Australian Income Protection News

Fri, 05 October 2007
MBF To List On ASX
MBF Australia said it intends to demutualise and list on the Australian stock exchange in an attempt to grow and diversify its business.

The health insurer said its plans have been endorsed by the MBF Council.It said a share market listing is likely in calendar 2008.

The board believes that demutualising is in the best interests of policyholders, that it will maximise MBF's future growth potential and enhance its ability to compete in a rapidly changing environment," chairman John Conde said.

Sat, 09 February 2008
Coke's boutique brewery
COKA-COLA Amatil and partner SABMiller will build a new boutique beer brewery at Warnervale on the central coast of NSW.

Coka-Cola said the brewery at Warnervale would have a capacity of 50 million litres and employ between 100 and 120 people.

Construction is expected to be completed by 2010.

Coka-Cola and South Africa's SABMiller will build the brewery through their Pacific Beverages joint-venture company.

Pacific Beverages last December bought the premium-beer brands Bluetongue and Bondi Blond from majority Bluetonge shareholder and advertising magnate John Singleton.

Sat, 16 February 2008
Australia urges wage restraint
Australia urges wage restraint from top CANBERRA, Feb 15 (Reuters) - The Australian government has called on chief executives to show wage restraint and set an example for workers to help fight inflationary pressures in the economy.

Prime Minister Kevin Rudd on Thursday announced an 18-month pay freeze for politicians and urged executives to follow suit, but Employment and Workplace Relations Minister Julia Gillard on Friday said all sectors of the workforce should show restraint.

"We expect everybody, unions, employers, corporate Australia, MPs themselves, everybody right across the community, to be participating in showing restraint to help us beat this inflationary challenge," Gillard told Australia radio.

Her comments come after official jobs data on Thursday found unemployment hit a 33-year low of 4.1 percent in January, adding to concerns the tight labour market would stoke inflation and prompt the central bank to further increase interest rates.

Earlier this week, the Reserve Bank of Australia warned that inflation expectations were picking up and there was a danger this could feed into higher wage claims.

The central bank raised its benchmark interest rates to 7.0 percent last week in an attempt to restrain inflation, which is growing at its fastest pace in 16 years, with core inflation rising 3.6 percent annually in the last quarter.

"We are obviously in a difficult year when it comes to fighting inflation," said Gillard, who is Acting Prime Minister while Rudd is overseas on Friday.

"We need people to be thinking that today's pay rise, if it feeds into the inflationary cycle, doesn't mean good news for tomorrow because that's inevitably got consequences for things like interest rates. So it is a time for restraint."

She said politicians and chief executives were the best placed to show restraint.

"Obviously, in terms of showing restraint, it is people who are already doing pretty well who can most easily show restraint," she said. (Reporting by James Grubel; Editing by James Thornhill)



Tue, 18 March 2008
Govt mulls changes to IR bill
The federal government may concede some changes to its workplace relations bill, but is determined to have laws to ban Australian Workplace Agreements pass parliament before Easter.

The coalition backed the government's bid to fast-track its workplace changes, allowing the draft law to pass the lower house without dissent and giving it priority in the upper house.

Workplace Relations Minister Julia Gillard said the government would consider making minor technical changes to the legislation after a senate inquiry identified some problem areas.

But she said it should not hold up the bill's passage.

"We will look at the senate inquiry report and if there are technical clarifications that need to be made we will consider that," she told parliament.

"But we are saying this ... there is no reason why this legislation can't be through the parliament by the end of this week."

The bill starts to dismantle the Howard government's controversial Work Choices laws and helps pave the way for the Labor alternative in 2010.

It bans the creation of new Australian Workplace Agreements (AWAs), initiates changes to the award system and imposes transitional employment agreements for workers on existing AWAs.

The senate's employment, education and workplace relations committee found the laws needed some tinkering before they passed parliament.

The Labor-dominated committee recommended passing the laws but noted several technical amendments may be required, based on evidence from workplace relations experts Professor Andrew Stewart and Dr John Buchanan.

