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There’s more pain on the way for Australia’s borrowers with the Reserve Bank today raising interest rates for the third time in as many months.

As widely tipped, the central bank lifted its key cash rate by 25 basis points to 3.75 per cent following its monthly board meeting. It’s the first time the RBA has lifted rates three months in a row. (Click here for economists’ reaction, including Michael Pascoe and Peter Martin.)

”In Australia, the downturn was relatively mild, and measures of confidence and business conditions suggest that the economy is in a gradual recovery,” RBA Governor Glenn Stevens said in a statement accompanying the rates verdict. The central bank’s ”gradual” increases in rates will ”work to increase the sustainability of growth in economic activity,” he said.

For a typical mortgage holder on a $300,000 mortgage, today’s rate rise will add about $47 to monthly repayments, assuming commercial banks match the RBA’s move. Officials for most of the major banks this afternoon said their rates policies were under review.

The Reserve Bank has made regular public comments in recent weeks that it sees no need to keep interest rates at ”emergency” levels as the economy rebounds from a slowdown during the past year. Ric Battelino, the RBA’s deputy governor, last week said the economy’s growth is likely to extend ”for a few more years yet.”

More to rises come

Still, the economic data continue to provide mixed readings. A measure of manufacturing activity in November out today showed the sector continues to grow with companies adding jobs, although the stronger Australian dollar slowed the pace of expansion.

Overall building approvals, meanwhile, surprisingly fell 0.6 per cent in October, according to other figures out today. A 5 per cent gain in approvals for private homes was countered by a 19 per cent drop in permits for flats and townhouses.

Even with today’s rate increase, the Reserve Bank’s efforts to tighten monetary policy are likely to be far from over.

”The big change in this statement was their reference to the increases so far as being material,” ANZ’s head of Australian economics Warren Hogan told Reuters.

”I read that as implying that they’re ready to now sit back and watch how these increases affect the economy. And the hurdle for further rate hikes will be much higher than we have seen so far.

“So I think our view that they’re going to 4 (per cent), 4.25 then sit there for much of the year is the right one. There’s every chance they’ll do it in February and March, although I wouldn’t be surprised if it’s dragged out over a number of months.”

JP Morgan’s Chief Economist Stephen Walters agreed that the RBA may make it four rate rises in a row: “With inflation likely to creep up, and the worst in the economy having passed, there is no need to keep rates at very expansionary levels.”

“We think they will again lift rates in February,” Mr Walters

said. ”The RBA does not meet in January, but I think they will hike when they return after the break. The word ‘gradual’ is still there in the RBA statement and I think they will start going slow in lifting after February.”

Before today’s move, investors were betting that rates would rise to at least 4.75 per cent in a year’s time – equivalent to four more rate rises over the period. Three weeks ago, however, the betting was for rates to rise to 5.25 per cent, indicating confidence in the economy’s strength has recently diminished.

The RBA’s board is not scheduled to meet again until next February.

Political view

Treasurer Wayne Swan said the rate rise would pinch household funds.

”This is tough for families…when rates go up it has an impact on the family budget,” Mr Swan told reporters.

He took aim at old comments from new Opposition Leader Tony Abbott that the government’s billion-dollar stimulus had led to interest rates rises.

”That is laughable and it comes from a political leader who is prone to making erratic statements,” Mr Swan said.

”Mr Abbott is in denial of the fact that this country has performed well in the global recession.”

Even with the latest jump, these rates were last seen in 1967, Mr Swan said.

Mild downturn

A year ago, the Reserve Bank was in the midst of a series of deep interest rate cuts as Australia joined other countries in attempting to limit the damage from the global financial crisis.

Last December, the RBA sliced one full percentage point from its cash rate, lowering it to 4.25 per cent on the way to a fifty year-low of 3 per cent by April. After a pause, the central bank has started to lift rates back towards more normal levels as fears of an economic crunch abate.

”The effects of the early stages of the fiscal stimulus on consumer demand are fading, but public infrastructure spending is starting to provide more impetus to demand,” Mr Stevens said in his statement today.

The jobless rate has been one of the surprises, with Australia’s unemployment holding well below 6 per cent when many had predicted a level in excess of 8 per cent. Business investment has also held up well in large measure due to the sharp rebound in China and India – leaving Australia as one of the few countries to start raising rates.

”Prospects for ongoing expansion of private demand, including business investment, have been strengthening. There have been some early signs of an improvement in labour market conditions,” Mr Steven said. ”The rate of unemployment is now likely to peak at a considerably lower level than earlier expected.”

The RBA believes economic growth ”is likely to be close to trend (in 2010) and inflation close to target.

Market response

In the aftermath of the rates news, the Aussie dollar initially dropped before recovering to about 91.5 US cents in recent trading, close to its level before the RBA statement.

Shares, also turned mildly lower before recovering to be about 0.2 per cent higher for the day with less than an hour of trading left.

Source :   www.theage.com.au

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G’dayUK 2009 is a series of events positioning Australia as an innovative and thriving economy. The aim is to encourage British companies and1201173161413australia-flag consumers alike to take another look at Australia as a great place to invest in, work, holiday, do business with and generally get to know.

By highlighting the unique range of skills, resources and opportunities offered by Australia, the heavy-weight burst of activity aims to reinforce business and consumer partnerships between the two nations by focusing on four main areas: trade & investment, food & wine, migration and tourism.

