Kevin Rudd has reclaimed the prime ministership after winning a leadership spill of the Australian Labor Party last night, defeating incumbent Julia Gillard 57-45, with Anthony Albanese replacing Wayne Swan as the deputy leader. In his speech following the ballot, Rudd emphasised the business community and young Australians will be key priorities for his government. "Let me say this to Australian business: I want to work closely with you. I’ve worked with you closely in the past, particularly during the GFC and there were some white knuckle moments there, as some of the heads of the major banks will remember," Rudd said. "But we came through because we worked together and I’m saying it loud and clear to businesses large and small across the country, that in partnership we can do great things for the country’s future." Julia Gillard announced she would not recontest her seat at the next election, also saying that while “[gender] doesn't explain everything, it doesn't explain nothing; it explains some things” in terms of the challenges she faced as leader. Carriers demand more backhaul access Competition watchdog the ACCC will begin an enquiry into Telstra’s charges to other carriers for use of its backhaul networks, following complaints from a group of carriers including iiNet, Vodafone and Macquarie Telecom. Backhaul fibre optic networks are used to send calls and data to and from mobile phone base stations and exchanges, with Telstra owning the only cables to some parts of the country. "We need the NBN to change some of its priorities to be able to help us bring competition to Australians," says Vodafone Australia chief executive Bill Morrow. “This is a huge impediment, and you're now going to get customers faster and faster internet access and taxing them if they use it. It ends up being a disproportionate tax as well because for companies like iiNet and Internode, our customers have much higher usage than Telstra customers or Optus customers,” says iiNet chief executive Michael Malone. ATO warning on profit shifting Tax Commissioner Chris Jordan has issued a warning to Australian companies hoping to emulate the tax minimisation strategies of tech giants such as Google and Apple, telling the federal government it needs to do more to stamp out the practice. "They can see what is happening as a result of these international companies taking profit out of the country. They are thinking: 'What functions can we move offshore, what functions can we disconnect and have third-party providers fulfil to put the profit in a low-tax jurisdiction and receive an exempt dividend coming back into the system?'" Jordan says. “That might be their assertion, but we are going to test every single aspect of those structures. We will want to know whether what purports to happen actually happens on the ground… It is one thing to put in place a fancy structure, but it is another to have it tested five years later, because by their nature these schemes are quite, sort of, artificial. “We will be taking a leadership role internationally in addressing the problem, but we need to also look at how changes can be made here. The corporate tax base is under threat. What's happening is unacceptable to the community, the government, and to regulators.” Overnight The Dow Jones Industrial Average is up 1.02% to 14910.14. The Aussie dollar is up to US92.81 cents.
Treasurer Wayne Swan has admitted the Australian economy appears to be losing momentum following the release of March quarter national accounts showing GDP growth slowed to 0.6% for the quarter, with businesses and households cutting spending. “We've come through the worst economic conditions in over 80 years with an economy that is 14% larger than it was at the end of 2007 and with an unemployment rate with a five in front of it. That is an incredible achievement," Swan said. “My overwhelming concern is that the economy is losing momentum; if not for the improvement in net exports the economy would be struggling quite significantly.” Simplot enters talks to save Devonport food factory Simplot Australia managing director Terry O’Brien has entered into talks with the Tasmanian government to help keep its Devonport vegetable processing plant viable, with Tasmanian Premier Lara Giddings not ruling out financial assistance. “If we're going to continue in vegetables in Australia we've got to have a business that's sustainable in its own right. The only thing we'd consider, or we think would make some sense from government, is assistance with things relating to energy savings or water savings that could give us some real returns,” O’Brien said. “We do not want to see Simplot close its doors, we want to see that company operating successfully here in Tasmania for the long term,” Giddings said. Another blow to Geelong as Target looks to cut 200 jobs Speculation is mounting that Wesfarmers-owned retail chain Target is looking to slash up to 200 back office jobs in Geelong as part of a bid to cut costs. The shake-up comes after Wesfarmers chief executive Richard Goyder warned of weaker second-half earnings before interest and tax at the variety store chain would fall somewhere between an $8 million loss and $12 million profit. “There have already been a number of team changes as part of this review and more changes are likely. However, we will work these through with the Target team and they will be kept informed of any changes that may arise,” a Target spokesperson said. Overnight The Dow Jones Industrial Average is down 1.4% to 14960.6. The Aussie dollar fell to a 20-month low of US95.11 cents.
