Economy

IR brings left and right into centre… Tax cuts wanted, broadband direction needed, but will budget deliver?… Bank mergers a turnoff… Inner city trends push

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IR brings left and right into centre

The surprise Coalition changes to WorkChoices announced Friday and which came into effect yesterday means there is now very little difference between the IR packages of the two major parties. (See Friday’s briefing.)

A special analysis by VECCI’s head of workplace policy David Gregory for SmartCompany shows that there is no longer any significant difference between the red tape and costs of hiring an employee under the Coalition Government or Labor policy.

“Both Labor and the Coalition now have two different sets of provisions with guaranteed standards that have to be included. There are minor differences, but on the whole the flexibility and options being offered to workers are fairly similar,” Gregory says.

Gregory says the ALP has collective agreements that have to be assessed under Fair Work Australia while the Coalition has introduced a fairness test under the Office of the Employment Advocate – which will be renamed the Workplace Authority. “On the surface there are two frameworks stipulating certain things that agreements must contain.”

He says the Coalition has shifted towards the “ALP” position and that the Coalition shift will negate workplace relations concerns as an election issue. “This will not be the issue for the election that it might have been previously.”

Meanwhile business is stuck in a hiatus, he says. “As of this morning it is no longer possible to lodge AWA agreements and we don’t know when they might be back operating as there is no legislation before Parliament.”

Coalition versus Labor: Who is offering what?

Labor position

Ten legislated National Employment Standards would be required to be included in all employment arrangements:

  • Hours of work.
  • Parental leave (both parents).
  • Requests for flexible work arrangements.
  • Annual leave.
  • Personal/carers leave.
  • Community service leave (unpaid).
  • Public holidays.
  • Workplace information statement.
  • Termination and redundancy standards.
  • Long service leave.

Also included would be:

  • Agreements would be assessed against 10 minimum employment standards that would continue to exist in awards.
  • “Collective agreements will be able to override award entitlements provided the agreement means employees are genuinely better off.”
  • Fair Work Australia to assess agreements within seven days. Also proposed to introduce “good faith bargaining”. Would also only be collective agreement outcomes. No AWAs or other individual agreement options, apart from common law agreements. (Cannot act to override award conditions.)
  • Unfair dismissal access would also be reinstated for all employees with separate six and 12 month qualifying periods applying, depending on size of business.

Coalition position, as amended on Friday

Australian Fair Pay and Condition Standard matters still required to be included in all employment conditions:

  • Hours of work.
  • Minimum rates of pay.
  • Annual leave, including two weeks cashing out option.
  • Personal/carers leave entitlements.
  • Parental leave.

Entitlements to public holidays, notice of termination and long service leave also contained in other parts of the Workplace Relations Act.

The Coalition will also now require all collective agreements, and all individual agreements covering employees earning less than $75,000 a year, to be tested against the list of protected award conditions, including:

  • Penalty rates.
  • Shift/overtime rates.
  • Allowances.
  • Leave loadings.
  • Public holiday entitlements.
  • Rest breaks.
  • Incentive-based payments/bonuses.

These are to be “assessed through a fairness test that will guarantee that entitlements are not traded off without adequate compensation”.

Agreements will still operate from date of lodgement but will be subject to assessment through the fairness test process carried out by the Workplace Authority.

Unfair dismissal access will continue to be limited to employees in businesses employing more than 100 employees, and then only available after a six-month qualifying period.

– Amanda Gome

Good times may get better

The good times are not just set to keep rolling – they are set to significantly improve. In the last few weeks, several surveys have reported that business expectations for growth in sales and profits are up.

Now the Dunn & Bradstreet business expectations survey predicts more good news. Expectations for growth in profits, employment and inventories for the September quarter 2007 is positive for the first time in five quarters. Also expectations for growth in sales and capital investments have taken a strong upswing. 

Better still, factors that have been putting pressure on businesses, including inflation and petrol prices, are beginning to ease.

And if Treasurer Peter Costello wants to gee-up businesses even more, then tomorrow’s budget will give him the opportunity. Almost half of the executives indicate that reducing company tax rates would have a significant positive impact on their business.

In further signs that inflationary pressure is easing, only 50% of executives anticipate higher selling prices in the September quarter than a year earlier. 

– Amanda Gome

Business wants tax cuts – but will the budget deliver?

Tomorrow’s budget will contain money for infrastructure, industry and childcare, but treasurer Peter Costello remains cagey on whether he will deliver the item that most business groups say is at the top of their wish list – tax cuts.

