Aussies are $1.2 trillion in debt ! Wow!
In a new record, Australians now owe more in household debt than the country's entire economy earns in a year. Reserve Bank figures show mortgage, credit card and personal loan debts now stand at $1.2 trillion, up 71 per cent from just five years ago and equating to $56,000 for every man, woman and child in the country.Our spending binge, fuelled most recently by the federal government's First Home Owner Grant, means personal debt now totals 100.4 per cent of Australia's annual GDP - one of the highest ratios in the developed world. "It's the first time household debt has cracked 100 per cent of annual GDP and it's a terrible, terrible sign," University of NSW economics professor Steve Keen told News Ltd. "It shows we are living beyond our means and many highly geared borrowers are now extremely vulnerable to further rate rises - they are already saturated with debt and will not be able to tolerate much of an increase to their repayments." Australia's financial headache is likely to get worse before it gets better. The country is in the midst of the peak spending season, when billions goes on the plastic, yet the Reserve Bank data dates back to October's debt levels only, so that means there are another two months of First Home Owner Grant-fuelled mortgage activity still to be taken into account. The extra cost is expected to add billions to the burgeoning debt tally.
Sunday, December 27, 2009
2010 forcast
As prospective home buyers look for the best time to jump into the market, many of the nation’s top housing analysts have forecast modest residential price growth of about 5 or 6 per cent in 2010. Some of Australia’s leading economists believe demand for homes will stay strong as investors and upgraders pick up the slack from first home buyers. But a small group of doomsayers is convinced a combination of rising interest rates, the winding up of the first home owners grant boost and over-inflated prices could lay the foundations for a crash.
Happily, the nation is emerging from the global financial crisis with strong population growth, the lowest interest rates in decades and a rosier jobs outlook. Most economists, industry heads and real estate agents see the sun continuing to shine on residential property next year. BIS Shrapnel senior project manager of residential property Angie Zigomanis predicts steady growth of about five to six per cent in established residential property next year. ‘‘I’d expect you’d see steady low-to-mid single digit growth next year,’’ Mr Zigomanis said. ‘‘Over the next two or three years I think you’ll find interest rates will keep slowly edging upwards and it’ll keep a lid on the massive double digit price growth we were seeing previously.’’ Annual established house prices in Australia grew 6.2 per cent to September 2009, the latest Australian Bureau of Statistics data show. ‘‘If you look at most markets, prices declined last year and while people are talking about booms and everything else, most of what it did was really put prices back to where they were 12 to 18 months ago,’’ Mr Zigomanis said. First home buyers would not be excluded from the market until the Reserve Bank of Australia (RBA) raised interest rates by another 1 or 2 per cent, he said. Investor demand and upgrader’s demand picked up in the last few months of 2009 and would continue well into next year. As city rents increased due to low vacancy rates, more first home buyers in the 25 to 35 year age group would be encouraged into the market. Housing Industry Association chief economist Harley Dale said Australia would experience significant 20 to 25 per cent growth in new housing stock through to mid 2011. He also supports predictions of about five to six per cent growth in established home next year.‘‘With prices, we’ll probably continue to get a little bit more growth over the next six to 12 months but probably not at the rate that we’ve seen over the last six months which has been driven a lot by the first home-owner base,’’ he said. Mum and dad investors, who tended to look at the same type of investment housing stock as first home buyers, were beginning to step in to fill the gap. A shortage of housing, low interest rates and the first home buyer’s grant had helped support prices, he said.But University of Western Sydney Associate Professor of economics and finance Steve Keen said the rates and grants combination had already helped cause a housing boom in 2009.‘‘The fact that rates are rising as we enter 2010, combined with the ending of the boost and the winding back of government stimulus packages, means that rising interest rates are likely to end the (housing) bubble that began in 2009,’’ Mr Keen said. The implications would be ‘‘substantially negative’’ for all properties, not just those valued under $500,000.‘‘I’d expect a five per cent or so fall (in residential house prices), probably returning to somewhere between the current peak and the previous one in September 2008.’’ Meanwhile Commonwealth Bank economist James McIntyre cites wages growth as a key part of the equation, while predicting significant skills shortages emerging within 12 to 18 months.He said house prices would grow in the ‘‘mid single digits’’ next year, but those increases depended on how the build up of wages translated to other sectors of the economy. ‘‘If the whole economy catches fire with a strong growth in wages, then that will really be supportive of a continued strong growth in house prices.’’ He dismissed suggestions the Reserve Bank of Australia (RBA) had waited too long to increase interest rates and said there was a very low chance of house prices falling. It would take a ‘‘significant global shock’’ and an unprecedented surge in building approvals of between 200,000 and 250,000 homes to see significant weakness in house prices, he said. Ray White Real Estate chairman Brian White believes Australia has avoided a dramatic downturn in house prices. ‘‘All of us seem to have forgotten the anguish of the first four or five months of the year and we’re trying to understand just how on earth the year finished so strongly,’’ Mr White, who heads the nation’s largest group of real estate agencies, said. He also forecast growth of about 5 per cent in 2010 and said it had become a vendor’s market. ‘‘Now we’re going into the new year with a number of interest rate increases occurring but with quite strong growth.’’
Happily, the nation is emerging from the global financial crisis with strong population growth, the lowest interest rates in decades and a rosier jobs outlook. Most economists, industry heads and real estate agents see the sun continuing to shine on residential property next year. BIS Shrapnel senior project manager of residential property Angie Zigomanis predicts steady growth of about five to six per cent in established residential property next year. ‘‘I’d expect you’d see steady low-to-mid single digit growth next year,’’ Mr Zigomanis said. ‘‘Over the next two or three years I think you’ll find interest rates will keep slowly edging upwards and it’ll keep a lid on the massive double digit price growth we were seeing previously.’’ Annual established house prices in Australia grew 6.2 per cent to September 2009, the latest Australian Bureau of Statistics data show. ‘‘If you look at most markets, prices declined last year and while people are talking about booms and everything else, most of what it did was really put prices back to where they were 12 to 18 months ago,’’ Mr Zigomanis said. First home buyers would not be excluded from the market until the Reserve Bank of Australia (RBA) raised interest rates by another 1 or 2 per cent, he said. Investor demand and upgrader’s demand picked up in the last few months of 2009 and would continue well into next year. As city rents increased due to low vacancy rates, more first home buyers in the 25 to 35 year age group would be encouraged into the market. Housing Industry Association chief economist Harley Dale said Australia would experience significant 20 to 25 per cent growth in new housing stock through to mid 2011. He also supports predictions of about five to six per cent growth in established home next year.‘‘With prices, we’ll probably continue to get a little bit more growth over the next six to 12 months but probably not at the rate that we’ve seen over the last six months which has been driven a lot by the first home-owner base,’’ he said. Mum and dad investors, who tended to look at the same type of investment housing stock as first home buyers, were beginning to step in to fill the gap. A shortage of housing, low interest rates and the first home buyer’s grant had helped support prices, he said.But University of Western Sydney Associate Professor of economics and finance Steve Keen said the rates and grants combination had already helped cause a housing boom in 2009.‘‘The fact that rates are rising as we enter 2010, combined with the ending of the boost and the winding back of government stimulus packages, means that rising interest rates are likely to end the (housing) bubble that began in 2009,’’ Mr Keen said. The implications would be ‘‘substantially negative’’ for all properties, not just those valued under $500,000.‘‘I’d expect a five per cent or so fall (in residential house prices), probably returning to somewhere between the current peak and the previous one in September 2008.’’ Meanwhile Commonwealth Bank economist James McIntyre cites wages growth as a key part of the equation, while predicting significant skills shortages emerging within 12 to 18 months.He said house prices would grow in the ‘‘mid single digits’’ next year, but those increases depended on how the build up of wages translated to other sectors of the economy. ‘‘If the whole economy catches fire with a strong growth in wages, then that will really be supportive of a continued strong growth in house prices.’’ He dismissed suggestions the Reserve Bank of Australia (RBA) had waited too long to increase interest rates and said there was a very low chance of house prices falling. It would take a ‘‘significant global shock’’ and an unprecedented surge in building approvals of between 200,000 and 250,000 homes to see significant weakness in house prices, he said. Ray White Real Estate chairman Brian White believes Australia has avoided a dramatic downturn in house prices. ‘‘All of us seem to have forgotten the anguish of the first four or five months of the year and we’re trying to understand just how on earth the year finished so strongly,’’ Mr White, who heads the nation’s largest group of real estate agencies, said. He also forecast growth of about 5 per cent in 2010 and said it had become a vendor’s market. ‘‘Now we’re going into the new year with a number of interest rate increases occurring but with quite strong growth.’’
