Category: Business

The Reserve Bank governor says Australia’s economy has passed its low point but faces a “bumpy path ahead”, with the Federal Government best placed to support the recovery.

In an annual speech to the Anika Foundation, Philip Lowe pointed to last week’s June jobs numbers as evidence that “we have now turned the corner” economically.

“In June, hours worked increased by 4 per cent and the number of employed people rose by 210,000,” he said.

“Notwithstanding this turnaround, the path ahead is expected to be bumpy and there are some major crosscurrents in the labour market at the moment.”

Dr Lowe warned one of those bumps was feedback from many businesses, particularly in construction and professional services, who said they were only able to hold on to their employees because they had an existing pipeline of work.

“As new orders have declined, this pipeline is drying up,” he observed.

“If it is not replaced soon, hours worked in these businesses will decline further, just at the same time that other parts of the economy are coming back to life.”

The Reserve Bank boss said continued government support, such as the Federal Government’s JobKeeper and JobSeeker programs, which were today extended into 2021 in a scaled-back form, would be necessary to help the economy recover.

He said the Government was exceptionally well placed to provide this continued support.

“The Australian Government is able to finance itself in the bond market, and it can do so on very favourable terms,” Dr Lowe said.

“There is strong demand for government debt and the Australian government can borrow for five years at just 0.4 per cent and for 10 years at just 0.9 per cent.

“These are the lowest borrowing costs since Federation.”

Not only are interest rates low, but Dr Lowe said Australia entered the pandemic with very low public debt relative to other nations.

“Debt across all levels of government in Australia, relative to the size of our economy, is much lower than in many other countries and it is likely to remain so,” he explained.

“So the public balance sheet is well placed to smooth out the shock to private incomes and support the economy through the pandemic.”

In that context, Dr Lowe today categorically ruled out any direct central bank financing of the Federal Government’s spending, as suggested by Modern Monetary Theory (MMT).

MMT attacks the obsession with government deficits and debt, and is gaining traction at a time when both are rising fast. Gareth Hutchens explains what MMT is, where it comes from and what its critics say.

“Monetary financing of fiscal policy is not an option under consideration in Australia, nor does it need to be,” he told the webinar audience.

“The message here is that somebody always pays.

“It certainly is possible for the central bank to change when and how the spending is paid for, but it is not possible to put aside the Government’s budget constraint permanently.

“Where countries have, in the past, sought to put aside this constraint, the result has been high inflation.”

Dr Lowe again downplayed the possibility of interest rates being cut much further from their current record low of 0.25 per cent.

“There has been no change to the board’s view that negative interest rates in Australia are extraordinarily unlikely,” he told an audience of business economists, many of whom work for the banking sector.

“Our reading of the international evidence is that the main potential benefit from negative rates is downward pressure on the exchange rate.

“But negative interest rates come with costs too. They can cause stresses in the financial system that are unhelpful for the supply of credit.

“They can also encourage people to save more, rather than spend more, so they can be counter-productive from that perspective too.

“So this is not a direction we need to head in.”abc news

Abdullah Kiğılı, Turkish businessman and the owner of a well-known Turkish clothing brand, has backed away from earlier remarks complaining about the state of Turkey’s economy, the Diken news website reported on Monday.

In an interview with the pro-government Hürriyet daily, Kiğılı said his earlier comment of “We have never seen a bigger crisis” was made some four months ago and that his views have changed.

“In 100 days, the sector has seen things that neither me nor anyone else would have dared to imagine,” Kiğılı said. “Interest on bank loans has dropped as promised, and inflation has been going down.”

The prominent retailer had given an interview to the Capital magazine that was published in December in which he had predicted that the retail sector had entered a most difficult period and that half the men’s clothing brands as well as 5 percent of the stores in all shopping malls would go out business.

“Some of my comments were taken out of context,” the businessman told Hürriyet. “Besides, it was an assessment that I had made months ago.”

Adelaide is set to experience “goldilocks conditions” for property prices in the next three years according to a new report, while another forecaster is predicting a slower South Australian economy.

BIS Oxford Economics’ Residential Property Prospects 2019-2022 report has predicted the median property price in Adelaide will hit $550,000 in three years — up from $495,000.

It is expected to have the highest property growth behind Brisbane, which is tipped to have a 20 per cent increase in the next three years.

In Adelaide, the predicted 11 per cent jump has been put down to moderate population growth and a steady supply of housing.

BIS Oxford Economics associate director Angie Zigomanis said the SA property market would have “goldilocks conditions” because “everything is moderate and nothing is extreme”.

“We see Adelaide as a ‘steady as she goes’ market — it’s got fairly moderate population growth,” he said.

