Today's quarterly health check of the economy from the Reserve Bank shows show quickly sentiment can change especially in periods of uncertainty when the default settling can be low expectations.
This time yesterday, economists were in "doom and gloom" mode after the ABS posted the surprise result that Australia's official jobless rate had spiked to 6.3 percent in July.
Now the RBA is painting a "less worse than expected" scenario and signalling that the July result might have been an aberration given that the jobs reading is known for its volatility.
In an unusually positive update, the RBA says Australia's jobless rate may have peaked and will stabilise before falling, according to the Reserve Bank's latest quarterly health check of the economy.
"Labour market conditions are generally better than expected a few months ago, though spare capacity remains," the statement says.
"The unemployment rate is forecast to be lower than previously anticipated.
"There has been a pickup in labour demand which has led to a noticeable rise in the employment to population ratio."
The RBA now believes the jobless rate will remain "little changed" over the next 18 months from a level that is "a bit lower than forecast" before declining in 2017.
The RBA's forecasts contradict some market economists who believe the jobless rate could still peak above 6.5 percent.
Australia's economic growth is also looking more positive with the RBA expecting it to pick up gradually to exceed three percent by 2017.
Despite the end of the mining investment boom, the RBA expects losses to be offset by strong growth in resource exports.
However, the RBA has also restated its concern that the transition from the mining boom to other non-mining parts of the economy is taking longer than expected.
"Businesses are waiting to see a sustained increase in demand before committing to major new investment projects," the statement says.
"Mining investment continues to decline as more projects reach completion but few new projects commence."
With concerns about the debt crisis in Greece abating, the RBA says the focus has shifted to how financial markets reactwhen the US Federal Reserve starts raising interest rates for the first time since 2006.
"This is expected to occur before the end of the year and is likely to be associated with an increase in global financial volatility."
The Reserve Bank believes once the Federal Reserve moves there will be an impact on the Australian dollar "which will depreciate further once the tightening commences."
On concerns about a real estate bubble in Sydney and Melbourne, the RBA noted that commercial banks had increased rates on investor lending after the Australian Prudential Regulation Authority (APRA) implemented measures to address the
Friday, August 7, 2015
Wednesday, August 5, 2015
Westpac has become the last of Australia's major banks to cut ties with the controversial payday lending sector.
The decision by Westpac comes after a lengthy internal review into doing business with payday lenders who often charge exorbitant interest rates to sometimes vulnerable people.
Payday lenders Money3 and Cash Converters have been told by Westpac they will need to source their funding from other finance providers.
In a statement, Westpac confirmed it was a "commercial decision to exit customers who provide payday lending products".
"We .. will no longer support new customers where we are aware that they provide 'payday' lending products.
"We are currently working with our affected customers as they source alternative banking services. We will honour existing contractual obligations as they manage this transition."
Shares in Money3 dived 7.5 percent while Cash Converter shares plunged 8.6 percent when Westpac's decision to dump payday lenders hit late yesterday.
Money3 confirmed it received notice from Westpac of the decision to end the relationship "with certain small amount consumer credit providers, including Money3".
"Westpac have committed they will honour all existing contractual agreements with Money3. The existing facility has a 12 month run off period after December 2015."
While Westpac says the decision to dump payday lenders was pragmatic, it is also protecting its reputation given the bank's policies on corporate social responsibility and increased scrutiny of the payday sector from the corporate regulator ASIC.
Payday loan providers have been criticised for targeting unemployed, disadvantaged consumers but also people in jobs who can't make ends meet.
Loans that are rolled over, or not paid back on schedule, can sometimes carry annual interest rates that can be in excess of 300 percent.
Goodshepherd Microfinance provides an alternative to payday lenders providing low or no interest loans sourced through a $130 million in capital provided by the National Australia Bank on a no interest basis.
Chief executive Adam Mooney, a former ANZ banker, welcomed Westpac's decision to dump their relationship with payday lenders.
"We hear daily stories of people who have been caught in endless cycles of debt through very expensive forms of finance. It has an impact at a human level and an economic level," Mr Mooney told the ABC.
"This cycle of debt leads to additional anxiety, resources are held back within the family from food, education and health. At an economic level, it does lead to entrenched poverty."
Mr Mooney said payday clients helped by Goodshepherd had often been caught in a cycle of exhorbitant interest rates.
"Prima facie it seems like they're reasonable rates but when you keep cycling and keep taking that 20 percent upfront establishment fee on a $2000 loan, over a year you can end up paying 350 percent as an effective cost of finance."
Money3 and Cash Converters might now need to seek finance from overseas lenders or international debt markets to fund their payday businesses.
The move by Westpac follows moves by the other major banks including the ANZ, Commonwealth and the NAB to cut all exposure to payday lenders.
Thursday, July 23, 2015
ABC Shops around the country will be phased out and closed as the national broadcaster moves to an online retail model.
Up to 300 staff employed by the ABC's commercial division through ABC Retail were briefed on the decision in a national video hookup last night.
