No taxes – No $900 Bonus!

Just to follow up on my blog about the Rudd Stimulus Package: The Age has reported that some people haven’t recieived the $900 amount even though they lodged a tax return of less than $100,000.

The article provides a few examples of people who aren’t receiving them and casts them in a sympathetic light. I don’t quite agree with the side The Age is representing here and this example proves why:

A Melbourne freelance documentary maker, Kerry, said she was shocked to discover she would not receive the bonus, which she has planned to pay towards her mortgage.

“I could claim on the documentary, which meant the small amount I did pay I got completely reimbursed,” she said. “So even though I’m a low income earner and my children both live at home and I was really depending on that $900, they are aged 19 and 20 so it’s just meant that I haven’t fallen into any of the eligibility areas. ”

“The fact that I’ve fallen through the cracks has absolutely destroyed me”

I can see why it may be unfair that they aren’t receiving the stimulus, but when they receive a large amount of tax deductions do they really need a $900 bonus as well? The use of words such as “shocked” and “destroyed” imply that Kerry is really suffering but the fact is she didn’t pay any tax so should she be eligible for the $900 that we have all paid for in our own taxes?

Published in: on May 11, 2009 at 6:56 am  Leave a Comment  

The 900 Dollar Answer


Kevin Rudd Photo: Bloomberg

Kevin Rudd Photo: Bloomberg

The big question on the media lips – has Kevin Rudd’s Stimulus Package been successful?


NSW Treasurer, Michael Costa, said the Rudd Stimulus, worth more than $50 million was a complete disaster  and has failed to create jobs. Costa said the Government had been confused and rushed into the decision in response to the economic crisis.

“The issue comes down to how many jobs did you save from that level of spending, and the cost-benefit of a stimulus becomes an issue,” he told Sky News on Monday. “It also means worthy projects that may well have positioned us for the recovery are not going to be there.

The Sydney Morning Herald reported on Costa’s announcement but did not appear to argue either side. However the article did report on Costa’s criticism against Rudd’s essay in the Monthly Magazine back in February. Rudd gives an analysis of the causes of the global financial crisis in the essay, and by linking Costa’s remarks on this with his criticism of the Stimulus package the SMH could be subtly making a criticism of their own.

I found an article in the Business Spectator quite interesting. The article argues that the increased Government involvement is having a negative affect on the economy and that the Governments “spending spree” is not a sufficient solution to our economic problems.

It is the supply side of the economy that matters most. And yet our current policies actually harm the productive capacity of our economy. The main consequences from current policies will be bigger government, less-efficient government, and more political risk. All of these things are a constraint on the supply-side of the economy.

The article gives evidence to this by reporting that the Commonwealth Government has increased it’s share in the economy from 22% to 28% and has added new layers of Government control. The article goes on to say that this affects our economy because the free market is more efficient than the bureaucracy.

The Heritage Foundation measures economic freedom (small government, free trade, private property, low regulation) and finds that it is correlated with prosperity, democracy, human development, and a clean environment. Countries classified as ‘free’ or ‘mostly free’ have a GDP/capita over $US30,000; while ‘moderately free’ countries have a GDP/capita of around $US15,000; and ‘unfree’ countries are around $US4,000 GDP/capita.

This is a very interesting take and does make one very valid point – economic growth comes from the private sector, not from the politicians and bureaucrats. So is the Stimulus package just another way the Government exerts it’s control on us? By throwing all this money into the economy other projects (such as construction and education) that require funding are likely to receive a lot less. Will this affect the efficiency of these projects?

Before the Stimulus Package went ahead The Age reported on the opposition towards the idea:

Nationals Senate leader Barnaby Joyce accused Prime Minister Kevin Rudd of applying a “pressure salesman trick” on the Australian people. “It’s not his money, it is the Australian people’s money, and there will be the due oversight that is expected of this,” he told reporters in Canberra.

While it has been nice to receive an extra $900 (I’ve actually received two), we cannot deny that it is in fact our own money! It’s good to see the media recognize this and not sensationalize the idea of a “free” payout.

The Australian has also reported on the failure of the Stimulus package saying that one of the reasons behind the payout was to increase Rudd’s popularity with the public in hope to be reelected next semester.

In recent weeks, as it has become clear that the impact of the fiscal stimulus was overstated, the Government has resorted to the feeble claim that things would have been worse without it. Its constant revision of its economic forecast makes it clear that whatever the impact of the fiscal stimulus, at the very least its structure was based on nothing more than guesswork.

