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Interest rates hike odds firm… Vic govt reshuffle… Cartel penalties on way… No more red tape, says ASX… Fairness test pitfall… SME failure myth… Lawyer wages through roof

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Interest rate hike odds firm

The likelihood of an interest rates rise next week has grown significantly, with a clutch of economic measures released today showing the Australian economy bounding from strength to strength.

The TD Securities-Melbourne Institute monthly inflation gauge released today shows that inflation in the economy increased by around 0.6% to an annual rate of 3%, the highest level measured by the gauge since August 2006.

The 3% annual figure is significant because it is at the very top of the Reserve Bank of Australia’s target inflation band of 2.3%.

Prices increased the most for fruit and vegetables, bread and cereal products, and alcohol and tobacco.

The surging confidence of Australian consumers is clearly illustrated in data released by the Federal Chamber of Automotive Industries today showing that a record 86,291 cars, trucks and buses were sold in July, a 11.3% increase on this time last year.

Large car sales rose by 18.6%, medium car sales by 21.7% and SUV compact sales by 23.7%. Small cars, which are generally more popular when consumers are concerned about the economic outlook, rose by just 3.9%.

And activity in Australia’s services sector also expanded last month, according to the Australian Industry Group-Commonwealth Bank Performance of Services Index released today. The index picked up one point to 56, well above the 50 point level that separates expansion from contraction.

Activity expanded in eight of nine sectors, with consumer and hospitality related services registering the strongest growth.

Today’s figures follow record retail sales and building approvals data earlier this week.

The RBA meets on Tuesday next week to consider whether it will increase the base cash rate from its current 6.25%.

Mike Preston

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Bloody hell, another New Zealander

New Zealanders love us, but the Japanese continue to shun Australia. The latest Australian Bureau of Statistics figures out this morning show that that short-term visitor arrivals from Japan fell by 1.8% from May to June, culminating in a 14.2% fall for the year from June 2006 to June 2007. New Zealand visitors were up 1.8% for the month of June, leading to a 15% increase for the year to June 2007.

Visitors from China, Malaysia and Indonesia were also up around 13% for the year to June 2007 while Hong Kong visitors were down 0.3%. British visitors were down 1.2%. Visitors from the US increased only slightly (0.9%) for the year to June 2007.

Reversing the decline in Japanese tourists is high on the ‘to-do’ list of Minister for Tourism Fran Bailey, who will focus on bringing more Japanese students to Australia including language vocations and study and surf tours.

 Amanda Gome

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Vic Government shuffle

Good sign or not? In the Victorian Government’s front bench reshuffle announced today, the small business portfolio has been taken from Theo Theophanous, where it sat naturally alongside Industry and teamed up with Agriculture under Joe Helper.

Now Innovation, Tourism, Small business and Industry and Trade are all in completely separate portfolios with different ministers although they are under the same department of Innovation, Industry and Regional Development.

But this could be good for small business. Apparently there were concerns that Theophanous had a lot on his plate and with the addition to IT, small business would be overlooked.

Word also is that the new Minister for Small Business, Joe Helper, has a bit of a passion for small business and is on top of the agriculture portfolio, so is looking forward to a new challenge.

 Amanda Gome

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Criminal penalties for cartel actions around the corner

The Federal Government plans to introduce, by Spring, laws that would make business owners and executives who engage in cartel-type activity subject to criminal sanctions.

The laws will be based on recommendations of the 2003 Dawson Review, which recommended individual penalties of up to five years jail for the most serious conduct, reports The Australian Financial Review.

 Mike Preston

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ASX rejects red-tape for listed companies

The ASX has rejected proposals that would have required listed companies to make greater disclosure of their environmental or social impact to investors.

Groups such as the Financial Services Institute of Australasia called on the ASX to increase corporate social responsibility reporting requirements in submissions to the ASX Corporate Governance Council review of corporate governance principles.

But in releasing its revised corporate governance principles yesterday, ASX chief supervision officer Eric Mayne revealed that the council has decided not to introduce specific requirements for triple bottom line reporting to the list of ASX reporting requirements.

