“The ultimate barometer of community confidence is the share market needs.
If these attacks strike at the heart of British society, the stock market should be tanking but no.
In fact, the stock market‘s been doing exactly the opposite.
Notwithstanding the current general election, the Brexit vote, and the near collapse of Greece, in the past few years the British stock market is at all-time record highs… it does show that terrorists are not achieving the sense of panic in the community or the economy.”
The Week that was…
A big week in the finance world.
We started the week on Monday with the independent workplace umpire, the Fair Work Commission, ruling that the penalty rates on Sundays and public holidays will be reduced in key industries, such as hospitality and pharmacies.
But, as expected, not all are happy.
The unions have already started advertising campaigns in regional areas, targeting independent and tightly held marginal seats, including those of Cathy McGowan, George Christensen and Ann Sudmalis.
This is because Labor will oppose the penalty rate cuts even though Labor leader Bill Shorten last year emphatically said to my colleague Neil Mitchell on Radio 3AW, that it would abide by Fair Work Commission ruling.
I replayed the audio on my radio show, Money News, between Bill Shorten and Neil.
This is how it went…
Neil: Will you accept their findings, giving this as an independent body assessing penalty rates odds for Sunday, if you’re Prime Minister?
Mitchell: You’ll accept them?
Labor, it seems, has changed its mind.
But, it hasn’t properly explained why…
But one thing to remember is many workers within big organisations don’t receive penalty rates.
This is because their employers, some of the biggest companies in Australia, did pay deals with unions and traded away those weekend penalty rates.
But one thing is for sure, retail and pharmacy workers who work Sunday’s will have their rates cut from 175 per cent to 150 per cent by July 2020.
The fact that there are cutting the rates over four years is quite interesting and, I suppose kinder for those workers.
They don’t have to lose all their penalty rates at once – but of course, this means they will also pay less tax and is this really what the government want to happen?
Now, one voice of reason in all this is Martin Ferguson, the ex long-time Labor minister and president of the ACTU.
He’s now chair of Tourism Accommodation Australia, an employer body, but he says though the decision was tough – it is fair, and that logic and long-term vision ultimately have won out.
But this wasn’t the only news to come out in the week.
Both the interest rates decision and minimum wage decision also came out on Tuesday.
Let’s start with the interest rates…
The Reserve Bank kept interest rates on hold at the historic low of 1.5 per cent.
The decision was widely expected, with the RBA needing to balance concerns over an economy which appears to be slowing with ongoing strength in the property market.
The cash rate has been on hold for 10 consecutive months since August last year, when the RBA slashed rates to combat weaker-than-expected inflation.
This is due to a couple of reasons, one being that the economy may have shrunk in the first quarter on 2017, as well as year on year GDP figures not quite stellar.
More on that in a bit…
Since we have confirmation that interest rates won’t rise this month, when will they rise? Is the question we’re all asking.
And it could very well be next month.
Some in the market are pricing the next move in interest rates as a rise, flatter house prices may give the RBA room to cut, should the economy deteriorate further.
Last week we did tell you that the housing markets on the eastern seaboard of Australia has cooled slightly and it looks stay that way.
The RBA is mindful that a sudden increase in rates could spark problems in the apartment sector, with investors potentially forfeiting deposits, putting the banks under additional pressure.
And of course on Tuesday we also had the minimum wage decision to rise by 3.3 per cent.
So that is $36,134 a year – before tax.
That’s the new minimum wage.
The Fair Work Commission gave the lowest paid a big leg up. But, as you would expect, the bosses are not happy.
The chief executive of the Australian Retailers Association Russell Zimmerman says:
“We are bitterly disappointed in this decision. Retailers are struggling”
Now, the pay rise works out at 3.3 per cent, which is almost twice the 1.9 per cent that average wages are rising by.
It’s more than prices for goods is rising, inflation is currently at 2.1 per cent
In Australia, more than 12 million people have a job.
But of those, 2.3 million are on the minimum wage. Though this increase today seems generous, the price of insurance, gas and rent has all been rising many times faster.
The Fair Work Commission does admit that some low paid will be left behind.
Justice Iain Ross, who handed down the decision, says:
“We acknowledge that the increase we purpose will not lift all award-reliant employees out of poverty.”
But the secretary of the ACTU, Sally McManus, has a good pointy – no one should be working full time and living in poverty.
But we do have to acknowledge that whilst out unemployment rate is not increasing – its quite steady actually – but the jobs that are created are part-time or causal jobs.
We are increasingly moving towards the casualization of the workforce and that could be a risky move if the underemployment rate continues to go up as it has been.
But of course, that $19 for Smashed avocado and $4 coffees could also be playing quite a significant effect on that poverty – we shall have to see.
Back to the GDP…
Our economic growth numbers came out on Wednesday, and they we’re better than some expected.
But the truth is, they’re pretty soft.
They showed 0.3 percent growth in the first quarter, that’s 1.7 percent annually.
The long-term average, you can say, is 3 percent.
So, we’re not in recession – not likely to be anytime soon – but the economy right now is not growing fast enough to create enough jobs, confidence, or revenue to turn around the federal budget.
But the interesting thing about the GDP figures is that we have successfully avoided recession for 26 years – we are, basically, the only economy to do so.
And whilst many, including myself at some points, have argued that we do need to have a recession; bringing likeness from then treasurer Paul Keating’s infamous words in 1990: “the recession we had to have”
But current treasurer, Scott Morrison, refutes this idea and says we do not want a recession and we don’t!
Recession might bring our housing prices down but it would nearly completely devastate our economy.
Be careful what you wish for, I always say…
I will be away on holidays for the next two weeks, cruising around wonderful Europe but I shall still continue with these newsletters and maybe even have a few small updates for you all. My mate, Steve Price, will be in the chair for me on Money News.
The Fairwork Commissioner increased the minimum wage this week by 3.3 per cent to $36,134 per year, but is this enough? And Are all happy? Of course not! But if you want to find out the true reaction to this decision, you have to go to lunch!
Money News –
First quarter GDP figures were released this week and Australia has successfully avoided a recession for 26 years. And whilst many argue we need to have a recession, in order to get our property prices back to normal, Treasurer Scott Morrison is singing a different tune. He says that we most certainly don’t want a recession
Work. Life. Money –
Due to the London terror attacks last week, Work. Life. Money did not air. However, we are back this week! And for every single one of us who has to fill in a tax return this year, we have the top tax tips and tricks for you. Professor Bob Deutsche, senior counsel at the Tax Institute, joins me on Sunday to tell you everything you need to know