An ABC spokesman said consultation with ABC Shop staff will take place in the coming months and there will be some redundancies from its workforce which comprises a mix of full time, part time, casual and contract staff.
The ABC currently has 50 stores around the country and 78 ABC Centres in other retail outlets as part of its bricks and mortar portfolio.
As part of the new digital strategy, the ABC will now review its lease arrangements with landlords to develop a model to focus on digital sales through ABC Shop Online and other commercial retailers such as David Jones.
The move by the ABC comes as "digital disruption" continues to rock the retail environment as consumers spend their money through subscription services, downloads and purchase goods online.
The accelerating switch to online purchases means the ABC's costs of maintaining its current retail network has become unviable and that it is no longer possible to sustain a its network of stores.
The ABC's managing director Mark Scott this morning began conducting a series of media interviews and briefings with ABC staff to minimise the potential fallout.
The director of ABC Commercial Robert Patterson acknowledged the importance of ABC Shops in the relationship with ABC audiences over the past 35 years.
"This decision has not been taken lightly. However, this strategy will create a more cost effective, nimble and flexible approach to servicing customers," Mr Patterson said.
"The ABC is confident that this new strategy will ensure continued audience engagement. Consumers will still be able to purchase much loved content both online and in stores."
The planned closure of ABC Shop properties comes after the national broadcaster suffered $254 million in funding cuts which saw the loss of more than 400 staff.
The additional job losses will be handled through a consultative process which began with last night's briefings with ABC Shop staff according to the head of ABC Retail Regina Hoekstra.
"The welfare of our staff will be a primary focus over the next few months. We are conscious that the ABC Shop is close to the hearts of our teams and we appreciate their ongoing hard work and dedication," Ms Hoekstra said.
"ABC Shop is a trusted brand with a strong product offer, loyal customers and an engaged, committed team. ABC Retail will continue to adapt to an ever-changing retail climate in order to provide a sustainable retailing experience for customers."
The decision to move away from bricks and mortar comes as the ABC remains embroiled in controversy after the Q&A program allowed convicted criminal, Zaky Mallah, into the live studio audience last month and question a Government frontbencher.
The ABC has admitted that was an "error of judgement" and the show's executive producer Peter McEvoy has been issued a formal warning.
An ABC spokesman said any forecast losses through the ABC Shop network would not be covered by taxpayer funds.
Monday, June 29, 2015
An unprecedented alliance of business, union, environmental, investor and welfare groups has been formed to forge what it sees as urgent common ground on climate policy.
The highly unusual coalition - to be branded the Australian Climate Roundtable - comes as developed nations gear up for the Paris Climate Conference in December where leaders will be under pressure to update their strategies for dealing with climate change.
While Australia’s main political parties support the international goal of limiting climate change to less than two degrees above pre-industrial levels, the Roundtable warns the objective will require “deep global reductions”.
The high profile members cover some influential employer and industry lobby groups such as the Australian Industry Group, the Business Council of Australia, the Australian Aluminium Council, the Energy Supply Association and the Investor Group on Climate Change.
They will be joined by groups at opposite end of the political and economic spectrum - the Australian Conservation Foundation (ACF), WWF Australia, the Australian Council of Social Service (ACOSS), the Australian Council of Trade Unions (ACTU) and the Climate Institute.
In a statement, the Roundtable warned that emissions reductions on the necessary scale will require “substantial change “and “present “significant challenges” in Australia and other developed nations.
“We believe Australia should play its fair part in global efforts to avoid the serious economic, social and environmental impacts that unconstrained climate change would have on Australia,” the statement said.
In a warning to the federal government the group said “delayed, unpredictable and piecemeal action will increase the costs and challenges of achieving the goals and maximising the opportunities.
“We also know that policies won’t work if they don’t last and stay on investors’ radars. The foundations of climate policy need broad and durable support, and we all have a role in building it.”
Outlining its goals, the group said the “ideal” climate policy taken to the Paris conference should:
• be capable of achieving deep reductions in Australia’s net emissions
• provide confidence that targeted emissions reductions actually occur
• be based on the full range of climate risks;
• be well designed, stable and internationally linked
• operate at least cost to the domestic economy
• remain efficient as circumstances change and Australia’s emissions reduction goals evolve
Highlighting the social risks of climate policy and climate change, the Roundtable says climate policy must also:
• protect the most vulnerable individuals;
• avoid disproportionate impacts low income households
• assist communities that are vulnerable to economic shocks or physical risks as a result of climate change or climate policy.
The united agreement from often distant parties on climate policy goals is significant, according to Business Council of Australia chief executive Jennifer Westacott.
“There is now overwhelming common ground on the need for a more certain and meaningful approach to emissions reduction,” Ms Westacott said.
Ai Group chief executive Innes Willox said the principles outlined by the Roundtable will help end the “frustration and disruption” to even changing climate policy.
“The shared recognition that we need to maintain competitiveness while reducing emissions over time is a major advance and a solid platform for future policy stability.”
ACTU president Ged Kearney welcomed the action and said “taking action on climate change, and investing and supporting the local clean energy industry, is vital if Australia is to create and capitalise on the high-skilled innovative clean tech jobs of the future.”