Wednesday, December 2, 2009
Rents increase
SYDNEY rents are set to climb more than 21 per cent over the next three years, the forecasting group BIS Shrapnel says. It suggests that after rising 6.2 per cent this year, Sydney rents will increase by 7.1 per cent a year for the next three years.
The tightening rental market will cause the vacancy rate to drop below 1 per cent, then remain very low in 2011, BIS Shrapnel predicted. The envisaged rent rises were an outcome of medium- and high-density dwelling construction starts plunging 28 per cent in 2009, reaching their lowest level since 1987. ''Housing supply is set to fall due to the low pipeline of new apartments,'' Jason Anderson, an economist at BIS Shrapnel, said. "While supply (of new apartments)has plunged, demand remains very strong.'' The net addition to the population from migration in 2008/09 is estimated at about 300,000, a record high, Mr Anderson said. Tighter lending restrictions on development projects following the global financial crisis had also contributed to the decline in supply. ''It is uncertain as to how long it will be before lending restrictions are eased and, even if some improvement were to occur in the near future, it would be some time before supply improves as most projects take 12 to 18 months to complete,'' he said. The rush to buy a first home was another factor adding to the pressure on rental markets. "A first-home buyer moving out of the family home, and purchasing a former investment property, will have actually reduced the available rental stock," Mr Anderson said. The long-term rental growth in Sydney between 2002 and 2008 was 3.5 per cent. The latest official data from the NSW Department of Housing indicated rents rose 3.9 per cent in the year to September. This reflected a $395 weekly median for two-bedroom rentals across Sydney. Rental growth was highest in the outer suburbs, with a 6.9 per cent annual increase to $310 a week. It was up 4.2 per cent to $375 a week in middle-ring municipalities and up 2.2 per cent to $500 in the pricier inner ring suburbs. The estate agent John McGrath said he expected rents would increase next year by between 5 and 10 per cent due to continuing short supply. He said yields would be maintained around current levels. Yields had dropped slightly from an average 5.3 per cent for apartments to 5.1 per cent, he said, and house rental yields had dropped from 4.4 per cent to 4.3 per cent.
adendum
Renters Becoming Latest Victims as Foreclosure Crisis Widens - (Washington Post - November 23, 2009)A new wave of foreclosures stands to hurt people who may have never taken out a mortgage: renters. In cities such as New York, Chicago and Los Angeles, where many investors are carrying upside-down mortgages on large rental buildings, some tenants are watching their homes fall apart along with the financing. The impact on tenants is uneven. New York City officials say the owners of the vast majority of buildings in foreclosure there are likely to maintain decent standards of living. Yet, of the 200 properties on the city housing agency's 2008 list of buildings with the worst maintenance problems, at least 77 had been in foreclosure. In buildings where a landlord is struggling to make loan payments, maintenance is often the first thing to go. Garbage can pile up, lists of overdue repairs get longer, and vermin multiply. http://www.washingtonpost.com/wp-dyn/content/article/2009/11/22/AR2009112200927.html
The tightening rental market will cause the vacancy rate to drop below 1 per cent, then remain very low in 2011, BIS Shrapnel predicted. The envisaged rent rises were an outcome of medium- and high-density dwelling construction starts plunging 28 per cent in 2009, reaching their lowest level since 1987. ''Housing supply is set to fall due to the low pipeline of new apartments,'' Jason Anderson, an economist at BIS Shrapnel, said. "While supply (of new apartments)has plunged, demand remains very strong.'' The net addition to the population from migration in 2008/09 is estimated at about 300,000, a record high, Mr Anderson said. Tighter lending restrictions on development projects following the global financial crisis had also contributed to the decline in supply. ''It is uncertain as to how long it will be before lending restrictions are eased and, even if some improvement were to occur in the near future, it would be some time before supply improves as most projects take 12 to 18 months to complete,'' he said. The rush to buy a first home was another factor adding to the pressure on rental markets. "A first-home buyer moving out of the family home, and purchasing a former investment property, will have actually reduced the available rental stock," Mr Anderson said. The long-term rental growth in Sydney between 2002 and 2008 was 3.5 per cent. The latest official data from the NSW Department of Housing indicated rents rose 3.9 per cent in the year to September. This reflected a $395 weekly median for two-bedroom rentals across Sydney. Rental growth was highest in the outer suburbs, with a 6.9 per cent annual increase to $310 a week. It was up 4.2 per cent to $375 a week in middle-ring municipalities and up 2.2 per cent to $500 in the pricier inner ring suburbs. The estate agent John McGrath said he expected rents would increase next year by between 5 and 10 per cent due to continuing short supply. He said yields would be maintained around current levels. Yields had dropped slightly from an average 5.3 per cent for apartments to 5.1 per cent, he said, and house rental yields had dropped from 4.4 per cent to 4.3 per cent.
adendum
Renters Becoming Latest Victims as Foreclosure Crisis Widens - (Washington Post - November 23, 2009)A new wave of foreclosures stands to hurt people who may have never taken out a mortgage: renters. In cities such as New York, Chicago and Los Angeles, where many investors are carrying upside-down mortgages on large rental buildings, some tenants are watching their homes fall apart along with the financing. The impact on tenants is uneven. New York City officials say the owners of the vast majority of buildings in foreclosure there are likely to maintain decent standards of living. Yet, of the 200 properties on the city housing agency's 2008 list of buildings with the worst maintenance problems, at least 77 had been in foreclosure. In buildings where a landlord is struggling to make loan payments, maintenance is often the first thing to go. Garbage can pile up, lists of overdue repairs get longer, and vermin multiply. http://www.washingtonpost.com/wp-dyn/content/article/2009/11/22/AR2009112200927.html
Thursday, September 17, 2009
Trusts and ATO
Tax experts are furious at a planned crackdown by the Australian Taxation Office on a commonly-used trust structure and say the ATO's backflip on the issue will have widespread ramifications for taxpayers and their advisers. The ATO is unhappy with the use of discretionary trusts with corporate beneficiaries. It is believed there are around 200,000 of these trusts in operation. Peter Bembrick, tax partner at HLB Mann Judd, says the structure is often used by trust owners who wish to accumulate funds within a trust. Under the structure the ATO wishes to target, distributions from a trust are allocated to a corporate beneficiary, but not actually paid (this is known as an "unpaid present entailment"). This allows the owners of the funds to reduce or defer income tax. The funds can then accumulate in the trust and be reinvested. "Where this does work particularly well is where you are looking to reinvest the money," Bembrick says. The ATO is growing increasingly concerned at the level of accumulated funds inside discretionary trusts, of which there are around 460,000 in use. It is believed half of these trusts have corporate beneficiaries. The ATO is particularly worried about the use of "unpaid present entitlements" and appears to be moving towards a position where entitlements should be treated as a loan and taxed accordingly. But Yasser El-Ansary, tax counsel at the Institute of Chartered Accountants, says the ATO's new stance represents a complete backflip from its previous position, which has been made clear in a number of tax rulings. "There definitely is a strong case to the say that ATO has previously been asked a specific question on this issue and the ATO has in effect, sanctioned the use of these structures." Bembrick agrees. "A change would have very big ramifications and goes against a lot of the planning and structures that people have a place." El-Ansary, who is part of the national tax liaison group that meets regularly with the ATO, is in Canberra today for a meeting on the issue with tax comissioner, Michael D'Ascenzo. El-Ansary expects robust discussion and says his organsiation remains concerned about the position of tax advisers, who could find themselves under fire from clients if the ATO does reverse its ruling. "There is potentially a significant implication for advisers," he says. "Ultimately, what we are aiming for is a solution that is workable for the ATO and taxpayers and their advisers."Read more on: Tax Strategy Trusts Tax planning
lets hope that the ATO gets some common sense and realizes that trusts are a way of protecting assets from unscrupulous litigators. Lets encourage entrepreneurship rather than destroy it, bureaucracy is the most destructive force to progress(LT)
lets hope that the ATO gets some common sense and realizes that trusts are a way of protecting assets from unscrupulous litigators. Lets encourage entrepreneurship rather than destroy it, bureaucracy is the most destructive force to progress(LT)
Saturday, June 6, 2009
Aus leading the way
Australia will help lead the world out of recession, as the local economy rebounds strongly off the back of rising consumer confidence, a survey has found. In the "first glimmer of hope" for the global economy, an Ipsos Reuters poll of 23,000 people across the globe has found that confidence is beginning to stabilise after eighteen months of decline. The upbeat analysis follows yesterday's surprise revelation that Australia has dodged a technical recession. Ipsos, a market research group, said that the resurgence of consumer confidence was strongest in the Asia Pacific region. While average global confidence remained flat, the percentage of Australians that deemed the current economic situation either 'good' or 'very good' actually jumped 6 percent, and outstripped the global average by 7 percent. "Interestingly, in the Asia Pacific region overall, including Australia, there was an increasing trend overall from 32 percent to 38 percent. This suggests that our region will lead the world out of recession and emerge relatively strongly", the Ipsos study concluded. The group said the stabilisation has been fuelled by the green shoots of improvement in US consumer confidence, alongside "significant improvements" in China and India. Meanwhile, the blame game has not shifted, with 42 percent of Australians naming the banks and financial professionals as the prime culprits in the crisis. America's former Bush administration and the current Obama administration were also blamed for the global fallout.
