China stumbles… Walker’s nuclear nightmare… Labor sidesteps unfair dismissal… Tax office ‘dob-in’ hotline

Stocks plummet as China stumbles

The ASX/S&P 200 plummeted 2.42% in early trading on Wednesday following a 9% drop on Chinese sharemarkets overnight, representing the biggest decline in China in more than a decade.

The Federal Treasurer Peter Costello, who called a press conference Wednesday morning, has predicted volatility in the equity markets for some time. “Any company today has to factor in external shocks,” he said.

The suggestion of weakness in the Chinese economy caused panic in US markets. The Dow Jones Index fell 2540 points (3.29%) in its biggest drop in absolute terms since September 17, 2001.

The jury is out on what triggered selling in the key Chinese sharemarkets in Shanghai and Shenzen. Rumours of a crackdown on share speculation by Chinese authorities, policy tightening to rein in Chinese inflation and nervousness about the US economy following Wednesdays comments by Alan Greenspan (see Economic Round-up below) have all been suggested as culprits.

TD Securities chief strategist Stephen Koukoulas says: “The world economy has been so dependent on China for growth momentum; any sign of that disappearing makes markets across the world — including Australia’s — very nervous.”

Koukoulas says while Australian stocks directly exposed to China such as commodities stocks will be most vulnerable to selling, broadly based concerns about the world economy will mean that even the banks and general stocks will be under pressure.

Austock senior client adviser Michael Heffernan described the US and Australian markets sell down as a “knee-jerk reaction”. “Clearly the market couldn’t keep growing at the rate it has — 1% every week just wasn’t sustainable, so for one reason or another we were always going to come back,” Heffernan says.

Heffernan predicts the S&P/ASX 200 will recover later today to finish less than 3% down on yesterday’s close.

— Mike Preston


Nuclear nightmare for Ron Walker

The nuclear project set up by three of Australia’s richest entrepreneurs to develop nuclear power already looks shaky.

On Tuesday at 10am it was all systems go for the nuclear project set up by entrepreneurs Ron Walker, Robert de Crespigny and Hugh Morgan.

At that time, a source involved in the project told SmartCompany the trio had been working on the plan for the past 12 months, doing research and looking for locations by the seaboard, primarily in Victorian and South Australia.

By that evening, there were reports that the feasibility study by the company had shown the nuclear plant would be uneconomical. And all members of the nuclear trio were unavailable for comment.

Treasurer Peter Costello at lunchtime on Wednesday tried to killed speculation that the project may go ahead soon by suggesting the economics may change in the future.

John Howard followed on SkyNews denying that he ever discussed subsidies with Ron Walker, and called for a sensible discussion on nuclear power as a response to climate change.

So what happened in between? Well, first Labor used all of its questions in Parliament to grill the Coalition on whether the company had discussions with Government ministers.

This was followed by state premiers Steve Bracks and Mike Rann saying they would not allow nuclear power plants in their states. T

hen, there was the double stumble by Industry Minister Ian Macfarlane as to whether he had or had not had conversations with the trio about the project — both on radio and in Parliament — before Howard intervened and admitted he had talked to Walker about the company.

Could there also have been a call from the Prime Minister’s office telling the nuclear trio to pipe down and go to ground?

— Amanda Gome


Labor’s secrecy on unfair dismissal

Labor is refusing to clarify its position on unfair dismissal, merely restating that Labor recognises the special circumstances of small business in formulating its policies on unfair dismissals.

At a speech last night to the Council of Small Business Organisations of Australia (COSBOA), the shadow minister for small business and independent contractors, Craig Emerson, sought to position Labor as the party to help working people.

He says that the sharp distinctions between workers and capitalists are a relic embedded in the class conflicts of the past. “In the 21st century the workers and the capitalists are the same people… Labor is taking a fresh approach, supporting effort, risk taking and entrepreneurship.”