“There are no drastic or wholesale changes to the principles. The enduring workability of Australia’s governance framework has allowed the council to fine-tune its approach rather than undertake a rewrite,” Mayne says.

 Mike Preston

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Business owners warned on fairness test pitfalls

Employers could still risk breaching contract or discrimination laws if a worker’s employment conditions are altered or reduced, even if those changes comply with the fairness test, an industrial relations expert has warned.

La Trobe University academic Jill Murray says that not only is the fairness test “incredibly inefficient” and “costly”, it could also leave employers in the lurch if changing conditions undermine wage and condition trade-offs, The Australian Financial Review reports today.

The problem, Murray says, is that the fairness test looks at an employee’s circumstances at a particular point in time to determine if they have received “fair compensation” for trading off pay or conditions.

For example, an employee might commit to working longer hours or weekends in return for a higher base rate of pay, but later find family commitments make working the longer hours difficult. An employer might then find they had obligations under discrimination law to consider more flexible hours for the employee, even if the trade off had previously been approved under the fairness test.

“Employers need to be very careful in undertaking to exchange penalties for other benefits, that they don’t breach contract of employment or other laws,” Murray told the paper.

And in other IR news, the workplace watchdog has stumbled across a loophole in workplace relations laws that means workers under 21 are not covered by the Federal minimum wage.

According to The Australian, a Workplace Ombudsman official told a Queensland woman she could not claim unpaid wages from a Cairns diving company because although employees of the business were covered by the Australian Fair Pay Standard, it only applies to people over the age of 21.

 Mike Preston

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More myths about small business failure

Want to know how the urban myth about most small businesses failing gets its legs? Read Page 4 of The Age business section today. There is an alarming headline: “Self employed leads to bankruptcies”. The story then goes on to say that more than half of small businesses that start-up are bankrupt after three years and the self employed are the biggest victims.

But the figures are based on the report called “Counts of Australian Businesses, including entries and exits.” The report does say that companies with no employees exit at a greater rate than do companies with employees. But that doesn’t mean the exiting companies are “bankrupt”.

Companies exit for all sorts of reasons, including selling, merging or simply shutting down a company to focus on another. A spokesperson for the ABS says that there is no follow-up data on what happens to companies that exit, but they certainly do not go “bankrupt”. While a small percentage may go into liquidation, deed of arrangement, or voluntary administration, the vast majority do not.

 Amanda Gome

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Small business owners sacrifice lifestyle for business growth

Households that draw most of their income from owning and running a small business earn less, but are worth more, than households reliant on wages, new research shows.

In 2005/06, the average gross household weekly income for households that primarily rely on earnings from an unincorporated business they own is $1627, compared to $1681 for wage earners’ households, Australian Bureau of Statistics figures released yesterday reveal.

It appears that small business owners are sacrificing money today to build a better business for tomorrow. Despite their lower incomes, small business owning households tend to have significantly greater net worth – $796,660, well above an average net worth of $526,595 for wage earning households.

The figures also show that over the past 20 years the proportion of Australian households that rely on income from an unincorporated business they own has declined, from an average of 7.6% between 1984 and 1994 to just under 6.3% in between 1995/96 and 2005/06.

It is unclear whether the figures represent a decline in the number of people who own small businesses or an increase in the number of small business owners who choose to incorporate, however.

Mike Preston

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Lawyer wages through the roof

Perth lawyers achieved the biggest pay boost in a year in which pay across the legal profession went through the roof.

Lawyers in the resource-rich state enjoyed an average pay increase of 9% in 2006/07, the Mahlab Recruitment annual legal salary survey found, ahead of Sydney lawyers on 6.4%, Melbourne lawyers on 5.3% and Brisbane lawyers on 4.7%.

Sydney lawyers remain the highest paid, however, with the average Sydney lawyer with five years experience in a top-tier law firm pulling in an average $125,000 a year, compared to their equivalents in Melbourne ($120,000) and Perth ($110,000).

Mike Preston

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