Surveying 23 countries, covering 75 percent of the world's gross domestic product (GDP), Ipsos found that by contrast to Australia, Europe - as well as the emerging economies of Russia and Brazil -recorded declining confidence. With Italy the only country in Europe to register a positive change – with a rise from 10 percent to 17 percent in consumer confidence. The company also found that around three quarters of Australians have cut their household spending in response to the economic downturn. This figure has not changed over the last year, indicating that the health of the economy has begun to stabilise. Australia's national accounts, published yesterday, showed that exports and household spending actually helped the economy grow by a 0.4 per cent in the first three months of the year - preventing a second consecutive quarter of negative growth that defines a recession.
Surveying 23 countries, covering 75 percent of the world's gross domestic product (GDP), Ipsos found that by contrast to Australia, Europe - as well as the emerging economies of Russia and Brazil -recorded declining confidence. With Italy the only country in Europe to register a positive change – with a rise from 10 percent to 17 percent in consumer confidence. The company also found that around three quarters of Australians have cut their household spending in response to the economic downturn. This figure has not changed over the last year, indicating that the health of the economy has begun to stabilise. Australia's national accounts, published yesterday, showed that exports and household spending actually helped the economy grow by a 0.4 per cent in the first three months of the year - preventing a second consecutive quarter of negative growth that defines a recession.
Monday, May 25, 2009
variable mortgage rates
Home buyers are flocking back into variable rate mortgages, which now account for 91 per cent of the residential lending market, their highest proportion in four months, a leading mortgage broker says. Mortgage broker Mortgage Choice reported on Tuesday that in April basic variable mortgages accounted for 48.15 per cent of all home loans approved - up nearly one per cent from March, while standard variable mortgages comprised 42.77 per cent of the market, down 1.47 per cent from March. Basic variable loans generally have fewer loan features than a standard variable loan, Mortgage Choice says.Fixed rate loans accounted for four per cent of all approvals, up one percentage point from a month earlier."Basic variable loans have been the most popular loan type for four months now, after overtaking standard variable for the first time on our records in January 2009," Mortgage Choice senior corporate affairs manager Kristy Sheppard said in a statement.Rates charged on variable home loans move in line with interest rates as set by the Reserve Bank of Australia (RBA), which has successively cut its overnight cash rate since September last year to a 49-year low."Despite interest rates being at their lowest in decades, the volatile global and domestic economic climate is having a strong influence over loan product preferences," Ms Sheppard said."Consumer conservatism with rates and fees continues to win out against loan flexibility and extra features."Line of credit loans in April, popular with property investors, posted a fall of five per cent from the previous month.
Commitments for owner-occupied housing rose 4.9 per cent in March, seasonally adjusted, to 59,793, Australian Bureau of Statistics data this month showed.Total housing finance by value rose by 6.7 per cent in March, seasonally adjusted, to $20.688 billion, the latest month in which data was available.
Commitments for owner-occupied housing rose 4.9 per cent in March, seasonally adjusted, to 59,793, Australian Bureau of Statistics data this month showed.Total housing finance by value rose by 6.7 per cent in March, seasonally adjusted, to $20.688 billion, the latest month in which data was available.
Tuesday, May 19, 2009
Federal Budget and Reserve Bank differ
Just a week after the Federal Budget, Reserve Bank of Australia (RBA) estimates suggest the numbers do not add up.By the RBA's calculations, the Budget could be out by $11 billion.
Documents obtained by 7News show the RBA has a major difference of opinion on Treasury's growth predictions. Treasury secretary Ken Henry today rejected criticism of the "optimistic" economic forecasts put forward by his department and defended its independence from government interference. Last week's Budget forecasts predicted the economy will see a recovery with above-trend Gross Domestic Product (GDP) of 4.5 per cent in 2011-12.
Treasury says the stimulus measures taken prior to the Budget will raise GDP by 2.75 per cent.
But Reserve Bank estimates, obtained under Freedom of Information by 7News say they will boost growth by roughly 1.75 per cent. That is a difference of 1 per cent of GDP, or $11 billion.
When the anomaly was pointed out to the government today the response was that Reserve Bank estimates were three months old and that part of the Budget had been clumsily worded.
Shadow Treasurer Joe Hockey is concerned there may be other errors in the Budget. "The Budget is barely one week old and now it has this multi-billion dollar problem," he said. "These Budget papers need to be corrected immediately." The section referring to measures taken prior to the budget should have included measures taken in the Budget. It would have added another 0.75 percent of GDP, bringing the document closer to the Reserve Bank's prediction. Giving his annual post-Budget address to business leaders in Sydney today, Dr Henry took at swipe at those who "seemed to think we must have simply plucked the numbers out of the air".Dr Henry said Treasury's method for calculating GDP used several factors, including the unemployment rate, the population aged over 15 and productivity. "We can obtain an index of real growth domestic product simply by multiplying together those five things and that's actually what we did," he said. "Taken together, those factors produce a GDP growth rate of 4.5 per cent." Reserve Bank Governor Glenn Stevens gave his assessment of Treasury's outlook in hardly a ringing endorsement. "I don't think it's, crazily optimistic," he said. Prime Minister Kevin Rudd says Australia's debt will peak around $300 billion.
Mr Rudd had to be asked the question several times on television before he would name a figure.
He said the peak projected public debt would be 13.8 per cent of GDP in 2013-14. "We're aiming to a gross figure of 13.8, which comes out at about 300 (billion)," Mr Rudd said.
Read the Freedom of Information documents here (WARNING: Large PDF file)
Documents obtained by 7News show the RBA has a major difference of opinion on Treasury's growth predictions. Treasury secretary Ken Henry today rejected criticism of the "optimistic" economic forecasts put forward by his department and defended its independence from government interference. Last week's Budget forecasts predicted the economy will see a recovery with above-trend Gross Domestic Product (GDP) of 4.5 per cent in 2011-12.
Treasury says the stimulus measures taken prior to the Budget will raise GDP by 2.75 per cent.
