Good times roll on… Rates hold… Broadband detail the clincher… Big QLD budget… Business urges schools to focus… Taxman eyes off pay pack options deals…

The good times roll on

Confidence is soaring among small and medium business, with the May Sensis business confidence indicator up 11 percentage points on this time last year.

The survey of 1800 businesses shows this quarter’s improvement in confidence is being driven by a big improvement in NSW and Victoria, although Western Australia is still the stand-out state.

Profitability and sales indicators were also high, while inflationary concerns eased.

Sensis Business Index author Christena Singh says: “Despite strong employment growth, overall growth in wage costs decreased during the last quarter, and SMEs are expecting further decreases in their wages bills for both the short and medium terms.”

Support for Federal Government

The Sensis survey also showed that support for the Federal Government jumped up 14 percentage points to 25%.

“Only one other time in the 14-year history of the index has support among SMEs for the Federal Government been higher. This was in May 1996, shortly after the election of the Howard Government,” Singh says.

Industrial relations policies was one of the major drivers for this support, with 22% of SME owners believing new workplace relations laws have a positive impact, while 5% believe they have a negative impact.

Some 17% of SMEs are planning to make changes following the introduction of the new workplace relations laws, with 10% saying they have already made changes. One in five of those said they have employed new staff as a result of the changes. (The survey was done before and after the Howard Government introduced the new fairness test.)

The Northern Territory Government is again the most supported state or territory government, with an approval rating of positive 8%, up seven percentage points over the quarter.

The Victorian Government achieved the second highest approval rating from SMEs, of positive 4%.

This is the first time SMEs have given Victoria’s Bracks Government a positive approval. “The last time the approval indicator was in positive territory was when the Kennett government was in power in August 1999,” Singh says.

The New South Wales Government is again the least supported government among SMEs.

– Amanda Gome


Interest rates on hold as economy booms

The Reserve Bank has kept interest rates on hold at 6.25%, but a strong quarterly economic growth result of 1.6% today means debate will continue on whether a rise will be necessary in the next 12 months.

The 1.6% increase in gross domestic product is well above the market prediction of a 1.2% rise. The annualised growth rate of 3.8% is the fastest since June 2004.

The construction, finance and insurance sectors were the largest contributors to GDP growth, each growing by 0.2%.

ANZ senior economist Riki Polygenis says the strong GDP result emphasises the upside risk to interest rates in the medium term.

“But in the current environment characterised by benign price and wage inflation, a rate hike seems off the cards before the federal election,” she says.

A Sky News survey of 12 Australian economists taken before the GDP figure was released illustrates the high degree of uncertainty about the interest rate outlook. Six of the twelve economists surveyed predict there won’t be an interest rise in the next 12 months, 5 think there will be a 0.25% rise and just one thinks there will be a 0.5% rise.

– Mike Preston


Tax ignored for big infrastructure spend in Queensland budget

Business groups have welcomed the focus on infrastructure in the Queensland budget delivered by the state’s Treasurer Anna Bligh yesterday, but say more should have been done to boost the competitiveness of the booming northern state’s tax system.

Almost half of the $32 billion forecast to flow into Queensland coffers in 2007/2008 will be spent on infrastructure, with multi-billion dollar spends on water and roads the biggest ticket items.

But Commerce Queensland president Beatrice Booth says the infrastructure spending, while positive, cannot hide the fact that business is a “loser” from the budget.

The budget contains a small cut in workers compensation premiums – about a $50 saving on a $100,000 premium – and an increase in tax free thresholds for land tax to $350,000. But Booth says what business really wanted to see was an increase in the payroll tax threshold from its current $1 million level to $1.5 million.

“We were looking for payroll tax and stamp duty relief – neither of these got a mention,” Booth says.

The Australian Industry Group’s Queensland director Chris Rodwell says the failure to cut payroll tax could see the competitiveness of Queensland’s tax system fall behind other states.

“A cut was needed in this budget given the speed with which other states are closing the gap with Queensland. With taxation revenue forecast to increase by nearly 11% in 2007/08, there was plenty of scope for movement in this area,” Rodwell says.

Queensland Retail Traders and Shopkeepers Association’s Scott Driscoll says the big debt load the Queensland Government is taking on is also a worry.

The budget forecasts strong economic growth of 5% for the year ahead and surplus forecast of $268 million, dramatically down on the $2.39 billion surplus delivered for 2006/2007.

The Queensland Government will also have to borrow $28 billion over four years to fund the works, including $3.6 billion next year. Bligh defended the decision to take on more debt, saying it was affordable and necessary given population growth and industrial expansion in the state.

– Mike Preston


Canberra budget’s restraint

By contrast, the 2007-08 Canberra budget is one of fiscal restraint. This year’s budget provides for a modest program of new spending and budget surpluses.

The 2006-07 budget operating surplus is estimated to be $39.3 million, and is forecast to increase to $103m in 2007-08. This represents a significant turnaround from the position envisaged in the 2006-07 budget and the 2006-07 mid-year review.

