Money Minute – December 18 2017 Budget Blues No More

Budget Blues No More

Look, there is some good news with the advanced report of todays from today’s Mid-Year Economic and Fiscal Outlook – the budget update. It forecasts Australia next year will pay down almost $600 billion in gross debt.

Now there is a variety of reasons, like the 371,000 jobs created. More jobs created mean more tax. At the same time, there are a fewer people unemployed which equals less money being paid out.

Iron Ore and Coal Prices, they are keys to our export wealth and economic health. In May, government said Iron ore would fall to $55 US a tonne. Today, its sitting above $69 a tonne, which is worth close to $3 billion to the budget bottom line.

It all adds up to $23 billion being paid off the national debt next year, cementing our Triple AAA credit rating which Standard and Poor’s previously said had a one in three chance of being cut.

Now, this is all great news. But with this there is a conundrum. Because while the economy is improving rapidly, many households – maybe yours – will be feeling worse off, at least for the next 12 to 18 months.

Wages not growing and interest rates are likely to rise if and as the economy picks up.

In Sydney and Melbourne, house prices – you can feel it – are cooling quickly. The wealth effect of higher house prices is dissipating.

You can see that in the shops already, with sales in full swing a week before Christmas. For many, households and retailers life is tougher.

Quicklinks to recent Money Minute progammes

Money Minute – December 14 2017 Changing Face of Banks

Money Minute – December 12 2017 Bitcoin Bears Have Claws

Money Minute – December 11 2017 Delicate China

Money Minute – December 8 2017 The Next Tax Crackdown

Money Minute – December 7 2017 Family Budget Squeeze

Money Minute – December 6 2017 Amazon Fizzler

Money Minute – December 5 2017 Tech Drives Cheap Prices

Money Minute – December 4 2017 Rates on Hold

Money Minute – December 1 2017 Banks Commission

Money Minute – November 30 2017 Bitcoin Boom

Money Minute – December 15 2017 Jobs, Jobs, Jobs

Jobs, Jobs, Jobs

Its good news though. Australia is in the midst of a jobs boom.

Its rea and its happening right now. Though the employment rate remained steady at 5.4 per cent, more people are finding work.

And before you come at me with “Oh! They measure people who work only one hour a week./ Note that of the 371,000 of new jobs created in the past year, 303,000 were full time – more people getting full time jobs.

This happens when businesses are growing and needs full time jobs. But it does depend on where you live and what you do.

The keys are New South Wales and Victoria. Both are experiencing booms on home construction and infrastructure. Its lead these states especially to drive the jobs boom. The New South Wales unemployment rate is 5.6  per cent. In most parts of Sydney, even lower.

The chief statistician judges this as full employment, and at some stage, wage rises will flow.

It also means the Federal Budget will show rapid improvement, when the government announces its Mid-=Year Economic and Fiscal Outlook on Monday. Tax cuts will be afforded before the next election.

But there is one part of these job numbers that are most impressive – the growth has come at a time when immigration into Australia is close to record levels.

Net overseas migration, in the year to June 30 – 245, 400 people. Now, total population t the same time, grew 1.6 per cent – 388, 100 people. The population 24.6 million.

Now, with migrants again it’s in Melbourne and Sydney – most people coming here from overseas rushed to our biggest cities.

Stop and think about this – Australia population in the last year grew 388,000. The number of jobs created was 377,000. In other words, new arrivals are being accommodated they are finding jobs – they are not a drag. Rather, they are helping building the Australia if the future.

Markets

The Dow Jones up 80 points over night. The dollar 76.6 US Cents

Quicklinks to recent Money Minute progammes

Money Minute – December 14 2017 Changing Face of Banks

Money Minute – December 12 2017 Bitcoin Bears Have Claws

Money Minute – December 11 2017 Delicate China

Money Minute – December 8 2017 The Next Tax Crackdown

Money Minute – December 7 2017 Family Budget Squeeze

Money Minute – December 6 2017 Amazon Fizzler

Money Minute – December 5 2017 Tech Drives Cheap Prices

Money Minute – December 4 2017 Rates on Hold

Money Minute – December 1 2017 Banks Commission

Money Minute – November 30 2017 Bitcoin Boom

Money Minute – November 29 2017 Economy is ‘Robust’

Money Minute – November 24 2017 Myer Crisis Meeting

Money Minute – November 22 2017 Tourist Dollar Battle

Money Minute – November 21 2017 Who Pays for Tax Cuts?

Money Minute – November 20 2017 Bank Royal Commission?

