The threat of another interest rare rise is unlikely to dampen calls for a spending spree in this year’s budget, or even reduce its likelihood.
Yesterday, Reserve Bank governor Glenn Stevens poured water on hopes on a pre-election interest rate fall, saying that the three interest rate rises last year had failed to dampen inflation pressures. This led to predictions that the expected election spending-spree may be curtailed.
However reading the fine print, it is unlikely that any spending spree announced in May and unlikely to be introduced until July would have an enormous short term impact on inflation. Even Stevens seems to agree, indicating that budget pledges would be unlikely to affect interest rate calculations before an election later this year.
– Amanda Gome
Male/female wage gap widens
Average full-time weekly earnings rose 2.6% over the 12 months to November 2006, to reach $1058.90, according to Australian Bureau of Statistics released today.
Public sector employees enjoyed average rises of 4% over the same period, significantly better than 2.7% received by private sector workers. The gender pay gap was also significant, with full-time male wages rising 3% and female 2.2%.
– Amanda Gome
Property investings’ new face
There’s a new kid on the property investment block: the renting/investor. They rent the place they want to live in, and buy, as a pure investment, the property they believe will have consistent tenant demand and give the most growth potential.
The basis for their approach is that it is more affordable to rent than to repay a mortgage on a principal place of residence. Rent will be set at 3–5% of the capital value of the property you are renting, depending on which capital city or region you live in. Home loan repayments on the other hand, currently hover around 7% of the loan amount.
Whereas a principal place of residence offers no tax relief other than capital gains tax exemption, and no income stream, that properly selected investment property, chosen purely and unemotionally for its capital growth and equity building potential, is going to return 3–5% of its capital value in rent.
This makes a significant contribution to the investment property loan repayments. Couple that with generous negative gearing provisions and the difference between the rental outlay versus a home loan repayment means a focused “renter/investor” can build equity faster on a high-growth asset than the traditional first home owner/occupier, where the focus is on lifestyle, not capital growth potential.
– Monique Wakelin, Eureka Report
NSW court extends employer duties to staff
Employers could be vulnerable to big payouts to sacked staff after a New South Wales Supreme Court decision significantly expanded the legal duties owed to employees.
Justice Stephen Rothman said employers’ duties of good faith and trust and confidence should be implied into employment contracts. Employees that have lost the ability to make claims for unfair dismissal due to the Federal Government’s WorkChoices legislation may now be able to make a common law claim for breach of contract instead.
Justice Rothman said the Catholic Church owed the duties to an employee who was sacked following an investigation into allegations of indecent assault. The church did not direct its investigator to interview a vital witness to the alleged incident, a failure Justice Rothman said breached the duties of good faith and trust and confidence it owed the employee.
The court decision means that employers can be subjected to claims for damages if they fail to “exercise of caution and diligence to be expected of an honest person” or act in a way that “destroys the relationship of trust and confidence” with an employee.
However, to get compensation, the employee must prove the breaches caused him or her damage. In this case, the court found that although the Catholic Church had breached the duty, the absence of any damage to the employee meant it did not have to pay.
The decision is subject to appeal to the New South Wales Court of Appeal.
– Mike Preston
Small-cap moves
Clothing company Pacific Brands has paid close to $250 million for the Yakka Group, owner of the Yakka and Hard Yakka workwear brands. The deal comes after Pacific Brands announced a half-yearly net profit of $53.8 million, up 6.1% on the corresponding quarter in 2006.
Good news for road traffic management company Traffic Technologies, which reported a maiden first half profit of $1.1 million. Housing loan franchisor Mortgage Choice reported $8.4 million half-yearly profit yesterday, up 13% on previous corresponding half.
Labour hire group Skilled posted a net first half-profit of $11.1 million, down 9% on its $12.3 million 2006 result. The company said acquisition costs associated with the purchase of Catalyst Group and TESA Group were responsible for the fall.
Consumer good company Housewares suffered a 29¢ drop in its shares yesterday after plans to sell its homewares business to McPherson’s was called off. McPherson’s withdrew due to concerns about the financial performance of the business.
– Mike Preston
Hot innovator
MyHome will launch on Monday as twin goliaths PBL and Microsoft move into the $100 million online property advertising to take on market leader Realestate.com.au.
MyHome, which will launch with a huge publicity campaign including TV program MyHome, will offer free real estate ads for three months, and claims to have as many listings as Fairfax’s Domain.com.au.
But Simon Baker, chief executive of Realestate.com.au, which is 58% owned by News and has a 60% share of the online property market, says he is not fazed. “We have invested a lot over the years in getting the content on board. We got in first and we have the brand recognition, like Colgate toothpaste.”
Read about how real estate innovator Simon Baker is going to take on twin goliaths, PBL and Microsoft in Hot Innovators today.
– Amanda Gome
Telcos to build on broadband network
A coalition of telcos including Optus, Macquarie Telecom, Telecom NZ/Powertel and Primus (known as the G9), yesterday released details of their plan to improve broadband network facilities across Australia.
The telcos plan to form a new company to spend $3.6 billion upgrading the existing network by installing fibre to the node: fibre-optic cable between Telstra’s central exchanges and the nodes from which phone cables go to households.
The fibre to the node upgrade will dramatically improve broadband download speeds, the telcos say.
The group will manage access by service providers once it is complete.
– Mike Preston
Water wars
The Federal Government’s takeover plan of the Murray-Darling Basin looks set to fail after the states’ spoiler campaign gained momentum.
Victorian Premier Steve Bracks is leading the charge with an alternative blueprint for management of the basin, claiming water security for Victorian irrigators was under threat.
Unfortunately, the water summit taking place tomorrow is not expected to resolve tensions between Canberra and the states. The water debate can be expected to go on for months.
– Amanda Gome
BAS deadline looms
BAS time again. The December quarter activity statements are due next Wednesday, February 28, now less than a week away.
“The business portal is the quickest, easiest and most secure way to lodge activity statements and pay amounts owing,” says deputy tax commissioner Geoff Robinson.
“You may even be eligible for a two-week extension if you lodge and pay online. Refunds are deposited directly into the nominated bank accounts and can be accessed once the deposit is cleared, usually in around 14 days.”
Any businesses concerned they may not meet the February 28 deadline should contact the tax office as soon as possible on 13 28 66.
For more information, including details of online services, visit www.ato.gov.au
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