Some of the "unintended consequences" could be fixed when the government drafted its more substantive legislation later in the year, it said.

One of the issues needing clarification was confusion in local government circles over state and federal awards and industrial jurisdictions, the report said.

Opposition senators, in their minority report, also warned there was nothing in the bill that implemented Labor's promise that people on more than $100,000 would be free to negotiate their own pay and conditions.

The coalition called for the bill to be withdrawn and continued to criticise it during debate, but maintained it would not vote against it in the senate.

The opposition allowed the lower house to approve the bill without insisting a formal vote be taken.

Debate began in the upper house after the coalition backed a government bid to give the draft laws precedence over other legislation.

But deputy opposition leader Julie Bishop said the legislation was fundamentally flawed and unnecessarily complicated.

Ms Bishop called for it to be redrafted to address the numerous technical and policy concerns.

"The bill is so poorly drafted that it should be withdrawn," she said.

The Greens also plan to try to change the bill in the senate, including a clause restoring unfair dismissal protection to all workers, despite Ms Gillard earlier saying the government would not consider any amendments that differed from its policy.

But a spokesman for Greens senator Rachel Siewert said the party had no intention of holding up passage of the bill this week.

"We're not wanting to delay it at all, but we do want to put these issues up," he said.

Australian Democrats senator Andrew Bartlett earlier warned the government against rushing through legislation without proper scrutiny.

He cited the previous government's Work Choices laws as an example of what could happen when bills were rushed through parliament too hastily.

© 2008 AAP

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Fri, 04 April 2008
Rents to rise by 50 per cent: report
There are more predictions of skyrocketing rents across Australia, with 50 per cent rises predicted by a property monitoring group.

The latest quarterly report on rents from Australian Property Monitors says median asking rents in the major cities have already risen at double-digit rates over the past 12 months.

It expects a further 50 per cent increase in most capitals over the next four years.

It says strong migration levels are outpacing residential construction, while renters are being discouraged from moving into home ownership by rising mortgage interest rates.

Mon, 05 May 2008
Rudd, Bligh to lead Qld Labour Day march
Prime Minister Kevin Rudd and Queensland Premier Anna Bligh will lead the Labour Day march in Brisbane today.

Mr Rudd and Ms Bligh will be joined at the head of the march by Queensland Council of Unions officials Ron Monaghan and John Battam.

Ms Bligh says today's public holiday is an important annual event for the labour movement.

"Labour Day is a time for us to take a moment and remember those people who fought very hard for the fair and decent working conditions that make Australia a great place to live and a great place to work," she said.

"Things that we take for granted today like an eight-hour working day, holidays, sick leave and other entitlements - each and every one of them, hard ones."

The march is scheduled to start at 10am AEST at the corner of Wharf and Turbot streets in Brisbane's city centre.



Mon, 02 June 2008
PROPERTY CRASH NOT LIKELY
Despite continuing gloom overseas, there's good news for owners here.

Rapid increases in interest rates have slammed Australian home owners with a mortgage to a point where they are now making the highest repayments in the developed world. Thankfully, one consolation is that generally house values are holding up.

I know there is a big increase in home repossessions and loan defaults, and property values are relatively stagnant, but compared with the rest of the world our real estate prices are staying pretty solid.

The question now is whether Australian residential property prices are overvalued and could we see the same sort of cracks which are happening overseas.

The news from overseas is just appalling. A recent US house price survey by the National Association of Realtors recorded an average 7.7 per cent drop for the year to March - the biggest fall since records started in 1982.

Would you believe states such as California and Florida are seeing average falls of up to 30 per cent over the past year as the credit crunch bites hard. At this stage 1-in-194 homes in the US have been repossessed and that ratio is climbing constantly. There are reports that some financiers are repossessing homes and then asking the owners to stay rent free to protect the property from vandals.

Now there are fears this sort of property crash could spread to Britain based on its current valuations. Average house prices in Britain are running at six times average earnings, which is way above the historic average of 3.7 times wages.

