Tag: The New Daily

The Economy’s Growing For All The Wrong Reasons

From The New Daily.

The national accounts released on Wednesday paint an alarming picture of a slowing economy that is staying in positive growth territory for all the wrong reasons.

GDP growth of 1.7 per cent over the past year is extremely sluggish, but that’s not the main point of interest.

The contribution of household consumption was the big question, because other sources of growth – government spending, business investment and net exports – aren’t enough to get things moving.

Headline household consumption wasn’t too bad, growing 0.5 per cent in the March quarter or 2.3 per cent over the past 12 months.

However, it’s the kind of consumption that is worrying.

The biggest increases in household spending were in ‘electricity, gas and other fuel’ (up 2.9 per cent) and ‘operation of vehicles’ (1.3 per cent).

The problem with the first category is that it represents ‘price inelastic’ goods. As prices rise, we still use our gas heaters or run our cars a similar amount.

Gas and electricity prices are getting eye-watering, and average unleaded prices have gone up 8 per cent since the December quarter.

So we’re spending more money and boosting ‘growth’, while consuming roughly the same amount of energy and fuel.

As for the ‘operation of vehicles’, that is harder to quantify.

Auto-industry economist Richard Johns tells me a number of factors are at work.

While currency fluctuations are not having much of an impact on car prices, Mr Johns has noticed many Australians opting for higher price-bracket vehicles.

That takes two forms. Firstly, cars are getting better, so even basic models include features such as automatic emergency braking. For some reason, the Australian Bureau of Statistics (ABS) tends to strip out those price components when it measures car-price inflation.

As a result the ABS says car prices have fallen over the past three quarters, whereas Mr Johns’ own research shows prices paid have risen.

The second factor influencing the ‘operating of vehicles’ is that Australians who earn more of their incomes from shares and property are gradually moving into luxury marques, whereas families who rely on wages are not.

That’s not just a function of ageing, but of the inequalities being created by perverse incentives in the tax system.

Savings slide

So household consumption isn’t as rosy as Treasurer Scott Morrison implies. He said on Wednesday that “household spending continues to support the economy, while household savings remain positive.”

Well only just, Mr Treasurer. While households are spending more on gas, electricity, fuel and vehicles, they are cutting back on discretionary items – alcohol spending fell 1 per cent and clothing and footware contracted 0.7 per cent.

More worrying, though, is how all this consumption is being funded.

Shadow Treasurer Chris Bowen noted on Wednesday, “…weak household income growth is meaning that households are dipping into their savings more and more … [that’s] is not a sustainable plan for the Australian economy.”

Mr Bowen’s right, though it’s worse than he says.

Before the global financial crisis, Australians were saving very little – often a ‘negative’ amount during 2003 to 2007 (see chart below).

What that means is that, after putting away 9 per cent of their incomes as super savings, households were not only eroding that saving by racking up debts, but sometimes borrowing more than the 9 per cent.

In the days of rapid house price growth that didn’t matter too much – the ballooning equity in homes offset the low savings rate.

But look at the figures now – we’re putting away a mandatory 9.5 per cent in super, then borrow about 4.8 per cent of our incomes to give an average savings rate of 4.7 per cent.

And this time around, house prices are forecast to remain flat or falling in the near future.

All told, the national accounts show a nation spending more on life’s essentials with less money left for the kind of spending that would buoy key areas, such as the sagging retail sector.

The economy needs stimulus, which the Treasurer obliquely admits. He said at his Wednesday media conference: “We made the right choices in the budget to invest in productivity-boosting public infrastructure and to deliver further support to small businesses to invest in their future.”

All true. These are not a good set of economic figures, but at least with those pragmatic measures in the budget the government is starting to take the problems seriously

Fair Work Commission to cut wages within four weeks

From The New Daily.

More than 600,000 low-wage workers in the services sector will suffer a wage cut on the first day of next month, after a judicial bench refused pleas to cancel or delay cuts to penalty rates.

In a decision handed down on Monday, the Fair Work Commission denied requests from unions for the wage cuts to be postponed for two years or, at the very least, for currently employed Australians to be quarantined from the cuts.

