15 August, 2017
The Reserve Bank has warned construction activity could decline as the number of residential building approvals falls from its peak in 2016 followed by a research predicting high-rise apartment construction will halve over the next decade.
The Reserve Bank’s warning comes after activity levels across Australia’s construction sector surged in July, improving at the fastest pace in at least 12 years, according to the Construction Index (PCI) released by the Australian Industry Group.
The bank also noted in their minutes that inflation in the costs of constructing a new dwelling had increased over the prior year in all capital cities other than Perth and Adelaide.
According to the Board, the established housing markets in Sydney and Melbourne had remained the strongest in the country although conditions had eased since late 2016. Housing prices in Perth had declined further, while apartment price growth in Brisbane had been weak.
Overall, housing credit growth had continued to outpace the relatively slow growth in household incomes.
In any case, the severity of residential housing construction slowdown is a point of contention. Any fall in the level of construction could put tens of thousands of jobs at risk. The Australian Bureau of Statistics estimates that every $1 million spent on residential construction generates 17 full-time jobs.
ANZ head of Australian economics, David Plank said it was too early to tell whether regulatory measures on housing have had their full effect, “The bank seems less confident that house price growth is moderating to a satisfactory degree,” he said.
18 September, 2017
Australians see better opportunity ahead for a long overdue pay rise.
According to the CEB Global Talent Monitor, Australian workers expect a 2.5% rise in base pay, and 0.7% increase in bonuses, the highest level since 2011.
“The spike in pay expectations comes as business indicators, including employment, profitability and trade, have all seen growing momentum over the last quarter, buying employee confidence,” says Aaron McEwan, HR advisory leader at CEB, now Gartner.
“After years of riding out low wage growth, workers are now hopeful that their base pay will start to see the flow-on effect from the positive business conditions surrounding them.”
Annual wage growth is running at a record-low of 1.9% a year, according to the Australian Bureau of Statistics’ Wage Price Index.
However, the CEB Global Talent Monitor survey in the second quarter of 2017 shows workers are already working harder to prove to their employers that their performance deserves recognition.
Discretionary effort rose 5% in the three months to June to 23%, putting Australian effort levels 6% ahead of the global average.
“The last five years have seen conversations around pay growth fall to the wayside as Australian organizations struggled to juggle budget constraints and limited funds,” says McEwan. “As a result, many Australian workers don’t know anything about pay processes.”
He says employers must educate employees on the practicalities of pay, such as how pay increases are calculated, time of year they’re likely to happen and how employees can go about asking for an increase.
“It’s important for managers to talk to employees and let them know how the process works, find out what they want and recognise the effort they are putting in,” he says.
“Not only can this improve engagement and job satisfaction, it can boost performance which can impact the bottom line.”
12 September, 2017
Research from the Reserve Bank of Australia has found that first home buyers getting help from family and friends was more likely to lead you into trouble than doing the hard yards of making your own way.
The RBA research showed that people using family help to buy a home had a 31 per cent likelihood of suffering financial stress, whereas the hardy souls who did it alone had only a 19 per cent likelihood of hitting trouble.
And of those who did tap family and friends to buy, 23 per cent had to go back for a top-up when things got tough later on. For those who did it alone, it was only 11 per cent.
The figures do not surprise as a change in financial culture, partly driven by the banks, meant that younger people were getting loans when they were not financially or emotionally prepared to manage them. In the past, banks demanded a significant deposit and evidence of your savings history unlike the recent times. There was a significant relaxation of those rules from the mid 2000’s.
The bank of mum and dad is growing in importance as house prices increase. Over 40 years the percentage of people getting help to buy property has more than doubled from 6.3 per cent to 13.9 per cent.
Denis Nelthorpe, CEO of legal service West Justice, said: “There are two things happening. The costs of housing are so great that couples with very good jobs and prospects struggle to meet the mortgage criteria so banks are becoming a bit more understanding.
“The other thing is where this is possible, families are providing most of the deposit and people are struggling to meet the high mortgage payments week in, week out. “The current climate is encouraging people to extend themselves more than they should and they need the assistance of parents.”
Added to this is a report from investment bank UBS which found that 33 per cent of people were lying on mortgage applications which meant there was about $500 billion in loans based on false information.
“While household debt levels, elevated house prices and subdued income growth are well known, these findings suggest mortgagors are more stretched than the banks believe,” UBS said. That adds to the level of vulnerability of people in the face of interest rate increases or economic downturns.
