Economy

Faster broadband a winner… Port expansion’s long-term gain… Federal WorkCover to expand?… Coles suppliers nervous… Perth property slows… Apple TV and PS3… Economy roundup

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Faster, better broadband a winner

Labor’s plan to deliver faster broadband to nearly all Australians will be a winner, according to independent telecommunications analysts.

The plan announced yesterday will give business and personal users access to high speed bandwidth up to 40 times faster than current broadband speeds.

A fibre optic broadband network would connect to every town and suburb, and from exchanges to “nodes”, the familiar waist-high Telstra pillars on street corners. Existing copper wires would carry signals between nodes and houses. Labor plans to sell $2.7 billion of Telstra shares to help build the $4.7 billion broadband network.

Paul Budde, an independent telecommunications analyst, says he has just returned from the Netherlands, which is three to four years ahead of Australia in installing the broadband speeds and functionality that Labor is proposing.

Businesses there spend a lot more time talking to customers and suppliers by video rather than traveling to see them. “When you have high-quality video, it changes everything. At the moment businesses don’t really use video conferencing because you don’t want a jerky picture and sound that drops out when you talk to customers. But the telepresenting, as it is called, is so much better – you are looking your customer in the eye.”

There will also be lots of opportunities for entrepreneurs. “You will see health care change as people can be released from hospital earlier and monitored in their homes by video. People can connect devices to electricity meters that measures energy use. There are a whole lot of new activities that stem from faster broadband and it is the smaller companies that take up those opportunities,” Budde says.

Analyst Stuart Corner, of ITWire, says Labor’s proposal is the answer to myriad calls for change – and a far better solution than the coalition’s piecemeal approach to broadband. “The proposal means 98% of the population would access 12 megabytes – that is much faster than most people have now – although we still won’t know what the service will cost business or the personal user.”

Budde dismisses the critics who say that Labor’s proposal will be quickly superseded by new technology. “If we don’t start now, when do we? It is like roads. You start building the infrastructure and then get better by replacing and upgrading the fibre and increasing the amount of fibre in the network and rolling it out deeper and closer to homes – this doesn’t happen overnight.”

Increasingly, small business is going to need access to reasonably high bandwidth just to operate simple email traffic. PDFs, video and spreadsheets all chew up bandwidth.”

The coalition has slammed the Labor proposal as an irresponsible use of money from the Future Fund. But it appears few voters will care, judging from blogs sent in to major newspapers, which are mostly in favor of the plan.

Here is an email from Andrew from Perth posted to The Australian:

“Our record on broadband is nothing to be proud of and a plan to get us up to the standards enjoyed in many of the countries we compete with is just plain common sense.

“Picture this: my mother works from home for my company in an area 35km outside of Perth. Burdened with nothing more than a 56k dial-up connection, her ability to do her job has been severely curtailed for years. Today she and those in the same area got access to ADSL for the first time. That’s just woeful.”

Your say: Will Labor’s plan help your business? How? Is it a move in the right direction?

Email: [email protected]

– Amanda Gome

Melbourne Port expansion: short term pain, long term gain for SMEs

Importers and exporters will foot a substantial portion of the $700 million-plus bill for the proposed deepening of Melbourne Port through extra cargo charges. But they will benefit from quicker and cheaper shipping in the long term, Port of Melbourne Corporation chief executive Stephen Bradford says.

The corporation yesterday released a supplementary environmental impact report, which found the deepening would not cause significant environmental damage. The 1400 page, $100 million report was commissioned after an initial environmental impact report was deemed inadequate.

Also released yesterday was a PricewaterhouseCoopers report commissioned by the Victorian Government. It says the improving the port of Melbourne could benefit the Australian economy by $1.7 billion over 20 years. Observers say the reports mean the project will almost certainly go ahead.

The Victorian Government has refused to say how much of the project’s cost it will bear, but Bradford has confirmed that port users will pay an additional $25–30 per cargo container to fund the works, bringing the total cost per container to about $70.

For many SMEs, that cost will be felt through higher freight forwarding charges, Bradford says. But completion of the deepening would see importers and exporters benefit as increased shipping capacity drives costs down and improves timeliness, he says.

VECCI spokesman Chris James says the project would build Australian businesses by lowering costs for importers and exporters. But he says there may be some disruption to businesses that operate on or around Port Phillip, such as diving operators and related tourism businesses.

The Port of Melbourne handles 38% of Australia’s shipping and is the nation’s busiest port. The Victorian and Federal Governments will make a final decision on the project after environmental review processes are completed in October 2007.

– Mike Preston

Federal WorkCover scheme open for business

The scope of Comcare, the Federal Government’s workers compensation scheme, could be dramatically extended after the High Court confirmed the constitutional validity of the scheme’s expansion yesterday.

The decision confirmed the Comcare scheme is open to businesses that compete against current or former government authorities, mainly large businesses such as John Holland, National Australia Bank and Linfox, as well as government authorities themselves.