Instead, the Commission chose to stagger the cuts to Sunday loadings, which means workers will have their wages cut every year on July 1 until 2019 or 2020, depending on their industry.

The verdict applies to workers paid Award rates in the hospitality, fast food, retail and pharmacy sectors.

ACTU secretary Sally McManus urged Parliament to legislate against the “devastating” cuts.

“This can be stopped. Our Parliament can stop it. Malcolm Turnbull can stop it,” she told reporters.

“There is a bill before Parliament as we speak and it can be voted on in the next two weeks and bring a stop to these penalty rate cuts.

“These cuts are devastating. It’s $70 a week in total on average for workers. These are the lowest paid workers in our community.”

Employer groups had urged the Commission to not phase in penalty rate cuts at all, arguing this would boost employment sooner.

The Commission dismissed this argument by acknowledging it was “cautious” about any boost to employment flowing from lower rates of pay. Instead, it argued that workers would benefit from “an increase in overall hours worked”.

However, it did decide to impose the public holiday penalty cuts all at once, from July 1, 2017.

Ms McManus disagreed, telling The New Daily that workers would end up “working longer for less pay”.

From July 1, Sunday penalty rates will be cut by 5 percentage points across the four sectors for full- and part-time workers, bringing penalty rates to 145 per cent for fast food; 195 per cent for pharmacy and retail; and 170 per cent for hospitality.

The McKell Institute, commissioned by the ACTU, has calculated, based on 2011 census data, that if the Sunday penalty rate cuts had been implemented in full on July 1, roughly 621,000 workers would have lost $1.4 billion in disposable income a year, with rural and regional areas the worst hit.

Some, such as Warren Entsch, Liberal MP for the worst affected electorate of Leichardt, have dismissed these numbers as exaggerated.

But even if the disposable income and affected worker numbers were overstated by the McKell Institute’s methodology, it would not affect the rankings. Rural and regional workers would remain the worst hit.

penalty rates electorates

The Australian Industry Group said the Commission’s decision was “fair”, but that it would have preferred for the cuts to be implemented straight away, not phased in.

Rob Mitchell, Labor MP for Australia’s second-worst affected electorate, told The New Daily that penalty rates are important because weekend workers “are missing out on what we value in Australia”.

“I know from my experience when I was with the RACV, having to work on Christmas Day and doing weekend work on both day shifts and night shifts, how this had a big impact on family life and the loss of participation in special family occasions,” Mr Mitchell said.

“This cut attacks the young, it attacks the vulnerable. The FWC does its work, and in this case it got it wrong – very badly wrong.”

Mr Mitchell was especially concerned about the impact of the cuts on consumer spending.

“For many in our communities, these cuts will mean that people have less discretionary spend. If they’ve got less discretionary spend, they’re going to be tightening things up, they won’t be going to restaurants or to the shops, so you could actually see a contraction in small town economies.”

How the changes will be phased in:

 

Government may water down private super borrowing restrictions

From The NewDaily.

The Turnbull government has taken planned restrictions to borrowing by self-managed superannuation funds off the agenda in the short-term in a move that may presage a weakening of the proposals.

Under a plan announced in April, debt on the books of SMSFs would be added to fund values when calculating the new $1.6 million limits for tax-free super pensions.

The move was designed to stop people effectively getting around the cap by using borrowings to reduce asset values and paying the debts off over time.

The initial consultation period for the move expired on May 3 but the government has opened discussions again with the superannuation industry.

A spokesperson for acting Financial Services and Revenue Minister Mathias Cormann said: “Following stakeholder feedback, the government will consult further with stakeholders on the proposal to add the outstanding balance of a limited recourse borrowing arrangement (LRBA) to a member’s total superannuation balance measure in conjunction with consultation on the non-arm’s length income integrity measure announced in the 2017-18 budget.”

The SMSF industry has kicked back on the moves, saying they may force some investors to sell properties because they won’t be able to make extra non-concessional contributions to their fund needed for debt repayments once it has hit the $1.6 million limit.

“Some self-managed funds may not be able to use limited recourse borrowing arrangements if they will be relying on non-concessional contributions to repay some or all of the loan interest and capital because the gross value of the asset(s) will take them over the $1.6 million total superannuation balance and they will be unable to make further non-concessional contributions to service the debt,” the SMSF owners alliance said in a submission on the issue to Treasury.