Whilst G’dayUK has a serious message, the week will also be a vibrant celebration of uniquely Australian products, people, places, businesses, skills and attitude and an invitation for the British to get involved. A stellar cast of well-known Australians, including politicians, business leaders, artists, winemakers and chefs will showcase Australia as a modern, energetic and desirable business and leisure destination.

G’dayUK 2009 is supported by the New South Wales, Queensland, South Australian, Victorian and Western Australian State Governments, Australian Trade Commission, Qantas and Tourism Australia in conjunction with the Department of Foreign Affairs and Trade, Wine Australia, Australian Business and kselfridgesey private sector sponsors.

G’Day UK 2009 is a chance for Australian celebrities, governments, businesses and agencies to show off the sunshine in Australia.

Two week’s worth of events will showcase Australia as a place of investment, tourism, business, and more importantly, as a prime destination for skilled migrants.

The G’Day UK Week will begin with a Manchester Migration Open Day on the 21 June, and will end with tasting premium Australian wines and Australian-themed food and wine menus cooked by Michelin-starred chefs on the 4 July in Selfridges, Oxford Street, London.

All information at http://www.gday-uk.co.uk/events

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A Swan Valley tourist resort is the latest outlet to be named and shamed on WA’s ever-growing filthy restaurant register.

The Swan Valley Oasis Restaurant and Function Centre at Henley Brook is the 46th eatery to be so exposed on the ‘Notifications of Convictions’ list published by the the WA Health Department.

As revealed first on WAtoday, the venue was fined $8,750, and ordered to pay $1571.70 in costs, for hygiene breaches including:                swan valley

– allowing vermin into the restaurant;
– exposing food to possible contamination; and
– failing to ensure the premises and appliances were clean.

The restaurant is part of the Swan Valley Oasis Resort, which also boasts a golf course and boutique brewery.

The eatery serves breakfast, lunch and dinner seven days a week, and is a popular wedding reception venue.

Testimonials on the venue’s website include one from Helen, of Hong Kong.

“Clean, relaxed and family-friendly – really pleased to have found a nice, reasonably-priced place to stay before heading out of Perth,” Helen wrote.

According to the website, Rebecca, of Paynes Find, was “pleasantly surprised by the quality of the meals and service”.  Samantha, of Albany, found the venue “very clean and neat” and said she would “definitely be back”.

Since September 2006, the 46 prosecuted food outlets have together been fined in excess of $170,000.

However, this might only be the thin edge of the potato wedge, because it is not compulsory for local authorities to report breaches to the government.

Hence, only hygiene breaches in 11 of WA’s 139 local authorities appear on the government’s dirt list.

After WAtoday.com.au exposed the initial 41 list inductees in January, Health Minister Kim Hames rejected a call by consumer group Choice to post hygiene ratings on restaurant doors.

Mr Hames said that hygeine breaches from every local council would be added to the list when mandatory reporting was introduced under a new Food Act that is being drafted.

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With more people, not only in Australia but around the world becoming aware of our negative impact on the environment change is coming fast.

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WESTERN Australia’s Liberal Government has handed down its first Budget, delivering a $647 million surplus but warning the state will be in deficit by 2012.

Treasurer Troy Buswell today delivered his first Budget since the Liberal Government came to power last year.

He said the 2008/09 surplus of $647 million would shrink to $409 million in 2009/10, and just $23 million the following year.

By 2011/12 the state will be in deficit to the tune of $513 million.

“Over the past months, as the global economy has been in decline, the state has been hit by large downward revisions to projected taxation revenue, GST grants from the Commonwealth and mining royalties,” Mr Buswell told parliament.

“Since the mid-year review, the Budget has lost a massive $4 billion in forecast revenue from these sources.”

Last year, then treasurer Eric Ripper delivered a surplus of more than $2 billion on the back of a booming commodities sector.

Economic growth remained high at 8 per cent for the 2008/09 financial year.

But forecasts predicted growth would fall into negative territory in 2009/10, with unemployment expected to peak, and business investment to fall by 17.5 per cent.

Mr Buswell said the Government would provide a one-year payroll tax rebate to small businesses with payrolls of up to $3.2 million to help protect jobs.

“Some 6,700 small businesses will be eligible for this payroll tax rebate, which will fully offset payroll tax for around 68,000 employees,” he said.

“The cost of this rebate is estimated at $100 million.”

A $47 million jobs training and skills package, and a $8.3 billion spend on infrastructure in the next financial year are key components of the Budget.
Mr Buswell said law and order were also strong focuses, in line with the Government’s election promises to boost funding for police and pump more money into prisons

Mr Buswell said the Government’s election promise to toughen up sentencing laws and introduce mandatory sentencing for people who assault police was underpinned in the Budget by a significant investment in prison capacity.

 

A total of $655 million will be invested in 2012/13 to create an extra 1657 prison beds across the state.

A record $5.1 billion spend on health services in the next year – rising 5.9 per cent, or $282 million from last year – will include the fast tracking of forward works for a new children’s hospital, the construction stage of the Fiona Stanley Hospital, and new hospitals in two regional centres.

Mr Buswell said the Government would push ahead with public sector reforms in a bid to achieve improved performance and efficiency.

The first stage of the economic audit committee promised by the Government during the last election was complete and a range of hard decisions had delivered $7.6 billion over the forward estimates, Mr Buswell said.

“I am looking forward to the second stage of the economic audit to identify strategies for broader reform over the longer term, so we can ensure the budget stays in surplus,” he said.

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