But yesterday’s High Court ruling that the Comcare scheme is underpinned by the corporations power in the Constitution means the scheme could potentially be open to all incorporated businesses.

The case was commenced by the Victorian WorkCover Authority after Optus sought to leave the state scheme and self-insure under Comcare, taking its $1.4 million in annual premium payments with it.

State premiers and business groups have expressed concerns that many businesses, especially SMEs, in state WorkCover schemes will have to payer higher premiums if larger businesses shift to Comcare.

– Mike Preston

Coles suppliers nervous

It now looks extremely likely that retail giant Coles Group will be broken up into three lots for sale: Discount department store Target as one; stationery and business supplies group Officeworks as another; and Coles supermarkets, liquor division and Kmart general merchandise outlets as the third.

This could be good news for businesses doing business with the retail monolith, as the market power of the three businesses is split. But it depends who buys each lot says Andrew Cavanagh, program director at the Australian Centre for Retail Studies at Monash University.

“If UK retailer Tesco buys Coles supermarkets and Kmart, then suppliers might be in for a bit of shock. If they think Woolworths or Coles are tough to deal with, imagine dealing with someone Tesco’s size.”

Local grocery suppliers, in particular, would be truly competing in a global market. Tesco has established relationships with suppliers worldwide and enormous buying power. Cavanagh says there are plenty of opportunities for creating efficiencies in Kmart and Coles and life for suppliers is likely to be tough as they get used to the new rules, whoever is in charge.

Retailer Solomon Lew has been named as a potential buyer for Target, and New Zealand’s Warehouse Group may be interested in Officeworks.

Coles’ board is expected to formally approve a sale process for the three businesses simultaneously at a meeting tomorrow.

– Jacqui Walker

Perth property slows

Last year Perth delivered investors the equivalent of five years’ worth of annual returns in just 12 months. This year we can expect growth to move to more sustainable long-term rates in all but the most exclusive areas.

After outperforming every property market in the country, Perth’s price growth has eased to more sustainable levels. In the year to December 2006, property prices grew at 36.9%, but between the September and December quarter growth slowed to 1.7%.

This will be year of consolidation in most Perth suburbs, with only a few select regions primed to increase in value. Supply will again be a critical issue, with tightly held areas of prime real estate ready to grow by 10–15%. The mortgage belt will continue to suffer, with negative growth a real possibility. Capital growth can still be had but investors and speculators will need to be more careful than ever before.

Residential property investors will be watching two key developments. North and South Fremantle will benefit from Landcorp’s $400 million mixed-use redevelopment of the Leighton marshalling yard. The joint venture with Mirvac and Multiplex will revitalise the formerly derelict area between the rail link and the beach.

Further south, Australand’s $900-million mixed-use Port Coogee development (18 kilometres from the city) will kick-start prices in White Gum Valley, Beaconsfield, Hamilton Hill and Spearwood.

Currently, about 30% of property buyers in Perth are investors. It’s crucial that Perth can either maintain or grow this level of property investment for the market to continue moving. Rents in Perth have been too low for too long. I expect that the strong demand for rents will continue and help push rents up by about 15% as the purchasing pressures of 2006 transfer to the rental market.

– Gavin Hegney, of the Hegney Property Group, www.hegney.com.au. This article first published in Eureka Report, www.eurekareport.com.au.

IT News: Apply TV Today, PlayStation 3 tomorrow

The long awaited Apple TV has been released in the United States, Britain and Australia today. You can have one in three to five business days. IT Wire writes that the Apple TV launch comes with little fanfare, disappointing those who were expecting a slew of content agreement announcements to coincide with its release.

The 40G device, costing $A449, connects to a widescreen TV for playback of content stored in iTunes on a Mac or PC. Users outside the US have far less choice in the type of content they can download from their local iTunes store to watch using the Apple TV.

Tomorrow Sony releases PlayStation 3 consoles in Europe and Australia. Considering the PlayStation 3 will also have a video download service in some countries, the timing of the Apple TV’s release could be seen as an attempt to spoil Sony’s party.

– Jacqui Walker

Economy round-up

Economic opinion is firming that the Reserve Bank will increase interest rates when it next meets on April 3, after yesterday’s Westpac/Melbourne Institute leading index of economic activity predicted strong economic growth over the next three to nine months.

The Australian dollar is strong, at US80.67¢ at 1230 pm, up further on last night’s Sydney close of US80.12¢.

The S&P/ASX 200 has responded strongly to last night’s decision by the US Federal Reserve not to lift interest rates and is trading up 1.24% to sit at 5934.4 points at 12.30 pm.

A survey of 300 businesses by Mercer Human Resource Consulting shows salaries had risen by 4.2% over the past 12 months, a steady increase in line with previous years. Wage earners who have been in their jobs for more than one year did even better, at 4.5%.

And the number of public servants across all Australian governments increased to 1,675,300 in November 2006, up 3.3% on the previous year, Australia Bureau of Statistics figures released today show. Public servant numbers grew fastest at the federal level, at 4.2%.

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