The opposition has not expressed a view on the legislation, saying instead it would like to ban SMSF’s borrowing altogether.

“Labor has previously stated that we will restore the general ban on direct borrowing by superannuation funds, as recommended by the 2014 Financial Systems Inquiry, to help cool an overheated housing market partly driven by wealthy Self-Managed Super Funds,” a spokesman for Labor’s shadow Financial Services Minister Katy Gallagher said in response to questions from The New Daily. 

“This has seen an explosion in borrowing from $2.5 billion in 2012 to more than $24 billion today.” 

Stephen Anthony, chief economist for Industry Super Australia, said there was an argument for leaving out existing arrangements from the changes.

“I’d be happy to see transition arrangements put in place and allowing the restrictions to apply to arrangements from here on in,” he said.

“But if the outcome of the consultation is just to water down what I see as a useful structural reform, I’d be very disappointed.”

The industry fears that introducing the new restrictions to existing arrangements would mean some SMSF owners would be forced to sell properties held in their funds because they would not be able to make loan repayments.

The explosion of SMSF property debt has been a concern for regulators, with the Murray inquiry into the financial system in 2014 recommending SMSF borrowing be banned, warning “further growth in superannuation funds’ direct borrowing would, over time, increase risk in the financial system”.

The Reserve Bank concurred.

Australia isn’t the only country caught in a housing bubble

Property bubbles have been created by a combination of ultra-low interest rates, easy lending, rapid population growth, and an openness to foreign investment. Underlying it all is the financialisation of property.

From The NewDaily.

It’s only natural for Australians to be obsessed with our own property market woes, but there is a whole world of bubbles out there waiting to be popped.

We chatter endlessly about prices in Sydney and Melbourne, which is unfair to the other capital cities. But it’s understandable, as 57 per cent of the nation lives in Victoria and New South Wales, according to Australia’s statistics bureau.

And we’re right to be concerned. Only this week, Citigroup chief economist Willem Buiter said Australia is in the midst of a “spectacular housing bubble”. He joined a great host of experts worried that our two main property markets have been running way too hot.

The numbers back him up. CoreLogic, one of our most widely cited property pricers, says Australian houses now cost 7.2 times the yearly income of a household, up from 4.2 times income 15 years ago.

Between the global financial crisis and February 2017, median dwelling prices almost doubled (+99.4 per cent) in Sydney, bringing them to $850,000, and in Melbourne (+85 per cent to $640,000), according to CoreLogic.

But we should not delude ourselves that a housing crisis is a uniquely Australian phenomenon. Cries of “Bubble!” are ringing out across the globe.

Sweden’s central bank boss Stefan Ingves this week issued a warning about sky-rocketing household debt and soaring property prices. Sound familiar?

In Switzerland, the cities of Zurich, Zug, Lucerne, Basel, Lausanne and Lugano face similar risks.

Then there’s Ottawa, Vancouver and Toronto in Canada – an economy comparable in size and composition to our own. As it has for Australia, the International Monetary Fund has told the Canadian government to intervene or risk an economic crash.

The International Monetary Fund (IMF) has issued similar warnings for Denmark, which is battling soaring prices in the capital of Copenhagen.

Most important of all is China. Prices rose 22.1 per cent in Beijing, 21.1 per cent in Shanghai and 13.5 per cent in Shenzen between March 2016 and March 2017, CNBC reported.

The warnings are familiar. “If young people lose hope, the economy will suffer, as housing is a necessity,” Renmin University president Wu Xiaoqiu said recently.

The difference is, if the Chinese economy crashes because of a housing market correction, it will echo throughout the world.

Hong Kong is fighting bubbles, too. Reports on its property market are full of “handsome gains” and an impending “burst“.

Closer to home is Auckland in New Zealand, where prices have also doubled since the GFC.

Despite Brexit, the mother country is hurting, too. There are periodic predictions that London will “finally burst” after years of rampant price growth.

So what’s going on? The consensus is that these bubbles have been created by a combination of ultra-low interest rates, easy lending, rapid population growth, and an openness to foreign investment.

