Finance

In 2008, one of the biggest financial disasters in history took place. When investment bank Lehman Brothers collapsed, the global financial crisis announced its unwanted presence to the world. Four years later, the European debt crisis has again left the global financial system teetering on the edge of the abyss.

Make no mistake. This is the Cuban Missile Crisis of economics. Christine Lagarde, managing director of the IMF, has warned of a 1930s style Great Depression. Former prime minister Paul Keating has called it the “worst crisis of his lifetime.” Legendary speculator George Soros, in a chilling interview with Newsweek, had this to say:

“We are facing now a general retrenchment in the developed world, which threatens to put us in a decade of more stagnation, or worse. The best-case scenario is a deflationary environment. The worst-case scenario is a collapse of the financial system.”

Continue reading "What happens to us if we collide with GFC 2.0?" »

Poor old bankers. They keep telling us how tough it is for them with their funding costs expected to go up and how they will need to keep interest rates inflated.

And if the crying poor line isn’t enough the banks are quick to tell us that we are “picking on them” if we have a debate about how poorly they behave especially when the RBA changes the official interest rate.

Perhaps the “we’re doing it tough” line would carry some weight if the big banks didn’t show record profits year after year and if the banks’ CEOs weren’t getting such big pay packets year after year.

Continue reading "Time for an inquiry into this bunch of bankers" »

Amidst all the presents, food and rowdy family gatherings, Christmas has also traditionally been a time for pause and reflection.

The many modern variations of Charles Dickens’ classic cautionary tale A Christmas Carol, where a miserly old man is visited by the specter of a deceased friend who shows him the error of his ways by traveling through time to reveal the impact of his miserable actions, reveals how this story of reflection and redemption at Christmas time still rings true.

With Labor’s crisis mini-Budget (sneaked in after the Parliament rose for the year and while Australians started focusing on Christmas) revealing yet another deficit blow-out, I can’t help wondering if Julia and Wayne could do with a visit from the Ghost of Budgets Past.

Continue reading "Rubbery figures and the Ghosts of Budgets Past" »

As 2011 fast comes to an end it’s timely to reflect on the significant policy reforms that gave small businesses a helping hand during the year. Central to these reforms has been the move towards Small Business Commissioners around the country.

The year started off with the South Australian Small Business Minister, Tom Koutsantonis, launching a period of wide ranging consultation with small businesses in that State.

With South Australia’s draft small business commissioner reforms unveiled in February and explained during information briefing sessions across Adelaide and regional South Australia, there was considerable excitement amongst small business and farmers that they would finally have an independent person to turn to in the event of a dispute with a larger business.

Continue reading "Zumbo’s wrap: What 2011 meant for small business" »

This Saturday the self-described “organic” Occupy Wall Street movement will be coming to a capital city near you.

They boldly claim “we are the 99 per cent” - it’s their official catchcry - so unless you consider yourself among the uber rich and powerful, these folks are your new voice.  So they’ll be speaking for you when they wave their glib and nebulous placards declaring “people not profits” and “be the solution”.  (I am not making these up – this is the print-ready poster artwork available on their website.)

Their initial beef was apparently with the financial sector – hence the occupation of Wall Street in protest.  But their list of demands goes beyond the remit of the corporate fat cats and includes free education and a type of Utopian redistribution of wealth.

Continue reading "Protesters occupied with glib, childish, pointless fantasy" »

In a week’s time, as Finance Ministers and Treasurers from around the world gather in Washington to discuss the economic woes afflicting America and Europe, there will be an important ceremony on the sidelines.

Euromoney, the world’s leading magazine for banking and finance, will present the prestigious Finance Minister of the Year Award.

Each year the award honours the Finance Minister, Treasurer or central bank governor whose key decisions “have directly benefited both the performance and perception of their country’s economic and financial achievements”.

Continue reading "Is Wayne Swan the greatest Treasurer in the world?" »

Share market panics are scary and absolutely no-one knows for sure where they’ll end up.

The smarties will talk about buying bargains now because Australia’s future is more linked to China than the US or Europe, and how our economy is much better placed to ride out any financial storms than the rest of the world.

They’re right. BUT share market panics are not logical. They’re driven by emotion and almost impossible to predict.

