Steady CPI eases rate fears
Australia’s key inflation measure, the consumer price index, increased by 0.1% in the March quarter – decreasing the likelihood that the Reserve Bank will lift interest rates when it meets next week.
The 0.1% figure defies economists’ predictions that CPI would increase by up to 0.7%. The result is an annual inflation figure of 2.4%, safely within the Reserve Bank’s 2–3% target band for inflation.
A drop in food prices of 2.3% and household products and services of 0.9% were the main reasons for the low CPI figure.
The low result has caused economists at Westpac Bank and TD Securities to reverse predictions that the Reserve Bank would increase interest rates next week. TD Securities’ Josh Williamson says: “This is a much weaker result than anticipated and we now think there is no risk of an interest rate rise in the foreseeable future, although the Reserve Bank will maintain a tightening bias.”
ANZ economist Tony Pearson says there is still a real risk that interest rates will rise next week, although the chance is now less than 50%.
Treasurer Peter Costello welcomed the result today, describing it is “a very low rise indeed”, that keeps Australia well within the inflation target band.
– Mike Preston
Labor floats s457 reforms
Skilled migrants would be quicker to employ but cost more under a policy proposal Labor will consider at its national conference this weekend.
Opposition immigration spokesman Tony Burke announced yesterday that he will push Labor to adopt a policy on section 457 skilled migration that would:
Introduce a ‘fast-track’ visa approval process that would allow businesses to get approval for section 457 visas in four weeks, much quicker than the current process, which can take up to 12 weeks.
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Change the composition of the local authorities that certify the need to import workers to meet a skills shortage. Labor proposes replacing the predominantly local business and chamber of commerce members of these bodies with state government appointees.
Require migrants to be paid at the market rate instead of the current legislated minimum rate, which is calculated on the basis of Australian average weekly earnings.
David Young, a director of recruiting and skilled migration company Australian Recruiting, says the change to local market rates of pay would almost always mean an increase in wage costs for businesses who hire workers under section 457, particularly where they are operating in sectors suffering skills shortages.
Young is also critical of Labor’s proposed change to the composition of local certifying authorities. “The best people to assess things are the local chambers of commerce. They’re more in tune with business and better able to asses whether there is a real shortage than the government,” he says.
But, he says, many businesses will welcome the prospect of shorter s457 processing times. “It typically takes 12 to 15 weeks from selection to arrival of a section 457 worker and that is a problem for a lot businesses. It means they can really be left in the lurch when they desperately need a position filled.”
– Mike Preston
Where are the Libs’ spending promises?
Prime Minister John Howard made a major positioning speech yesterday called Australia Rising, naming the economy, social policy, climate change and Asian relations as central to his vision for the future.
But it has left pundits scratching their heads. While the speech came ahead of a federal cabinet meeting in Brisbane, apparently to make decisions about the budget and tax cuts, there was nary a mention about any large spending spree initiatives.
No one doubts that in an election year they are not on the way. But usually there would be a few large pre-budget initiatives announced by now.
The announcement today that inflation is barely stirring, meaning interest rates are less likely to rise anytime soon, could be the trigger for Howard to start leaking budget initiatives or even making some big-ticket announcements.
And there were a few clues from Howard yesterday as to what is coming: possible tax cuts for the “sandwich generation”, especially women who need flexibility to meet the demands of work and home. And setting targets for cuts in greenhouse gas emissions is also on the cards.
– Amanda Gome
‘Operational’ sackings can be done to cut pay
Businesses that sack an employee and then readvertise the position at a lower rate of pay fall under the “operational reasons” exemption from unfair dismissal, according to a recent decision by the Australian Industrial Relations Commission.
Facing financial difficulty, discount retailer Priceline sacked a well-paid “space planner”, an employee whose job it was to decide where products appear on shelves. It then re-advertised the position at a significantly lower pay level.
The employee lodged a claim for unfair dismissal with the AIRC, but the claim was dismissed in a hearing before a single commissioner on the basis that the dismissal occurred because of Priceline’s “financial difficulties and the subsequent decision to reorganise its structure” and therefore fell with the “genuine operational reasons” exemption.
This represents a substantial broadening of the operational reasons exemption from unfair dismissal. Previous AIRC decisions have taken the re-advertisement of a sacked employee’s position shortly after dismissal as being a sign that a termination for genuine operational reasons did not occur.
– Mike Preston
Bendigo Bank rejects offer
The Bendigo Bank has rejected the Bank of Queensland’s merger offer. Bendigo Bank has said the offer was too low and didn’t offer enough value for shareholders.
“The board believes that the proposal does not provide sufficient value and certainty for Bendigo Bank shareholders. The proposal involves significant risks, including integrating organisations with different business models and philosophies,” says its statement.
Bendigo Bank’s shares fell 5% on the announcement, despite the bank upgrading its 2007 earnings guidance to cash profit after tax of $117 million, amounting to cash EPS growth of 12%, and announcing a target for the 2008 financial year of cash EPS growth in excess of 12%.
Under the proposal, Bendigo Bank shareholders would have received 0.748 Bank of Queensland shares and $5.50 cash for each Bendigo Bank share. The offer is well over the market value of the shares. Bank of Queensland claimed it would save $70 million in costs through the merger but there were concerns that merger would have caused a culture clash.
– Jacqui Walker
Online real estate battle sours sour
The battle for the $100 million online property advertising market just turned nasty for twin goliaths PBL and Microsoft. Their new site Myhome.com.au has suffered yet another blow after property franchise First National pulled 30,000 property listings, saying it would no longer be involved.
Myhome, which launched on February 26 with a huge publicity campaign including TV program MyHome, claimed to have as many listings as competitor Fairfax’s Domain.com.au. It also vowed to take on market leader Realestate.com.au, which had 60% of the market. But apparently one of the reasons First National has baled is due to poor traffic on Myhome. It certainly shows the advantage of first mover – both online and on the internet.
– Amanda Gome
Emerson releases paper on business red-tape reduction
Labor’s spokesman on the service economy, small business and independent contractors, Craig Emerson, has released a research paper supporting the red-tape reduction promises made by Labor leader Kevin Rudd last week.
Emerson argues in the paper that the Howard Government has increased the regulatory burden more since 2000 than in the first 82 years of Australian government since Federation.
Several strategies for reducing business red tape are discussed in the paper, including increasing the threshold at which businesses must pay GST from $50,000 to $75,000 in annual revenue and providing incentive payments to the states to cut inefficient taxes and regulation.
– Mike Preston
Noni B profit warning
Despite strong retail sales figures from the Australian Bureau of Statistics earlier this month, womens clothing retailer Noni B has issued a profit warning. Managing director Alan Kindl said net profit for the year to July 2 would be between $7.4 million and $8.2 million. Last year’s figure was $8.2 million.
Retail trade grew of 0.5% in February, slightly above market expectations and in line with recent growth trends in the sector, according to the latest ABS figures released earlier this month.
Kindl blamed a depressed NSW economy and unseasonably warm weather in March. “You can bet there’s a lot of retailers out there doing worse than us,” he said.
– Jacqui Walker
Quarterly activity statements and super contributions due
March quarterly activity statements and super contributions are due on Monday April 30 because the 28 April deadline falls on a weekend. ATO deputy commissioner Geoff Robinson has encouraged businesses to take advantage of tax office help to avoid penalties for late lodgment and any payments owing.