Saul Eslake, a renowned Australian economist, told The New Daily there are “common factors” across these affected nations, including immigration. But he cautioned against shutting the borders.

“It’s wrong, it’s factually incorrect to deny that immigration has contributed to rising house prices. It has contributed to it. But I would argue that to respond to it by, as Tony Abbott among others has advocated, cutting immigration would be the wrong approach.”

Dr Ashton De Silva, a property market expert at RMIT University, also blamed demographic change across the globe.

However, Dr De Silva said each country’s unique factors should not be ignored.

“The fact that it’s happening the world over is important to note because there are many countries going through a very similar cycle, such as China,” he said.

“However, whilst we can take this overarching view, we need to be mindful that there is a very important local story going on. And that story is not always consistent.”

If Australia wants to beat its bubble, perhaps it should look to Singapore.

It was fighting rampant prices too until the government intervened and did two things: boosted supply by building a whole bunch of new apartment buildings, and dampened demand by hiking stamp duty and cracking down on foreign buyers.

DomaCom test case: super-for-housing is back on the agenda

From The NewDaily.

Listed investment group DomaCom Ltd is suing the tax man to allow self-managed super fund investors to buy into properties they live in – a test case with potentially huge implications for superannuation and housing affordability.

DomaCom’s ambitions were stymied last October when the Australian Taxation Office said the company’s plans did not pass the ‘single purpose test’ for superannuation.

DomaCom uses trust structures to allow SMSF investors to buy a percentage of a property that they or their families live in. The ATO considered this creative use of trust structures to essentially allow people to gain a benefit by living in their property while holding it as a superannuation investment.

But DomaCom didn’t take that decision lying down. It moved to start an internal dispute process with the ATO. That process proved inconclusive, so now the company is asking the Federal Court to rule on the situation.

It would like the court to say that DomaCom’s structures are not in-house or related trusts for the purposes of superannuation.

To bring the case, DomaCom is financing a civil action taken by one of its clients, who has invested in an apartment built for student accommodation and would like his daughter to rent it while she completes her studies.

DomaCom CEO Arthur Naoumidis told The New Daily, “if we get the ruling in our favour then we would argue we have a precedent and we could follow it”.

However, were the courts to find in DomaCom’s favour, regulators are likely to be concerned on two counts. The purpose of superannuation could be undermined by allowing SMSF owners and their families to live in properties part-owned by their private super funds.

There would also be concern that housing affordability could be further damaged by SMSFs pouring money into residential property.

Even if that idea holds water legally, the ATO and Treasury would be unlikely to let it lie.

Helen Hodgson, associate law professor at Curtin University, told The New Daily last year that “if it was found to be technically possible I imagine fairly soon we would find someone saying the loophole should be closed”.

DomaCom is a listed investment company with lots of units and investments. But unlike other investment companies it allows people to choose a property they want to buy into and purchase through a dedicated sub-fund.

When a property is found by would-be buyers, DomaCom organises a book build where would-be investors promise to buy units at a certain price. If enough money is raised the sub-fund buys the property, essentially through crowd funding.

DomaCom has claimed it is not restricted by the sole purpose test because it ensures when people buy into a sub-fund they are legally buying into a small part of the overall DomaCom structure, rather than buying a single asset.

What DomaCom believes is that if an SMSF buys a stake in, or all of, a sub-fund, its owners can legally live in the building or rent it to their children because the SMSF would receive income from the overall revenues of the fund, not rent paid.

It would also allow children to build stakes in properties their parents bought in an SMSF through purchasing units in the sub-fund over time using their super contributions.

“The ability to use superannuation to help people into a home is clearly a topical issue in Australia and it is our belief that the DomaCom Fund can play a key role in solving this issue whilst still protecting the assets of the SMS,” Mr Naoumidis said.

The housing market is swinging to over-supply

From The NewDaily.

First time home-buyers may have been relieved on Wednesday to see home prices falling by an average 1 per cent across the nation, according to the latest data from CoreLogic.

‘May’ is the operative word. In a nation full of property experts, even relatively inexperienced house hunters know that figure could bounce back next month.

The figures for bubble-cities Sydney and Melbourne were heartening for non-home-owners, falling 1.3 and 1.7 per cent respectively – the biggest monthly slide since November 2015.