13 September, 2017
Spending on the basics of life is consuming more of Australians’ weekly incomes with housing costs driving that change, according to new figures from the Australian Bureau of Statistics. The ABS Household Expenditure Survey, done every six years, shows that Australian households spent an average of $1425 a week in 2015-16 — $190 more than six years earlier.
Of that, housing costs accounted for 19.6 per cent. Six years ago housing accounted for 18 per cent and when the survey began back in 1984 it was only 13 per cent. The ABS said nearly 30 per cent of Australian households were over-burdened with debt, with mortgages the driving cause.
Debt has grown faster than the incomes and assets of households over the survey period, helping to drive the proportion of households who are over-indebted, up from 21 per cent in 2003-04 to 29 per cent in 2015-16.
The average family spent $279.12 a week on housing in the latest survey compared to $223.14 back in 2008-9. That is a rise of 25.1 per cent while incomes rose 24 per cent and overall expenditures rose 15.3 per cent.
Utilities were another driver of spending, rising 25.8 per cent over the survey period to an average of $40.92 a week. That’s a rise of 11 per cent when inflation is taken out. Over that time median incomes rose 21.5 per cent to $1607 a week.
Other big spending increases were in education (up 44 per cent), household services (up 30 per cent), health care (up 26 per cent) and housing (up 25 per cent).
On the other hand, spending on alcohol, tobacco, clothing and footwear and household furnishings has not changed significantly from six years ago.
The survey showed the relative number of people doing it really tough had declined. Around 1.3 million Australian households (15 per cent) reported four or more markers of financial stress, down from 16 per cent in 2009-10.
In addition, the proportion of Australian households who did not report experiencing any markers of financial stress has steadily increased, from 54 per cent in 2009-10, to 59 per cent in 2015-16.
Low income growth has helped drive debt growth with average household debt doubling over the survey period. The top 20 per cent of households control more than 60 per cent of all wealth, while the lowest 20 per cent control less than 1 per cent.
Overall, however, inequality has lessened slightly over the past decade. But one in six Australians still couldn’t afford a night out once a fortnight and one in 10 could only afford second-hand clothes. Average home loans for over-indebted households were over four times the size of home loans held by households with more moderate debt levels. The over-indebted carried an average of $286,400 compared to $59,500 for others.
18 September, 2017
A new analysis conducted by finder.com.au using data from the Australian Institute of Health and Welfare (AIHW) found that Aussies spent almost 2.4 million days in hospital beds for preventable illnesses. Australians clogging up the healthcare system with preventable hospitalisations are costing the country $2.3 billion every year.
The analysis found that in 2015-16, of the 10.6 million hospitalisations that year, almost 680,000 were for potentially preventable illnesses such as asthma and dental treatments.
“Preventable hospitalisations put extra strain on the health care system. That’s why we’re focused on helping our members stay healthy through a number of programs such as Victor Chang heart checks, to identify opportunities for early intervention, and free annual dental checks to ensure good long-term oral health,” HCF medical director, Andrew Cottrill, told finder.com.au.
These preventable hospitalisations equated to a whopping 2,398,037 preventable days in hospital beds across Australia and an average of 3.9 days in hospital for every Australian.
Kidney or urinary tract infections were the most common cause for people heading to hospital and were responsible for 11% of all preventable hospitalisations.
The second most common cause for preventable hospitalisations was chronic obstructive pulmonary disease (COPD) at 10.5% of all cases, followed by dental conditions at 9.9%.
“We encourage and support people to use their health insurance to help them access health care which may lead to early detection of ill health and allow them to seek treatment potentially before it’s too late,” an nib spokesperson told finder.
Many health funds offer their members access to broader health cover programs, which can help members live healthier and longer lives. These programs can include stress management courses, exercise classes and health checks.
05 September 2017
The current system for distributing goods and services tax revenue has been criticized by the Australian Bankers’ Association (ABA) and called for a comprehensive review of the tax system.
The ABA argued for a review of the various types of taxation across all three levels of government, to include corporate and personal income taxes, the GST, excise duties, royalties, payroll, and property taxes. It said the review should consider whether these taxes remain fit for purpose and ensure that all governments can be certain that they will be provided with the revenue they need.
The ABA’s submission to the Productivity Commission’s inquiry into Horizontal Fiscal Equalisation (HFE) states that in unintended and undesirable consequences have emerged during the system’s 17 years of operation.
A key issue identified by the AB is the three-year averaging mechanism used to determine the GST allocation. It said that volatility in certain revenue streams – particularly in mining royalties – “leads to a situation where the averaging mechanism cannot adjust sufficiently quickly to compensate states for years when their key revenue source declines sharply.”