“It hasn’t been experiencing an oversupply, like we’ve seen in places like Brisbane and Perth, or a recent undersupply, like in Sydney and Melbourne.

“In the meantime, we think there will be some upside from the point of view of APRA (Australian Prudential Regulation Authority) conditions being removed from some of the bank lenders.

“This will make it easier for some potential borrowers to take on a loan and purchase a property.”

Throughout the country, Brisbane was tipped to have the highest growth in the report, followed by Adelaide, Canberra (10 per cent) and Darwin, Perth and Melbourne (all 7 per cent).

The report stated that while a “weak Queensland economy and high level of dwelling supply” had dampened price growth in Brisbane, affordability, easing credit conditions and lower interest rates could be a “catalyst” for price growth.

It has predicted much of the growth would be concentrated toward the end of the three-year period.

Sydney and Hobart were tipped to have 6 and 4 per cent growth respectively.

The report predicted more stability in the Sydney market after an 18 per cent decline in the two years to June 2019 and slower growth in Hobart, which saw a median house price growth of 36 per cent in the three years to June 2018.

It comes as Deloitte Access Economics’ latest business report stated that South Australia’s economy will be slowing down.

“The SA economy has performed relatively well of late, burning the naysayers as it received tailwinds from some key positives,” the report stated.

“The low Australian dollar, low interest rates and strong global growth supported the state’s strengths in farming, manufacturing and tourism, while growing spending by governments also contributed to the ongoing growth.

“Housing construction is on the back foot and, although taxpayer spending support for growth remains high, it isn’t rising at the rate that it was.”

The report stated that South Australia has a $2 billion pipeline for infrastructure spending and $104 million to push housing constructions.

Property Council SA executive director Daniel Gannon said changes to land tax announced in last month’s State Budget could have a “devastating” impact on the economy.

“We think that they’ll trigger a land tax tidal wave across the state,” he told the ABC.

“We think mum and dad investors, but also institutional investors, could be hit in a pretty big way, which will have a much bigger [flow-on] impact on the economy.

“There’s a number of stings in this particular tail because this time next year, we’ll have the increase to council rates, to levies, to charges as a direct result of the statewide re-evaluation and then the changes to land tax aggregation will also kick in.

“What we’re saying to the Government is simple — we want a fair tax system in South Australia and a fair system that doesn’t disincentivise investors in the market.

“But also a system that doesn’t start eroding the nest egg of property superannuates across South Australia.”

The State Government’s changes will regain $40 million in land tax, under a new way of calculating the charge.

It is designed to close a loophole that allows property investors to pay less tax. with .abc.net.au/

Eight hundred eighty-five private companies have been transferred to Turkey’s Savings Deposit Insurance Fund (TMSF) since a 2016 failed coup due to their alleged affiliation with the Gülen movement, according to the Dünya news website.

Turkey accuses the movement of orchestrating the abortive putsch, although it strongly denies any involvement.

In addition to these companies, valued at close to TL 60 billion ($10.5 billion), the TMSF seized the shares of 123 companies and the properties of 108 individuals.

These companies, shares and individual properties are now controlled by trustees appointed by the TMSF.

Among these companies, Boydak, İpek and Aydınlı were the largest with some 20,000 employees.

Jailed businessmen Hacı Boydak and Memduh Boydak, former board members and the owners of Boydak Holding, were given lengthy prison sentences on charges of Gülen links in July 2018.

Akın İpek, the founder of İpek Holding, is living in the UK, which recently denied a request from Turkey for extradition.

Ratings agency Fitch downgraded Turkey’s sovereign rating to “BB-“ on Friday, saying the dismissal of its central bank governor heightens doubts over the authorities’ tolerance for a period of sustained below-trend growth, Reuters reported.

Governor Murat Çetinkaya was sacked on July 6 and President Recep Tayyip Erdoğan said on Wednesday he had dismissed him because Çetinkaya failed to follow instructions on interest rates and the bank had not properly fulfilled its role.

Fitch, which lowered Turkey’s rating from “BB” with a negative outlook, said Çetinkaya’s removal also highlights a deterioration in institutional independence and economic policy coherence and credibility.

It said the move “risks damaging already weak domestic confidence (evidenced by rising dollarisation), jeopardising the inflow of foreign capital needed to meet Turkey’s large external financing requirement and worsening economic outcomes.”

Fitch said the dismissal also added to uncertainties over the prospects for structural reforms and management of the public sector finances.

Over the past 20 years a yawning gap has emerged between the cost of living and our sagging standard of living as the prices of many of the goods and services we ‘need’ have risen way in excess of the prices for our discretionary ‘wants’.

