per cent in Spain.

Importantly the "trend" measure calculated by the the Bureau of Statistics suggests unemployment has peaked and is already heading down.

"The labour market has clearly passed a turning point," said UBS Wealth Management economist Alvin Pontoh. "We've had the third successive month of double-digit increases in jobs, nearly all of them full-time. The recovery in hours worked is positive for income and consumer spending in the Christmas months ahead."

Victoria gained an extra 37,900 full-time workers between October and November, creating full-time jobs at the rate of 1200 per day; most of them completely new positions and 14,100 replacing previously part-time jobs.

Premier Brumby said the gains was ''an early Christmas present for Victorian families''.

Victoria had recorded more jobs growth than any other state for the seven month in a row.

Over the past year Victoria has created 73,200 new jobs, while the rest of the nation lost 3520.

"We have been generating jobs while other states have been losing jobs,'' Mr Brumby said. ''Victoria is the engine room of the national economy.''

Victoria's unemployment rate stands at 5.4 per cent, a rate bettered by no state other than Western Australia.

Queensland now the only state with an unemployment rate in excess of 6 per cent, at 6.1. NSW has slipped below the 6 per cent benchmark to 5.98.

The Budget forecast that had unemployment peaking at 8.5 per cent and the November update that had it peaking at 6.75 per cent appear to have been rendered obsolete.

"The monthly move in employment is always a bit of a lottery, but thankfully today’s result isn’t just a one off," said IPAC Securities economist Adam Carr. "It’s the third consecutive solid gain and consistent with other upside surprises."

"With the labour market having turned a corner I no longer think a bearish consumer outlook is credible. We have seen 100,000 jobs created over the past few months – three quarters of them full-time. Solid incomes growth, a still low cash rate and high confidence will all act to encourage growth and keep spending solid. It's consistent with what we are hearing from retailers themselves."

While Treasurer Wayne Swan welcomed the news saying it meant "more Australian families this Christmas would have a bread winner" Shadow Treasurer Joe Hockey said it was a warning to the Rudd government to "please stop spending so much money".

"It’s time to look again at the massive stimulus spending, reallocate it to places like hospitals, perhaps better aged care if you are going to spend the money, but ultimately the best thing that can be done now is to stop spending so much money, stop putting upward pressure on interest rates and start focusing on getting Australia out of its debt," he said.

The Australian dollar surged half a US cent on the news in the belief that it would embolden the Reserve Bank to bring forward likely rate rises, before losing much of the gain to close at 91.22 US.

Victoria leads the way

Since August:

Victoria: 54,700 jobs gained

NSW: 11,800 jobs gained

South Australia: 11,700 jobs gained

Western Australia: 5100 jobs gained

Tasmania: 300 jobs lost

Queensland: 2800 jobs lost

Seasonally adjusted, August - November ABS 6202.0

Published in today's SMH and Age

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Thursday, December 10, 2009

Westpac's week - so far

Michael Evans in BusinessDay:

Westpac customers, and even the Prime Minister, Kevin Rudd, are now picking apart the bank and its image-conscious boss - who was once carried into a St George staff Christmas party dressed as Cleopatra sitting on a throne. And to think things were going so well.

Tuesday, December 1 marked the first anniversary of the completion of the Kelly-led merger between Westpac and her old bank St George that turned Westpac into a powerhouse. Mrs Kelly, known to answer customer complaint emails personally, and her retail banking chief, Peter Hanlon, hit the branches to sell her mantra ''delight the customer''.

When the Reserve Bank raised interest rates by 25 basis points, Westpac was ready, pressing the button soon after on a 45-basis-point move. The big four banks baulked. Handsome profit is one thing, overt greed is another. The Treasurer, Wayne Swan, said it was a ''cynical'' move without justification.

Wednesday: ANZ, NAB and the Commonwealth were largely expected to march to Mrs Kelly's fast-step move. There is silence. Talkback radio starts to murmur...

Thursday: Mrs Kelly's week takes a turn for the worse. The NAB boss, Cameron Clyne, undercuts Westpac, matching the RBA's 25 basis point rise, politely suggesting to Westpac customers they might like to pay him a visit. Still, the week has a bright moment. Mrs Kelly reportedly receives her annual cash bonus of $2.6 million.

Friday: CBA and ANZ raise rates over and above the RBA but largely avoid criticism as they are below Westpac. CBA's Sir Ralph Norris, who once wrote a reference for Mrs Kelly to get the job running St George, says he feels home owners' pain.

Sunday: Competition boss Graeme Samuel sheepishly admits he would think twice if asked again about whether Westpac and St George should be allowed to merge.

Monday: Mrs Kelly makes her first comment, telling investors her ''ambition is to delight customers and earn all their business'' . Asked if she has misread the political and customer response, Mrs Kelly says: ''No, I don't think so,'' adding that ''no customer'' would lose their home because of Westpac's rise. ''[The politicians] can see the evidence before them that funding costs have gone up materially,'' she said (See, Wednesday.)

Tuesday: Mrs Kelly quietly moves Mr Hanlon, the chap in charge of retail banking who helped put up the rate rise, into human resources. Instead of dropping the spade, Kelly keeps digging.