Australian Conservation Foundation chief executive Kelly O’Shanassy described it as “an unlikely alliance, but we’ve come together because the challenge of tackling global warming is bigger than any of our differences.”
“ Among the things we have in common is a shared goal for Australia to cut its net greenhouse pollution to zero or below.”
The creation of the Roundtable comes after years of debate over climate policy and the government’s repeal of Labor’s controversial carbon tax and emissions trading scheme.
But as preparations are made for the Paris conference, Prime Minister Tony Abbott is under pressure from within the Liberal Party to prevent Australia from signs up to bind emissions targets.
Mr Abbott has been asked by some members to “examine the evidence” on climate change before agreeing to further emissions cuts.
Environment Minister Greg Hunt recently said the government will soon announce its post 2020 target for emissions and that Australia will play “a constructive role” at the Paris conference.
Friday, June 26, 2015
Superannuation funds face a major shakeup in their corporate governance under controversial reforms announced by the federal government today.
Under draft legislation to be released, superannuation funds will be required to have an independent chairman and independent directors will need to comprise at least a third of a fund’s board.
While the government’s key target is known to be union-backed industry superannuation funds, the proposed changes will also apply to retail, corporate and public sector funds now worth $2 trillion in retirement nest eggs.
Listen to my report from this morning's edition of AM where I speak with Assistant Treasurer Josh Frydenberg
Funds will also be required to detail in their annual reports whether they have a majority of independent directors on an “if not, why not” basis under similar rules that apply to ASX-listed companies.
The government’s pursuit of industry superannuation funds in particular comes amid concerns about a lack of transparency and links between the union movement and the boards controlling the industry superannuation sector.
The draft legislation is also timely for the government as the Royal Commission into Trade Union Governance and Corruption highlights incidents of alleged misconduct and conflicts of interest between trade unions and employers.
Unveiling the proposed changes, the Assistant Treasurer Josh Frydenberg said the federal government was delivering on a commitment to improve the governance of superannuation funds.
“Not only does superannuation represent the hard-earned retirement savings of Australians, it is already the second largest asset held by Australian households,” Mr Frydenberg said.
“Given the size of the superannuation system, and its importance in funding the retirement of Australians, good governance is absolutely critical.
“Independent directors bring additional experience and expertise to boards making a valuable contribution to their decision making.”
The proposed governance shakeup has been cautiously welcomed by Industry Super Australia which represents union backed not-profit superannuation funds.
But ISA’s deputy chief executive Robbie Campo said successful industry funds were being targeted despite current scandals in the wealth management industry.
The superannuation system now comprises more than 120 percent of Australia’s gross domestic product (GDP) and is anticipated to grow to from $2 trillion to $9 trillion by 2040.
The number of Australians over 65 and seeking to access their retirement savings is expected to double by 2054-2055.
The proposed reforms will apply to all superannuation funds regulated by the Australian Prudential Regulation Authority (APRA) with the exception of self managed funds.
The government’s proposal for majority independent directors and an independent chairman mirrors the Labor government Cooper Review commissioned in 2010.
The legislation if passed allows for a three year transition period to allow funds to reconstitute their boards under the new governance rules.
Australia Post has announced major job cuts as the decline in its traditional letter delivery service continues to accelerate.
The ABC reported earlier today that 1,900 voluntary redundancies will be offered over the next three years from metropolitan centres.
The redundancies come as Australia Post confirmed losses in its mail delivery business is approaching $500 million this financial year.
Listen to my interview with Australia Post managing director Ahmed Fahour broadcast on The World Today
With the volume of ordinary mail expected to plunge by more than ten percent, Australia Post has warned it will report its first company wide financial loss in more than 30 years.
The disruption created by the Internet and other online messaging services has taken losses at Australia Post to more than $1.5 billion over the past five years.
Australia Post managing director Ahmed Fahour admits the decline in the mail delivery service is now critical.
"We have reached the tipping point that we have been warning about where, without reform, the business becomes unsustainable," Mr Fahour said this morning.
"We welcomed the federal government's decision to support reform so we can manage the mail service losses, meet the changing needs of our customers and continue to invest in growing parts of our business such as parcels and trusted services."
In announcing the voluntary redundancies, Mr Fahour confirmed there would be no change to postal deliveries five days a week.
However, earlier this year Mr Fahour flagged the possibility of a two-speed postage service for its loss making letter deliveries business so it can focus on the lucrative opportunities in freight and parcel deliveries.
Mr Fahour said there would be no forced redundancies caused by the overhaul of the letters business and the focus would be on retraining and deployment.
"While reforming our business we have made a number of commitments to protect our employees, our Post Offices and the community," Mr Fahour said.
Under the proposals, Mr Fahour said he would protest Australia Post's national network of more than four thousand post offices.
He said there would be financial support for licensed post offices and community postal agencies which make up 80 percent of the business.
Australia Post says since October 2013, more than four thousand staff have been transitioned into different roles with an emphasis on its fast growing parcels delivery business.