It explains why many Australians feel poorer even though wages have risen over that period a little more than the official consumer price index which measures inflation.

Fidelity International’s asset management specialist Anthony Doyle has tracked the price movements in ‘needs’ versus ‘wants’ since 2000, based on the sub-categories within the consumer price index.

While the official CPI has gone up 57 per cent, the prices of, for example, secondary and tertiary education, healthcare, childcare, insurance, housing and most utilities have increased significantly more than the CPI.

Even the cost of food has risen faster than the CPI over the past 20 years.

Doyle says the compilation of a true cost-of-living index is just too difficult to do for statistical agencies because different people buy different things. He argues that we can get an understanding of the price pressures households face by looking at the underlying sub-categories of the CPI.

“So we have this official CPI inflation measure which is the determinant of how the Reserve Bankacts on monetary policy – (in order to achieve) its  main goal of keeping within its 2-3 per cent inflation target.

“But if you think about the real costs of life. The cost of some these components (of the CPI) have grown materially over the course of 20 years,” Doyle says.

Since 2000, while the CPI has risen 57 per cent, the cost of hospital and medical services are up 195 per cent, preschool and primary education has increased almost 160 per cent while the cost of electricity has galloped ahead by 194 per cent.

Against this wages have gone up 78 per cent over this period.

Thus it is becoming increasingly difficult for many Australians to retain their standard of living or increase their savings.

“These are 20-year long-term trends and I can’t see why it would reverse,” says Doyle, who also argues that the implications for Australian investors are significant.

The RBA’s rationale is that this will stimulate businesses to invest, improve unemployment, increase consumer demand and raise prices.

“With the RBA cutting interest rates to all-time lows, it is becoming increasingly difficult to generate returns that will keep in line with some of these components that are rising materially,” Dolye says.

So there is now increasing pressure on households to invest in higher yielding investments.

So many Australians and particularly older people that are living off investment income are being pushed, by necessity, into riskier higher yielding asset classes – particularly equities and property. theage-Elizabeth Knight

Twelve per cent of Australian properties were resold at a loss — compared to what the sellers had paid for them — in the first three months of 2019.

It was the highest level of loss-making sales in six years and another sign of weaker property market conditions, according to the latest “Pain and Gain” report by property analysts CoreLogic.

This was also a marked increase from 10.5 per cent (in the December 2018 quarter), and 9 per cent (in the March 2018 quarter).

“Australia had a total of $486.8 million in realised gross losses from resales over the March quarter, with highest share of losses nationally seen in Perth (24.8pc) and Sydney (19.9pc),” CoreLogic analyst Camer Kusher wrote in his report.

On the flipside, $14.3 billion was the total gross profit earned by owners reselling their properties across the nation.

In dollar terms, Australia’s most expensive cities, Sydney (24.3pc) and Melbourne (23.5pc), accounted for most of those profits due to their “higher cost of housing” and “strong growth in dwelling values prior to the recent downturn”.

Investors were also more likely to resell their properties at a loss compared to owner-occupiers.

In the first quarter, 10.5pc of properties owned by owner-occupiers sold at a loss, compared to 16.7pc for investment properties.

“Clearly any property owner will aim to make a profit from the sale of their property,” Mr Kusher said.

“In a falling market, owner-occupiers may be more prepared to sell at a loss if they are purchasing their next home at an equivalent or greater discount.

“Conversely, investors, because of taxation rules, would seemingly be more prepared to incur a loss because they (unlike owner-occupiers) can offset those losses against future capital gains.”

He also said that all capital cities experienced an increased number of loss-making resales over the March quarter, compared to the December 2018 quarter.

Across the capitals, the share of properties resold at a loss varied significantly — Sydney (9pc), Melbourne (6.4pc), Brisbane (11.5pc), Adelaide (8.4pc), Hobart (2.1pc) and Canberra (10.2pc).

Meanwhile, resale losses for Perth (32.8pc) and Darwin (45.5pc) were at record levels.

CoreLogic said that apartments were much more likely to resell at a loss compared to houses.

During the March quarter, the proportion of loss-making apartments (20.5pc) far exceeded the number of houses sold at a loss (9.5pc).

The number of apartments selling at a loss increased rapidly compared to the December (17.9pc) and March 2018 quarters (14.6pc).

House owners are also increasingly selling their property at a loss, but the uptick was at a much slower rate — compared to the December (8.3pc) and March 2018 (7.1pc) quarters.

However, these figures were not as severe compared to regions that are still grappling with the end of the mining boom.

The weakest property market in the March quarter was, by far, Darwin — 58.2pc of apartment vendors sold for a loss, compared to 40.8pc for house vendors.