Continue reading "Ignore the crash, and have some beer and skittles" »

The US debt crisis has raised some very serious questions, and the answers floating around range from crazy to impenetrable. So we talked to Scott Pape, The Barefoot Investor, to shed some light on what’s going on.

Q. How the HELL did the US get into this mess?

A. Even though it’s the biggest economy on the planet, and it’s a really complex beast, they got to this point the same way that Tom from Townsville’s credit card got out of control – the US Government consistently spent more than they made.

And now they’re broke – and like Tom, that means they can’t pay for the basics.

Continue reading "The US debt crisis explained" »

A News Ltd survey of Australian imams unearthed a renewed call for the recognition of sharia banking in Australia. At The Punch we weren’t really sure what that meant, so we asked expert in Islamic banking Dr Hussain Rammal, a lecturer in International Business at UniSA, to talk us through the basics.

What are the main differences between Islamic banking and Western banking?

The main difference is in the way the two systems deal with money. Under the Islamic economic system money is seen as a medium of exchange and has no intrinsic value. Therefore charging a higher rate of return (interest) on lend money does not sit well under the Islamic system. Islamic financial institutions use an asset-backed system where they purchase the assets on behalf of their customers and then use various financing agreements to on-sell the asset to their clients. These include profit-and-loss sharing, leasing and hire-purchase, and mark-up based agreements.

Continue reading "Punch Q & A: What is this Islamic banking caper?" »

On April 1, health insurance premiums rose across the board by an average of 5.56 per cent. The increase happens every year, while the percentage that premiums increase by differs. This year’s increase, according to research by iSelect, equates to around five million baskets of groceries or eight million tanks of petrol. It would also be enough to buy groceries for 100,000 families for a year. In individual dollar terms it works out to an average annual increase in premiums of $190 per family.

So last week I did a number of radio interviews, talking about the increase and suggesting ways that consumers can try to reduce their personal cost while making sure that they have appropriate cover. And one question that I was asked (fortunately off-air, because it took me aback a little) was whether I thought it was fair that everyone – regardless of size or health – paid the same premium.

It’s a version of a question that I’ve been asked a number of times: Should health insurance should be medically underwritten. In other words, should the overweight, underweight, smokers and otherwise-unhealthy among us be paying more for their health insurance? The crux of the reasoning, of course, being that the healthy consumers in the population are paying more than their fair share of premiums. And that’s not fair, right?

Continue reading "Are healthy people ripped off by health insurance?" »

Twenty years I’ve been in the workforce. That’s 20 years of deadlines, jumping on planes, working late into the night and, ultimately, furthering the fortunes of companies and proprietors who are decent enough – sorry, lucky enough – to have me.

During those two decades, how many times do you reckon I’ve asked for a pay rise? Most years? Biannually? Nope. Just once.

Not a savvy thing to admit, but a quick ask around friends and colleagues reveals the same: Women don’t ask for pay rises.

Continue reading "Sisters should ask for pay rises themselves" »

Each and every day millions of Australians pay financial institutions to access their own money.

Some pay more while others pay less, depending on the way they do it. Sometimes, as with EFTPOS transactions, the price consumers pay for their own money is largely invisible, being factored into the prices of goods and services. In other cases, the cost of using your own money is embedded in bank fees, or else in forgone interest from transaction accounts with negligible rates of interest.

One of the most expensive ways for Australians to access their own money is by using a third-party automatic teller machine - that is, an ATM not provided by their own bank. In most cases, third-party ATMs charge $2 for every transaction, including checking one’s account balance. In other words, $2 is the price consumers pay every time they are disloyal to their bank.

Continue reading "Owning an ATM is money in the bank" »

Attempting to make political capital out of interest rates is a risky business. It’s so tempting for both governments and oppositions to have a go at it, but invariably it ends up like some kind of disastrous military quagmire from which you must make a humiliating retreat.

:

Joe Hockey’s demands that the Government step in to stop banks raising interest rates above the levels set by the Reserve Bank is a big and risky play. He could ask his former Prime Minister John Howard about its dangers. Howard’s famous statement that “interest rates would always be lower under a Coalition Government” came back to bite him in 2007 when rates rose right in the middle of an election campaign. 