What makes these figure different to the falls seen 18 months ago, however, is the context in which they are happening.

In its simplest form, the market is swinging towards over-supply in a very short space of time – something that will surprise buyers who’ve been told for years that the problem was ‘under-supply’ .

The ‘over-demand’ problem

The government, and every real estate agent or property spruiker worth their salt, has been using the myth of ‘under-supply’ to explain the sky-high prices that are locking a generation buyers out of the market.

High profile real estate agent John McGrath wrote on Tuesday in the Switzer Daily investment newsletter that: “We have too much population growth fuelling demand and too much of an undersupply to experience a crash.”

Well it’s not quite that simple. As covered earlier this week, the immigration intake is going to become a hot-potato at the next election, so may not be as reliable a back-stop as in recent years.

And the ‘under-supply’ problem is mostly a myth anyway.

As University of Sydney town planning academics Peter Phibbs and Nicole Gurran explained recently, ‘under-supply’ is the government’s way of explaining rock-bottom housing affordability, without having to do much about it.

A far more accurate term to use is ‘over-demand’, which is created by the large tax refunds the government has been handing back to property investors since changes to capital gains tax laws in 1999.

The much under-reported figure that proves that point is the number of Australian residents per dwelling, measured by the Bureau of Statistics, which has remained virtually unchanged right through the housing boom years.

There is no great mis-match between the number of dwellings available to be lived in, and the number of people wishing to rent or buy them.

The ‘under-supply’ simply reflects too few dwellings on the market to cater for investors who wish to enjoy large tax refunds through negative gearing, as well as the apparently fool-proof capital gains that benefit from the 50 per cent capital gains tax discount.

When these dynamics are understood, falling house prices in the bubble cities have to be the result of one of two things: investors deserting the market, or a larger volume of properties coming onto the market.

Well investors are still not deserting the market according to the Reserve Bank’s latest credit data. It shows the value of investor loans growing by 7.3 per cent year-on-year, which is still higher than the growth in owner-occupier loans, at 6.1 per cent.

So if investor demand for credit is continuing apace, and if the usual numbers of young first-home-buyers are out looking for a home, how can prices be falling?

The answer is on the supply side. The much discussed ‘apartment glut’ is beginning to work through the system, with knock-on effects in the detached housing market.

As Mr McGrath himself notes: “CoreLogic figures tell us that the supply of established housing stock available for sale in Sydney and Melbourne is at its highest level for this time of year since 2012.”

Meanwhile, foreign buyers – mostly from China – many of whom are not captured by the RBA credit data, are pulling out of the market. That leaves even greater supply for local investors to pick over.

In those circumstances, prices can fall despite ‘strong investor demand’.

What we are seeing is not a shift from a large under-supply back to more normal levels of supply, but a shift from normal-ish levels of supply to over-supply – with slightly lower levels of investor demand due to the China exodus.

That will leave Treasurer Scott Morrison with some explaining to do at the next election, when he will presumably continue to promise to ‘unlock supply’ and solve the affordability problem.

In fact, it’s looking pretty unlocked already.

The ‘jobs growth’ myth leading us to breaking point

From The New Daily.

When the ratings agency S&P Global downgraded its outlook for the Australian economy earlier this week, it would have caught many people by surprise.

That hasn’t been the story coming out of Canberra in recent months. Treasurer Scott Morrison put on a sterling display of optimism during budget week, telling us that not only were lots of jobs being created, but the tax revenue flowing from those jobs would help bring the budget back to surplus.

Sadly, S&P has the more accurate picture. As noted on Wednesday, it sees our economy as “very high risk” due to “strong growth in private sector debt and residential property prices in the past four years”.

But the housing bubble is only half the story. Times have changed from the years when a large mortgage would quickly get easier to service as inflation eroded the real value of the debt.

Now, other forces of erosion are at work. Number-crunching last week’s jobs data from the Bureau of Statistics shows that it’s not debts that are eroding, but the number of hours of work available in the economy.

When the Treasurer quotes the jobs data, he tends to focus on the ‘seasonally adjusted’ unemployment rate, which fell from 5.8 to 5.7 per cent in April – the more reliable ‘trend’ figure remains stuck at 5.8 per cent.