CEO Anna Bligh commented: “It is clearly untenable for states such as Western Australia to receive a GST share of less than 35 cents in the dollar, nor was this possibility foreseen or intended by the original GST agreement. It is worth considering whether states should keep a minimum portion of unique revenue resources to encourage innovation. The distribution should be able to better respond to fluctuations in revenue sources, to avoid unplanned budget deficits and financial market disruption.”
More broadly, the submission called for “well-considered, evidence-based holistic reform of the taxation system which focuses on driving economic incentive, investment, economic activity and jobs, and which promotes higher productivity and a higher standard of living for all Australians.”
15 September 2017
From January 1, 2018, residents investing in eligible affordable housing will be entitled to a CGT discount of up to 60 percent if they hold the investment for at least three years. The standard discount rate is 50 percent. The Government has released draft legislation to implement a number of housing affordability policies.
The Government also intends to permit managed investment trusts (MITs) to invest in affordable housing. Effective July 1, 2017, MITs will be permitted to hold affordable housing for the purpose of deriving long-term rent, and to derive other eligible business income from investments including shares or commercial property. MITs will be allowed to construct or develop the affordable property within the MIT.
Consistent with current MIT withholding tax rules, eligible foreign residents will generally be able to take advantage of a reduced withholding tax of 15 percent on investment returns, including income from capital gains. However, this concessional rate will not apply to capital gains income derived from selling affordable housing held for less than 10 years.
However, from 16:30 AEST on September 14, 2017, MITs will not be permitted to acquire residential property, unless it qualifies as affordable housing. The aim is to prevent MITs from investing in houses, units, and apartments to hold for long term rent (other than affordable housing). It is also intended to clarify the long-standing convention that the primary purpose of the MIT concessional tax treatment is to apply to passive investment income.
MITs currently holding residential property will be provided with a transitional period until October 1, 2027, for their existing property assets.
To qualify for the higher discount and MIT concessional tax treatment, affordable housing tenancies will need to be managed by a registered Community Housing Provider. Housing providers will determine the tenant eligibility criteria, including the rent charged, consistent with state and territory affordable housing policies.
07 September 2017
Following the announcement in other states, the Western Australian Government has announced that it will introduce a four percent foreign buyer’s surcharge,
The surcharge will apply from January 1, 2019. It will apply at a rate of four percent on all purchases of residential property in Western Australia by overseas buyers, including individuals, corporations, and trusts. It will be payable in addition to the normal transfer duty on property purchases.
The charge will be restricted to residential property. It will not apply to purchases of commercial or industrial property, residential developments of 10 or more properties, commercial residential property, or mixed-use properties that are used primarily for commercial purposes.
The state Government said that the 2019 implementation date will allow the market to adjust.
The Government estimates that the surcharge will raise AUD21m (USD16.8m) in its first full year (2019-20), and a total of AUD49m over the forward estimates period to 2020-2021. It said the revenue raised will pay for a freeze on fees for vocational education courses, and help repair the budget.
New South Wales, Victoria, and Queensland currently apply a surcharge on foreign buyers. South Australia will follow suit from January 1, 2018. The proposed Western Australian rate of four percent is in line with that to be introduced in South Australia, and is lower than the rates applied in New South Wales and Victoria.
Treasurer Ben Wyatt said: “This new revenue base will help put the budget on a more sustainable footing. Introducing the Foreign Buyers Surcharge is a smart and responsible decision. We are bringing WA into line with other states and guaranteeing a new ongoing revenue source for years to come.”
31 August 2017
The ATO has published a report on the five-year roll-out of the SuperStream system, which introduced a data and payment standard. Businesses must now pay superannuation guarantee (SG) contributions to superannuation funds using SuperStream, and employers can make all their contributions in a single transaction.
The Australian Taxation Office (ATO) has said that 95 percent of superannuation payments are now made digitally.
The ATO said that more than a million businesses now use SuperStream, including around 800,000 employers, 2,500 Australian Prudential Regulation Authority (APRA) funds, and 350,000 self-managed super funds (SMSFs).
ATO Deputy Commissioner James O’Halloran said: “SuperStream has fundamentally moved the previously manual process between funds and fund members to standardized electronic processing, across industry, with inbuilt security and efficiency savings for fund members. SuperStream now provides a modern platform for further efficiencies in the superannuation industry and the sharing of services from the ATO.”
