Economy

Dollar smashes US83c… WorkChoices = low unemployment?… Will employment push up rates?… COAG action on red tape… Australian SMEs are not competitive… New visa invites young workers

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Dollar smashes US83 cent barrier

The Australian dollar hit yet another 17-year high today, pushing through the US83 cent barrier to be US82.2 cents at 12.25pm.

A decline in the US dollar caused by speculation of a poor trade deficit figure today and strong retail figures in New Zealand were key contributors to the dollar’s strong performance this morning.

– Mike Preston

 

WorkChoices = low unemployment?

Opinion is divided today over Prime Minister John Howard’s claim that WorkChoices can take at least part of the credit for yesterday’s 32-year unemployment low of 4.5%.

Phil Ruthven, chairman of business information provider IBISWorld, believes WorkChoices has contributed to the record unemployment figure.

“Especially at the SME level, employment was being held back by a feeling that there was a degree of rorting in the system… by a few rogue employees, and that has gone now,” he says.

He also rejects the Opposition’s claim that the mining boom is a bigger contributor to strong unemployment. “That is nonsense. The mining industry employs only 120,000 or so people. Twice as many jobs were created last year.”

But Melbourne Institute Labor economist Mark Wooden is more sceptical about Howard’s claim. “We really just don’t know, and certainly the Prime Minister doesn’t have any evidence to support it other than the employment figures,” he says.

But, he says, if the increased unfair dismissal protections for employers in WorkChoices have made a difference, they would show up most clearly at the SME level. “SME owners often aren’t able to spend a lot of time on selection, so they are more likely not to hire if they are doubtful about a candidate,” Wooden says.

That’s what the experts think – but what is your view? Have the changes to unfair dismissal laws introduced by WorkChoices led you to hire more staff?

Email: [email protected]

 – Mike Preston

 

Good employment figure – but will it push interest rates up?

As political leaders argue about the extent that WorkChoices is responsible for yesterday’s drop in unemployment, another crucial question has gone largely unanswered – does the unemployment figure make it more likely interest rates will rise in May?

According to ANZ economist Riki Polygenis, the answer is yes.

“The tightness of the labour market certainly adds to the risk the Reserve Bank will raise interest rates next month,” she says. “It adds to household incomes, which leads to strengthening retail sales and housing loans approvals. These signs against a backdrop of capacity constraints also leads to building inflationary pressures.”

Westpac economist Anthony Thompson says it will also add to wages pressures. “There has been persistent tightness in the labour market, and the prognosis that unemployment could go down even more will add to the upside inflation risk.”

– Mike Preston

 

Business hopes for action on reducing red tape

Business will be hoping to see real action on red tape reduction come out of today’s COAG meeting between the state premiers and the Prime Minister.

National regimes for property securities registers, consumer product safety and business registration are just some of the topics on the agenda.

Reform of Australia’s ports and the states premiers’ plans for a national climate change regime have dominated the airwaves in the lead up to today’s meeting, but increased political tensions as the federal election approaches means real progress is unlikely.

The nation’s political leaders are expected to make an announcement when they emerge from behind closed doors around 3pm today – come to SmartCompany then for an update on the key issues.

– Mike Preston

 

More aggression needed in Asia

Australian SMEs does not fare well in the competitive landscape of Asia, lacking competitiveness and having lower growth prospects than neighbouring countries, according to a new report by UPS Asia Business Monitor.

The survey looked at 1200 SME leaders from around Asia and found China’s SMEs are the most competitive, with 71% of respondents saying they are more competitive than those in their own country.

SMEs from Japan, Hong Kong, Korea, Singapore, Taiwan and India are all seen as being more competitive than Australia. Only 39% of respondents felt that Australian SMEs are more competitive than their own.

Australia was also seen as having lower prospects of economic growth in the next 12 months than six other Asian countries.

Many SMEs in Asia say their best growth prospects lay in the IT industry, but many countries did have their own industry focus.

Best growth prospects for SMEs:

  • Australia: Mining, IT
  • China: Manufacturing, IT
  • Hong Kong: Financial services, retail
  • India: IT, automotive
  • Indonesia: IT, leisure and tourism
  • Japan: IT, automotive
  • Korea: IT, manufacturing
  • Malaysia: Agriculture, forestry and fishing, IT
  • Philippines: IT, business services
  • Singapore: Leisure and tourism, biotechnology, health and pharmaceuticals
  • Taiwan: IT, leisure and tourism
  • Thailand: Manufacturing, automotive

– Amanda Gome

 

One more tick for the global economy

The Federal Court has just struck out a registered design because brochures displaying the product (a vacuum cleaner) had already been published in China by a competitor before the design was registered in Australia.

As a result, reports The Australian Financial Review, the Australian design failed to pass the hurdle of distinctiveness.

It is the first time the new laws – which expanded the territory in which a design may be considered published in Australia to include everywhere – have been taken for a spin.

Meanwhile, the Australian Industry Group is calling for the Federal Government to establish a mechanism to resolve disputes with China over intellectual property infringements as part of its talks on the free trade agreement.

– Amanda Gome

 

Influx of young workers expected

A new temporary visa could result in an influx of workers from low wage countries determined to secure permanent residency. In September, the Federal Government will introduce an 18 month work visa to allow international students, under 30 years old who have graduated, to gain work experience in their field before applying for permanent residency.

In a surprise move, the Government has also decided to introduce a visa for graduates who have no relevant work experience. The academic who first advised the Government on the migration policy, Bob Birrell, has warned in The Australian Financial Review that the visa would need to be closely managed as it could result in a “flood” of people keen to take up the opportunity.

Sounds to us like it could be good news for skill-strapped SMEs.

– Amanda Gome

 

Economic round-up

A massive 60.2% increase in revolving credit commitments drove businesses borrowing up 15.6% in seasonally adjusted terms in February 2007, according to Australian Bureau of Statistics figures released today.

Lease borrowing also increased by a significant 24.1% for the month. By contrast, personal finance commitments rose by just 0.4%.

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