Money Minute – November 17 2017 Job Prospects Brighter

Money Minute – December 14 2017 Changing Face of Banks

Changing Face of Banks

Ross Greenwood: Ill tell you what, sitting in the heart of Australia’s great retail precincts, in Pitt Street Mall, in the middle of the city, gearing up for Christmas, and of-course, its busy.

But the breaking news out of finance today is the Commonwealth Bank. Yesterday, late, it filed its statement of defence against the allegations it had more than 56,000 breaches of AUSTRACS provisions, which means they had to report each time there was a transaction of more than 10,000.

Now, the Commonwealth had admitted that it did not report in a timely matter more than 53,500 occasions. Now, the whole point about this is, it says it comes from one breach – that’s the way in which its trying to mitigate the amount of fine it gets hit with.

But the whole point about this is, AUSTRAC today is likely to hit the Commonwealth with 100 more breaches. It could even allege some allegations but it actually allowed money to be sent overseas for terrorising financing.

Anyways, more of that later one.

The face of banking, as a result of that, is changing no doubt.

But also retail. So let’s say for an example, earlier this week, the ANZ sold out its life insurance business for about $2.4 billion to Zurich.

Then we go to retail here, say for an example Westfield. The Lowy family of course sold out its Westfield European business for some $33 billion.

So the face of retail, the very face of banking it changing.

Across the road, right here – you got Microsoft. Its all about the experience, just like an Apple store.

So when it comes to banking, things have to change. And that’s being seen today with the opening of a new bank. Well actually its more like a store, a retail precent. This is Suncorp.

Suncorp is well known for insurance and banking. So what they’ve done is create a new shop front, right in the heart of the Pitt St Mall.

Now, you might argue “why one earth would you go an do all of this stuff?”

Well, Chris Flemming is the stores manager for Suncorp. Chris is with me now –

Chris, this does not look like a bank. There is a coffee shop, there’s the whole thing. Why on earth would you do this? What can a person do in this store they couldn’t normally do in a bank branch?

Chris Flemming: Yeah, Ross. As you can see, we are doing things differently here at Suncorp. Its not just about coming in for a Home loan, we can link in conveyancing, building, pest, and the insurances that can go with it.

Ross: But you’ve made this look like a retail store – quite deliberately, haven’t you?

Chris: Yeah, l we need to design stores like this with the customer in mind,. Make it easier, simpler and be in the heart of where customers are coming to shop with a retail mindset.

Ross: But is this also because people these days are using online services, so much more, that the need for a old-=fashioned bank branch is not as great as it once was? So therefore, when people come in, and interact with you physically, that they are excepting different things?

Chris: Yeah, I think people want experiences, and that’s what this store does. It is about coming and having great conversation, grab coffee and we can support people to financial wellbeing.

Ross: You’re serving coffee here, are you charging for them or not?

Chris: No, no – all free.

Ross: Free Coffee from the bank, who would’ve thought that.

So can I tell you that this is the way in which banking is changing, retail is changing in this new online world.

Markets

Overnight, the Dow Jones Index up 136 points. The Dollar 76.2 US Cents.

 

Quicklinks to recent Money Minute progammes

 

Money Minute – December 14 2017 Changing Face of Banks
Money Minute – December 12 2017 Bitcoin Bears Have Claws
Money Minute – December 11 2017 Delicate China
Money Minute – December 8 2017 The Next Tax Crackdown
Money Minute – December 7 2017 Family Budget Squeeze
Money Minute – December 6 2017 Amazon Fizzler
Money Minute – December 5 2017 Tech Drives Cheap Prices
Money Minute – December 4 2017 Rates on Hold
Money Minute – December 1 2017 Banks Commission
Money Minute – November 30 2017 Bitcoin Boom
Money Minute – November 29 2017 Economy is ‘Robust’
Money Minute – November 24 2017 Myer Crisis Meeting
Money Minute – November 22 2017 Tourist Dollar Battle
Money Minute – November 21 2017 Who Pays for Tax Cuts?
Money Minute – November 20 2017 Bank Royal Commission?
Money Minute – November 17 2017 Job Prospects Brighter
Money Minute – November 16 2017 The Big Squeeze
Money Minute – November 15 2017 High Noon At CommBank

Money Minute – December 12 2017 Bitcoin Bears Have Claws

Bitcoin Bears Have Claws

Listen, I’ve explained the phenomenon that is Bitcoin a lot in this segment over the time. Generally, I’ve warned people to avoid punting on Bitcoin.

Because you got so little control, almost no knowledge about what you’re investing in. And at almost every step, I’ve was wrong.

The price of Bitcoin has just soared and soared, just a month ago I said to come back and look at its value in a years’ time. Well, it was $US10,000 then, it was more than $17,700 at some point overnight.