It was followed closely by losses in regional Western Australia (apartments: 47.4pc, houses: 37.3pc) and Perth (apartments: 49.2pc, houses: 28.8pc).

Meanwhile, ACT (1.9pc), Hobart (2.1pc) and Melbourne (2.5pc) had the lowest proportion of houses selling for a loss.

In regards to house sales, Hobart (2.1pc), regional Tasmania (7pc) and regional NSW (7.7pc) had the lowest proportion of loss-making sales.abc

Labor will today release its policy costings, which are expected to outline $154 billion in savings to the budget over a decade, due to its contentious tax changes.

The Opposition’s plans to curb negative gearing, capital gains tax concessions and dividend imputation have been a central battle in the federal election campaign.

Labor will set out how those changes and a crackdown on multinational tax avoidance would allow it to fund spending promises on education and health care, while also bringing the budget back into surplus.

The ABC understands Labor’s costings will show it intends to match the Coalition’s surplus this coming financial year, but promise a quicker reduction of debt.

“We will show bigger budget surpluses over the forward estimates and the medium-term, achieving a surplus of 1 per cent of GDP by 2022-23, four years earlier than the current Government trajectory,” Shadow Treasurer Chris Bowen said.”Labor has consistently said further tax relief can be prudently provided when the budget is back in healthy surplus, if the economic and fiscal circumstances allow — that is reflected in Labor’s final fiscal plan.”

Get key political stories and analysis straight to your inbox, including special election coverage from Annabel Crabb.

Speaking on RN Breakfast, Mr Bowen committed a Labor government to a $7.5 billion surplus in 2019-20 if elected next week.

He projected a $13 billion surplus in 2020-21, $2 billion more than the Coalition’s forecasted $11 billion surplus.

The Shadow Treasurer conceded voters could be surprised that his party was projecting larger surpluses than the Coalition.

“I accept it’s unusual, perhaps historically, for the Labor Party to go to an election promising bigger budget surpluses,” Mr Bowen said.

“But it’s right for the times because we do believe that the economy needs a bigger buffer.

“We need a fighting fund for the economy.”

The Coalition has described Labor’s key policies as tax hikes, with Prime Minister Scott Morrison repeatedly warning of the economic consequences of a Labor government.

He said it had taken the Coalition six years to repair the budget from when Labor was last in power.

“We’re getting the budget back into surplus for next year,” the Prime Minister told the ABC.

“We’ve done that not by raising taxes, but by getting spending under control.

“Labor can’t manage money and when you can’t manage money you can’t run the country and you always end up spending more than you save.”

But Mr Bowen will use his party’s costings to argue households are paying $18,600 on average each year to fund the tax concessions.

“There is a first– and second-class tax system in Australia,” Mr Bowen said.

“If you have access to good advice and your income comes through family trusts, if you have the ability and means to maximise your concessions, then you get first-class treatment.

“If you are a normal pay-as-you-go worker then you pay very close to the headline tax rate.”

In previous election campaigns, opposition parties have released policy costings only a couple of days before polling day, but this time Labor is releasing the details eight days before the May 18 poll.abc news

Sydney home owners are slashing prices at a rate not seen in a decade amid ongoing gloomy predictions for the state of the housing market.

Across the city, the average discount on initial prices is 8.2 per cent, or $87,134, for houses and 8 per cent, or $56,160, for apartments.

House sellers have not discounted at this level since January 2009, while apartments have not had discounts like this since 2006.

Sydney’s median house price fell 9.9 per cent last year and the average time to sell climbed to more than 70 days. Domain senior research analyst Nicola Powell said vendors were struggling to adjust price expectations quickly enough.

But she added the discounting rate was also likely higher because those in the market now generally had to sell and were more willing to accept a lower offer.

Sellers on the upper north shore are dropping house prices the most, recording an average discount of 9.5 per cent over the six months to December.  At the region’s median house price of $1.634 million – which fell 9.2 per cent last year — that is a $155,000 price cut.

“We’ve got people knocking back the first offer they get and then selling for hundreds of thousands of dollars less three or six months later,” said Tim Fraser of Di Jones Real Estate North Shore.

Despite prices being in decline for nearly two years, Mr Fraser said, many home owners still expected prices from the 2017 peak.

In the city and east, sellers slashed prices 9.3 per cent — or more than a $200,000 price cut at the $2.2 million median. In the inner west, lower north shore and north west, prices dropped an average of 9 per cent.

Sydney’s most affordable pockets — the west and south west — had the smallest discount, with houses selling 7.2 and 7.3 per cent below initial prices, or $50,760 and $50,288, respectively.