Australian residential property values are currently double Britain's historic high - 12 times earnings in Sydney and 10 times in Melbourne.

Australian mortgage repayments are 57 per cent of average incomes compared with 50 per cent in Britain where the historic average is just 30 per cent.

A recent survey in The Economist magazine says Australia has the most overvalued residential property in the world.

All these comparisons make for very nervous reading and you'd think would point to an impending crash the size of that in the US. That may very well be the case a few years down the track.

But for the moment there appears to be a couple of significant planks underpinning Australian property values.

Firstly, the high skilled and business immigration numbers combined with low construction levels is creating a shortage of supply accentuated by the banks tightening development financing.

Full employment also means that even though higher loan repayments are stretching family budgets, household incomes won't fall.

The other factor is the rental crisis. Strongly rising rents are usually a precursor to rising values as investors chase property to take advantage of the strong yields.

For property owners it looks like a crash in values isn't on the cards for at least a few years. For those looking to get on the property merry-go-round for the first time, property is not going to get any more affordable either.

But it seems there is hope of picking up an affordable bargain if you know where to look.

Last week on my Sunrise program we interviewed Terry Ryder who is a former property writer and now runs a business called Hot Spotting, which analyses property issues.

Terry Ryder put together a list of the top 12 places to buy a house for under $200,000. Yep, $200,000 and many on the list are well below that level down to $90,000 in one area.

Now before you chortle and say they must be in the middle of nowhere, Ryder's 12 locations all have good community facilities and reasonably good employment prospects for people moving there, because they're booming.

There are only two locations on the list close to a capital city - Melton near Melbourne and Elizabeth on the outskirts of Adelaide.

Ryder says most areas close to Sydney and Brisbane were priced out of this list.

His personal pick is Parkes in regional NSW because of its location as a transport hub.

In Queensland, Charters Towers is the best pick while in NSW there's Broken Hill, Glen Innes and Inverell.

In Victoria, the best buys are Gippsland, Melton and Mildura.

Further south in Tassie, George Town and the Rosebery-Zeehan area are on the list.

In South Australia, Elizabeth rounds out the top 12.



Sun, 15 June 2008
Surprise slump for jobs
UPDATE Australia's economy shed jobs in May, a surprising slump that snapped 18 months of jobs growth, relieving pressure on the Reserve Bank to raise interest rates further to cool demand.

The country's labour force shrank by 19,700 last month, seasonally adjusted, compared with the 13,500 new jobs economists expected to be created. Of those jobs lost, 10,400 were full-time and the remainder part-time, the Australian Bureau of Statistics reported.

"We weren't expecting a contraction," said Helen Kevans, an economist with JP Morgan, who tipped the economy added 5000 jobs last month, among the most pessimistic of 22 analysts polled by Bloomberg. "Business confidence has been very weak, so it's not surprsing there has been a flow-on effect to employment."

The unemployment rate was 4.3%, seasonally adjusted, matching a revised 4.3% rate at the end of April. The participation rate decreased to 65.2% from 65.5%, or less was expected by a Bloomberg survey. The total labour force contracted to 10,691,200 in May.

The jobless rate remains near a three-decade low, kept down in part by mining companies expanding operations to meet rising demand from Asia. The monthly slump in jobs, though, was the most in more than five years, and compared with a revised gain of 37,500 jobs in April.

Rate risks recede, dollar dives

The jobs data "will take some pressure off wage growth, which the RBA has been concerned about for some time," Ms Kevans said, adding she expects the RBA to leave official rates on hold at 7.25%.

Economists said the impact of job losses on both full and part-time workers underscored the pace of the RBA-orchestrated slowdown.

"Normally you'd expect at the start of a downturn you would see it only in part-time," said Joshua Williamson, senior strategist at TD Securities.

"This suggests the slowing economy and tighter financial conditions are actually moving faster than expected."

Mr Williamson said the RBA may hold rates steady while expectations of a rate rise this year will ease.

The Australian dollar dived on the jobs data, falling about one US cent to trade recently as low as 93.74 US cents, as investors unwound bets that official rates will rise.