Hockey has been immediately embarrassed by the reaction of one Liberal MP to the prospect. Liberal MP Don Randall was asked about idea this morning, and not knowing it came from Hockey said this:

Continue reading "Hockey’s big dangerous play on interest rates" »

Does anyone else have a creepy feeling about the strength of the Australian economy?

I can’t seem to shake the sensation that we’re all in some kind of 80s teen horror film: all dancing to the drum machine at summer camp with a frothing cup of beer in one arm and the entire cheerleading team in the other. This is of course moments Jason returns from the dead once more – announcing his entrance to the party by beheading the captain of the football team with an efficient slash of his machete.

If you think this overly pessimistic just remember all good things end: the record high Dow Jones Industrial Average was recorded on this date, October 11 2007, on day high 14,198.10 points. Almost exactly one year later, October 10 2008, the you have the largest intra day point swing on the Dow Jones since 1987, of 1,018.77, that day the market hits a low of 7,882.51 points.

Continue reading "What does Martin Place think of the Aussie economy?" »

Today is Monday October 11.

On this day, just three years ago, in 2007 the Dow Jones enjoyed a record high of the Dow Jones Industrial Average occurred at 14,198.10 points. Strangely enough the largest intra-day point swing since 1987 took place almost exactly a year later on the 10 of October 2008, that day the market reached a low of 7,882.51 points. 

What’s on your mind today?

With official interest rates set to rise and the costly festive season looming large on the horizon there’s no doubt Australian’s budgeting skills will be put to the test over the next few months.

Financial skills are incredibly valuable but it’s often not until you get older that you begin to appreciate the small lessons about saving and spending your parents may have taught you when you were a kid.

Growing up on a farm meant my Mum and Dad generally made the most of having me and my two siblings around during school holidays to do the jobs that needed to be done. Often we were given the opportunity to make some cash carting hay or working in the wool sheds.

Continue reading "Giving kids an early start in learning to make ends meet" »

The Budget this week has me thinking about how no one likes their finances meddled with, especially given the prospect of more or increased bills. I’m no exception.

When they arrive in my letter box I’m instantly in a bad mood. I know they’re due but somewhere in the back of my mind I still hope that just once in my lifetime, the “systems” will go down and all the slates will be wiped clean. 

I find I’m actually quite defensive towards them.  I sometimes wonder if I were to tear it up, would anyone notice?

Continue reading "Love or loathe the budget, bills are the real enemy" »

The public is doing it. Even the PM is doing it. And the workforce don’t get a fair deal either. No matter how hard we try to warm to them, we just can’t help resenting the banks.

A new survey out today shows that the level of satisfaction with banks is low and that 63% people think that banks are getting worse at balancing profits and affordability.

Is it just another version of a national tall poppy syndrome, or are banks like those irritating over-achievers at school who just rubbed us up the wrong way for being obnoxious and successful? Or maybe there is a more simple reason – they can’t help acting badly.

Continue reading "Top 5 reasons we all love to hate the banks" »

How long have you been with your bank? When was the last time you switched all your accounts to another bank?

If you’re like most Australians the answer will either be “never” or “years ago”.

And there’s your reason why bank service will never be quite up to scratch. It’s us. We’re bank suckers. We talk about how banks treat us, and the poor level of service, but that’s all we do. Talk.

Continue reading "Rebelling against banks can make them lift their game" »

This morning’s Channel 10 news debate between Finance Minister Lindsay Tanner and his Opposition counterpart Barnaby Joyce was the first time the two have gone head to head since Joyce took up the job.

.

The clash was a good example of how a political debate can appear one way in Canberra and unfold in another when it comes time for people to actually tune in.

To give a cricketing analogy, Tanner has won the test match of a parliamentary sitting fortnight but Joyce just won the higher rating Twenty 20.

Continue reading "Tanner wins the week, Joyce wins the day" »

For most of this century, it’s been very hard to love Macquarie Group, as the bank is now known.

It should be held up as a great Australian success story - a home-grown investment bank that has followed only a handful of local companies in creating a truly global business. Think Westfield (shopping malls), BHP (rocks and oil), Foster’s (beer and wine), CSL (blood and plasma) and News Corporation (fine company, generous employer).

It built a business model - buying, owning and milking infrastructure assets - that, at least until very recently, was being emulated around the world.

Continue reading "Come back Macquarie Bank, all is forgiven" »