The bank tries to explain its decision, sending thousands of customers an email comparing mortgages to banana smoothies and likening the cost of borrowing money to the cost of bananas.

Wednesday: Customers, aware of the lack of competition in the banking sector, revolt as per the smh.com.au website: ''Money talks, BS walks. Take your loans to another organisation.''

Like an annoyed parent, Mr Rudd, who lent the Government's gold-star rating to the major banks during the crisis, tells Westpac to take ''a long hard look at itself''.

But Mrs Kelly is having no thoughts about changing her mind on the rate rise.

Dialogue with Canberra remains open.

Read more >>

And why is Westpac donating to both the Liberal and Labor parties?

The amounts are small, but...

Westpac Political Donations 2007-08

HT: Institutional Economics

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Read more >>

Westpac digs deeper

...still

Opposition leader Tony Abbott has opened up the prospect of reregulating the banks in response to Westpac's outsized rate increase saying Kevin Rudd gave Westpac "enormous support" during the financial crisis without getting influence in return.

The attack and threat of regulation came as Westpac emailed tens of thousands of customers a link to an animated video that compared mortgages to bananas and released a consumer confidence survey showing its own rate rise was hurting.

Mr Abbott said that under John Howard as Prime Minister and Peter Costello as Treasurer, "if the Reserve Bank put interest rates up or down the banks put interest rates up or down by the same amount".

Raising the prospect of regulation he said "Now, the government has given a lot of support to the banks, quite understandably in the throes of the global financial crisis, but why hasn’t got any leverage over them?"...

During the financial crisis the government allowed guaranteed deposits with banks, guaranteed bank borrowing and allowed Westpac to take over St George.

Regulation of mortgage interest rates was abolished during the Hawke/Keating government of the 1980s in response to a recommendation of the Campbell committee of inquiry into Australia's financial system.

While stopping short of threats of regulation or payback Mr Rudd invited Westpac to "have a long hard look at itself" after emailing a video link to customers comparing its 0.45 point rate hike to an increase in the price of bananas.

Accompanied by images of storms lashing banana trees and a Westpac branch the voiceover says 'in some ways a bank is really just like a company that sells banana smoothies."

The video was yesterday removed from the Westpac website and replaced with a notice saying the page "no longer exists".

"[Westpac is] talking about peoples' most basic things in life - a mortgage, an affordable mortgage, to underpin things as basic as a home," Mr Rudd told told Townsville radio.

"Customers out there should be looking at where else they can do their banking."

Further information emerged yesterday about the low take-up of the government's bank switching package with the Australian Securities and Investment Commission revealing that in the 18 months to July it had logged only 193 calls at its bank switching hotline.

The "hotline" uses the same phone number as the ASIC switchboard making it difficult to determine whether it is used at all. ASIC staff described the number of calls as "very low" relative to the total number ASIC receives.

Neither the Treasurer nor the Prime Minister have invited the public to make use of the hotline during the dispute with Westpac.

The Westpac-Melbourne Institute survey conducted during the week Westpac announced its near doubling of the Reserve Bank's 0.25 per cent rate hike shows that while overall consumer confidence dropped 3.8 per cent in December, confidence amongst mortgage holders dived 8.9 per cent.

The proportion of Australians believing that now was "a good time to buy a dwelling" slid 12.3 per cent.

Asked to recall the events that had dominated the news during the week in which the Coalition switched leaders and Westpac produced a near double interest rate increase only 6 per cent nominated political events. More than 40 per cent nominated interest rates.

Switching banks is as easy as...

1. Comparing mortgage rates
2. Proving your identity all over again
3. Proving your partner's identity
4. Providing bank statements showing savings habits
5. Providing payslips or group certificates
6. Providing evidence of superannuation, child support
7. Obtaining a new home valuation
8. Paying any exit fee *
9. Paying any set-up fee
10. Switching over direct payments and debits *

* things the Rudd/Swan bank switching package actually helps with

Published in today's SMH and Age

Westpac's Bananas video now:

Westpac Melbourne Institute Consumer Sentiment Report, December

Read more >>

Wednesday, December 09, 2009

Now Westpac treats its staff like idiots

Westpac's retail chief Peter Hanlon lost his job Monday.

Gail Kelly announced she was moving him on to a new position - group executive, people and tranformation. He moves February 1. Good luck to him.

That night he sent an email to customers - the "bananas" email.

Julian Lee has the story in the Herald, along with the "bananas video" he attached.

This is the man who chaired a community consultation about rates pain last Monday, unleashed a double-sized rate rise Tuesday, and sent out the mating call of the banks Wednesday, and had the NAB rebuff it big time Thursday.

Here's Julian's story:

IN THE world according to Westpac, mortgages are much like banana smoothies, and the cost of borrowing money is like the cost of bananas.

All of this will be news to the hundreds of thousands of Westpac customers who received an email on Monday night from the bank's retail chief explaining its supercharged interest rates.

The email from Peter Hanlon included an animated video, Cool Bananas, that justifies the bank's decision to raise interest rates across its variable mortgages by 45 basis points, nearly double the Reserve Bank's recent 25-basis-point rate increase.