As I did say, I was wrong about the price. But something did happen overnight, that’s a bit of a make or break for Bitcoin. Bitcoin futures started trading on the Chicago Board of Exchange –  a proper exchange. And it was a wild ride.

It always people to bet on the future of Bitcoin. It means also, it can go long or short.

Now, I want to take you back to Margot Robbie.

No, I haven’t gone mad! Margot Robbie in the bubble bath in the movie, The Big Short. Remember? Explaining about traders how found about those US mortgages before the Global Financial Crisis were really, really poor quality.

Margot Robbie: So now he’s going tosh ort the bonds. This means to bet against. Got it? Good.

Ross: Got it? Good.

But before they got to the point of being able to short the housing market, the investors who bet against them convinced Wall St to create financial markets that they could short – to bet against.

Collateralised Debt Obligations, Collateralised Default Swaps. Remember those ones?

Well, here is the parallel with Bitcoin.
For the first time, anybody who thinks Bitcoin is a con can bet against them…short them. You got that?

Now, to be fair, there were more people buying Bitcoin Futures than selling them. So the price, just a short time ago, was $17,940. Up almost two and a half thousand on the night  – up 16 percent.

In other words, the bulls were beating the bears handsomely. But for the first time, the Bitcoin Bears have got claws. I just wonder when they are going to sue them.

Markets

Overnight, the Dow Jones Index up by 36. The Dollar 75.3 US Cents.

Quicklinks to recent Money Minute progammes

Money Minute – December 11 2017 Delicate China

Money Minute – December 8 2017 The Next Tax Crackdown

Money Minute – December 7 2017 Family Budget Squeeze

Money Minute – December 6 2017 Amazon Fizzler

Money Minute – December 5 2017 Tech Drives Cheap Prices

Money Minute – December 4 2017 Rates on Hold

Money Minute – December 1 2017 Banks Commission

Money Minute – November 30 2017 Bitcoin Boom

Money Minute – November 29 2017 Economy is ‘Robust’

Money Minute – November 24 2017 Myer Crisis Meeting

Money Minute – November 22 2017 Tourist Dollar Battle

Money Minute – November 21 2017 Who Pays for Tax Cuts?

Money Minute – November 20 2017 Bank Royal Commission?

Money Minute – November 17 2017 Job Prospects Brighter

Money Minute – November 16 2017 The Big Squeeze

Money Minute – November 15 2017 High Noon At CommBank

Money Minute – November 14 2017 Crisis Bites

Money Minute – November 13 2017 Where’s the Money?

Money Minute – November 9 2017 Teflon Bank

Money Minute – November 8 2017 Markets Fire Up

Money Minute – November 7 2017 Rates, Cup and Fights

Money Minute – November 6 2017 Tax Scandal Breaking Today

Money Minute – December 11 2017 Delicate China

Australia’s relationship with China is vital to our national interest. The integrity of our national security and intelligence – well that’s equally as important as well.

As of June this year, China is our biggest import market, biggest export market – so our biggest trade partner.

By far, the biggest export is Iron Ore – about $44 billion. Followed by coal, that’s about $8 billion and gold that’s about $2.4 billion.

But – from that you can see how important Iron Ore is to China. To its steel industry, to building its infrastructure. From China, our biggest import is Telecommunications gear – worth almost $7 billion a year.

Followed by computers – $4.7 billion.

Now to think also 1.2 million Chinese tourists came here to Australia last year, and that forecast to rise to 3.3 million a year, within 10 years.

This year, universities Australia noted $21 billion of education export earnings, making the education of international students by Australian colleges and university our third largest industry, behind Iron Ore and Coal. Most of those students – well, they are Chinese.

So when China’s embassy in Australia last week put out scarifying statement saying, among other things, stories about Chinese influence and Chinese infiltration are made up out of thin air – “they are filled with cold-war mentality and ideological bias” – you gotta listen up.

The government is now seeking reforms in the ways foreign powers interfere in Australia’s political affairs to curb the use of Chinese or other foreign nations, to influence our elections or our policies.

There have been warnings about this – back in October the head of the department of foreign affairs and trade, Francis Anderson, urged universities to protect themselves from the rising influence  of the Chinese Communist party. It was followed by no less than the ASIO boss, Duncan Lewis, saying government has to be very conscious of foreign interference in Australian universities.

I suspect that a policy that’s strong on security, but without paranoia or racist undertones is the key here. It’s a very delicate thing to pull off.

Markets

The Dow Jones on Friday up 170 points, The Dollar just over 75 US Cents.

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