Included in a list of targets for funding (in a budget predicted to maintain a surplus of over $13 billion) are:

  • $1.4 billion over 10 years for industry, including measures to help new business get off the ground, boost exports and establish new productivity centres.
  • Up-front tax rebates for childcare costs that worth up to $8000 a year per family.
  • $19 billion between 2009 and 2014 for land transport infrastructure.
  • $1 billion in new defence spending.

But Costello has refused to confirm or deny whether there will be tax cuts in tomorrow’s budget. He told Channel Nine yesterday that while there were “a lot of things to do” before tax cuts could be delivered, “it’s always Coalition policy to keep the tax burden as low as possible”.

This leaves the door open for the tax cuts most business owners and industry groups are hoping for. Here are the budget priorities for several of Australia’s leading business groups:

Council of Small Business Associations of Australia

  1. COSBOA says the fringe benefits tax system is a complicated and expensive mess. It wants all business meal expenditure, a wider range of commercial vehicles and all salary packaged childcare costs to be exempt from FBT.
  2. Reform the GST inequity that allows consumers to avoid GST on most goods purchased online from overseas but that requires businesses to pay GST on the same items.

Real Estate Institute of Australia

  1. Introduce a new sliding scale under which capital gains tax rates diminish over time, and expand the CGT exemption that applies to small business assets held for more than 15 years.
  2. Improve housing affordability by increasing the first home owner grant from $7000 to at least $14,000 for both new and existing homes and index-link the scheme to the median Australian house price.

Australian Information Industry Association

  1. A national skills and training package to attract more students to the information and communication technology industry and increased funding for universities and schools in that area.
  2. An expansion of the Government’s $1.4 billion industry package to help innovators in the ICT sector learn the skills required to become entrepreneurs.

Australian Industry Group

  1. Reduce rate of tax on incomes between $25,000 and $30,000 from 30% to 15% and commit to meeting targets to reduce the top tax rate from 45% to $40% and the tax rate on incomes between $75,000 and $100,000 to 30%.
  2. Refund the superannuation contributions tax to the superannuation accounts of all low income people and middle income people aged over 50 and increase the co-contribution amount under the superannuation co-contribution scheme from its current 9%.

– Mike Preston

 

Will the budget break the broadband impasse?

Fear of a vicious political campaign by Telstra means tomorrow’s federal budget is unlikely to contain a much-needed announcement on Australia’s broadband future, one of the nation’s leading internet policy experts says.

Telecommunications analyst Paul Budde says the budget presents the perfect opportunity to announce the new funding and strong legislation needed to break the regulatory deadlock that is preventing progress on a national fibre to the node broadband network.

But, he says, Telstra’s clear preparedness to take on the Government in order to get its way on broadband will probably prevent a decision being made.

“There will be no holding Telstra back from them if they don’t like the direction the Government is taking, and that must make them pretty nervous – the last thing they want around the budget is a battle royale with Telstra,” Budde says.

A failure to make a decision will just delay the inevitable, Budde says, with pressure for action on broadband set to intensify as the election approaches. “At some point soon, the Government is going to have to be very brave and confident in its approach on this issue, he says. “If they give in to Telstra, consumers will pay. Not a good thing in an election year.”

Meanwhile, the Australian Competition and Consumer Commission head Graeme Samuel has called on Telstra to make its broadband plan public, The Australian reports today. Telstra last week criticised the ACCC for knocking back an agreement on access prices Telstra had reached with the Government.

– Mike Preston

 

Bank mergers are a customer turn-off

Small and medium businesses are still not happy with their banks and they would like the Big Four banks to keep their hands off regional and other banks.

In the latest East & Partners Index, the Sentiment Score towards business banks fell to 42.1 points (out of 100) thanks to deterioration in the sentiment towards banks reported by smaller businesses with an annual turnover between $1 million to $20 million.

The survey also found that business customers who bank with a non-Big Four bank would prefer their bank to merge or be taken over by a foreign or regional bank rather than one of the domestic Big Four banks.

Businesses with turnover between $5 million and $20 million annually indicated they would be more likely to switch banks if their bank was taken over by a Big Four bank.

Businesses with $1 million to $5 million turnover were less inclined to change banks if their bank was swallowed by a bigger bank, which the study’s authors thought might indicate a lack of attachment to banks generally.

“In many cases, SMEs and middle-market customers have made a strategic choice not to bank with one of the Big Four, so the idea of becoming one of their customers by default does not appeal at all,” East & Partners financial markets analyst Zoran Knezevic says.

In a finding that might make the Bendigo Bank directors feel better about their decision to reject the merger offer from the Bank of Queensland, mergers in the banking sector are generally unpopular with business customers. Two thirds of businesses regard banking industry consolidation in a negative light.