Prime Minister Julia Gillard has warned “every reasonable option is on the table” to deal with a $12 billion budget shortfall and fund the Gonski school funding reforms and NDIS, in a speech delivered to the Per Capita Institute yesterday. “I have expressly determined we need to have every reasonable option on the table to meet the needs of the times – even options previously taken off the table… The nation and the government must have maximum flexibility to deal with these complex, and rapidly changing, events … that is my approach,” Gillard said. “All options are on the table, so increased tax on superannuation, increased taxes on the family home, death duties, which Wayne Swan ruled out in Parliament – all options are on the table,” Shadow Treasurer Joe Hockey said in response. Merrill Lynch downgrades Woolworths over $800 million Masters loss Merrill Lynch has downgraded its earnings estimates for retail giant Woolworths over concerns its home improvement chain Masters is set to lose $800 million over the next four years. Despite Masters generating gross margins of 42%, compared to 32% at rival Bunnings, the brokerage firm predicts losses for the chain of $135 million this financial year, rising to $265 million in 2015/16. “The problem for Masters is, despite its very high gross margin… its costs per store are currently inhibitively high,” analyst David Errington said. BHP sells US Pinto Valley mine for $629.5 million Mining giant BHP Billiton has announced it has sold its Pinto Valley copper mine in Arizona to Canadian firm Capstone Mining for a better-than-expected price of $629.5 million. Pinto Valley was one of 10 non-core assets or offshore assets flagged for sale by BHP in response to weaker cashflows as a result of lower commodity prices. Overnight The Dow Jones Industrial Average is up 0.72% to 14,818.75. The Aussie dollar is down to US103.51 cents.
Treasurer Wayne Swan has begun preparing the public for a deficit and possible future budget cuts, following a warning by the Grattan Institute the federal government faces deep structural deficits for many years ahead. “Not only have the terms of trade fallen from their peaks, but the sustained high dollar and global headwinds have also hit profitability and contributed to subdued domestic price growth across the board,” Swan said. “There's no doubt this year's budget is going to be brought down in some extremely challenging and unusual circumstances. The substantially weaker revenue outlook means we are going to have to make some very difficult decisions.” Moody’s cuts QBE’s debt rating Ratings agency Moody’s has downgraded its rating for insurance giant QBE from A3 to Baa1, citing natural disasters and low interest rates, ahead of around $1 billion in the insurer’s debt falling due over coming months. “The downgrade of the rating primarily reflects the group's weakened earnings, internal capital generation and debt service coverage measures, as well as QBE's sustained elevated financial and operational leverage profile,” Moody's analyst Alan Murray says. “The group's above-average aggregate worldwide catastrophe exposures relative to capital, and its recent adverse trends in reserve adequacy, are additional considerations.” Qantas looking to strike deal with Latin American airline giant Qantas is looking to strike deals with Latin American airline Latam, which was formed last year from the merger of Chile's LAN and Brazilian airline TAM, citing its alliance with Emirates as a model for the proposed deal. “[The LAN-TAM merger distracted] the very senior people that we need to talk to. We've got a very strong relationship there and we will talk over the next year or so,” Qantas International chief executive Simon Hickey says. “[A deal] would be great but we would have to work out what is the art of the possible. It's not just the regulator here but it's the regulator on both sides.” Overnight The Dow Jones Industrial Average is up 0.1% to 14,567.1. The Aussie dollar is steady at US102.75 cents.
Australian state and federal government deficits are set to reach 4% of GDP, or $60 billion in real terms, unless governments make tough cuts to “share the pain”, according to as assessment by the Grattan Institute. “Everyone will have to share the pain [in order to get the budget back into surplus]. Victoria's Kennett [government] showed what could happen in the early 1990s. It was explicit about saying that everybody was going to have to share in bringing the budget back into surplus.” The dire assessment comes after Treasurer Wayne Swan revealed $7.5 billion has been wiped off federal government revenues since October, striking a “sledgehammer blow” to the federal budget. "We have seen the terms of trade come down but the dollar didn't move. That's caused a hit, if you like a sledgehammer, to revenues in the budget since the mid-year update of something like $7.5 billion. And of course the impact won't just be in this financial year. It will also be across the forward estimates,” Swan said. Billabong to reveal its fate tomorrow Billabong is expected to make a major announcement tomorrow as it wraps up takeover negotiations with its former US head, Paul Naude, and private equity firm Sycamore Partners. At 60 cents a share, Naude’s bid falls well below both the $1.10 bid the consortium initially offered in December and the $3.30 a share bid from private equity firm TPG in February last year, which Billabong rejected. Earlier this month, Billabong announced it would give Naude and Sycamore Partners 10 days exclusive access to the company’s accounts for due diligence. Target pursuing Texan company over counterfeit MAC makeup Wesfarmers-owned retail chain Target is pursuing Mudd Puppy Cosmetics and its owner, Marcy Dickerson, through US courts in order to identify how the company obtained its MAC cosmetics range. The legal action comes after Target was forced to remove its MAC products from shelves after the cosmetics line’s owner, Estee Lauder, launched legal action against the retailer for allegedly selling counterfeit products. Overnight The Dow Jones Industrial Average closed up 0.07% on Friday to 14,547.51. The Aussie dollar is down to US102.59 cents.