But Reserve Bank estimates, obtained under Freedom of Information by 7News say they will boost growth by roughly 1.75 per cent. That is a difference of 1 per cent of GDP, or $11 billion.
When the anomaly was pointed out to the government today the response was that Reserve Bank estimates were three months old and that part of the Budget had been clumsily worded.
Shadow Treasurer Joe Hockey is concerned there may be other errors in the Budget. "The Budget is barely one week old and now it has this multi-billion dollar problem," he said. "These Budget papers need to be corrected immediately." The section referring to measures taken prior to the budget should have included measures taken in the Budget. It would have added another 0.75 percent of GDP, bringing the document closer to the Reserve Bank's prediction. Giving his annual post-Budget address to business leaders in Sydney today, Dr Henry took at swipe at those who "seemed to think we must have simply plucked the numbers out of the air".Dr Henry said Treasury's method for calculating GDP used several factors, including the unemployment rate, the population aged over 15 and productivity. "We can obtain an index of real growth domestic product simply by multiplying together those five things and that's actually what we did," he said. "Taken together, those factors produce a GDP growth rate of 4.5 per cent." Reserve Bank Governor Glenn Stevens gave his assessment of Treasury's outlook in hardly a ringing endorsement. "I don't think it's, crazily optimistic," he said. Prime Minister Kevin Rudd says Australia's debt will peak around $300 billion.
Mr Rudd had to be asked the question several times on television before he would name a figure.
He said the peak projected public debt would be 13.8 per cent of GDP in 2013-14. "We're aiming to a gross figure of 13.8, which comes out at about 300 (billion)," Mr Rudd said.
Read the Freedom of Information documents here (WARNING: Large PDF file)
Wednesday, May 13, 2009
capping salary sacrificing on super
The federal government has cut by half the amount some Australians can save in superannuation through salary sacrificing and has reduced its contribution to lower income earners who choose to save more."The government will reduce the generosity of some superannuation concessions for those with greater private wealth," Treasurer Wayne Swan said on Tuesday as he handed down the federal government's 2009/10 budget.
"The cap on concessional super contributions will be lowered and the matching rate of the superannuation co-contribution will be reduced temporarily."The cap on concessional super contributions for people aged under 50 will be reduced to $25,000 from $50,000, the budget documents said.The cap for those aged 50 and over, which was an interim measure to make up for the fact that they hadn't participated in the super scheme for as long, would be reduced to $50,000 from $100,000 up to the 2011/12financial year.The concessional contributions allows employees to salary sacrifice, avoiding the normal income tax rates of 30 per cent or more, and put the money into their super scheme, which is taxed at 15 per cent.The government will also reduce the super co-contribution matching rate to 100 per cent from 150 per cent, for lower income earners for the next two financial years. The rate will rise to 125 per cent for 2012/13 and the year after that.Up to this financial year, the government had contributed up to $1,500 to those who put an extra $1,000 after tax into their super scheme. The maximum contribution for the next two years would now be $1,000.
"The cap on concessional super contributions will be lowered and the matching rate of the superannuation co-contribution will be reduced temporarily."The cap on concessional super contributions for people aged under 50 will be reduced to $25,000 from $50,000, the budget documents said.The cap for those aged 50 and over, which was an interim measure to make up for the fact that they hadn't participated in the super scheme for as long, would be reduced to $50,000 from $100,000 up to the 2011/12financial year.The concessional contributions allows employees to salary sacrifice, avoiding the normal income tax rates of 30 per cent or more, and put the money into their super scheme, which is taxed at 15 per cent.The government will also reduce the super co-contribution matching rate to 100 per cent from 150 per cent, for lower income earners for the next two financial years. The rate will rise to 125 per cent for 2012/13 and the year after that.Up to this financial year, the government had contributed up to $1,500 to those who put an extra $1,000 after tax into their super scheme. The maximum contribution for the next two years would now be $1,000.
Budget 2009
Some Australians bore the brunt of those hard choices, while others are set to benefit from the Treasurer's recession-busting budget plan.
Here is a breakdown of this year's winners and losers:
WINNERS
Pensioners Single pension payments boosted by $32.49 per week, $10.14 per week extra for couples on the full rate.
Carers Mr Swan plans to introduce one-off bonuses for Australia's 500,000 carers - $600 per year for carer payment recipients and an extra $600 per year for carer allowance recipients.
Parents18 weeks of Paid Parental Leave from 2011 – paying minimum wage of $540 a week - worth $731 million over four years.
Homebuyers First Home Owners Fund extended by a further six months from June 30.
People who enter into contracts on or before September 30 will still be eligible for a grant of $14,000 for an existing dwelling and $21,000 for a new home.
The more generous scheme will then been phased down, and end after December 31. Read more
CompaniesSmall businesses will be able to claim a 50 percent tax deduction on new capital worth $1,000 or more, such as vehicles, purchased between December 13, 2008 and December 31 this year. Read more
Larger companies – particularly industrial and transport groups – are set to gain from the $22 billion infrastructure plan.
Low-income earnersThe average person will be better off from July 1 - when the tax savings from last financial year will range from nearly $3 for those with annual salaries of $30,000 up to about $10.50 for those on $100,000 a year.
Middle-income earnersThey will receive the tax cut but some will be hit by the rise in the Medicare Levy, the phase out of Private Health Insurance rebate and changes to superannuation contributions.
InvestorsThe vast infrastructure plan will lift activity from listed industrial companies and promote growth. However, some investors will be hit by the changes to concessional superannuation contributions.
Students$1.5bn for the Jobs and Training Compact, providing education and services to support young people, retrenched workers and local communities.
LOSERS
Baby boomersThe decision to raise the pension age to 67 will come as a big blow for baby boomers born after 1952.
The qualifying age will increase in six monthly increments between 2017 and 2023 as the government attempts to lighten the burden of the "demographic time bomb" of a growing pension bill and a shrinking workforce.
The rich High-income earners will suffer a rollback of tax breaks on superannuation. Read more
From 1 July 2010, the private health insurance rebate will be reduced on a means tested basis by 30 percent for those earning more than $75,000.
The Medicare Levy will be pushed up from 1 percent to 1.5 percent for singles earning above $90,000/couples $180,000, single income earners above $120,000 will pay the full surcharge of 1.5 percent.
Middle-income earnersWhile generally winners, middle income earners will also be hit by cap on salary sacrificing for superannuation. Read more
From 1 July 2010, the private health insurance rebate will be reduced on a means tested basis by 30 percent for those earning more than $75,000.
Here is a breakdown of this year's winners and losers:
WINNERS
Pensioners Single pension payments boosted by $32.49 per week, $10.14 per week extra for couples on the full rate.
Carers Mr Swan plans to introduce one-off bonuses for Australia's 500,000 carers - $600 per year for carer payment recipients and an extra $600 per year for carer allowance recipients.
Parents18 weeks of Paid Parental Leave from 2011 – paying minimum wage of $540 a week - worth $731 million over four years.
Homebuyers First Home Owners Fund extended by a further six months from June 30.
People who enter into contracts on or before September 30 will still be eligible for a grant of $14,000 for an existing dwelling and $21,000 for a new home.
The more generous scheme will then been phased down, and end after December 31. Read more
CompaniesSmall businesses will be able to claim a 50 percent tax deduction on new capital worth $1,000 or more, such as vehicles, purchased between December 13, 2008 and December 31 this year. Read more
Larger companies – particularly industrial and transport groups – are set to gain from the $22 billion infrastructure plan.
Low-income earnersThe average person will be better off from July 1 - when the tax savings from last financial year will range from nearly $3 for those with annual salaries of $30,000 up to about $10.50 for those on $100,000 a year.
Middle-income earnersThey will receive the tax cut but some will be hit by the rise in the Medicare Levy, the phase out of Private Health Insurance rebate and changes to superannuation contributions.
InvestorsThe vast infrastructure plan will lift activity from listed industrial companies and promote growth. However, some investors will be hit by the changes to concessional superannuation contributions.
Students$1.5bn for the Jobs and Training Compact, providing education and services to support young people, retrenched workers and local communities.