He then went on to call the unfair dismissal regime introduced by the previous Labor government in 1993 as a “lawyer’s picnic”.

It all sounded promising. Then he changed tack. The unfair dismissal laws that have applied from 1996 reveal that Australia’s employment protection legislation is one of the least strict in the OECD, he says.

Only a handful of OECD countries provide exemptions for small business — but none for businesses with up to 100 people. For example Germany has an exemption for businesses with up to 10 people, Sweden 10, Portugal nine and Korea five.

He then goes on to say that Labor will not see a return to the technical and time-consuming process that dragged small business employees away from what they need to be doing — run their businesses.

So what does that all mean? As Peter Hendy, head of the Australian Chamber of Commerce and Industry told SmartCompany recently, Labor announced last year it would set up a fast-track tribunal to hear claims by small business. But Labor still has said nothing about backing away from plans to reinstate unfair dismissal rules for small business.

Your say: Should Labor come clean on its unfair dismissal policies so voters have a clear choice on how they vote before the election? If Labor gets in and reinstates an unfair dismissal regime for small business, will it change your hiring and HR practices?

What do you think?

Send your comments to Feedback at

—  Amanda Gome


Flight Centre

The $1.6 billion private equity backed management buy-out of Flight Centre is under a cloud after talks collapsed with a key dissident shareholder, Lazard Asset Management.

Shareholders met in Brisbane yesterday to vote on the buy-out, but the deal was blocked after 12.5% shareholder Lazard argued the buy-out was unfair to smaller shareholders and undervalued Flight Centre.

— Amanda Gome


Dob in a mate – your tax agent or clients

Industry concern that some tax agents are gaining an unfair commercial advantage through unlawful and dishonest practices has led the tax office to introduce a “dob-in” hotline.

Accountants are cautiously welcoming the move after initial concerns about unsubstantiated complaints were allayed by adding some rigor to the investigation process. The program encourages tax agents to dob in suspect actions of other agents or even their own clients.

CPA Australia and the Institute of Chartered Accountants in Australia are still worried that clients will clam up in fear that their advisers will turn them in. The tax office inquiries could lead to an audit, letter or visit from the tax office, or referral to the Tax Agents’ Board. Findings will be published quarterly.

— Jacqui Walker


Small cap wrap

Bad news from Telstra’s biggest mobile phone reseller Fone Zone as it reports net profit for the first half of $1.9 million, 69% down on the previous corresponding period. Fone Zone also reported a 41% fall in EBITDA to $6.1 million in line with a profit warning issued by the company last December after problems with supply of handsets for Telstra’s new Next G network. Full year earnings are expected to be $16 million, a 25% downgrade.

Better results came from labor hire company Chandler Macleod, which upgraded it earnings guidance and posted sales up 17.5% to $388.5 million, thanks to acquisitions and better than expected employment markets in Queensland, Western Australia and South Australia.

REA Group, the owner of, posted a 98% profit rise in the first half to $5.7 million. The company is expanding rapidly by launching new websites, revamping others and buying online property sites in Italy, Luxembourg, Britain and New Zealand.


Economic Round-up

Stocks movements are dominating news today, but yesterday’s comments by highly respected former US Federal Reserve chairman Alan Greenspan that the US economy could go into recession by the end of this year may have an impact over the longer term.

Greenspan said: “Invariably forces build up for the next recession, and indeed we are beginning to see that sign… it is possible we can go into recession in the latter months of 2007.”

The prediction is contrary to the US Fed’s official position that the US economy will continue to experience modest growth this year.

The sharemarket selling has also hit the Australian dollar, the Aussie dropping back from yesterday’s closing price of US79.45 cents to US78.6 cents at 11am Wednesday.

Total credit provided to the private sector by financial intermediaries rose by 1.3% over January 2007, following a rise of 1% over December. Over the year to January, total credit rose by 14.9%, according to figures released by the Reserve Bank on Wednesday morning.


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