The clip begins with the words ''once upon a time'' and tells how the price of banana smoothies rose after storms ravaged banana plantations and pushed up the price of bananas...

''That's why the price of smoothies increased by 50 cents,'' says the voice. ''In some ways a bank is really just like a company that sells banana smoothies. A bank is a business that buys and sells something … only in this case that something is money.''

The voiceover is accompanied by images of storms lashing banana trees and a Westpac branch. Westpac justifies its actions by saying that if it failed to raise interest rates then it would not be in business ''tomorrow'' and would not ''be there'' for its customers.

A spokeswoman said it was made two months ago to help staff understand the global financial crisis. Based on feedback it was given a wider airing. ''We are trying to use a visible example of bananas and how their price was affected by the cyclone in Queensland [in 2006] to explain a complex issue. Our intentions were honourable, and [we] thought it a useful tool.''

But marketing experts said the bank was only digging a larger hole. ''This long-winded parable of Westpac being like a banana seller in a storm on a tropical island somewhat beggars belief,'' said Stephen Pearson, head of the ad agency Lowe Worldwide.

''The style and tone is quite child-like, and for any educated person [it is] likely to be seen as condescending.''

Richard Foster, head of the Financial and Consumer Rights Council, also criticised it, coming as it did off the back of comments yesterday by the Westpac chief banana, Gail Kelly, that customers would not be hurt by the rise.

''When a mortgage holder is experiencing stress and housing affordability, I don't think they are going to be overly impressed that Westpac says it is helping them by putting up rates.''

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. So Westpac flew all these community representatives to Sydney for a meeting, then...

. Westpac blows it - big time

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Read more >>

Prepare to return to normal. We've done it.

Gruen's speech, below, is a bottler

Leading economists have forecast an upswing that will add more than $300 to the monthly cost of servicing a mortgage as the Reserve Bank Governor has spoken of the need for still higher "spreads" between what banks pay for funds and what they charge for loans.

The survey of the executive committee of Australian Business Economists released at its annual Sydney forecasting conference has the Australian economy bouncing back to near-normal growth of 3.2 per cent next year.

As a result the economists expect the Reserve Bank to push up its cash rate from 3.75 per cent to 4.75 per cent next year and then to 5.50 per cent in 2011.

The move would lift Westpac's standard variable mortgage rate from 6.76 per cent to 7.76 and then 8.51 per cent. The National Australia's Bank's 6.49 per cent rate would climb to 7.49 and then 8.24 per cent.

The extra monthly repayment on a $300,000 mortgage would amount to $190 next year and $340 by 2011.

At the conference Reserve Bank Governor Glenn Stevens warned of still higher mortgage rates as banks widened their margins in order to comply with proposed new capital rules designed to make them safer.

"The intention, after all, is that lenders will operate with more capital against the risks they are taking," he said...

"Capital is not free; shareholders have to be induced to supply it and it will have to be paid for."

"Customers of financial institutions - depositors and borrowers - will also pay via higher spreads between what lenders pay for funds and what they charge for loans."

The rules are outlined in a discussion paper sent to financial institutions by the Australian Prudential Regulation Authority. They are not yet in place and so cannot help explain Westpac's outsized December 0.45 point rate hike.

Treasury executive director David Gruen told the conference Treasury had underestimated the resilience of the economy in the May Budget but that without its $37 billion stimulus packages Australia would have been in recession in the December, March and June quarters of the past financial year.

Responding to critics who said Australia didn't need to do as much as it did, he said by doing what it did Australia achieved a "radically better outcome" than other advanced countries.

"The first and most obvious benefit is that unemployment is lower than it would otherwise be. Among other things this means less long-term unemployment and hence less skill atrophy and less general disaffection with society on the part of the long-term unemployed. Recessions break productive links between firms and between firms and workers, when firms that would otherwise be viable are driven into bankruptcy."

Winding back government debt would be easier if there was broad political and community agreement about the process of the kind Australia had enjoyed in the 1980s.

The ABE executive committee forecasts only a modest increase in unemployment from 5.8 to 6.2 per cent. It includes the chief economists of Westpac, ANZ, Commonwealth Bank, Citibank and Macquarie group.

Published in today's SMH and Age

ABE Forecasts

Australian Business Economists Annual Forecasting Conf 2009

Read more >>

Tuesday, December 08, 2009

We're more Chinese, less British

China has become Australia's biggest source of migrants, for the first time eclipsing our traditional main points of origin New Zealand and the United Kingdom.

The latest migration figures show a record 6350 new settlers arrived from mainland China in the four months to October, more than both the 5800 who arrived from the UK and the 4740 who came from New Zealand.

The new Chinese ascendancy owes more to a collapse in migration from the traditional sources than it does to the impressive 15 per cent annual growth in migration from China. The number of migrants from the UK is down 28 per cent over the year and the number from New Zealand down 47 per cent.

Adelaide University demographer Graeme Hugo says the global financial crisis has hit migration from our traditional sources in ways that haven't much affected China...

In March the government sliced 18,500 of the skilled migration program for 2009-10, disproportionately hitting the United Kingdom for whom skilled migrants account for 8 out of 10 flights booked. Chinese migration, dominated by family reunions, suffered less.

