Red tape review lifts hopes… No, it’s not a bear market… Defence industry SMEs boosted… IT news… Small-cap moves… Economic roundup


New hope on business red tape


Business groups hope that a new Productivity Commission report a new regime of annual industry-specific red tape reviews by the commission, to commence on April 1, will signal the beginning of real action to cut red tape.


The report on joint state and federal national reform agenda says reduction of the red tape burden on business could save the Australian economy up to $8 billion a year.


“Now it is time for action”, says Mark Triffit, a spokesman for the Business Council of Australia. “Everyone is in furious agreement that red tape is a problem and that there are solutions; the missing piece of the puzzle is a timetable for action and action itself. All the commitments in the world won’t mean anything world unless governments follow through.”


Occupational health and safety, payroll tax and other state taxes are the key areas where excessive regulation is holding businesses back, Triffit says.


Tony Steven, the chief executive of the Council of Small Business of Australia, says a proliferation of new legislation regulating areas such as privacy, email spam, financial services and the GST mean businesses face more red tape that ever.


Steven says governments should focus on ways to make it easier for business to comply with regulation. “There needs also to be a concerted push towards enabling small business to use technology to deal with government more efficiently; for example, a single portal to deal with Government would be a big help.”


Alan Moran, director of the deregulation unit at the Institute of Public Affairs, says there has been a massive increase in business costs of complying with social regulation in relation to the environment, occupational health and safety and consumer protection. “Business red tape in these areas has been examined and reviewed a lot, but on balance it has increased over the past 10 years; we have actually gone backwards,” he says.


The answer is stronger political will, not yet another review, Moran says. “Progress in reducing business red tape will only be made when governments begin to resist the temptation to introduce new laws every time some unfortunate event creates public pressure to do so.”


– Mike Preston


A correction, not a bear market


The important thing to know about the sharemarket correction that began yesterday is that it kicked off in China after an announcement that a special task force was being set up within the Securities Regulatory Commission to take action against illegal fund flows into the “A” sharemarket in Shanghai.


Chinese A shares fell 8.8% after the announcement, which spooked overseas markets and then sent the Dow Jones briefly into free-fall before it closed 3% lower. The local market followed suit and there was some panic and pandemonium. CommSec’s system crashed at one stage.


The Chinese A sharemarket is to the world sharemarket what the town of Corryong is to the rest of Australia: very small, but with an important weather station.


But the fact that global sharemarkets have gone into a funk because the Chinese authorities want to get rid of the crooks infesting A shares is nothing short of bizarre. You would think this is a good thing.


There is also a lot of talk that high February CPI figure in China will lead to further monetary tightening from the Peoples’ Bank of China, since what they have been doing already clearly is not working.


As Michael Knox of ABN-Amro Morgans told “Before this correction, the Chinese Shanghai Share Indexes had risen by early this week to a level some three times as high as in early 2006. It was clear that they were likely to fall. Now that fall has begun it is likely that we’ll see a technical correction in Chinese stocks of 25–30% over the next six weeks.”


A 30% correction is no laughing matter, of course, but I think two things flow from this peculiar cause of yesterday’s correction:


  • Global markets were looking for a reason, any reason, to correct; and
  • Nothing is really wrong.


This tells me it is likely to be shallower than the 12%, four-month number that interrupted the commodities fun between May and August last year, and that it is yet another buying opportunity.


Profits are rising by 20% or more, unemployment is at 30-year lows, inflation is not a problem, interest rates have stopped rising, business confidence is very strong and, notwithstanding the slump Shanghai stocks, the Chinese economy remains fundamentally strong.


In this situation the only problem for investors is finding stocks that are not overpriced. The companies themselves and the world in which they operate are fine.


The last thing you should be doing today is selling quality companies and incurring costs; but nor should you be buying more until the dust settles.


– Alan Kohler, publisher Eureka Report (


Boost for defence industry SMEs


SMEs in Australia’s defense industry received a boost today with Defence Minister Brendan Nelson unveiling a new policy that includes measures to assist SMEs compete internationally for major projects.


The policy, which is similar to the draft policy released last November, affects nearly 1000 companies. Prospective suppliers for large projects will be required to examine the scope for involvement by Australian firms when bidding for work.


The biggest benefit of the policy, according to Mike Turner, head of the Australian Industry & Defence Network, is that SMEs will have prior knowledge of projects to assist them to make decisions about the equipment they buy and the staff they need.


SMEs can also register their expertise and current capabilities on the Industry Capability Network, which will be viewed by large international companies.


“Ten years ago there was no policy to help SMEs,” Turner says. “This is a total blessing, although we would have liked this announcement a few months earlier, as we expected.”


– Amanda Gome


IT news


One-third of US net users have gone wireless, and exorbitant Telstra pricing is choking Australian wireless broadband, writes IT newsletter ITWire. Telstra’s much-lauded NextG network speeds are phenomenal (if patchy) but so are the prices – much higher than competitor Hutchison’s 3 network. Telstra is relegating Australia to the slow lane: we can forget mobile data services. It also helps Telstra kill off any possible competition from VoIP via wireless broadband.


Small-cap moves


There was more bad news from Housewares International yesterday when it reported a loss of $29.1 million, a $41 million decline in net profits for the December half of 2006. The announcement follows last week’s decision by McPherson’s not to buy Housewares International’s homewares business.


Salmon grower Tassal Group yesterday reported a doubling in half-yearly net profit to $13 million. It announced plans to cut costs and focus on marketing into Asia.


And retailer Harvey Norman reported a 37% profit increase for the six months to December 31 to $180.5 million, driven by strong sales and good profits from its franchising operations.


Economic roundup


The Australian stockmarket has recovered slightly after yesterday’s China-induced fall. The S&P/ASX200 fluctuated this morning and at midday was 5857.8, up 0.43% on yesterday’s close. The Australian dollar is also slightly, to US78.75¢.


A strong – 3% – January increase in existing home sales in the US, the highest since June last year, was offset by a 7.5% drop in durable goods orders in the same month.


Private new capital expenditure in Australia for 2006-07 is expected to be $74.4 million, according to figures released today. The result, up 5.2% on the last estimate, is weaker than market expectations.


The improvement will come off a low base. New private capital spending for the December 2006 quarter was down 1%, seasonally adjusted. Estimates for equipment, plant and machinery decreased by 1.9%, representing the third consecutive quarterly fall. Building and structure spending estimates increased by 3.5%.


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