But it’s what is happening behind those figures that is worrying.

First, there’s the ongoing trend towards part-time work. In the past year, the 49,300 full-time jobs created were easily eclipsed by 102,800 part-time jobs.

The growth rate for part-time jobs is three times that for full-time jobs, and if that trend continues over the next year, many heavily indebted households will start to reach breaking point.

The debt problem

Australia now has a middle strata of homeowners, between renters and those who’ve paid off their mortgages, who are carrying historically high levels of debt.

Not only are their debts not being significantly eroded by inflation, but the purchase price of homes in most cities continues to climb, loading up new generations of home buyers with even bigger debts.

That’s what S&P is concerned about. Mortgage holders are also struggling with two other trends – below-inflation wages growth, and the fall in hours worked revealed by the ABS last week.

While for an individual, having a part-time job is a lot better than none at all, for many families the problem of having one or even two breadwinners wanting more hours is growing.

This is what you need

Australia’s population is growing at a rapid annual rate of 1.4 per cent.

The workforce doesn’t grow quite that quickly due to the ageing population profile, but it’s not far behind – 1.36 per cent in the past year according to the ABS.

If workers’ hours had remained constant on average, the total hours worked would have risen by 22.5 million in the past year to reflect the expanding workforce.

What we saw last week was a fall of two million hours in the month of April, and growth over the year at half the level it should be – 10.4 million hours.

Those figures say a lot more about how the economy is progressing than simple ‘jobs’ figures, but even the job figures fell behind.

There have been 152,100 jobs created in the past year (to April), but the workforce has grown by 172,400 people in the same period. That is, more people than jobs available.

Household debt, meanwhile, continues its march higher. The average household debt is 190 per cent of disposable income, according to the RBA.

It’s important to remember, too, that most of that debt is concentrated in the one-third of households which have a mortgage.

That’s the slice of middle Australia for whom celebrations over a ‘fall in unemployment’ will make no sense.

RBA figures show that one third of mortgage-holders has less than a one-month buffer in the household finances before they fall into arrears.

That’s a risk for them, but also for the economy.

S&P is only telling us what the economists in the Department of Treasury already know, but the politicians aren’t keen to say.

Bank-owned super funds earn less than term deposits

From The New Daily.

The bank-owned superannuation fund sector has performed so poorly that putting your money in term deposits over 10 years would have earned a better return than retail funds, according to new research from Industry Super Australia.

That is despite the funds including growth assets like shares, property and private equity in their asset portfolios.

Not-for-profit industry and other super funds outperformed retail funds by almost 2 percentage points a year, the study found.

Over 10 years, retail funds returned an average of 3.3 per cent a year, compared to industry super’s 5.1 per cent.

That outperformance makes a huge difference to your account. If you had $50,000 in a retail fund at the start of the period and you made no additional contributions, it would have grown by 38.3 per cent to a total of $69,170.

If you had the same balance in an industry fund, it would have grown by 64.4 per cent to $82,220. Double the starting balance and you’d have $164,440 in your industry fund compared with $138,340 in a retail fund.

The reason for the difference is the profit model, Industry Funds Australia CEO David Whiteley said.

“Consistent outperformance by industry super funds over bank-owned super funds reflects the differences between for-profit and not-for-profit business models, which over the last two decades have seen significantly different member outcomes.”

The ISA report also looked at the dollar value to fund members of the outperformance of industry funds and the underperformance of retail funds. The industry funds returned their members an extra $42.91 billion in outperformance above the median of all super funds over 10 years.

The retail funds, meanwhile, cost their members $25.42 billion by underperforming the industry median.

Interestingly, the industry funds returned more to their members through outperforming the median despite having a smaller asset base. The latest figures from APRA (Australian Prudential Regulation Authority) show that retail funds had $579.9 billion in assets while industry funds have $517.9 billion.

The outperformance of industry funds showed up in other ways. Three-quarters of bank-owned super fund assets were in funds listed in the lowest 25 per cent of return tables, and 94 per cent of them performed below the median.

For industry funds, the situation is reversed. Three-quarters of all industry funds were in the top performance quartile, and 91 per cent of them performed above the median.