Professor Hugo says New Zealand migration collapsed as our neighbours across the Tasman decided to hang on to their jobs.

"Just as someone from Adelaide is likely to try to hang on to their job in the global financial crisis rather than move to Sydney or Melbourne to take their chance at a time of tightening employment, I think that would be the case in Auckland as well."

"It's an immediate response. New Zealanders don't need to apply to immigrate, there's no pipeline - that's why the response is so big."

Short-term arrivals figures also released yesterday show a change in where visitors are choosing to stay. NSW, traditionally the most popular state, has received 6 per cent fewer visitors over the past year. Victoria and Western Australia have received 9 and 15 per cent more.

At the same time the high dollar and the continuing impact of bonus payments sent a record 570,200 of Australians overseas on holiday in October, meaning that for at least some of the month 1 in every 40 of us was out of the country.

Departures climbed 20 per cent in October, swamping a 7 per cent recovery in arrivals.

New Zealand remained our most popular destination, with travel to Indonesia and the United States up an extraordinary 51 and 47 per cent on the previous year.

Travel to Malaysia jumped 50 per cent, travel to the Philippines 40 per cent, and travel to Fiji 24 per cent.

Tourism and Transport Forum executive director Brett Gale said the boom came at a cost to the local tourist industry.

“Over the past year departures have outnumbered arrivals by almost 600,000. On the one hand, it's hurting domestic tourism, but more optimistically, there's an opportunity because it has made so many new airline seats available to bring overseas visitors into Australia."

The changing face of migration

July - October 2008:

New Zealand 8890
United Kingdom 8110
India 5830
China 5540

July - October 2009:

China 6350
United Kingdom 5800
India 5450
New Zealand 4740

Source: ABS 3401.0

Published in today's SMH and Age

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Abbott also destroys tax reform

Tim Colebatch:

Some time before Christmas, after a year and a half of seriously heavy work, after considering hundreds of lengthy submissions from some of our best and brightest, the Henry review will deliver its report to Treasurer Wayne Swan, setting out its plan for tax reform in Australia.

Right now, I would urge the Henry team not to. I suggest some excuse be found to put it off for another year. Maybe there's some more research we ought to do. Coalition Leader Tony Abbott could help come up with some reason to avoid a decision. But why? Because the Henry team's review of the tax system is a once-in-a-generation chance for experts to look at the system in detail, and suggest how it can be made to work better. If they do their job well, there could be big gains for us as a nation.

But to bring out the report before the 2010 election, with the Opposition now opposing everything the Government proposes, would destroy that opportunity. If the Henry report is on schedule, it will be DOA - dead on arrival.

Prime Minister Kevin Rudd is a cautious manager, not a brave reformer. At the best of times, tax reform would need a lot of luck and Opposition support to make it to the runway, let alone get airborne. Under Malcolm Turnbull as leader, it was just possible. Under Abbott, forget it...

If Abbott is willing to try to destroy emissions trading - his party's policy for years - as just ''a great big new tax'', you can imagine what he will do with a report that will inevitably propose some new taxes and tax rises, while other taxes are scrapped or cut. The Henry report will be endless fuel for Opposition attacks. And to avoid damage, Rudd is likely to respond by shelving the whole thing.

That is the problem created by oppositions that see their job as being to declare war on everything. It drags down the policy debate. The ultimate exponent today is Barnaby Joyce, who claimed last month that we won't be able to buy a steak if we have emissions trading. You can always find something to attack, set the hurdles for yourself very low, and clear them with ease.

But an opposition that wants to be taken seriously as a prospective government must set its hurdles higher. It has to propose its own policies as alternatives. We're not mugs. If an opposition leader keeps attacking the government's policies without declaring any of his own, we smell it.

We've seen lots of opposition leaders before who thought their job was to oppose whatever a government proposed. They failed to win credibility, and lost. That credibility comes from doing the hard stuff: carrying the fight to the Government on some issues, lining up with it on others, and coming up with an alternative on the issues where you differ.

Credibility would come from Abbott being what his supporters say he is: a decisive guy who is not afraid to make a tough call, who sees the positives in everything, and who doesn't hide his views, so we know exactly where he stands.

Well, please, could someone find that Tony Abbott and bring him out? The Tony Abbott we've got now is doing just the opposite: on the biggest issue of our time, he is putting off making the tough call until everyone else has done so first. And he's held so many positions on it that no one has a clue what he really thinks, or what an Abbott government would do.

In recent weeks he has declared the scientific arguments on global warming are ''complete crap''. Yet now he tells us he believes them. He urged Turnbull to put off a decision until after this month's Copenhagen summit. Now that it seems that Copenhagen is likely to put us on the path to a global agreement, he wants us to wait until the US Congress has made up its mind. If that happens in the next few months, as some close observers predict, what comes next? Do we wait until Iran or Saudi Arabia decide what to do?

What do we make of this serial indecision on an issue of first-level importance, which we have been debating for years? The Bureau of Meteorology has just reported that last month was the hottest November ever recorded across Australia. This year is likely to end up the second or third hottest on record. The past eight years have all been among the 15 hottest years on record. Yes, there's always a chance the scientists have got the wrong explanation for it, but isn't it better to buy ourselves insurance by acting now than being sorry when it's too late to do anything?