“Those areas that have seen some of the highest price falls have seen the highest level of discount,” Dr Powell said, adding that higher priced areas also traditionally had greater levels of discounting. “It goes hand in hand.”

Citywide, the level of discounting has increased 50 per cent year-on-year, with biggest jumps in the north-west, west and Canterbury-Bankstown.

“They have seen quite a lift in supply, there’s a lot of new stuff on the market as well as exisiting stock, ” said Commonwealth Bank senior economist Gareth Aird.

“When prices are falling there is a mismatch generally … between what the sellers want and what buyers want and can pay. If it’s a soft market buyers adjust that downward.”

ANZ head of Australian economics David Plank said discounting would help clear the backlog of properties from the market.

“As that stock moves and new listings continue to decline, the available stock to buy will go down,” he said. “When that starts to happen, that’s when you start to see stabilisation of prices.”

He noted if Sydney was to have a peak to trough market fall of 20 per cent, as forecast by ANZ, the pace of price falls would need to decline.

Mr Plank said the pullback in new listings — down 17 per cent in January according to Domain data — suggested there was “no rush to the exit” by home owners and survey indicators showed that, while still nervous, buyer interest was starting to rise as prices fell.

Sandra and Norm Cahill have been trying to sell their four-bedroom Epping house since October to make a sea change to the Central Coast and thought they would have no problem selling within their previous agent’s suggested price range of $1.8 million to $2.1 million.

“We said we wouldn’t drop the price below $1.8 million,” Mrs Cahill laughed. “We didn’t have one offer for the [first] three months, even after we dropped the price [to $1.65 million] … We’re now sitting at $1.53 million, that’s a big drop.”

With a new asking price, new styling and new agent, Catherine Murphy of The Agency North, they hope to find a buyer soon.

Ms Murphy said pricing a property right was critical in the cooling market. “If you’re out of a 3 per cent range of what the market thinks it’s worth, it simply won’t get the traffic of buyers through,” she said.

She noted Epping — which saw a 10 per cent drop in house prices last year — had been hard hit by the downturn and vendors were finding it difficult to keep expectations in line with the constantly moving market.

Apartments owners in Canterbury Bankstown, the south west and the city and the eastern suburbs faced the biggest price cuts while those in the northern beaches, the south and the west had the lowest.

Buyers’ agent Michael Ossitt, director of Strand Property Group, said with fewer sales vendors and agents had fewer comparable sales to benchmark their expectations against.

”So you’ve got vendors still expecting too much because they don’t have a benchmark to go off,” he said.domain.com.

Amazon founder and chief executive officer Jeff Bezos has finalised his divorce with wife MacKenzie, who will get a stake in the online shopping giant worth more than $US35 billion ($49 billion).

Ms Bezos gave up her interests in The Washington Post, the newspaper that Mr Bezos bought in 2013, and Blue Origin, the space exploration company he founded.

She also agreed to handing over 75 per cent of the pair’s 16.3 per cent stake in Amazon, meaning she retains a 4 per cent share.

“I’m grateful for her support and for her kindness in this process,” Mr Bezos said in a tweet.

“And am very much looking forward to our new relationship as friends and co-parents.”

Mr Bezos also retweeted a post from his former partner, the only tweet on her account after she joined the social media platform this month.

She said she was happy with the division of shares.

“Excited about my own plans,” Ms Bezos said.

“Grateful for the past as I look forward to what comes next.”

The couple announced they were divorcing in January, after a period of “loving exploration and trial separation”.

In a joint statement, the pair said they would remain partners.

“Though the labels might be different, we remain a family, and we remain cherished friends,” they said.

The couple’s announcement to split came just before The National Enquirer published a story saying Mr Bezos was having an affair with a former TV host.

Mr Bezos later accused the tabloid’s publisher of threatening to publish explicit photos of him unless he stopped investigating how the Enquirer obtained his private messages.

Before the separation, Mr Bezos’s 16.3 per cent stake was worth about $200 billion, making him one of the world’s richest people.

He will still be the company’s biggest shareholder when the divorce is complete, which is expected to happen in about 90 days.

Ms Bezos met her husband when interviewing for a job at a New York hedge fund, according to a 2013 profile in Vogue.

They pair became engaged after three months of dating and were married three months later.

They have four children together.

Ms Bezos, now a novelist, did accounting for Amazon for its first year after it was founded in 1994.

Speaking at an event in Berlin last April, Mr Bezos said his wife’s support was instrumental when he started the company.

“When you have loving and supportive people in your life, like MacKenzie, my parents, my grandfather, my grandmother, you end up being able to take risks,” he said.

ABC/wires