He added: “There are estimated savings of AUD2.4bn (USD1.9bn) per year for fund members, with an estimated AUD800m in realised efficiencies for employers and Australian Prudential Regulation Authority funds.”
According to the report, there has been an average 70 percent time saving for employers completing contributions. Superannuation members can now complete a rollover in three days, compared to an average of 45-60 days previously. There has also been a reduction in lost member accounts by nearly 90 percent in the last six years.
Approximately 17 million fewer cheques are handled each year by funds, and the straight-through processing rate on contributions is over 85 percent. The straight-through processing rate for rollovers is over 95 percent.
A total of AUD1.5bn has been invested in Super Stream across the 2012-2018 financial years. The cost has largely been borne by APRA funds, and by employers or their agents.
12 September, 2017
Apple has rolled out its much-anticipated iPhone X, a redesigned product of glass and stainless steel with an edge-to-edge display that chief executive Tim Cook called “the biggest leap forward since the original iPhone”.
The phone features wireless charging, an infrared camera and hardware for facial recognition, which replaces the fingerprint sensor for unlocking the phone. The home button found on previous iPhones is also gone, and users instead tap the device to wake it up.
The phone, which is priced at $1579 in Australia and ships on 3 November, as well as the holiday shopping season that follows are the most important for Apple in years. The new phone’s ship date raised questions about possible supply constraints ahead of the holidays.
Apple normally ships new products within a week or two of announcing them, though Cook said the later date was consistent with earlier guidance to investors.
Apple shares were last down 0.6 percent. They had traded as much as 1 percent higher during the launch event.
The company has sold more than 1.2 billion iPhones over the past decade and ushered in the era of mobile computing, but last year had a substantial decline in revenue as many consumers rejected the iPhone 7 as being too similar to the iPhone 6.
The screen on the iPhone X is about the size of the current iPhone 7 plus, though the phone is smaller. It features richer colours thanks to a new technology called OLED that other vendors such as Samsung are also rolling out.
But in an embarrassing moment for Apple senior vice president Craig Federighi, the face ID unlocking did not work on his first attempt during the on-stage presentation.
Apple also introduced the iPhone 8 and iPhone 8 Plus, which resemble the iPhone 7 line but have a glass back for wireless charging.
The new phones feature Apple’s first proprietary graphics processor, which provides greater speed, improved cameras and some features for augmented reality apps.
The cheapest phones have 64 gigabytes of memory, up from 32 gigabytes in previous models, and will sell starting at $1079.
The company also introduced an upgraded Apple Watch, which can make phone calls and access the internet without the user carrying an iPhone. The Series 3 watch will start at $559.
Apple did not provide sales figures for its watches, but Cook said sales had risen 50 percent from the year before and that the Apple Watch was now the best-selling watch in the world.
Gene Munster, an analyst with Loup Ventures, believes sales of the watch could double or even triple because of the new connectivity.
An upgraded Apple TV will support the high-resolution display known as 4K and will feature more programming options as Apple steps up efforts to cut content deals and produce its own shows.
8 September, 2017
Huawei has become the second biggest company in the smart phone market by overtaking Apple sales figures in the month of June and July.
New research carried out by Counterpoint predicts that August sales could be a “hat-trick” for the Chinese company. Counterpoint attributes the growth to Huawei’s consistent investment in R&D and manufacturing, as well as aggressive marketing and sales channel expansion.
Counterpoint’s research director Peter Richardson pointed out: “However, a weak presence in the South Asian, Indian and North American markets limits Huawei’s potential in the near-to-mid-term to take a sustainable second place position behind Samsung. Huawei is over-dependent on its home market China where it enjoys the leadership position and operator-centric markets in Europe, Latin America and Middle East.”
Senior analyst Pavel Naiya said that the iPhone 7 and 7 plus were still the world’s best-selling models, followed by Oppo’s R11 and R57. Samsung’s Galaxy S8 came in fifth place while the S8+ came in seventh.
Naiya noted that none of Huawei’s models appeared in the top ten rankings for global sales. He added: “While having a diverse portfolio allows Huawei to fight on multiple fronts, it does little to build overall brand recognition; something Huawei badly needs if it is continue to gain share. While Huawei has trimmed its portfolio, it likely needs to further streamline its product range like Oppo and Xiaomi have done – putting more muscle behind fewer products.”
Despite Huawei coming out strong, Apple has the iPhone 8 coming out next week, which may help it to reclaim its place. It’s also expected to announce a launch date for iOS 11 and maybe a new generation of the Apple TV too.