Abbott's denunciation of emissions trading as ''a great big new tax'' ignores the reality that what comes into government as taxes goes out as benefits to people. It ignores the reality that any solution to global warming is going to cost a lot of money - and that emissions trading, if it works as planned, creates incentives for the market to find the lowest-cost way of solving the problem.

And don't be fooled: with 2 per cent annual population growth and rapid mineral development, even Australia's minimal target to cut its emissions in 2020 to 5 per cent below 2000 levels will be hard to achieve, let alone the more ambitious targets we may have to take on if the Copenhagen process results in a global agreement next year. It can be done, but only by tough governments prepared to get on with the job. That's why centre-right governments the world over are backing emissions trading.

If Abbott ever leads the Coalition back into government, he will have to do the same. He will have to run the very scheme he now attacks. There are no soft answers to hard issues.

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Monday, December 07, 2009

An animated journey through climate change

The BBC takes you along for the ride:

Read more >>

"Tony and the people who put him in his job do not want to do anything about climate change..."

This and much, much more from this morning's Malcolm Turnbull blog:

"While a shadow minister, Tony Abbott was never afraid of speaking bluntly in a manner that was at odds with Coalition policy.

So as I am a humble backbencher I am sure he won't complain if I tell a few home truths about the farce that the Coalition's policy, or lack of policy, on climate change has descended into.

First, let's get this straight. You cannot cut emissions without a cost. To replace dirty coal fired power stations with cleaner gas fired ones, or renewables like wind let alone nuclear power or even coal fired power with carbon capture and storage is all going to cost money.

To get farmers to change the way they manage their land, or plant trees and vegetation all costs money.

Somebody has to pay.

So any suggestion that you can dramatically cut emissions without any cost is, to use a favourite term of Mr Abbott, "bullshit." Moreover he knows it.

The whole argument for an emissions trading scheme as opposed to cutting emissions via a carbon tax or simply by regulation is that it is cheaper - in other words, electricity prices will rise by less to achieve the same level of emission reductions.

The term you will see used for this is "least cost abatement".

It is not possible to criticise the new Coalition policy on climate change because it does not exist. Mr Abbott apparently knows what he is against, but not what he is for.

Second, as we are being blunt, the fact is that Tony and the people who put him in his job do not want to do anything about climate change. They do not believe in human caused global warming. As Tony observed on one occasion "climate change is crap" or if you consider his mentor, Senator Minchin, the world is not warming, it's cooling and the climate change issue is part of a vast left wing conspiracy to deindustrialise the world.

Now politics is about conviction and a commitment to carry out those convictions. The Liberal Party is currently led by people whose conviction on climate change is that it is "crap" and you don't need to do anything about it. Any policy that is announced will simply be a con, an environmental figleaf to cover a determination to do nothing. After all, as Nick Minchin observed, in his view the majority of the Party Room do not believe in human caused global warming at all. I disagree with that assessment, but many people in the community will be excused for thinking the leadership ballot proved him right.

Remember Nick Minchin's defense of the Howard Government's ETS was that the Government was panicked by the polls and therefore didn't really mean it.

Tony himself has, in just four or five months, publicly advocated the blocking of the ETS, the passing of the ETS, the amending of the ETS and, if the amendments were satisfactory, passing it, and now the blocking of it.

His only redeeming virtue in this remarkable lack of conviction is that every time he announced a new position to me he would preface it with "Mate, mate, I know I am a bit of a weather vane on this, but....."

Third, there is a major issue of integrity at stake here and Liberals should reflect very deeply on it. We have an Opposition whose current leadership dismisses the Howard Government's ETS policy as being just a political ploy. We have an Opposition Leader who has in the space of a few months held every possible position on the issue, each one contradicting the position he expressed earlier. And finally we have an Opposition which negotiated amendments to the Rudd Government's ETS, then reached agreement on those amendments and then, a week later, reneged on the agreement.

Many Liberals are rightly dismayed that on this vital issue of climate change we are not simply without a policy, without any prospect of having a credible policy but we are now without integrity. We have given our opponents the irrefutable, undeniable evidence that we cannot be trusted.

Not that anyone would doubt it, but I will be voting for the ETS legislation when it returns in February and if my colleagues have any sense they will do so as well."

Read more >>

Employers are hiring full-time. Could this be the start of something big?

A surprise surge in full-time job advertisements is raising the prospect that the worst of the employment crisis is over.

Ahead of the official job numbers to be released Thursday the index complied by the Olivier recruitment group shows advertisements for full-time positions up 5.9 per cent in November; substantially more than the 4.6 per cent increase in ads for part-time positions.

It's the first time demand for full-time workers has exceeded demand for part-timers since he onset of the financial crisis.

Over the year to October 130,000 Australians lost full-time jobs while 147,100 gained part-time ones.

The Olivier figures suggest the rot may have stopped.

"If employers are willing to hire, they are now at last willing to hire full-time," said Olivier director Robert Olivier. "It means the underemployment that has been concerning us is starting to unwind".

"Job advertisements usually take 3 to 6 months to work through the system and turn into jobs. So that means soon we'll see full-time employment overtaking part-time employment."

