THE NEWS WRAP: Business groups warn Swan against tax changes

Big business has warned the federal government against tinkering with the tax system, ahead of Tuesday’s budget.

 

“The more you load our budget with unsustainable expenses, the longer it takes to get to tax reform,” Business Council of Australia chief executive Jennifer Westacott says.

 

“If [the federal budget] is just a revenue grab, it is sending a signal to the rest of the world that Australia is a tough place to do business… We really are putting at risk, long-term business confidence.”

 

“The government needs to act in the medium to long-term interests in this budget, strengthen the capacity of the private sector to fill the gaps that the public sector cannot do because of its financial impairment,” says Australian Chamber of Commerce and Industry chief executive Peter Anderson.

 

China preparing substantial economic reforms

 

Liu He, the leader of China’s Central Leading Group on Financial and Economic Affairs, is preparing a series of sweeping reform proposals for the world’s second largest economy, aimed at heading off a looming fiscal crisis.

 

The seven point plan, to be presented to the Third Plenum of the 18th Communist Party Congress in October, is designed to reform a financial system that currently channels cheap capital to state-owned enterprises at the expense of entrepreneurs and households.

 

The seven points include liberalising interest and exchange rates, implementing effective property and consumption taxes, reforming China’s land transfer and usage system, facilitating urbanisation, reducing inequality of income distribution, slashing red tape and imposing market prices on commodities.

 

Goldman Sachs remains bullish about Australian stocks despite mining boom peak

 

Goldman Sachs Asset Management (GSAM) managing director Dion Hershan remains bullish about the Australian economy and the big four banks, despite the end of the mining boom, which he says was driven in 2008 and 2009 by Chinese government stimulus.

 

“We just wrote a note to some of our clients saying we’re actively looking for low-yield companies. The markets are at a fascinating point where investors are at almost peak levels of impatience – everyone wants the dividend today or the special dividend tomorrow,” Hershan says.

 

“But the dividend is only one aspect of total return, with capital appreciation generally more important over the long term, and we think there’s a lot of good Australian cyclical companies that have growth but it’s long-dated and investors have lost patience.

 

“I think we’ve probably seen the peak of commodity demand growth and prices, yet the supply won’t peak for two to three years and the large mining companies are operating at peak levels of capital expenditure today. A lot of them are borrowing quite heavily to sponsor projects that might never get the returns envisaged.”

 

Overnight

 

The Dow Jones Industrial Average is up 0.24% to 15,118.49. The Aussie dollar is flat at US 100.05 cents.

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