Credit Suisse's gauge of future interest rates moves halved, cutting its prediction of two rate rises in one year's time prior to today's jobs data to just one. The index also showed that expecations of a rate rise at the RBA's next board meeting in July halved from 10% to 5%.



Wed, 09 July 2008
Industrial advocate welcomes backpay ruling
Industrial relations advocate Ralph Clarke says workers on section 457 visas are often underpaid in the hospitality industry.

Mr Clarke says the Industrial Relations Court has ordered an Adelaide restaurant trading as Swaad of India to pay its former chef more than $40,000 because of underpayment of wages.

Mr Clarke says Sumit Kumar worked for the restaurant for 14 months.

He says Mr Kumar came to Australia on a section 457 visa and it is common for workers on those visas to be exploited.

"In many instances, particularly in the hospitality industry, underpayment of wages is rife," he said.

"These workers are paid in cash under the table, well below their award minimum and are threatened that, if they complain about it, their visa will be cancelled and they'll be deported back to the country from whence they came."



Sat, 02 August 2008
Debt mutes the horn of plenty


THE combination of rising interest rates and the global credit crunch has pushed the economy to the brink of recession. Consumers have reined in their spending and borrowing, while businesses are finding it hard to get the finance they need to proceed with investment projects. Consumer and business confidence has been falling for months along with the partial indicators of demand, such as retail sales and housing finance approvals.

The Reserve Bank has been cautiously pointing to the signs of slowing demand since March. What has changed views over the past week is the speed with which conditions appear to be deteriorating.

The National Australia Bank's business survey had profits, sales and employment at record levels in January. The survey it released last week showed businesses expect a recession over the next 12 months.

Business borrowing was booming at an annual growth rate of 25 per cent between July and January. Over the past three months, it has been rising at an annual rate of only 3.6per cent.

"The speed with which the economy has turned around is sharper than you've seen in the soft landings of the mid-1990s and early this decade. It is more akin to the end of the '80s, heading into the last recession," says ABN AMRO chief economist Kieran Davies.

He attributes the speed of the downturn to the "tightening in financial conditions". This includes not only the official and unofficial increases in rates, but also the toughening of lending standards by the banks.

This is hitting households as well as businesses. Home buyers can still get a mortgage, but not if they've got only a 10 per cent deposit, as was the case until early this year. In the second half of last year, the banks were welcoming new big business customers with open arms, as companies found they could no longer tap world financial markets with their own bond or commercial paper issues. But then the banks got scared.

They have to set aside twice as much capital for business loans as for mortgages. The banks are trying to conserve as much of their capital as they can because of a fear that over the next year or two they may face large write-offs. "We keep hearing anecdotes of good businesses with good projects that are finding it difficult to get finance," Davies says.

Tumbling share markets have made it hard for companies to access capital there, while they have also contributed to the loss of consumer confidence.

ANZ Bank's chief economist Saul Eslake notes that the Reserve Bank was planning for a sharp fall in consumer demand. In the second half of last year it was growing at a rate of close to 6 per cent: "Reading between the lines of the Reserve Bank's forecasts, it expected that to slow to something well under 2 per cent in 2008. That is a very abrupt slowdown in domestic spending."

Eslake says there are still some positive factors that could change the outlook in the second half of this year.

The tax cuts, which were more generous than any handed out by the previous government, are just starting to filter through into household hands. The petrol price, which contributed to the collapse of retail sales in June, is falling. And the benefits of the new contracts for iron ore and coal are just beginning to flow through.

Eslake puts the chance of a recession at no more than 25 per cent, saying that although consumers are pulling their heads in, there is enough business investment and exports in the pipeline to keep growth positive.

Consumers may feel as if there is a recession, but the long-awaited lift in export volumes could mean that Australia slips past the technical definition of two quarters of negative growth.

"The risk of a recession is small but it is rising and is probably closer than at any time since we were last in one," he says.

