Could this be the biggest spending election campaign of all time? Six months out and the bacon is flying.
Pork barrelling is on for old and young with billion dollar pledges from both parties to build new roads in Sydney’s traffic clogged Western suburbs.
You can expect the caravan to roll around to all the state capitals. Some top ups perhaps for Brisbane’s Cross River Rail, Melbourne’s East West Link, Adelaide’s South Road and Perth’s Gateway airport road project? Yes, all necessary projects. Too necessary, in fact, to be hijacked by the political cycle.
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Job cuts are set to dominate the economic news again this year, so it’s going to be important to keep things in perspective.
Official job figures out last week show the economy had 5500 fewer jobs last December than it did last November. As a result, the number of people looking for but unable to find work jumped by 16,600 to 656,400, and the jobless rate went from 5.3 per cent to 5.4 per cent.
Last year, total employment grew just 1 per cent, lagging behind population growth of 1.6 per cent. The economy needs to create about 13,000 extra jobs each month just to absorb population growth.
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IT’S time for the Reserve Bank to stump up on Tuesday with an interest rate cut to kick-start the nation.
The Australian economy has been a one trick pony for much of the past decade, but our prized runner - the mining industry - just turned lame. It is time for the Reserve Bank to give the other parts of the economy retail, manufacturing, services and construction a giddy up this Tuesday.
It’s a close call - given the Reserve Bank has already cut interest rates 1.5 percentage points over the past year - but another rate cut at 2.30pm looks like the favourite.
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We’ve been here before. Amid all the breathless commentary about the end of the mining boom, it pays to recall some economic history. Australians are no strangers to the boom and bust cycle of our “golden soil and wealth for toil”.
In an excellent speech delivered two years ago, but still relevant today, then Reserve Bank deputy governor Ric Battellino recounted the full story.
The gold rush days of the 1850s marked Australia’s first adventure in mining frenzy, following a similar gold rush in California in the late 1840s. Gold was discovered first near Bathurst in New South Wales, but discoveries were also made in Victoria shortly after.
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The economic debate has become so warped that it is now considered a display of political bias to suggest that the nation’s economic condition is nowhere near a mere gasp away from total collapse.
The idea of boosting confidence in the national output has become politicised, a demarcation point between the Government and the Opposition. The aggression of the Opposition’s attacks on Labor economic management, the wobbly nature of minority government, and the insecurity of a slice of the electorate are the distorting factors.
But what might be effective politics is not good for growth. Businessman James MacKenzie, a neutral voice, says the negativity is is bizarre, and he’s not alone among top executives baffled by the determination of some Australians to talk down the national well-being.
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Reserve Bank Governor Glenn Stevens put it eloquently yesterday when he complained that economic discussion in this country has “reached a rather curious position”.
An objective observer arriving from overseas, according to the Governor, would feel that Australia’s glass is at least half full, but Australians themselves are “grimly determined to see our glass as half empty”. In a speech to a business lunch in Adelaide, Stevens said: “Numerous foreign visitors to the Reserve Bank have remarked on the surprising extent of this pessimism.
“Each time I travel abroad I am struck by the difference between the perceptions held by foreigners about Australia and what I read in the newspapers at home.”
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ATM fees have long been a sticky topic. For many people, paying an ATM transaction fee is an unwelcome but accepted fact of life.
For Indigenous Australians in remote communities however, ATM fees can have a significant impact on their life, swiftly eroding their humble bank balance.
This is the finding of a report released late last year by the feisty Australian Financial Counselling and Credit Reform Association (AFCCRA), titled “ATM Fees in Indigenous Communities”, which focussed on excessive ATM fees in remote communities.
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First home buyers have just cause to feel betrayed by the Rudd-Gillard government as they struggle under the strain of seven consecutive interest rate rises which have been exacerbated by loose fiscal policy.
A disturbing new survey by Mortgage Choice has found that 10 per cent of first home buyers, who purchased their homes in the past two years, have either sold their homes or are considering selling because of financial hardship, caused by interest rate hikes.
The survey also found that another 6 per cent would sell if interest rates climbed a further one per cent, while another 14 per cent would sell if they rose another 1.5 per cent.
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In 1983, money came out of the closet. Up until then any discussion about money was taboo and considered uncouth. No-one ever talked about how much their house was worth, or what shares to buy, or whether to buy Aussie dollars now to get the best rate before they went on holidays.
Term deposits were considered financially sexy. No-one had heard about managed funds, superannuation or property syndicates unless you were among the rich and famous.
At that time treasurer Paul Keating floated the Australian dollar and deregulated the financial system.
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Ralph Norris and the Commonwealth Bank have had a tough week.
