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MCN FINANCE
OCTOBER 2010 • VOL 1, ISSUE 08
Jobs surge stirs rate rise fears A
surprise surge in new jobs has stirred fears about a Melbourne Cup interest rate rise and put the Australian dollar on course to reach parity with the greenback for the first time since the early 1980s. Close to 50,000 jobs were created in September, a figure more than double market forecasts of 20,000. While the jobless rate stayed at 5.1 per cent, Jobs Minister Chris Evans expressed concerns about what it could mean for interest rates. “Obviously, there are impacts on the value of the dollar and interest rates, which will be governed by the Reserve Bank,” Senator Evans told reporters in Melbourne on Thursday. A lower jobless rate usually puts pressure on inflation but shadow treasurer Joe Hockey said the government should still be aiming for an unemployment level of 4.0 per cent. Following the latest data, the experts were bracing for a Melbourne Cup rate rise announcement when the Reserve Bank of Australia (RBA) meets again in November. “It’s only those global uncertainties that are keeping the Reserve Bank sidelined but you can’t ignore the strength of the
domestic story and the risks that it is posing to the inflation outlook,” JP Morgan chief economist Stephen Walters said. The positive official jobs data also fired up the currency markets, with the Australian dollar surging by 0.8 of a US cent within 20 minutes of its release. It reached a high of 98.83 US cent at 1755 (AEDT). Two years ago the local unit reached 98.49 US cents, on July 16, 2008. Market watchers expect the Australian dollar to march towards parity with the greenback for the first time since July 1982 when Australia still had a fixed exchange rate. The International Monetary Fund (IMF) is also positive about the Australian economy, predicting an above-average growth pace of 3.5 per cent in 2011. Its report was even more chipper about the global economy, forecasting growth of 4.8 per cent this year and 4.2 per cent in 2011, which would far surpass the 0.6 per cent decline of 2009. The IMF’s forecast for worldwide growth this year is 0.2 of a percentage point more than its previous estimate in July.
Australia’s second biggest trading partner, China, was expected to enjoy 10.5 per cent growth in 2010 followed by 9.6 per cent in 2011. Treasurer Wayne Swan said Australia would benefit because a strong performance in China and other emerging powers offset weakness in the United States and Europe. “We’re fortunate to be in the right place in the world at the right time,” Mr Swan told ABC radio. When parliament resumes later this month, the coalition plans to move a motion calling on Treasury secretary Ken Henry’s tax review to release all information within five working days. Flagging the move, Mr Hockey said it would provide the basis for a fully transparent and informed discussion, although he declined to mention the controversial mining tax, which the review proposed. The coalition will also introduce legislation, into a hung parliament, which would require the Australian Taxation Office to issue a tax receipt to taxpayers giving them details about how their money was spent.
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Jobs Minister Chris Evans
Mining industry resigned to new tax
T
he mining industry understands the new mining tax is going ahead and is now focussed on having input into how it is applied in their best interests, Resources Minister Martin Ferguson says. Mr Ferguson on Thursday co-chaired the first consultation meeting with mining companies of the federal government’s Policy Transition Group, tasked with finalising the tax. After hearing miners’ concerns in Perth, he signalled the $50 million taxing point for the minerals resource rent tax could be adjusted. The minister told reporters a policy discussion paper
released last week had focused the industry’s attention on the key issues. “I think the industry is now focussed on the fact that the government is clear in its intent to put this tax in place. “Their job is to try to frame the issues that go to the application of the tax,” Mr Ferguson said. “In essence, they understand that we are going to move forward and their job is to try and have an impact on where the tax cuts end and their potential liabilities.” Mr Ferguson said the intention was to hand a report to Treasurer Wayne Swan before Christmas.
“Clearly the issue of the $50 million threshold has been raised but in terms of our consideration, that’s a matter we’ll have to discuss in due course with the treasurer.” Mr Ferguson said mining companies had urged him to resolve matters by Christmas. “They want these matters resolved for the purposes of certainty.” The minister said it was intended to finalise draft legislation before the end of the financial year and have further consultations, with the legislation taking effect in July 2012.
Gillard rejects government bullying claims
P
rime Minister Julia Gillard has rejected suggestions that business leaders are commonly subjected to intimidation and retribution for disagreeing with federal government policy. A number of senior executives from companies including Woodside, Telstra and ANZ have raised concerns about a culture of retribution in Australia that threatens free speech and could stifle reform. Telstra’s Catherine Livingstone said that “on the retribution issue, that is prevalent and has been over time”. Ms Gillard said differences of opinion between her government and business were
AAP
normal. “The only thing I would say is, obviously there will be times when the government agrees with business community members, there will be times that we disagree,” Ms Gillard said on Thursday. “There will be many, many occasions on which the business community does not have one view. The only important thing is that on all sides they’re respectful conversations.” The comments from the business sector came after Treasurer Wayne Swan this week warned banks not to raise interest rates beyond or independent of action by the Reserve Bank of Australia.
Opposition finance spokesman Andrew Robb said he had heard reports of behaviour that went beyond the normal argybargy of policy discussion. “The sorts of comments I’m hearing is that the greater fear is about commercial problems being created if you don’t cooperate with the government.” However, former Liberal treasurer Peter Costello used to make similar demands to that of Mr Swan. Mr Swan denies a culture of intimidation exists. He said he engaged often with the business community, which he described as “a very important source of advice and intelligence”.