Treasurer Wayne Swan has admitted proposed reforms to the superannuation system will not make a “significant contribution” to budget savings, as criticism of the proposed changes mounts. “The fact is that we have a substantial savings task in this budget and whatever changes are made in super will not be making a significant contribution to that savings task,” Swan said. However, while industry groups acknowledge the challenges posed by a rapidly ageing population, they remain concerned about the lack of detail around the government’s proposed reforms. “At the moment every Australian thinks their super is at risk because there's no clarity from the government. The government needs to outline what their changes are and end the games,” Financial Services Council chief executive John Brogden said. Glenn Stevens appointed as Reserve Bank governor for another three-year term Reserve Bank governor Glenn Stevens has been appointed for another three-year term as head of Australia’s central bank. The extension, announced on Wednesday by Treasurer Wayne Swan, will see Stevens serve until 2016, when deputy governor Philip Lowe is tipped to take over the role. “I congratulate governor Stevens on his reappointment, which acknowledges his enormous contribution to Australia's economic resilience through his conduct of monetary policy, as well as his enduring focus on financial stability working together with our other key regulators,” Swan said. Cyprus accepts €10 billion bailout conditions Cyprus has formally accepted a set of conditions that will see the troubled island nation eligible for a €10 billion ($A12.27bn) bailout. Under the deal, the Cypriot government will close the bankrupt Laiki Bank, with all deposits under €100,000 transferred to the Bank of Cyprus, while deposits over €100,000 could be taxed at rates of up to 60%. “The Cypriot authorities have put forward an ambitious, multi-year reform program to address the economic challenges they face,” said International Monetary Fund managing director Christine Lagarde. “The overarching goals are to stabilise the financial system, achieve fiscal sustainability and support the recovery of economic activity to preserve the welfare of the population.” Overnight The Dow Jones Industrial Average is down 0.8% to 14550.4. The Aussie dollar is down slightly to US104.57 cents.
Start-ups look set to benefit from a new $350 million round of equity funding through the federal government’s Innovation Investment Fund, announced as part of the Venture Australia package.
The G7, a group of the world’s seven largest industrialised economies, has warned excessive volatility in currency markets undermines the stability of markets.
Yesterday we looked at how the economy would fare if the Coalition’s broad economic and fiscal policies — to the extent that we know them — were successfully implemented.
Federal Opposition Leader Tony Abbott says the Coalition will only release its policy costings after the government releases theirs, after the Prime Minister flagged a number of cost-saving measures to be considered ahead of the budget.
Some say it’s too late. Some, even those who have been continuously calling for the nation to go to the polls for the past three years, say it’s too early, given the budget announcement isn’t until May.
The total claimed losses from the floods affecting Queensland and NSW are likely to hit $50 million this week, says the Insurance Council of Australia, as governments and industry flag financial assistance for flood victims.
There is renewed speculation Chinese miner Shenhua Group could buy Nathan Tinkler’s 19.4% stake in Whitehaven Coal.
Business groups have downplayed the Federal Government’s concession the budget is unlikely to return to surplus in 2012-13, with one group describing the move as “neither here nor there”.
Shadow treasurer Joe Hockey has said that he cannot guarantee the Coalition will bring the budget back into the black, despite calling the government’s abandonment of the surplus as “humiliating.”
Federal Treasurer Wayne Swan has announced the Federal Government will probably not achieve the promised budget surplus in the 2012/13 budget year, saying that the strong Australian dollar has contributed to a fall in profits across all Australian businesses.
The disapproval rating of federal Opposition Leader Tony Abbott has hit near-record levels in a new poll, although the Coalition has maintained an election-winning lead over Labor.
The Federal Government’s review into GST has recommended broadening the tax base to boost federal tax revenues, but Treasurer Wayne Swan says such a move would hurt battlers.
Business groups have praised the Federal Government for the goals outlined in the Australia in the Asian Century white paper, including a vision to transform Australia’s innovation system.
A commodity price increase will push the Australian dollar even higher, giving leeway to the Reserve Bank to cut interest rates again, the CEO of ANZ has predicted.