LOSERS
Baby boomersThe decision to raise the pension age to 67 will come as a big blow for baby boomers born after 1952.
The qualifying age will increase in six monthly increments between 2017 and 2023 as the government attempts to lighten the burden of the "demographic time bomb" of a growing pension bill and a shrinking workforce.
The rich High-income earners will suffer a rollback of tax breaks on superannuation. Read more
From 1 July 2010, the private health insurance rebate will be reduced on a means tested basis by 30 percent for those earning more than $75,000.
The Medicare Levy will be pushed up from 1 percent to 1.5 percent for singles earning above $90,000/couples $180,000, single income earners above $120,000 will pay the full surcharge of 1.5 percent.
Middle-income earnersWhile generally winners, middle income earners will also be hit by cap on salary sacrificing for superannuation. Read more
From 1 July 2010, the private health insurance rebate will be reduced on a means tested basis by 30 percent for those earning more than $75,000.
Thursday, April 2, 2009
Difficult times ahead
AUSTRALIA will encounter an increasingly difficult time over the coming months as the economy battles against the backwash of the global financial crisis, the head of the Commonwealth Bank said yesterday.But Ralph Norris stopped short of agreeing with Gail Kelly, his counterpart at Westpac, that the country would fall into recession this year as a consequence of the worldwide drop-off in economic growth.Speaking a day after Mrs Kelly said a local recession was now unavoidable, Mr Norris, who heads the country's second largest bank by market capitalisation, said his organisation, remained cautious about the short- to medium-term outlook for growth.With more than 70 per cent of the developed world now in recession, the Commonwealth Bank chief executive told a Credit Suisse-organised investment conference in Hong Kong that the current state of play represented the "worst economic performance in our lifetimes".World growth was now forecast to go backwards this year and this would have a direct impact on the Australian economy, which was already slowing and experiencing rising unemployment, Mr Norris said. The effects would be felt across a broad range of the bank's customers, which made the domestic outlook "increasingly difficult".However, he joined both Mrs Kelly and ANZ Bank's chief executive, Mike Smith, who spoke at the same conference this week, in praising the strong policy responses by the Government and the Reserve Bank in helping to offset the worst of the global downturn.
The Federal Government's twin stimulus packages totalling $52 billion and the deep cuts in interest rates by the Reserve Bank would help to "soften the impact" of the slowing economy.
Mr Norris also highlighted the strength of the Australian banking sector which, unlike the shattered financial services industries in the US and Britain, was now among the strongest in the world. With four of the only 12 globally "AA" rated banks, the Commonwealth, Westpac, ANZ and National Australia Bank were also now listed among the world's top 20 safest such institutions, he said.Each was profitable, well capitalised and, just as importantly, continuing to lend, as witnessed by the finance flowing to the housing market. That was being helped by three main drivers: a chronic undersupply of homes, the boost provided by first-time home buyers, who have been bolstered by the Government's direct grants, and the 400 basis points cut in interest rates.As for the state of consumer credit - a key indicator of both the economy's immediate health and the quality of the bank's lending book - Mr Norris said its housing and personal loan portfolios remained sound.While conceding that there had been a small rise in the arrears rate of those home-owners who were 30 days or more behind in their repayments, this, he argued, was off an historically low base.As to a recent jump in credit card arrears, that could be put down to a one-off change in the minimum monthly amount that borrowers now needed to meet
The Federal Government's twin stimulus packages totalling $52 billion and the deep cuts in interest rates by the Reserve Bank would help to "soften the impact" of the slowing economy.
Mr Norris also highlighted the strength of the Australian banking sector which, unlike the shattered financial services industries in the US and Britain, was now among the strongest in the world. With four of the only 12 globally "AA" rated banks, the Commonwealth, Westpac, ANZ and National Australia Bank were also now listed among the world's top 20 safest such institutions, he said.Each was profitable, well capitalised and, just as importantly, continuing to lend, as witnessed by the finance flowing to the housing market. That was being helped by three main drivers: a chronic undersupply of homes, the boost provided by first-time home buyers, who have been bolstered by the Government's direct grants, and the 400 basis points cut in interest rates.As for the state of consumer credit - a key indicator of both the economy's immediate health and the quality of the bank's lending book - Mr Norris said its housing and personal loan portfolios remained sound.While conceding that there had been a small rise in the arrears rate of those home-owners who were 30 days or more behind in their repayments, this, he argued, was off an historically low base.As to a recent jump in credit card arrears, that could be put down to a one-off change in the minimum monthly amount that borrowers now needed to meet
Thursday, March 12, 2009
Housing shortage to increase
The federal opposition says housing shortages in the near future are likely to be far higher than predicted in a new report.In a report commissioned by the federal government, the National Housing Supply Council has confirmed there is plenty of land available for development on the fringes of Australia's major cities.But it says without significant government and industry intervention the housing crisis could increase tenfold by 2028.In 2008, the housing shortfall was around 85,000 dwellings.In three years, the number was expected to reach 203,000 and hit 431,000 by 2028.The forecasts are based on recent housing development and government funding trends.But if these trends slow, the predicted shortfall could top 800,000, the report warned.The shortfalls could also be higher than the report predicts because it fails to include the impact of the global financial crisis.Opposition housing spokesman Scott Morrison said the projections are "overly optimistic"."Banks and housing groups have been forecasting an undersupply of 200,000 dwellings in the next financial year and I think that's pretty accurate," he told AAP.Mr Morrison said exorbitant state and local government charges associated with new housing development must be cut and more land released.The government should also be doing more to help the private sector rather than public housing, he said.But National Housing Supply Council chairman Owen Donald said the majority of housing demand was coming from the bottom end of the market and people from lower socioeconomic backgrounds were going to be hardest hit as rents and housing prices lift.He said there had been a significant boost to housing investment, particularly in social housing, by the Rudd government but much more was needed."The absence of a very significant industry response and a very significant response from government will actually lead to a deterioration of housing supply ... and ... affordability," Dr Donald told reporters.Housing Minister Tanya Plibersek said the bleak outlook should not be seen as a sign that the Australian dream of home ownership was no longer achievable."No, this report shows that with government action and with industry responses we can begin to close the gap between housing demand and housing supply," Ms Plibersek told reporters.Ms Plibersek said it should also send a clear message to industry."The incentive is that they want to build the sort of houses that people want to buy, that's their bread and butter."
Saturday, March 7, 2009
housing sustained by first home buyers
It's only first-home buyers entering the property market that is keeping the sector afloat, the Property Council of NSW says.The housing market in Sydney's west is enjoying a mini-property boom, the latest figures from the NSW Office of State Revenue shows.The number of sold sales across all western Sydney suburbs for the three months to February soared by up to 20 per cent on last year, News Limited reported.Sales in suburbs such as Blacktown and Penrith sales are up 20 per cent. In Liverpool, Campbelltown and Fairfield they are up 12 per cent - to a six-year high.The number of contracts exchanged in the three months to February was up more than 1,100 over the same period last year.But it is only the first-home buyers that are producing the figures, the NSW Property Council says.Its executive director, Ken Morrison, says the figures point to the need for extending incentives to get buyers into the market."The rest of the market is very, very flat and falling and we saw that this week with new data out from the ABS (Australian Bureau of Statistics) on development approvals figures."So the rest of the market is extremely flat and falling."The only thing that is holding it up is this first home buyer incentive."NSW Treasurer Eric Roozendaal also attributed the sales increase to first time home buyers entering the market.He said that half the homes sold in the areas had been bought by first-home buyers, adding that more than 8,500 contracts had been exchanged in the last three months."We're seeing people take advantage of the NSW government stamp duty concessions and the first home-owners grant to move from rental accommodation into their first home," he told ABC Radio on Saturday.
well, lets see if the councils can see their way through being power wielding dictators and actually allow small developers to build and help the economy to resurrect instead of obstructing the way as they have been to date
Monday, March 2, 2009
Rate cut or not to rate cut, that is the question
The Reserve Bank's recent aggressive policy of interest rate cuts could be coming to an end this week, a prominent economic expert says. The RBA gave strong indications two weeks ago that it would be backing away from a series of drastic rate cuts that have seen four percentage points shaved off the cash rate in the past six months.While some are predicting the central bank will ease rates by as much as 1 percentage point tomorrow, others, including Macquarie Bank's interest rate strategist, Rory Robertson, think it could leave rates on hold. "I think this week's policy decision probably boils down to a choice between a 50-basis-point cut or a policy pause," he told AM. "The Reserve Bank's cut by four percentage points in the past five or six months; that's the sharpest easing in monetary policy in their history and mortgage rates in Australia now, in the 5 to 6 per cent range, are as low as they've been in 40 years. "So I think the Reserve Bank has flagged pretty clearly its inclination to think about pausing. "Whether or not it pauses tomorrow, I'm not sure. I think there is a real possibility the Reserve Bank will pause after cutting at five consecutive meetings."