The Oliver count shows is also remarkable because it shows job advertisements continuing to climb after two consecutive Reserve Bank interest rate hikes. If backed up by the differently-calculated ANZ job index to be released this morning it will indicate that employers are keen to get hold off staff ahead of an economic recovery whatever happens to interest rates.

NSW and Victoria lead the way with jumps in advertisements of 7.3 and 9.3 per cent, well in excess of the national average.

"The eastern seaboard's catching up," said Mr Olivier. "The mining states started looking for workers first, but now there's a feeling the recovery will last there's a scramble for workers in financial services, and in administrative and clerical jobs - the jobs that were cut back when things turned down."

Economists surveyed by Reuters expect 5000 more workers to have found jobs when the official figures are released Thursday, with an increase in the number of Australians looking for jobs pushing the unemployment rate up from 5.8 per cent to 5.9 per cent.

They now see Australia's unemployment rate peaking at just 6.3 per cent, down from 7 per cnet last month and 8 per cent the month before that.

The November Budget update had unemployment peaking at 6.75 per cent, down from a forecast of 8.5 per cent in the May Budget.

Published in today's SMH and Age

Read more >>

So Westpac flew all these community representatives to Sydney for a meeting, then...

Westpac has been hit by fresh resignations from its Community Consultative Council in the wake of the double-sized mortgage rate hike delivered just one day after a round table discussion about financial hardship.

The defections came as Australia's chief ecompetition regulator told the ABC he was now not sure he would allow Westpac to take over St George if the application came before him again.

Citing "insincerity" the Finance Sector Union's Rod Masson and the ACTU's Sharan Burrow wrote to Westpac Friday saying it was "galling" that a bank's retail chief had purported to consult the Council about financial hardship less than a day before announcing a near-doubling the Reserve Bank's rate hike.

"The meeting was chaired by Peter Hanlon, the executive who less than 24 hours later announced the double hike," Mr Masson told the Herlad/Age. "We discussed the impact the Reserve Bank hikes would have on people who had lost their jobs and suffered reduced hours. Sharan articulated our points clearly and there were lots of smiles and nods around table"...

"It was pretty disrespectful if you ask me. He must have known what Westpac was planning but didn't try to make the argument."

"We will stay in the ANZ and the National Australia Bank's stakeholder forums, but not Westpac's - not after this."

The Finance Sector Union and the Council of Trades Unions are the second and third groups to have withdrawn from Westpac Community Consultative Council after the consumer group Choice which left about two years ago. Over the weekend Westpac's website was updated to remove reference to all three. Continuing members of the Counil include the Smith Family, Mission Australia and the St James Ethics Centre.

"Westpac is disappointed," said spokesman David Lording. "But we respect that sometimes opinions diverge."

ACCC Chairman Graeme Samuel told the ABC's Inside Business banks such as Westpac faced less competition and found it easier to push up rates. While his decision to allow Westpac to acquire St George last year was the right at the time he was not sure it would be right today.

"You might ask that if Westpac were to seek to acquire St George today, rather than prior to the global financial crisis, whether we'd have the same view as what we had back then. I don't know the answer to that, but I raise it as a question," he said.

Published in today's SMH

ACTU FSU Letter to Westpac

Westpac's shrinking consultation website

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Sunday, December 06, 2009

There was The Punch, there was The National Times, and now there's The Drum.

Or there will be.

I think this website will go live in a soft launch Monday morning.

It's www.abc.net.au/thedrum/

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Saturday, December 05, 2009

Changing banks is as easy as....

Well, full marks to the Treasurer for good intentions

As Treasurer Wayne Swan calls on mortgage holders to punish the ANZ, Commonwealth and Westpac banks for outsized rate increases inquiries by the Herald reveal that one year after his much-hyped bank-switching package, moving banks remains difficult.

The ANZ yesterday lifted its variable mortgage rates 0.35 points, the Commonwealth 0.37 points, and the Westpac-owned St George 0.39 points in a partial repudiation of its parent's 0.45 point hike.

With the National Australia Bank lifting rates by only 0.25 percentage points and now offering by far the best deal Mr Swan stepped up his attack the other big banks saying banks that have done the right thing could "expect to be rewarded by their customers and by new customers, while banks like ANZ, Commonwealth and Westpac copped the severe backlash they deserve".

But a survey by the consumer group Choice finds that of the 76 per cent of bank customers unlikely to switch, only half are satisfied...

More than half of the rest won't switch either because "too much effort is required" or because they have several products with the same bank making it "too difficult".

The Treasurer's package had four prongs. One was a listing and switching service that required banks to give their customers accurate information on direct debits to take to the new bank.

The ANZ spokesman said there had not been "a significant take up of the service so far," but added that customers didn't need it in order to switch.

Another was "a single consumer complaints hotline on 1300 300 630, providing a first contact point for all consumer complaints about basic banking products".

The number turns out to be the Australian Securities and Investments Commission switchboard. When The Herald phoned it yesterday a recorded voice asked whether the caller was an ASIC-registered agent, a company director, or wanted information about scams, financial products or services.