Even the US, which has been the epicentre of the world financial crisis, has so far kept economic growth in positive territory. But as the International Monetary Fund has stressed, the crisis still has a long way to run, with no sign yet that the downturn in housing in the US has hit bottom.

It is housing that is the soft underbelly for Australia's economy. For 20 years, Australian households have been rapidly raising more debt and using the lion's share of it to buy housing. Debt has risen at an average annual rate of about 15 per cent, more than three times as fast as income.

In 1988, the average household had debts totalling 32 per cent of its income. Now the average is 160 per cent.

It is the elevated level of household debt that has made consumers so sensitive to moves in interest rates, and which has the potential to pitch the economy into a much more difficult downturn.

The global financial turmoil has been described as a process of deleveraging. Sectors of the economy that had built up excessive debt are being forced to wind it back.

"Deleveraging can only occur in two ways," Eslake says. "People can repay debt, perhaps by selling assets and using the proceeds to repay debt or by saving more. Or else they can default, and that is a process with serious consequences."

The housing market has turned. Demand is falling while supply is increasing. The number of sales is down and prices are starting to weaken. Michael McNamara of Australian Property Monitors says the figures on the number of sales come through slowly. As of March, they were down by 25 per cent.

There are more unsold properties on the market, with 225,000 properties listed for sale, up from 200,000 a year ago. The number of housing loans for new purchases is down by 7.1per cent.

Morgan Stanley chief economist Gerard Minack believes prices will come down 20 per cent to 30 per cent. He does not accept the argument that housing is in short supply or that high rates of migration will support the market, saying that if houses are not affordable, they will not be bought.

"We are in the process of bringing the curtain down on what has been a super cycle for the Western world's financial institutions, which was built on the willingness of consumers to increase their leverage at fantastic prices," Minack says.

Financial deregulation and an extended period of low interest rates added fuel to the fire. "The escalation in leverage over the past 20years is completely off the scale. It is bigger than the 1890s property boom and bigger than the 1920s. It is bigger than anything we've ever seen, and I think we've reached the limit of how far these trends can go. The unravelling will be extremely painful."

Minack says there is a huge momentum in the growth of borrowing: even with the slowdown, households have $95 billion more debt now than they did a year ago.

There is a danger that what were virtuous cycles during the boom could become vicious in the bust.

Banks that were encouraged to lend by rising asset prices become fearful when prices fall and tighten their lending standards, frustrating the efforts of the central bank and government to stimulate the economy.

Attempts by households to reduce debts can result in a fall in housing prices, putting consumers under greater pressure to reduce debt. The growth in household debt has a counterpart in rising foreign debt, which stands at roughly $700 billion.

Bank deposits have not been enough to fund the rise in household borrowing, so the banks have turned to world markets, which have been more than willing to lend. They are still willing, albeit at a much higher interest rate than was being charged a year ago.

"The funding costs can only get worse if we see interest rates come down here and the currency starts to fall, so that the attractiveness of lending to Australia diminishes," Minack says. The economy may hover along at a reduced but still positive pace of growth for several more quarters.

The darker concerns are for 2009, when the pain of falling share prices is more likely to be compounded by falling house prices, while business will be cutting staff.

In its review of global financial stability released last week, the IMF's head of capital markets Jaime Caruana said the US sub-prime crisis was no longer the greatest threat to the world economy.

Rather, it was that a weakening world economy would reduce the banks' capacity to lend, which would further undermine growth.

Reserve Bank governor Glenn Stevens and Treasurer Wayne Swan have stressed the strength of Australia's banks as our bulwark against the global financial turmoil. However, they are not masters of their funding costs and their effort to correct for the years of plenty may yet pull the economy down.



Sun, 14 September 2008
Rental yields to jump another 10% in 2009
The stage is set for a recovery in the Australia's housing market fuelled by extremely tight rental market and chronic undersupply according to an economist.

Savanth Sebastian, economist with CommSec said any downward pressure on interest rates is likely to a surge in people looking to buy their first home. "The calls for rate cuts as early as September are being voiced, and potential investors and homebuyers would not want to be caught napping," he said.