Mr Robertson says he thinks Australia is heading into a recession, but he argues there may be justification for keeping some "fuel in the tank" for later interest rate cuts to stimulate the economy. He says with the second stimulus package injecting money into the bank accounts of millions of Australians from April, the Reserve Bank could afford to see whether the economy recovers without the need for further rate cuts. "The Australian economy to this point hasn't shrunk at a dramatic pace," he said. "We've cut as hard as any other central banks have cut and our policy rate is actually connected to something that matters and that's mortgage rates at least," he said. "So I think there is room for the Reserve Bank to take into account of the fact that interest rates have come down across the economy, there have been two fiscal packages, and the Australian dollar has come down a lot. "I'm not convinced that faster is better in terms of rate cuts from here. I think that's the story the Reserve Bank is in the process of telling."Don't expect a rate cut this month.
Mr Robertson says he thinks Australia is heading into a recession, but he argues there may be justification for keeping some "fuel in the tank" for later interest rate cuts to stimulate the economy. He says with the second stimulus package injecting money into the bank accounts of millions of Australians from April, the Reserve Bank could afford to see whether the economy recovers without the need for further rate cuts. "The Australian economy to this point hasn't shrunk at a dramatic pace," he said. "We've cut as hard as any other central banks have cut and our policy rate is actually connected to something that matters and that's mortgage rates at least," he said. "So I think there is room for the Reserve Bank to take into account of the fact that interest rates have come down across the economy, there have been two fiscal packages, and the Australian dollar has come down a lot. "I'm not convinced that faster is better in terms of rate cuts from here. I think that's the story the Reserve Bank is in the process of telling."Don't expect a rate cut this month.
Tuesday, February 17, 2009
Economists predict modest rate cuts
Economists doubt the Reserve Bank of Australia (RBA) has finished cutting the official cash rate just yet, but borrowers shouldn't rely on any more aggressive reductions.The RBA's minutes from its February board meeting - where it cut the cash rate by another 100 basis points - indicate the central bank remains concerned about the short-term prospects for the economy.It says its 400 basis points worth of rate cuts since September and the government's stimulus package will give a "significant" boost to the economy, but will take time to be effective."Given the speed at which the global contraction had occurred, short-term prospects were thus still for weakness in demand and output," the minutes said."Nonetheless, the substantial measures taken would help to cushion the economy from the contractionary forces coming from abroad and, over time, work to establish conditions conducive to stronger demand later in the year."Macquarie Securities economist Benjamin Dinte said the RBA would be hesitant to continue lowering rates at an aggressive pace."(But) we do believe that further softness in global economic conditions and domestic confidence is enough to justify another reduction in rates in March," he said.Federal Treasurer Wayne Swan conceded the government's latest $42 billion stimulus package, which passed the parliament last week, will take time to work through the economy."That's what the government has said about the package and why we moved so swiftly last October and again in recent weeks," Mr Swan told reporters.Economists are looking for the government's $10.4 billion stimulus package announced in October to help lift Wednesday's December quarter retail sales by 1.0 per cent after just 0.1 per cent growth in the previous three months.New opposition treasury spokesman Joe Hockey, unsurprisingly, doesn't believe the government has got the response to the global recession right."It's time to be prudent, it's time to be careful, it's not a time to panic," Mr Hockey told the Fairfax Radio Network."You have to show confidence, you have to believe things are going to get better, you have to have a plan to get things better. I don't think the government is doing any of that."But Mr Swan said it was the coalition that didn't understand the depth of the global recession and the type of response required."You've seen underscored today from the Reserve Bank minutes the need for a very substantial fiscal stimulus for our economy," he said.Still, despite the expected boost to consumer spending, the RBA expects the December quarter gross domestic product will be "broadly flat"."... a relatively good result in comparison with other developed economies," the minutes said.JP Morgan Australia chief economist Stephen Walters said it was the performance of those other economies that was likely to determine the need for further interest rate cuts.He said economic conditions among Australia's major trading partners had shown an "alarming deterioration" particularly in Japan - Australia's largest single destination for exports - where output had collapsed."Already, on current forecasts ... 62 per cent of Australia's export partners will be in recession in 2009, including eight of the top 10 destinations," he said."A pause (in rate cuts) next month is possible if economic conditions improve, but so too is a cut of more than 50 basis points, depending on how the data prints, particularly offshore."Financial markets have fully priced in a 50 basis points cut by the RBA next month.
Thursday, February 12, 2009
$42b stimulus package for Australia
The Rudd Government will pour an extra $42 billion into the economy over the next four years in its latest bid to defy the economic gravity that is dragging down economies around the world.
The extra spending was contained in a package of measures announced today by Prime Minister Kevin Rudd and Treasurer Wayne Swan, as the Government battles to adjust its policies and forecasts fast enough to cope with the rapidly deteriorating global economy. It brings the total stimulus efforts by the Government to $88.7 billion.The Government also halved its 2008/09 growth forecast for the economy to 1% from a November forecast of 2%. Today's spending package includes $28.8 billion for infrastructure, schools and housing, as well as $12.7 billion cash payments for low and mid-income earners, to be paid in March, 2009.''The Government will move heaven and earth to reduce the impact of the global recession on Australia,'' Mr Rudd said .
Opposition Leader Malcolm Turnbull, speaking on Sky News, pledged to work with the Government on the stimulus budget but said the Opposition would go through the spending proposals ''line by line'' in the coming days.The "substantial" package ''will be felt in the short term,'' said ANZ economist Katie Dean. "It should provide a significant boost to growth in the March and June quarters" and "may delay a technical recession''.Nonetheless, the scale of the global slowdown will likely overpower the Government's best efforts to prevent the recession from taking hold here, she said.''A lot of the shock has already flowed into the economy and it will be very difficult to for Government to avert a very sharp downturn in business investment.''
Today's additional outlays are expected to support about 90,000 jobs over the next two years, the Government said.Calling the global financial crisis ''a crisis not of Australia's making,'' Mr Rudd flagged an "exit strategy" to running public debts and said economic growth should eventually return the budget to surplus ''over time''.The Government would keep future discretionary spending to 2% in coming years in an effort to ease debt.However, he warned, "no one knows how long and deep this part of the economic cycle will be''.The announcement comes just hours before the Reserve Bank is expected to do its bit to help spark a revival in confidence among consumers and businesses alike. The bank's board is meeting today and markets expect it will cut its key interest rate by at least 100 basis points, or 1 full percentage point, to 3.25% when it reveals its decision at 2.30pm.
Red ink
The additional spending - coming on top of other measures including October's $10.4 billion stimulus plan - means the Federal budget faces years of deficits. Canberra has not clocked up a budget deficit since 1997-98.Mr Rudd said the Government now predicts its deficit for the year to June 30 will total $22.5 billion alone. That shortfall compares with projections of a surplus of $5.4 billion as recently as November and a massive $21.7 billion surplus when it announced its budget last May.The deficit will expand further to $30 billion in the following two years.