The underperformance of retail funds happens regardless of size. Larger funds only reported higher returns in the not-for-profit sector, meaning the for-profit fee model undermined any advantage members might have got from economies of scale.

The five largest public-offer funds owned by the banks and AMP, each with more than $30 billion in assets, performed well below the median, the research found.

Matt Linden, public affairs director for Industry Super Australia, said “the performance of the system is being weighed down by bank funds”.

While bank funds underperformed, they have managed to hold their membership.

“Lots of people are disengaged with super and are not financially literate,” Mr Linden said.

“Maybe the bank-owned funds are exploiting this disengagement for their benefit.”

Industry Super Australia CEO David Whiteley said the for-profit model “sits very uneasily” with both the interests of members and the “social policy objectives” of compulsory super.

“It is now time for the banks to disclose the profit from compulsory super and for the regulator to investigate the chronic underperformance of bank owned super funds.”

* The New Daily is owned by a group of industry super funds

The human face of Australia’s housing crisis

From The New Daily.

Chris Radford and Michelle Apostolopoulos are high school sweethearts. They met and fell in love at Northcote public school, which sits on the same main road that runs near both their parents’ fully paid off houses.

They both rent in Melbourne and are fast approaching the age their parents married, bought houses and started families. Repeating that feat in today’s market seems impossible.

Chris, 24, has spent the last six years of his life stacking shelves in a trendy inner-city supermarket, so he knows the price of avocados – that symbol of millennial decadence that is supposedly holding him back from property ownership.

“Four bucks, five bucks each. Yeah, I know how much they cost,” he says. “I don’t eat a lot of avocado to begin with.”

The couple, who plan to marry soon, are exactly who Treasurer Scott Morrison’s latest federal budget was supposed to help: hard-working, hard-saving Australians who want nothing more than a modest home to call their own.

Unlike their parents’ generation, the ‘Australian Dream’ seems to be getting further out of reach, what with rising prices, penalty rate cuts and record-low wage growth.

Chris pays $110 a week for a room in a house he shares with two friends in the Melbourne suburb of Moonee Ponds. When it rains, water drips through the ceiling into a strategically placed pot.

The house will soon be knocked down for apartments, so the landlord has given up on the place.

When his parents bought their house in Thornbury for $80,000 back in 1991 it was not much of a stretch for two people in their mid-20s. It is now worth at least $1 million, probably more.

Because of this enormous increase in value, buying even a more modest house today requires vastly more effort. Chris and Michelle, 23, estimate that a median-priced Melbourne home will require them to save a 20 per cent deposit of $150,000.

Even if they were to save every dollar they earn, it would still take them years to build that much – and that’s without taking price growth into account.

“It’s so unfair, two people should be able to save enough in a few years for a house!” Michelle says.

“Even if we saved hard I know we wouldn’t be able to afford within 32 kilometres of here.”

Part of the reason that saving is so hard for the couple is the new round of attacks on their pay.

Chris has worked his supermarket job all through high school and now into university. He works Sundays and has for years. He also works unpaid at an internship as part of his university degree, which requires him to work full-time on top of his part-time work.

This leaves him relying heavily on weekend penalty rates — which he’ll lose come July 1 because of a recent decision by the Fair Work Commission.

“If I didn’t have to work on Sunday, I wouldn’t,” he says.

Michelle, too, regularly works weekends. But because she works for one of Australia’s two main supermarkets, she’ll be lucky enough to keep her penalty rates.

“People who work weekends miss out on seeing family and friends,” she says.

“You deserve [penalty rates], you’ve busted your arse all weekend.”

They’re both disappointed the government didn’t do more in the budget to make things easier for low-paid workers and aspiring property buyers like themselves. Treasurer Morrison’s plan to allow first home buyers to tip up to $30,000 into their superannuation doesn’t excite them.

“When you really look at the details it starts looking practically impossible,” Michelle says.

“The government isn’t doing anything to make it easier to buy a house.”

To make matters even worse, with the university debt repayment threshold dropping, Chris and Michelle will both have to pay back more to the government each year.

“A lot of people think you’re not working hard enough if you can’t save a deposit. They just pick on young people because we can’t do anything about it,” she says.