"In recent times a perfect storm of factors has ensured that the housing sector remains the least favoured asset class despite the high rental yields on offer. The home loan market has experienced its weakest start to a year in 19 years. The rate hikes have clearly done their part in spooking potential home buyers and investors from signing on the dotted line. Clearly rate hikes, rising living costs and high oil price have all adding to the stress on the household budget. The Reserve Bank has put rate cuts on the agenda - a far cry from the possibility of further rate hikes that homebuyers were faced with a couple of months ago."

This optimistic outlook comes despite the housing finance data showing the number of total housing finance commitments falling by 24.8% over the past year – the biggest fall in 13 years.

"If Australia's population wasn't rising sharply, the fall in home lending would point to lower home prices. But the rental market remains extremely tight, with rental yields expected to jump a further 10% over the coming year," said Sebastian



Fri, 14 November 2008
THOUSANDS of jobs are set to go after St George shareholders approved the $17 billion Westpac takeover.
The vote was 95 per cent in support of the merger despite resistance from some shareholders and St George staff.

The merger will create Australia's largest bank, but 2000 jobs will be slashed despite promises to keep the St George brand and branch network for at least three years.

The job cuts will occur mostly in the technology divisions and back-office operations, where there will be duplication as a result of the merger, reports The Australian.

The Finance Sector Union warned the job losses could be higher, with up to 5000 positions under threat.

Suncorp revealed yesterday it would cut 350 staff, on top of the 200 it has already lost by merging its retail and banking businesses.

Shares in both banks were punished -- Westpac off 11 per cent and St George 9.5 per cent -- as weakness emerged in the broader financial sector.

St George chairman John Curtis, who will become the deputy chair of Westpac , said the financial landscape had changed.

"This is one of the most uncertain economic times we have seen in the past 30 years, so putting together two good banks and making one big bank is extremely important,'' he said.

"In the past six months the financial plates of the world have moved,'' Mr Curtis said.

Mr Curtis said there could be further consolidation in the banking sector, particularly at the junior end of the market, which was struggling with high wholesale costs.



Fri, 06 March 2009
Murdoch tops CEO pay packets
News Corp chairman and chief executive Rupert Murdoch took home the largest salary among Australia's chief executives last year.

The Australian Financial Review today put Mr Murdoch, whose remuneration topped more than $US20.6 million ($A27 million), at the top of the chief executive salary list.

The figure includes a $US12.5 million ($A16.4 million) bonus and was up 46.5 per cent on his remuneration package of $US14.096 million ($A18.5 million) last year.

Mr Murdoch is followed by Westfield Holdings boss Frank Lowy, who took home $A14.6 million including a $A13.4 million bonus -- up 9.7 per cent on last year.

Qantas chief executive Geoff Dixon came ninth on the list, with a pay packet of almost $A6.1 million, a figure which included $A946,907 in accrued equity benefits as well as post-employment benefits worth $A1.55 million. His package was up 163.8 per cent on last year.

The average total remuneration for the country's highest paid, including the value of share options packages, was $A1.7 million - up from $A1.35 million last year, the newspaper said.

Advertisement

AdvertisementMore than one third of the 100 highest paid received a bonus of more than $1 million.

Underpinning the 29 per cent pay rise for the top executives were the best company profits in more than a decade.



Wed, 15 April 2009
Employment services review may cost jobs
The government is due to announce its two billion dollar review of government contracts including those providing employment services.

And unions are warning the review could cost jobs

Thousands face uncertainty

The Australia Services Union which represents Jobs Network workers says thousands of employees in not-for-profit welfare agencies face an uncertain future as the government pushes ahead with plans to review the nation's employment services sector.

ASU NSW secretary Sally McManus says there'll be a huge displacement of staff while welfare and homelessness programs provided by the agencies will be jeopardised if they lose their government contracts.

Employment and Participation Minister Brendan O'Connor is due to announce the review of government contracts including those presently awarded to Wesley Employment, Job Find and WAYS Employment.