The third prog - a website entitled understandingmoney.gov.au - links to a single page of tips about how to switch home loans including "shop around for a better deal" and "calculate the costs of switching".

The forth prong many have achieved the most: an inquiry into mortgage exit fees that led to at least one at least one bank abolishing them for new contracts.

Melbourne Business School professor Joshua Gans said the ideal would be for customers to simply log onto a website and switch, in the same way as they could for mobile phone providers.

"We'll probably never get there, But right now we are so far away," he said. "Westpac would think very hard about higher interest rates in such a world."

Published in today's SMH and Age

Graphic: Easterline

Here's what I wrote in January last year:

Worried about what’s happening to your mortgage?

The Treasurer Wayne Swan is working on it. But in the meantime he is offering advice straight out of cloud-cuckoo-land.

It’s this: “Vote with your feet.”

As Mr Swan sees things: “The banking system in this country is competitive. If one of the major banks wants to increase its interest rates over and above other banks, then customers should take note of that and they should act accordingly.”

It sounds as if he’s been listening to Smokey Robinson whose 1960 hit song advised young women to “shop around”. Or perhaps to Adam Smith, the father of modern economics. Back in the 18th century Smith said that if everyone shopped around and voted with their feet and if the sellers responded, no-one would end up paying more than they had to.

On the face of it “shopping around” is good advice right now...

For the first time in years most of the big five banks are charging different standard variable mortgage rates. There’s no longer a single standard rate. The National Australia Bank is charging 8.67 per cent, Westpac 8.72 and (much to the Treasurer’s displeasure) the ANZ, the Commonwealth and St George want as much as 8.77 per cent.

As Mr Swan put it last week: “I would be reminding all ANZ customers that there is a competitive market out there, and if they’re unhappy they ought to vote with their feet.”

But voting with your feet and moving from, say, the ANZ to the NAB is difficult if you already have a mortgage. Mr Swan might like to try it.

First he’ll need to prove his identity all over again – it’s often a matter of driver’s licences, passports and signed statements from people such as church ministers who can certify that they know you. If it’s a joint loan his wife will need to do it as well.

And he’ll need to provide reams of bank statements demonstrating his spending and saving habits, as well as pay slips or group certificates along with perhaps a letter from his employer confirming that he works there. The bank might also ask for his child support statements and superannuation statements. He’ll most probably have to value his house (or agree to pay the new bank to do it) and get a copy of his rates notice as well.

Perhaps he’s organised. He might be able to get the package together in a couple of days. Or like many bank customers he might find the whole process daunting.

And he’ll face fees. Most banks charge an exit fee of around $700. (Mine would charge me $3,000.) They charge another $300 to release the title to the property and many seem to delay doing it, perhaps in order to hang on to their lucrative customers a little bit longer.

The new bank might want fees as well, perhaps $600 to set up the new account. And then he’ll have to switch all the paperwork over, filling out form after from - one for each direct debit. He’ll have to let his pay office know, and so on.

And for what?

Perhaps to discover a month or two down the track that the rates on offer have changed. His new bank isn’t the cheapest any more.

That’s why Australians don’t vote with their feet. The banks know this even if the Treasurer does not.

Each bank routinely charges its new customers less than it charges its existing ones, offering them discounts safe in the knowledge that their existing customers are rusted on and won’t attempt to get the cheaper rates by changing.

Customers who have become financially stretched or have lost their jobs are unable to change at all. New lenders won’t take them.

To his credit the Treasurer recognises that there is a problem. He has asked his department to examine the barriers to switching and report on ways to break them down.

It could do worse than examine the market for mobile phone calls.

These days mortgages, like mobile phone calls, are regarded as homogenous. The product is much the same whichever of the big providers you sign up to. What differs is the branding, service and price.

Until 2001 Australian mobile phone users were more or less stuck with the company they had signed up to, just as are Australian bank customers.

Changing your phone company involved changing your phone number, and in some cases changing your phone as well.

These days phone companies are compelled to provide you with an unlock code to switch your phone over should it be locked and to allow your new provider access to your old number.

As Professor Joshua Gans of the Melbourne Business School puts it: “You don’t even have to tell your current provider that you are leaving. Talk about an easy break-up!”

Gans wants it to be just as easy to switch mortgage providers.

He wants you and me to take ownership of our bank account numbers in the same way as we have taken ownership of our mobile phone numbers.

Technologically it should be easy to switch them between providers.

I would also make it easy to switch over identity and income and expenditure documents. Once you had been proved who you were and what you earned to one bank, you shouldn’t have to do it for the next.

Abolishing exit and entry fees might be more difficult. Lenders face genuine costs in setting up and closing accounts. But the fees they charge should be limited by the Competition and Consumer Commission to their actual costs.

Then those of us on variable rate mortgages could vote with our feet. (Those of us on fixed rates could not, but that’s what you expect when you sign a fixed rate contract.)

We would have real market power and we would terrify the lenders by using it. They could hardly object, it would be the free market at work.

I am looking forward to the Treasury’s report.

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Friday, December 04, 2009

Those stimulus measures, did they work?

From the ABS yesterday:

Sydney shoppers have shrugged off the Reserve Bank's first interest hikes to spend at their fastest rate in 8 years.