15 September, 2017
Financial Services Minister Kelly O’Dwyer has rejected claims that reintroduced legislation to overhaul the governance of superannuation funds is ideological.
The laws were quietly introduced amid the noise from last-minute negotiations to strike a deal on media law reforms, and the release of previously confidential papers of former High Court judge Lionel Murphy.
A key proposal in the legislation is to force industry boards to ensure a third of trustees are independent and that an independent chairman is appointed.
Ms O’Dwyer said claims by union-backed industry super funds that the Government was pursuing an ideological dispute were a diversion from the need to protect the interests of members.
“The package of reforms that the Government is bringing forward applies equally across the sector to all funds, whether they’re retail, industry or corporate funds.
“This is important because we force people to put money aside from their wages to provide for their retirement income, and people need to know that money is protected.
The Federal Government has been struggling to pass legislation since its proposed reforms were blocked by the Senate in December 2015.
Ms O’Dwyer has been the latest minister charged with pushing through the reforms, after similar moves by her predecessors Josh Frydenberg and Arthur Sinodinos were stalled.
Industry Super Australia has accused the Government of caving in to pressure from retail funds to dismantle the current governance of super funds.
Chief executive David Whiteley said the Government was giving banks a “leave pass” on transparency and disclosure requirements.
“Rather than dealing with the big issues like the superannuation gender gap and unpaid superannuation, it appears the Government has caved in, dismantling the successful industry super governance model,” he said.
Industry Super Australia has been running an advertising campaign in recent months likening retail superannuation funds to foxes in the henhouse.
The three bills introduced would provide greater oversight of Australia’s $2.3 trillion superannuation sector, handing greater powers to the Australian Prudential Regulation Authority (APRA), and giving workers the right to choose their own fund.
31 August, 2017
Industry experts say that a new regulatory system supposed to enable superannuation fund members to see the costs their fund is charging them, will not cover about 20 per cent of the industry, leaving many uninformed and worse off.
Under the system, scheduled to apply from October 1, all super funds will have to disclose information on costs in their product disclosure statement. But a special exemption will leave “platforms” run by private sector super funds out of the equation.
“If the platforms are excluded it means there is not a level playing field and a lot of retail funds will be carved out,” said Jeff Brensahan, chairman of research group Super Ratings.
Platforms are investment structures that hold members’ funds while also allowing them to choose different investment options below the platform level. They hold about 70 per cent of the $587 billion in retail super funds, or about $411 billion.
The effect of the platform carve-out means the actual cost of running the platform will be declared but the costs of the investment activity under the platform will not.
There are two problems with that carve-out. It means investors can be lulled into thinking retail funds are cheaper than they really are and encouraged to put money in which will in turn return less than they expect because the full cost structure has not been declared.
Secondly, it could make not-for-profit funds and the 30 per cent of retail funds not covered by the exemption look relatively more expensive.
“New super disclosure rules will make it impossible for consumers to compare super fund fees and costs giving bank-owed and other retail super funds another leg up by failing to capture investment platforms,” said David Whiteley, CEO of Industry Super Australia.
Mr Bresnahan said: “The platform might charge 50 basis points to manage but there could be another 50 basis points of costs under that that are not captured.”
The measure could also damage the capacity of not-for-profit industry funds to make long-term investments in areas like infrastructure and private equity by portraying their costs as higher than they actually are.
“It runs the risk of making direct investment look more expensive than indirect investment when that’s not the case,” Mr Whiteley said.
“This could negatively impact both member returns and the capacity of Australian super funds to invest in long-term, nation-building infrastructure projects.”
Direct investment where funds buy into projects or properties “can cost as much as four times the cost of passive investment”, Mr Bresnahan said. “But funds will return more from it.”
Those funds making active investment could find themselves compared unfavourably with retail funds which declare platform costs that are only half their overall costs. And their overall returns through indirect investment could be significantly less than that earned by direct assets by their competitors. “The real point is what funds return on top of all costs,” Mr Bresnahan said.
Cbus CEO David Atkin said the fund questioned whether the Australian Securities and Investment Commission’s new rules would create clear and consistent fee and cost disclosure “given that different disclosure rules will apply depending on the structure of the super fund and the way they structure their investments”.
ASIC investment and superannuation manager Gerard Fitzpatrick said: “If a super fund considers that investment costs are offset by greater returns, then they should be communicating the benefits of that investment strategy that to their members.
“These changes are intended to improve the accuracy and comparability of the information provided to consumers.” Financial services minister Kelly O’Dwyer said the ASIC move “supports increased transparency across the superannuation sector”.