Following the decision to raise lending rates by almost double the Reserve Bank’s own rate hike there has been stinging criticism from pretty much every sector of the economy and a bit of personal abuse thrown in for good measure.
Representatives from across the political spectrum have anointed “bank bashing” as Australia’s new national sport and the CBA and Ralph himself are a daily headline for every journalistic medium.
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Two weeks ago I decided to take a public stand on behalf of ordinary Australians. Home buyers, consumers and small business are sick and tired of being taken for a ride by the banks, who time and time again increase their interest rates above and beyond the official movements of the Reserve Bank.
I’ve had my critics - but if that means I’m standing up to a guy who earns $50,000 a day, while the customers who underwrite his business earn $50,000 a year – then I’ll cop it.
A strong banking sector is vital, but at the same time banks have an obligation to give something back to the community.
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This time yesterday Australians were merrily preparing for the Race that Stops the Nation, confident in the economists’ predictions the RBA would avoid the un-sportsmanlike act of hiking interest rates on Cup Day.
Just 24-hours later all hell has broken loose.
The RBA might have turned on the rates tap with its 25 basis points rise in official interest rates announced at 2.30 yesterday afternoon, but the Commonwealth Bank forced open the flood gates with an immediate move to put its own rates up 45 basis points.
Commbank boss Ralph Norris is not talking this morning, instead letting the Australian Bankers Association make the running.
Association chief executive Stephen Munchenberg said: “What the Commonwealth Bank is saying is that that marginal effect has built up 2 basis points or 0.2 per cent each month, and that’s now built up over nearly a year since the banks last moved interest rates, so there’s a cumulative effect there.”
Westpac just announced its profits have risen 84 per cent in the last 12 months. Yes, that wasn’t a typo - 84 per cent. In the 12 months to September 30 the Gail Kelly-steered Westpac made a net profit of $6.346 billion.
Apparently Kelly is due to make an announcement later today. Wonder what on earth that could be.
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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:
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The likelihood of interest rates rising is back on the agenda, following explicit warnings from the Reserve Bank that it is considering the need for tighter monetary policy.
The Coalition has consistently warned that the Labor Government’s heavy borrowing and build up of debt will put upward pressure on interest rates.
These warnings have been rejected by the government and by a few select commentators in the media.
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Update 3pm: The RBA surprised everyone and left interest rates on hold today.
In recent years a horrendous new phrase has appeared to describe people struggling to make ends meet. They’re suffering from “mortgage stress.”
This week it was reported almost half of the young people who availed of the Rudd Government’s increased help for first-home buyers were suffering from this terrible condition. If true life will get a whole lot more stressful for them over the coming months as interest rates return to normal, starting most likely with a Reserve Bank announcement this afternoon.
Where did this “mortgage stress” phrase come from, anyway? It sounds like some kind of psychological disease that should be covered by Medicare. As far as I can tell what it actually means is you have borrowed too much money.
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UPDATE: As of 5pm all four banks have already passed on the interest rate increase.
For the second time in as many years, the Reserve Bank has helped cement the banking community’s reputation as a cuddly bunch of warm-hearted funsters by using Melbourne Cup Day to stick it to home-owners.
While you were munching on some prawns the RBA increased rates from 3.25 per cent to 3.5 per cent, resisting the temptation to go for a much more dramatic and painful 0.5 per cent rise, but still sticking by its warning that there would be more more pain to come.
Many people with mortgages will shrug this one off – we’re still about $700 a month better off in terms of repayments than we were when the GFC hit.
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Update 2.35pm: The RBA has just announced it has raised the official cash rate by 0.25 a per centage point to 3.25 per cent.
The Rudd Government is yet to make a hard decision. But this won’t stop them leaving the heavy lifting to someone else - namely Glenn Stevens at the Reserve Bank.
Whether the RBA decides to lift interest rates today or on Melbourne Cup day, this will be a hard decision. It will mean increased pressure on family budgets and small business.
For the more than 200,000 Australians who have bought their first home recently, it will their first Rudd rate rise, with more to follow.
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Last Friday I continued a tradition of my predecessor in Cook, Bruce Baird, by catching up with one of our more prominent Shire constituents at Tatterstalls Club in Sydney.
The occasion was a public hearing of the House of Representatives Standing Committee on Economics, which Bruce used to chair. The constituent was none other than Reserve Bank Governor Glenn Stevens. The Shire conspiracy over economic management in Australia continues!
As usual, reports of the proceedings narrowed in on the key question of where rates are headed. Sadly, the answer is up, by as much as 2%. This was not a major revelation as the Governor had already flagged this view in the Bank’s August monetary policy statement.
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