Of the 2007-08 surplus, more than $90 million is attributable to strength in the ACT property market, increased activity from an accelerated land release program, and returns from some one-off commercial developments.

The main areas for spending are transport/infrastructure, health and education.

– Jacqui Walker


Devil is in the detail on broadband

SMEs will be anxiously waiting for the details of the public review and tender process on broadband brought to Federal Cabinet by Communications Minister Helen Coonan yesterday.

The SME perspective often seems to get lost in the debate on broadband. For many SME owners, the future growth and success of their businesses depends on getting access to fast broadband – and at a good price.

Price is critical to SMEs. The SmartCompany/Dun & Bradstreet Opinion Leaders Poll shows that 97% of SME owners believe price is important or very important; 92% of SME owners believe faster broadband is important in their business and 52% say it is very important.

While 58% say better broadband would allow their companies to offer new services or products, 40% say faster broadband would have an immediate impact of increasing their sales.

Until we see the details, we can’t know whether the new review and tender process will be able to produce the outcome Australian businesses need to grow.

Federal Treasurer Peter Costello’s comment that the ACCC will have a role to play in the process is welcome, because the independent statutory body has been tough in trying to hold Telstra to account in this debate.

There will need to be more like it involved with the review if Telstra is to be prevented from browbeating its way to a cushy regulatory deal on broadband – a deal that likely would see consumers pay more.

– Mike Preston


Business leaders push for better education

Business leaders are pushing for an increase in standards and industry involvement when they meet educational experts in Canberra today. Business leaders will put forward a proposal to have secondary schools specialise in a particular discipline like business or technology.

When high schools have specialised in one area in other countries, it has met with big success. In Britain, the performance of specialist schools that choose one area, such as arts or business and enterprise, consistently outstrips non-specialist schools.

Business leaders will meet Minister for Education Julia Bishop today to put their concerns that schools were not providing the skills needed in the workforce.

Meanwhile Australia’s eight elite universities are calling for a more student-driven higher education market, arguing that the current policy framework is out of date.

Under the proposal to be pitched today, students would compete for national tuition scholarships. Their chosen university would receive the funding. The Group of Eight argue that a greater focus on student demand should shape university education and would introduce more price competition to universities.

– Amanda Gome


Labor would regulate carbon entrepreneurs

Mandatory carbon emission trading is a way off for Australia, but in the meantime carbon entrepreneurs are using voluntary schemes to create new business and generate revenue – as well as offset carbon emissions. See our story Carbon Entrepreneurs for details.

Opposition leader Kevin Rudd has responded to a call for national standards by promising Labor would build on the existing schemes – comprising the Federal Governments’ Greenhouse Friendly program, the mandatory renewable energy target, and the NSW Greenhouse Gas Abatement scheme – with national standards for voluntary carbon offsets.

National standards would give comfort to consumers who can now pay some airlines and travel agents to make their journeys emission free, and add credibility to the claims of companies such as News Corp, ANZ bank, NAB and AFL, which are aiming to be carbon-neutral by buying offsets.

SMEs have been slow to prioritise concerns over the environment, but there are plenty of services available to help them go carbon-neutral – see our story for details.

– Jacqui Walker


Tax office warning on options

The ATO has issued a warning to company directors and executives who use trusts to reduce their personal tax bills on options acquired under employee share schemes.

Under the microscope will be schemes where an executive transfers the options to a trust, which can then acquire shares as a discount to market value, sells those shares and distributes the gains to family members who are taxed at rates lower than the executive.

Frank Drenth, executive director of the Corporate Tax Association, told The Australian Financial Review that the fact that the tax office believes taxpayers should be assessed should be enough to steer people away from these schemes.

– Jacqui Walker


Myer building buyers

Retailers interested in taking space in part of the Bourke and Lonsdale streets Myer buildings in Melbourne, which will be vacated and by the department store and redeveloped after their sale, will be watching the sale process closely.

The GPT Group has been tipped as one of the most likely high bidders because it owns the adjacent 56,000 sq m Melbourne Central shopping centre. Lend Lease is also expected to make a high bid. CFS Retail Property Trust is also a potential bidder. A Myer spokeswomen told The Australian Financial Review that the company hoped to make a decision this month.

– Jacqui Walker


Chinese turbulence

The roller coaster ride of the Chinese sharemarket continued yesterday with a 7% slump before rallying to close up more than 3%. Last week’s decision to triple the stamp duty on share trading was the major culprit, and the index has slipped almost 20% since then.

The Chinese Government has spent the last few days lecturing the nation that cooling the market was good for its long-term health. Fortunately global markets remain relatively unaffected by the turbulence.

– Amanda Gome


Economy round up

The value of the Australian dollar has risen strongly in response to this morning’s unexpectedly high GDP figure, shooting up to US84.22c at 12.30pm from a closing price of US83.55c yesterday. The S&P/ASX 200 is down 0.3% to 6352.7 at the same time.



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