Interest rates to stay on hold
The Reserve Bank of Australia announced this morning that it has decided to keep the standard cash interest rate unchanged at 6.25%. The decision met with expectations that the RBA would take no action on rates after consumer price index data released last week showed inflationary pressures were easing.
St George Bank head of economic research Steven Milch predicts there won’t be any rate rise this year, although he predicts the rate is more likely to go up than down in early 2008.
A wage breakout remains the key risk to inflation this year, Milch says.
– Mike Preston
Luke warm reaction to industry package
Poor John Howard. Earlier this week it looked like perfect timing for the release of the $1.4 billion industry package which included a suite of programs for small and medium businesses.
He must have figured the fuss over Labor’s IR policies would have died down by now and the Coalition could take their turn in the spotlight promoting small business.
But it really went down like a lead balloon, with the mainstream media just not that interested in small and medium business. Instead Labor’s deputy, Julia Gillard, further irritated business with threats to business not to launch an advertising campaign opposing WorkChoices.
The major newspapers and online sites barely gave it a passing glance. Industry commentators were also lukewarm.
Here is a round up of what they said:
Tony Stevens, from COSBOA, says the statement had a lot to do with export and trade, and also initiatives aimed at medium sized companies, which was welcome.
Peter Hendy, chief executive of the Australian Chamber of Commerce and Industry says the plan got the balance right but R&D concessions should be extended further.
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Craig James, Commonwealth Securities, says the new package was unlikely to substantially boost prospects for industry.
Labor’s Kim Carr: “You would have thought after all this time they would have produced a document with a little more vision about what the 21st century has in store.”
– Amanda Gome
Vic budget delivers tax, WorkCover premium cuts to businesses
Business has won close to $1.5 billion in tax concessions and industry support from the Victorian budget delivered by the state’s Treasurer John Brumby last night.
Business groups this morning welcomed the spending, which VECCI chief executive Neil Coulson says “will help make Victoria an even more attractive place to live, work and invest”.
The biggest ticket items for business are a 10% cut in WorkCover premiums, worth $668 million over four years, and a cut in land tax rates worth $508 million over four years, with the biggest 0.5% cut applying to properties valued at $2.7 million or more.
The budget also includes a previously announced cut in payroll tax from 5.15% to 5.05% to apply from 1 January 2007.
Other business-friendly measures include:
- A cut in stamp duty from 4% to 2.5% on new vehicles worth between $35,000 and $57,009.
- $66 million over four years to support major events and tourism.
- $9.9 million to expand export assistance programs.
- $8.3 million to attract skilled migrants to high-demand areas.
Infrastructure received the biggest boost in the budget, with capital work to schools and hospitals worth more than $1 billion, and $900 million in new funding for Victoria’s public transport network.
The budget, Brumby’s 11th, delivers a $324 million operating surplus but will increase net government debt from $3 billion at the end of the 2007 financial year to a predicted $7.9 billion by June 2011. It predicts the Victorian economy will grow at a healthy 3.25% over 2007-2008, up from the 2.75% growth rate expected to be achieved in the current financial year.
The 10% cut in WorkCover premiums, which will save small employers an average of $625 per year, was a highlight for businesses, VECCI’s Coulson says.
“The cut in WorkCover premiums will help the overwhelming majority of businesses, particularly those affected by the continuing drought, a relatively high Australian dollar and recent interest rate rises.”
The budget will be viewed positively by Victoria’s large manufacturing sector, according to Australian Industry Group chief economist Tony Pensabene. “This is a sound and prudent state budget that improves competitiveness in Victoria, builds new industrial capacity and invests in future productivity,” he says.
– Mike Preston
I spy with my government eye…
The mega portal where government knows everything your business does is coming to you. In yesterday’s industry statement, the Federal Government committed almost $90 million over 10 years to create a new online registration system so that business can register their business name and get an ABN online day or night.
A welcome move; but look at who is involved – the tax office and the corporate watch dog ASIC. It is the beginning of the one-stop shop where business has to deal with one government through one giant portal.
And with that comes fears of privacy breaches. Already government partners have access to a vast range of online resources, so will it make much of a difference?
Tony Stevens, chief at small business lobby group COSBOA, thinks so: “Imagine one website to do everything.” But he also points out that most people are unaware of the powers that government already has. “The one-stop shop might actually draw people’s attention to it.”
– Amanda Gome
Labor under increasing pressure on IR
As the business backlash to Labor’s IR policy grows, deputy Labor leader Julia Gillard spent the morning trying to quell fears in the mining sector that Labor’s policies would lead to more industrial action. And Labor leader Kevin Rudd has said he will keep consulting with business.
The criticism of the policies is coming from every business group, representing big and small business. It is looking more likely that at least some business groups will fund an advertising campaign against Labor in the lead up the election.
– Jacqui Walker
Governments consider skilled migration changes
Businesses could be required to meet a range of potentially expensive requirements before hiring workers on skilled migrant visas under a new proposal being considered by the Federal Government and by the states.
Under the proposal, obtained by The Australian, business could be required to:
- Hire local apprentices or contribute money to training funds before importing workers from overseas.
- Advertise a job vacancy in Australia for 28 days before filling it with a foreign worker.
- Provide information to prospective foreign employees about the pay and conditions under which they will work in their first language.
The Council of Australian Governments, which commissioned the proposal, will announce its recommendations on reform of the skilled migration scheme later this year.
Retail business selling for big dollars: PWC report
Retail businesses are selling to private equity for record prices, with some businesses attracting prices at 10 times annual earnings, according to a new report by PricewaterhouseCoopers.
Merger and acquisition activity in the consumer goods sector totalled $6 billion over the past two years, with more than $1.5 billion of that activity driven by private equity, the report reveals.
PricewaterhouseCoopers partner Greg Keys told The Australian Financial Review that he believes prices are reaching the limit of what the market will pay. “The choice retailers have is whether to maximise value in the short term through a full or partial sale of shares in the business or to prepare strategies to prosper in an even more competitive marketplace,” Keys says.
News Corporation bid for the Wall Street Journal
Rupert Murdoch’s media empire News Corp launched a $US5 billion takeover bid today for the US publishing firm Dow Jones, which owns The Wall Street Journal newspaper.
Linfox on spending spree
Lindsay Fox’s transport group Linfox is on the acquisition trail. It has acquired New Zealand-based logistics company Provincial Freightlines for an undisclosed price. The deal will result in a doubling of Linfox’s New Zealand turnover, to around $A170 million.
Michael Byrne, the CEO of Linfox Logistics, told The Age the group intends to make an acquisition in Australia and a third elsewhere. Linfox Logistics boasts revenue of around $A1.7 billion.
Economic round up
The market has responded positively to this morning’s announcement that interest rates will stay put, the S&P/ASX 200 picking up 1.1% to 6212.8 at midday. Foreign exchange traders were understandably less enthused, the Australian dollar dropping to US82.52 cents from yesterday’s Sydney close of US82.90 cents.
The Department of Employment and Workplace Relations skilled vacancy index dropped by 2.2% in April, suggesting wage pressures will continue to be a concern for business and something the Reserve Bank will need to keep an eye on.
New South Wales experienced the biggest drop in vacancies, down 4.9%, followed by Victoria (4.1%) and WA (3.8%). There were 13.4% less jobs for available for medical and science technical officers, 9.7% less for chefs and 9.1% less for building and engineering associates.