Retail sales data for October, the month the rate hikes began, show spending in NSW up 1.2 per cent in the month and 8.8 per cent over the year, the fastest growth rate in the nation.

Spending on cafés and restaurants climbed an extraordinary 40 per cent and spending on takeaway food 21 per cent.

"People are eating out again," said CommSec economist Savanth Sebastian.

"The sustained improvement in consumer sentiment, rising wealth and the pick up in the labour
market has allowed us to lift our spending on luxuries and treats, rather than limiting ourselves to necessities."

ANZ senior economist Julie Toth said sales in cafes, restaurants and take-away outlets tended to reflect consumer confidence more immediately than sales in other outlets.

"It shows consumers were not feeling too dented or threatened by the first cash rate rise," she said.

JP Morgan economist Helen Kevans said much would depend on how consumers reacted the the series of three interest rate rises.

"This is not only the first time the Reserve Bank has hiked the cash rate three times in three straight months, it is also the first time since 2003 it has hiked the cash rate in December, ahead of the key Christmas spending period," she said.

Myer chief executive Bernie Brookes said Christmas sales were tracking in line with Myer's forecast 2008-10 sales growth of 3 per cent with early sales of Christmas decorations and hampers in November now translating into robust sales for cosmetics and especially gift vouchers.

Mr Brookes said sales of gift cards were up by between and 30 and 40 per cent on the previous year.

He said Myer had not seen any effect of the Reserve Bank's interest rate rises to date but that if rates rose by between a further one to three percentage points Myer could see an effect.

Seperately released industry figures show car sales up in November with 85,833 new cars sold with businesses rushing to buy new vehicles before the special budget tax break expires in December.

Passenger car sales were up 9.4 per cent on a year ago to 47,059 while sales of four wheel drives were up 44 per cent to 18,360 and sales of light commercial vehicles up 38.9 per cent to 18,094.

Pick-up trucks accounted for 18 per cent of all motor vehicle sales in November.

Published in today's SMH

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Westpac blows it - big time

The National Australia Bank has declared war on Westpac, opening up the biggest-ever mortgage rate gap between the major banks in a lunge for Westpac's customers.

NAB's decision to lift its already-lower standard variable mortgage rate by just 0.25 points in contrast to Westpac's 0.45 means that from this morning NAB customers will pay a standard variable rate of 6.49 per cent compared to Westpac's 6.76 per cent.

Customers enjoying discounts will pay 5.79 per cent compared to Westpac's 6.06 per cent.

The saving on a $300,000 mortgage amounts to $51 per month; on a $500,000 mortgage to $84 per month.

Asked how long it had been since such a wide gap had opened between the big Australian banks NAB personal banking executive Lisa Gray said her records did not go back that far...

"It appears to be so long ago that non-one can find the exact period of time," she told the Herald, "But it would be decades ago, if there was such a difference."

Treasurer Wayne Swan hailed the new competion as a victory for consumers and the community.

"Families looking to take out a mortgage will obviously take close notice," he said.

"The contrast with the behaviour of Westpac earlier this week could not be more stark."

Westpac pushed up its rates 0.45 percentage points Tuesday - almost double the Reserve Bank's 0.25 point hike - and Wednesday set out the case for other banks to do the same, its retail chief Peter Hanlon declaring on Melbourne radio that "all of the banks are in the same boat".

NAB executive Lisa Gray said yesterday each bank had different finances and invited Westpac customers to switch.

"I call on Westpac customers who are not happy with their actions earlier this week to come and have a look at NAB, because we can offer them a better deal," she said.

"We led the industry by abolishing overdrawn fees on personal transaction and savings accounts and by getting rid of over limit fees on NAB credit cards. We also led the industry by abolishing the $4 and $5 monthly account service fees on our most popular transaction accounts."

"We have offered the cheapest standard variable interest rate amongst the major banks for the past six months and our new rate is likely to remain unbeaten amongst the major banks."

RMIT marketing professor Michael Beverland said Westpac had made a mistake and destroyed whatever advantage it had had in the battle for customer's hearts.

"The banks have been talking in emotional language, saying we're here for you, we want to abe a partner in your life, they have moved away from being rock solid brands to being emotional brands."

"That makes what Westpac did really quite contradictory. They went completely against that and reinforced what most people thought about banks before. It was a critical event."

Westpac's executive Gail Kelly remained unavailable for comment for the third successive day since the 0.45 point hike, despite fronting a campaign earlier in the year to explain funding costs.

Her retail head Peter Hanlon pointed out that Westpac's whole-owned subsidiaries St George and Bank SA had yet to announce their interest rate moves and may well decide not to follow Westpac's lead.

"They make their own decisions," he said. "They report individually to Gail Kelly."

The NAB move makes it likely that no other lenders will follow Westpac, not even the ones it owns.

The ANZ and Commonwealth Banks have yet to declare their hands.

Asked whether Westpac's existing customers would make the effort to switch or just accept the higher mortgage repayments Professor Beverland said he thought they would at least hav a hard think.

"They'll look at what's involved in switching. Can we have a conversation with the bank manager about the interest rates and the difference. It will force them to look, because this is quite new."

Published in today's SMH and Age

Photo: The Punch