Read about what the banks are doing to win back SME customers by clicking here.

Click here for our checklist – How to change banks.

– Jacqui Walker

 

City living’s tribal pull

From the early 1990s, a new generation of students and Generation-Xers, having postponed marriage, mortgage and children, started to value the proximity of the inner suburbs to the institutions of modern civilisation: the café, the bar, the restaurant, the night club. And – as an added bonus – the workplace was but a short commute.

Now bigger changes loom ahead. The proportion of one-person households is expected to surge this decade, surpassing the number of family households by 2010. In 1991, the number of one-person households was just 24%; by 2010 that number is expected to pass 28%. Today the number of family households is 28% but the figure is falling. It was 41% in 1991.

The inner-city makeover, affected by a new generation with a new perspective on how youth should be lived, changed the value of inner-city property. Warehouses and factories were now viewed as open-plan living spaces; they lent themselves to industrial chic conversions.

To the apparatchiks and the aficionados of inner-city living, civilisation diminishes with distance from the city centre.

Eventually the sublime magic of demographic tension would multiply the value of that property. And herein lies the reason why the baby boomer tribe still believes in the might and the power of property investment.

The god of capital appreciation has smiled upon their household, and upon the households of their friends and of their extended family. Every person within the boomer circle has been touched by the miracle of capital growth.

Radical concepts such as childless unions, sequential monogamy, contract relationships, and same-sex couples are eroding the raison d’être for the very existence of middle suburbia and especially outer suburbia.

There will always be a demand for the type of housing that best shelters the traditional nuclear family. Kids need space. Parents prefer kids to have space. Parents and kids get along together best when there is space. The separate house on a separate block of land delivers that lifestyle. Not everyone in the future will race off to the funky inner-city, dress in black, sip latte, and sneer at the ’burbs – as appealing as this lifestyle is.

But whatever proportion of future Australians do choose “the suburban way of life”, it will be, it must be, a lesser proportion than that which exists today. As a consequence and over time, there must therefore be a differential expressed in the value of dwellings demanded by the city’s different tribes.

But where are the signs (beyond the current Xer-based baby blip) that tomorrow’s youth will forsake the material and take up the maternal? Boomers did it. Their parents did it. Xers delayed it. Generation-Ys, I think, will take their lead from the early behaviour of Xs and trade kids for career, property for travel, security for experiences and relationships.

And again, if I am right in this assessment, then the price tension applied to middle and outer suburbia in the future must be less than that which will apply to the geography that delivers proximity to the grooviest institutions of out city-obsessed culture.

The equivalent institutions that previously determined suburban property value were schools, public transport, shops, recreations facilities and services.

Today and tomorrow the tenets of successful residential property location in the city will be access to the city centre and to all the accoutrement that separates the childless from the rest. This accoutrement litters the inner city.

If, as I expect, the inner-city tribe grows faster than other tribes, then the value of inner-city tribal housing will appreciate faster than the housing of others. This isn’t rocket science; it’s simply a matter of reading the shifting sands of Australian social culture and values.

– Bernard Salt, partner at KPMG

This is an edited version of a feature that first appeared in The Eureka Report.

 

WA sets green energy target

The Western Australian Government has set a 20% renewable energy target for the state’s electricity supply by 2025, The Australian Financial Review reports today.

WA Premier Alan Carpenter also announced legislation would be introduced to require all new houses to have water and energy efficient devices, funding provided for free energy efficiency audits and a $36.5 low emission energy development fund.

Western Australian treasurer Eric Ripper is under pressure to return some of proceeds from the state’s mining bonanza to business in the form of tax cuts when he brings down the state’s budget on Thursday. The budget is expected to achieve a record $2 billion surplus.

– Mike Preston

 

Economic round up

New job ads grew a strong 3.5% in April, according to ANZ Job Ad data released today.

ANZ economist Tony Pearson says the strong number “could feed into higher wages” given the capacity constraints the Australian economy is currently experiencing.

The total number of ads was 27% more than in the April 2006 report.

The Australian construction industry is contracting, according to The Australian Industry Group – Housing Industry Association Performance of Construction Index, which fell 3.2 points to 47.9 (below the key 50.0 points level separating expansion from contraction). The deterioration reflected weaker commercial and apartment building activity.

The S&P/ASX 200 is down 0.1% on yesterday’s close to 6301.7 at 12.28pm, while the Australian dollar is trading at US82.47 cents, up significantly from the US82.27 cent Sydney closing price on Monday.

– Mike Preston

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