Feb 5, Mr Rudd said the global financial crisis would punch a $115 billion hole in the Government's expected revenues between this year and 2011-12, with taxes from businesses set to shrink by $76 billion alone as profits wither.That revenue drop prompted ANZ economist Katie Dean to forecast this year's Federal deficit would come in at between $10-15 billion (about 1% of gross domestic product), rising to as much as $35 billion next fiscal year.''The Government is doing what they can, given their finances, but the pull from not only dysfunctional credit markets and but deepest global recession since the 1940s, is too much,'' ANZ's Dean said.
Other countries are preparing big spending programs in a bid to reverse a slowdown that is now dogging virtually every economy.The new US administration led by President Barack Obama is seeking Congressional support for a stimulus package of at least $US819 billion ($1.3 trillion), or equivalent to about 5.8% of the country's GDP.
Growth, jobless
Asia, home to six of Australia's 10 largest trading partners, has seen a sharp slowdown in growth in the past six months, triggering big falls in prices of many of Australia's main exports with more to come.''The global economic outlook has drastically deteriorated since Mid-Year Economic and Fiscal Outlook 2008-09," today's report by the Government stated.In the wake of the intensification of the financial crisis in September 2008, confidence has fallen and the inter-connected impacts of declining orders, production and employment have combined to produce the most extraordinarily synchronised slump in global economic activity in decades."
"The December quarter 2008 is likely to have recorded the weakest quarterly global GDP performance since World War II."Apart from halving this year's GDP growth rate for Australia, the Government today predicted growth would slow further to 0.75% next fiscal year.Those tallies compare with respective forecasts of 2% and 2.25% made by the Government in November.More people are now expected to lose their jobs as the economic downturn savages business, with the unemployment rate now forecast to rise to 5.5% in 2008-09 and 7% in 2009-10.In November, the Government had forecast respective jobless rates of 5% and 5.75%.
The unemployment rate was 4.5% in December.
Bonus payments
The $12.7 billion cash payments will include one-off bonus payments of $950 each for low- and middle-income households and individuals through five bonuses to be paid in the next few weeks through either the Australian Tax Office or Centrelink.It means 8.7 million workers earning $100,000 or less will receive a lump sum payment of $950 each from April.About 1.5 million single-income families will also receive the payment, provided they receive Family Tax Benefit Part B, in the fortnight beginning March 11.Farmers will also receive a $950 bonus payment, as will families eligible for FTB Part A who have a child at school. They will receive an immediate payment of $950 this week.The Government will also provide a one-off $950 training and learning bonus for eligible students and people outside of the workforce returning to study to help with the costs of education and training.The package, which is virtually a mini-budget in all but name, is the second major economic stimulus package announced by the Government since the $10.4 billion economic security strategy released in October.
$88.7 billion and counting
It takes the total amount spent by the Government on stimulating the economy since september to $88.7 billion, including bank deposit guarantees, the car industry package, as well as nvestment in residential-backed mortgage securities, local government, infrastructure projects, and on the states through the Council of Australian Governments (COAG).The statement said that while the nation was in a better position than most other countries to weather the global recession, Australia could no longer ''resist the pull of global economic forces''.The infrastructure spending in this package involves a major roll-out of $890 million to fix accident black spots, install rail boom gates, repair regional roads and build community infrastructure such as libraries, town halls, community centres and sport centres.Schools around Australia will benefit from $14.7 billion over three years to construct school halls, libraries, indoor sports facilities and performing arts centres.The package includes funds of between $250,000 and $3 million for primary schools for capital expenditure projects and $1 billion for the construction of science and language laboratories in secondary schools, while all schools will be able to apply for extra funding of between $50,000 and $200,000 for minor maintenance and infrastructure.
Housing, small business
Public and community housing will receive a $6 billion boost to allow for the construction of about 20,000 new homes to be completed by December 2010.Small business also gets $2.7 billion in extra tax breaks aimed at supporting jobs.This means, for example, a business which buys a $2000 computer by the end of June this year will receive a $600 additional deduction while a business which buys a $60,000 backhoe before the end of June will receive an extra $18,000 deduction.The Government will also provide free ceiling insulation to 2.7 million homes to improve energy efficiency by increasing the solar hot water rebate from $1000 to $1600 from Tuesday and the low emissions plan for renters rebate will double to $1000.
The extra spending was contained in a package of measures announced today by Prime Minister Kevin Rudd and Treasurer Wayne Swan, as the Government battles to adjust its policies and forecasts fast enough to cope with the rapidly deteriorating global economy. It brings the total stimulus efforts by the Government to $88.7 billion.The Government also halved its 2008/09 growth forecast for the economy to 1% from a November forecast of 2%. Today's spending package includes $28.8 billion for infrastructure, schools and housing, as well as $12.7 billion cash payments for low and mid-income earners, to be paid in March, 2009.''The Government will move heaven and earth to reduce the impact of the global recession on Australia,'' Mr Rudd said .
Opposition Leader Malcolm Turnbull, speaking on Sky News, pledged to work with the Government on the stimulus budget but said the Opposition would go through the spending proposals ''line by line'' in the coming days.The "substantial" package ''will be felt in the short term,'' said ANZ economist Katie Dean. "It should provide a significant boost to growth in the March and June quarters" and "may delay a technical recession''.Nonetheless, the scale of the global slowdown will likely overpower the Government's best efforts to prevent the recession from taking hold here, she said.''A lot of the shock has already flowed into the economy and it will be very difficult to for Government to avert a very sharp downturn in business investment.''
Today's additional outlays are expected to support about 90,000 jobs over the next two years, the Government said.Calling the global financial crisis ''a crisis not of Australia's making,'' Mr Rudd flagged an "exit strategy" to running public debts and said economic growth should eventually return the budget to surplus ''over time''.The Government would keep future discretionary spending to 2% in coming years in an effort to ease debt.However, he warned, "no one knows how long and deep this part of the economic cycle will be''.The announcement comes just hours before the Reserve Bank is expected to do its bit to help spark a revival in confidence among consumers and businesses alike. The bank's board is meeting today and markets expect it will cut its key interest rate by at least 100 basis points, or 1 full percentage point, to 3.25% when it reveals its decision at 2.30pm.
Red ink
The additional spending - coming on top of other measures including October's $10.4 billion stimulus plan - means the Federal budget faces years of deficits. Canberra has not clocked up a budget deficit since 1997-98.Mr Rudd said the Government now predicts its deficit for the year to June 30 will total $22.5 billion alone. That shortfall compares with projections of a surplus of $5.4 billion as recently as November and a massive $21.7 billion surplus when it announced its budget last May.The deficit will expand further to $30 billion in the following two years.
Feb 5, Mr Rudd said the global financial crisis would punch a $115 billion hole in the Government's expected revenues between this year and 2011-12, with taxes from businesses set to shrink by $76 billion alone as profits wither.That revenue drop prompted ANZ economist Katie Dean to forecast this year's Federal deficit would come in at between $10-15 billion (about 1% of gross domestic product), rising to as much as $35 billion next fiscal year.''The Government is doing what they can, given their finances, but the pull from not only dysfunctional credit markets and but deepest global recession since the 1940s, is too much,'' ANZ's Dean said.
Other countries are preparing big spending programs in a bid to reverse a slowdown that is now dogging virtually every economy.The new US administration led by President Barack Obama is seeking Congressional support for a stimulus package of at least $US819 billion ($1.3 trillion), or equivalent to about 5.8% of the country's GDP.
Growth, jobless
Asia, home to six of Australia's 10 largest trading partners, has seen a sharp slowdown in growth in the past six months, triggering big falls in prices of many of Australia's main exports with more to come.''The global economic outlook has drastically deteriorated since Mid-Year Economic and Fiscal Outlook 2008-09," today's report by the Government stated.In the wake of the intensification of the financial crisis in September 2008, confidence has fallen and the inter-connected impacts of declining orders, production and employment have combined to produce the most extraordinarily synchronised slump in global economic activity in decades."