“What are you supposed to do? Store everything in a cardboard box, then live in the cardboard box too?”

Budget 2017: Bank bashing a winner, but tax cuts leave ScoMo exposed

From The New Daily.

The Turnbull government’s budget this week went a long way to neutralising the policy issues that Labor exploited at the last federal election, especially by whacking the big banks. But the government deliberately left itself exposed on the one issue that could bring it down.

The Coalition can now claim to have cracked down on big banks, who have managed to make themselves public enemy number one by treating customers poorly while raking in huge profits and showing inadequate contrition for the shonky operators among their ranks.

It’s impossible to tell definitively which budget measures were the result of rigorous policy analysis within the bureaucracy, and which were cooked up as a quick political fix in the minister’s office.

The deficit levy in 2014 on very high income earners was reported to be a relatively last-minute decision by the Abbott administration to pre-emptively counter accusations that the budget only imposed cuts on students, the elderly and the unemployed.

This year’s levy on the banks could be seen in a similar light, with reports emerging that Treasury officials who met with bank representatives after the budget knew very little about the levy or how it might operate.

The crackdown on banks involves more than just the levy. There is also a new requirement for bank executives to be registered with the industry’s regulator, with the attendant threat that bankers can be struck off the register for misconduct and stripped of their bonuses. Banks found guilty of misconduct will also face increased fines.

The government could argue these reforms would have been the likely outcome of a royal commission.

This of course does not sate the community’s desire for bankers to be subjected to a public inquisition and then metaphorically placed in the stocks or strapped to a crackling pyre.

Even though the government was prepared to reverse its position on a number of other policy issues, such as Gonski, it apparently didn’t see the benefit of conceding to Labor on a banking royal commission.

Perhaps this is because it occurred to Treasurer Scott Morrison that he could discipline the banks while filling a revenue hole at the same time.

It is no secret the Treasurer is unhappy with the banks – and not just because they’re singularly ungrateful for the government’s protection against the indignities of a royal commission.

ScoMo is unhappy because they appointed a senior Labor identity – former Queensland premier Anna Bligh – as their chief lobbyist.

That role had reportedly been earmarked for one of Mr Morrison’s senior advisers, and the Treasurer had apparently given his blessing for the appointment.

Anyone with an ounce of political common sense knows that lobby groups are unwise to appoint someone of the opposite political flavour to the government of the day.

The only exception to this rule is if it’s close to an election and there is a good chance the government will change.

Canberra circles are rife with stories of ministers and their staff not only refusing to meet with such lobbyists, but excluding them from other consultation processes.

Retribution can even extend to unfavourable policy decisions, as the bankers learned on budget night.

The Treasurer would be pretty happy with the outcome of the decision so far.

The bankers are squealing, voters don’t like one of the most trusted political faces in recent history shilling for the banks, and Labor can’t claim any credit for the crackdown.

ScoMo will also be confident in the knowledge that if the banks try to pull a mining tax rebellion – with a multimillion dollar advertising campaign – they will only reinforce voters’ resentment and the resulting backlash will demonstrate just how unpopular the banks are.

Big business tax cuts may be ScoMo’s undoing

However, just as Tony Abbott’s deficit levy didn’t magically make the rest of the 2014 budget fair, the banks levy can’t do the same for this year’s budget.

The decision to double down on promised tax cuts for the big end of town will be an albatross that PM Turnbull carries to the next election.

This is even more the case now that low-income taxpayers will be required to pay the Medicare levy increase for the NDIS and the total 10-year bill for business tax cuts has blown out to $65 billion. This weakness could have so easily been avoided.

The government could have set aside the big business tax cuts until the budget was in surplus (until we can afford it), or the average net tax raised from big corporates exceeded a certain threshold (until they are paying their fair share of tax).

For a budget that was so smart on politics, the decision to keep the tax cut for big business was dumb.

Leaving it on the books simply gives Labor a free kick. No wonder it was the main feature of Opposition leader Bill Shorten’s budget in reply address.

If voters conclude the Turnbull government is no better than the banks in wanting to rip them off, it will be the PM and the Treasurer being dragged to the stocks and the pyre at the next election.