Ms McManus has called for a delay on the awarding of new contracts until there's a full audit of the impact of the government's decisions with a guarantee that any workers displaced be given preference of employment with any new provider.



Sun, 14 June 2009
Job ads fall for 13th month in May - ANZ survey
JOB advertisements fell for the 13th straight month in May and declined by about half over the year, a survey shows.

The ANZ survey released today found the total number of jobs advertised in in newspapers and on the internet fell 0.2 per cent, seasonally adjusted, in May to an average of 136,457 per week.

Job ads also declined by 49.9 per cent over the year, suggesting total employment in Australia would contract over the year ahead, ANZ head of Australian economics Warren Hogan said.

"Job advertising has fallen to about half the level it was at a year ago and is consistent with outright declines in the level of employment in Australia over the second half of 2009,'' he said.

"We expect these falls in employment to start coming through in the official statistics at anytime.

"Overall job advertising remains weak and is consistent with rising unemployment over the year ahead.''

ANZ expects unemployment to breach six per cent in 2009 before eventually peaking at more than eight per cent in 2010.

The bank is forecasting a 29,000 rise in unemployment with the release of the Australian Bureau of Statistics (ABS) May Labour Force report on Thursday. The median market forecast is for unemployment to rise 0.3 percentage points to 5.7 per cent in May, with a loss of 30,000 jobs during the month.

The number of job advertisements in major metropolitan newspapers decreased by 1 per cent in May to an average of 8123 per week, following a 3.1 per cent gain in April.

Newspaper advertisements are now 52.5 per cent lower than in May 2008.

In trend terms, the number of newspaper job advertisements fell by 4.1 per cent in May to be 55.6 per cent lower than a year ago.

The fall in newspaper job advertisements in May was driven by decreases in most states and territories, the survey found.

The largest falls in percentage terms were in Queensland 4.9 per cent, the Northern Territory (4.5 per cent) and New South Wales (1.5 per cent).

Western Australia fell 0.8 per cent, Victoria fell 0.4 per cent and the ACT dropped 0.1 per cent.

Tasmania and South Australia were the only two states to record increases, up 12.5 per cent and 7.8 per cent respectively.



Wed, 23 December 2009

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Last updated: December 23, 2009

Search for: Weather: Sydney 21°C - 29°C . Mostly fine.

storyBig banks set to gain market power

By Alison Bell From: AAP December 23, 2009 12:19PM Increase Text Size Decrease Text Size Print Email Share Add to Digg Add to del.icio.us Add to Facebook Add to Kwoff Add to Myspace Add to Newsvine What are these?

Bank CEOs say new regulations mean they will have to pass on higher costs by boosting rates./File

THE market power of the big banks will be felt by consumers in 2010 as their chiefs warn of further rises in borrowing rates, and the sector prepares for regulatory changes.

After a year of re-pricing loan books, lowering interest rates and uncertainty over when bad debts would peak, a bout of monetary policy tightening by the Reserve Bank has laid the groundwork for higher lending margins.

As well a 15-month competition squeeze, prompted by higher offshore funding costs and the Federal Government bank wholesale funding guarantee, has hampered the funding activity of smaller banks, giving the majors a price setting advantage.

The result has been the development of a lending market comprised of two pillars, two stumps and three minnows.

After undercutting its rivals in early 2009 and targeting first home buyers, Commonwealth Bank and subsidiary BankWest now have 29.5 per cent of the home loan market, according to recent Australian Prudential Regulation Authority data.

Start of sidebar. Skip to end of sidebar.

Related CoverageANZ forecasts higher profit as bad debts peak

The Australian, 4 days ago

CBA warns of`forced' hike

The Australian, 7 days ago

CBA, ANZ, NAB still reviewing rates

NEWS.com.au, 2 Dec 2009

Commonwealth homeloan rates up 25bp

The Australian, 8 Oct 2009

The only way is up for rates

Perth Now, 15 Jun 2009End of sidebar. Return to start of sidebar.