"The December quarter 2008 is likely to have recorded the weakest quarterly global GDP performance since World War II."Apart from halving this year's GDP growth rate for Australia, the Government today predicted growth would slow further to 0.75% next fiscal year.Those tallies compare with respective forecasts of 2% and 2.25% made by the Government in November.More people are now expected to lose their jobs as the economic downturn savages business, with the unemployment rate now forecast to rise to 5.5% in 2008-09 and 7% in 2009-10.In November, the Government had forecast respective jobless rates of 5% and 5.75%.
The unemployment rate was 4.5% in December.
Bonus payments
The $12.7 billion cash payments will include one-off bonus payments of $950 each for low- and middle-income households and individuals through five bonuses to be paid in the next few weeks through either the Australian Tax Office or Centrelink.It means 8.7 million workers earning $100,000 or less will receive a lump sum payment of $950 each from April.About 1.5 million single-income families will also receive the payment, provided they receive Family Tax Benefit Part B, in the fortnight beginning March 11.Farmers will also receive a $950 bonus payment, as will families eligible for FTB Part A who have a child at school. They will receive an immediate payment of $950 this week.The Government will also provide a one-off $950 training and learning bonus for eligible students and people outside of the workforce returning to study to help with the costs of education and training.The package, which is virtually a mini-budget in all but name, is the second major economic stimulus package announced by the Government since the $10.4 billion economic security strategy released in October.
$88.7 billion and counting
It takes the total amount spent by the Government on stimulating the economy since september to $88.7 billion, including bank deposit guarantees, the car industry package, as well as nvestment in residential-backed mortgage securities, local government, infrastructure projects, and on the states through the Council of Australian Governments (COAG).The statement said that while the nation was in a better position than most other countries to weather the global recession, Australia could no longer ''resist the pull of global economic forces''.The infrastructure spending in this package involves a major roll-out of $890 million to fix accident black spots, install rail boom gates, repair regional roads and build community infrastructure such as libraries, town halls, community centres and sport centres.Schools around Australia will benefit from $14.7 billion over three years to construct school halls, libraries, indoor sports facilities and performing arts centres.The package includes funds of between $250,000 and $3 million for primary schools for capital expenditure projects and $1 billion for the construction of science and language laboratories in secondary schools, while all schools will be able to apply for extra funding of between $50,000 and $200,000 for minor maintenance and infrastructure.
Housing, small business
Public and community housing will receive a $6 billion boost to allow for the construction of about 20,000 new homes to be completed by December 2010.Small business also gets $2.7 billion in extra tax breaks aimed at supporting jobs.This means, for example, a business which buys a $2000 computer by the end of June this year will receive a $600 additional deduction while a business which buys a $60,000 backhoe before the end of June will receive an extra $18,000 deduction.The Government will also provide free ceiling insulation to 2.7 million homes to improve energy efficiency by increasing the solar hot water rebate from $1000 to $1600 from Tuesday and the low emissions plan for renters rebate will double to $1000.
Wednesday, January 28, 2009
Rates to be 2.5%, cost of living falls
A massive fall in petrol prices has pushed the cost of living down for the first time in two years and opened the way for interest rates to fall to as low as 2.5 percent.Petrol prices fell by more than 18 percent in the December quarter as unleaded petrol fell from around $1.50 per litre in September to close to $1.00 per litre in December, mirroring falling oil prices.According to official figures released today, the consumer price index – which tracks the cost of living in Australia – fell by 0.3 percent in the December quarter. Over the 12 months to December, the CPI rose by 3.7 percent, well below its previous reading of 5 percent.The fall in the cost of living - which is the fastest decline logged in 10 years - is expected to open the way for further rate cuts from the Reserve Bank of Australia (RBA), starting with its first meeting of the year, to be held next week.Economists expect the RBA to trim the cash rate by 75 basis points, a move that would take the cash rate to 3.5 percent.“There’s nothing of concern in these figures for the Reserve Bank that will stop it aggressively cutting interest rates next week,” Riki Polygenis, economist at ANZ Bank told ninemsn.She believes rates will fall by 75 basis points next week and will ventually fall to 2.5 percent this year.While the fall in prices and interest rates may be good news for consumers, other economic figures released today showed a sharp slowdown in economic activity.The Westpac/Melbourne Institute index of economic activity - which tracks the likely pace of economic growth in the future - contracted by 2.2 percent in November, and analysts said it showed that the odds of Australia entering a recession this year are shortening.“With the –2.2 percent growth rate for November we are now reporting the first negative reads for growth since May 2001,” said Bill Evans, Westpac’s chief economist. “In the past this has been a useful signal ofthe likelihood of Australia experiencing a recession.
28/01/2009 By Stuart Fagg, ninemsn Money
Tuesday, January 27, 2009
3 day work week
British workers could have their working week cut to three days under plans being considered by the government to help companies cope with recession.The government is understood to be considering paying firms to cut the working hours of thousands of staff instead of retrenching them in an attempt to stop unemployment soaring past two million.Now business secretary Peter Mandelson is facing calls to offer compensation for workers who have their hours cut.Unnamed ministerial sources told The Observer newspaper that a compensation scheme for workers was an option being discussed but was "not imminent"."Government sources said there were issues about whether to restrict compensation to the car industry or apply it to all firms," the newspaper said.The Department for Business is already advising employers on its website to consider cutting staff hours as a way to save money, saying it might be better than making staff redundant.Similar measures were after a series of crippling strikes by mine workers in the 1970s which had dramatic knock-on effects through the rest of the nation's economy.Former prime minister Margaret Thatcher introduced a short-time working directive in the 1980s to cover earnings lost through shorter hours.
Monday, January 19, 2009
Aus economy
Federal Treasurer Wayne Swan says he won't speculate on whether Australia will go into a recession, despite a new report saying Australia's budget is "buggered".The Access Economics report, to be released on Monday, warns Australia will go into recession this year as the economic boom unwinds.A blow out in the account deficit and a loss of 300,000 jobs is likely to be a result of the downturn, it says.The report demonstrates the difficult global conditions that Australia confronts, topped off with a shrinking economy in the US and slowing in economic growth in China, Treasurer Wayne Swan told ABC Radio on Monday.But when asked whether Australia would go into a deficit, he replied: "I certainly don't speculate about that."I mean every day will bring a new set of private sector forecasts and I don't intend to... respond to them on a daily basis."But I guess what this report does do is point to the impact of a global recession, and what it will mean for world growth."The government would respond "if necessary in a timely way", with a further stimulus package if it was needed, Mr Swan said.
More on this subject from an ABC report....
A key economic forecast says Australia will definitely fall into recession this year and has described the Federal Budget as being "buggered".The latest business outlook from Access Economics says that Australia's prosperity will unwind quickly because of the slowing Chinese economy and unemployment will be up to 7 per cent by next year.The report says global growth is slowing at a scary speed, and Australia's growth prospects are expected to follow the lead in similarly swift fashion.Chris Richardson from Access Economics says the implications for this year's Federal Budget are tough, and the Government faces some ugly policy choices."It doesn't however mean that the Government should stop doing what it's doing," Mr Richardson said.Federal Treasurer Wayne Swan told ABC Radio's AM program that budget revenues will be more seriously affected than first thought.He says the report confirms the very difficult global conditions faced by the Australian economy, but he would not speculate on a recession."Revenues will take a heavier hit than was thought at the end of last year, but we'll account for that in good time," he said"We face the prospect of the United States economy shrinking, and of course the prospect of China not growing anything like [what] was expected only a few months ago.
"There's no doubt that a slowing China will have a very substantial impact on countries in this region, and most particularly Australia."Both those events are deeply concerning for growth in this country and the impact in terms of revenue for the Budget and also the impact on employment."
Friday, January 16, 2009
A Path Less Travelled
A friend of mine was saying how much they are enjoying a book called "A Path Less Travelled" by Scott Peck and it reminded me that it was this book that I first read many, many years ago that started me on my quest for personal fulfillment. With this I would like to recommend this book to anyone who has an interest in self development and achieving the maximum achievement, wealth, abundance, freedom and everything their heart desires to read this book.
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