Westpac, despite holding its standard variable interest rate (SVR) around 17 basis points above its rivals, has grown its market share by twice the average rate over the past 12 months since acquiring St George Bank and now holds 26.9 per cent of the market.

Westpac in December sparked a public outcry by raising its standard variable rate by 45 basis points - almost double the amount of the RBA's 25 basis point increase to the official cash rate that month.

ANZ and NAB have market shares of 15 per cent and 15.1 per cent, respectively.

Smaller rivals, Bank of Queensland, Suncorp-Metway and Bendigo Bank have been left with 1.8 per cent, 2.9 per cent and 2.2 per cent of the mortgage market, respectively.

The big banks have continually cited higher wholesale funding costs as the reason behind their need to hike lending rates.

But Fat Prophets analyst Colin Whitehead says the banks are also expanding net interest margins - the difference between the rate at which they borrow and the rate at which they lend - and profitability, as they benefit from less fierce competition from smaller rivals.

"That does weaken their arguments that they need to increase rates at a faster pace than the RBA," he said.

But CBA chief executive and Australian Banking Association chairman Ralph Norris points to wide price differentials on rates as indicating "a pretty competitive market."

"I think it's probably the first time in a long time where we've seen such a range of pricing differences between the majors, individually between each other, and also the second tier banks," he told AAP.

Westpac's chairman Ted Evans agrees, saying "competition will ensure that power is not abused."

But over the longer term, borrowing rates will also be impacted by the outcome of APRA's proposed alteration of liquidity rules, now due by June 2011, in line with changes being introduced by the Basel Committee on Banking Supervision.

The changes aim to safeguard the financial system in line with proposed global standards, by ensuring local banks can withstand a mild bank run and continue to roll over maturing wholesale debt.

CLSA analyst Brian Johnson says the conventional wisdom that Australian banks sailed through the global financial crisis largely unscathed is wrong.

"The banks entered the GFC in July 2007 with a serious structural business model flaw with their more than 100 per cent loan to deposit ratios," he said in a recent client note.

The rise of banks as funding intermediaries for the current account deficit has also resulted in a mismatched "borrow short - lend long" business model with most of the banks' current liquid assets comprising short-term commercial paper issued by other banks.

To correct this, APRA proposes banks hold more capital and high quality liquid assets, which it says will add five basis points to standard variable rate loans after the liquidity rules are finalised.

Mr Norris says the changes will force CBA to reduce credit availability and to pass on a standard rate rise to borrowers of between four and seven basis points.

ANZ chief executive Mike Smith puts the likely standard rate hike impact at between 18 and 20 basis points.

Southern Cross Equities analyst TS Lim estimates rises between five and 10 basis points while JPMorgan's Stephen Walters estimates a 35 basis points increase.

Meanwhile, bank shareholders could see their dividends impacted, after suffering share dividend cuts of up to 25 per cent in fiscal 2009.

Under prudential standards to be issued by APRA requiring higher capital requirements from mid-2010, banks will have to retain more capital, creating the potential for smaller dividend payouts.

Mr Johnson notes bank profits are not enough to fund the current average 70 per cent dividend payout ratio as well as maintain Tier 1 capital ratios at elevated levels.

KPMG head of financial services Michelle Hinchcliffe says shareholders are unlikely to see dividends recover until 2012.

"At the end of the day there is always going to be a cost of having these increased levels of capital for having a sound financial services sector."



Wed, 23 December 2009
Bushfire fighters won't lose pay: govt
Frontline bushfire fighters will not lose their pay entitlements for working weekends and public holidays, NSW Premier Kristina Keneally says.

She was responding to a Daily Telegraph story which said the government was trying to strip away a 17 per cent loading that National Parks and Wildlife staff receive for working weekends and public holidays, and replace it with penalty payments.

The report said a number of allowances were also targeted, including fire boots, leading to a potential drop in salary of up to 20 per cent.

But Ms Keneally said negotiations had just started.

"There is no intention to cut those entitlements," she told reporters on Wednesday.

"There is no intention to cut front line services."

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