The Australian also argues that the Australian public have seen right through the package and are critical of the Government vision as not one piece of national infrastructure has been produced. I tried to put my money back into the economy through retail and such, although there was no massive change in my expenditure and I know a lot of people who either saved the money, or being university students, spent it on alcohol!

So far all of these articles have critiqued the Stimulus package and haven’t looked the any positive arguments towards the issue. Although I do agree with their views I didn’t see any statistics on the unemployment rate and whether or not it has actually fallen, risen or remained stable. I did look at the March-April unemployment rate on a Government website and I could see that it has increased to 5.5% – one piece of evidence that the  Stimulus Package so far hasn’t been beneficial in that area. 

Published in: on May 11, 2009 at 6:39 am  Leave a Comment  

Fiat to pull Chrysler out of Bankruptcy

2006 Chrysler 300 Series Photo: CNN

2006 Chrysler 300 Series Photo: CNN

The collapse of car company Chrysler’s has been the topic of media discussion this week – the American company filing for a Chapter 11 bankruptcy on April 30th. The first car company to go under during the current economic recession has made international news, however I did find some interesting facts about the Chrysler history that makes one think the media could have predicted the downfall of the company.

The Sydney Morning Herald reported that President Barrack Obama had ordered Chrysler to conduct a quick bankruptcy, with an auction for the company’s assests hoping to be completed in 3 weeks. As a result of lenders refusing to reduce debts the company has no money to continue trading but instead of totally closing it’s doors an alliance will be formed with Italian car company Fiat over the following weeks.

The transaction would help create the world’s sixth-largest carmaker, a merger Chrysler wasn’t able to do outside bankruptcy because of opposition by some of its secured lenders.

The SMH said that no other buyers had showed any interest in the company. They also said that this was the fifth largest bankruptcy in American history! I think that’s quite a massive set back to the American economy. And I do think the move should have been more premeditated – Chrysler is a ‘luxury’ car brand with ridiculous prices and not much practicality to the average consumer so who can really afford to splurge on these kind of cars right now?  The US and Canadian Government are going to give the company a total of US $6 billion in taxpayers money to start the new alliance with Fiat. The SMH seems to consider this a positive move as it will keep some jobs for those who originally worked for Chrysler but if I was an American taxpayer I would be a little bit peeved. I would prefer my money to be going towards the education or health system as opposed to a car company.

CNN said that Chrysler was king of the hill only a few years ago with their 300 series, but a string of uninspired products destroyed their reputation.

In remarks at the White House, President Obama said that the bankruptcy filing is not a failure for the company but “one more step on the path to Chrysler’s revival.”

Obama really does have a positive outlook on everything doesn’t he!

I did find a really interesting article on Chrysler from 1983 from the Heritage Foundation and it reported that Chrysler nearly went bankrupt in 1987 but was bailed out by the American Government with $1.2 billion in loan guarantees. The article tries to reveal the myths surrounding the bail out – and raises one serious question about the American Government:

It shows that if the bailout is indeed the model for an American industrial policy the consequences could be disastrous

I agree with this article and think it is relevant to the situation today; does the the American Government need to take a closer look at industrial policy and business-government relationship? With the near bankruptcy in 1983 was the amount invested back then an absoloute waste? Why didn’t the media pick up on this issue sooner? We will have to wait and see how the formation of Fiat and Chrysler pans out…Stay tuned!

Published in: on May 4, 2009 at 10:19 am  Comments (1)  

Whining about the Swine

A couple in Mexico City Photo: The Guardian (UK)

A couple in Mexico City Photo: The Guardian (UK)

The media has been going crazy with week with reports that the Swine Flu has hit Australia. The “pandemic” has been front page news of the Sydney Morning Herald two days in a row, as well as international papers. While it is no doubt that the flu has been very lethal in Mexico, with over 90 deaths, I don’t think it has quite reached the “pandemic” status in Australia that media representations are implying.

I read an article in the Sydney Morning Herald yesterday that said the Swine Flu was going to further push the economy into recession.  The SMH reported that Crude Oil stocks had fallen alot this week from the concern that the flu breakout would curtain air travel. It is a possibility that the Swine flu could affect the economy but I think it is a bit too soon for the media to be making these predicitons – it only creates more worry and concern for us!

An article in Time made me feel a lot more confident when they agreed that the media was overexaggerating the effects of the swine flu on the economy.

The odds that tens of thousands of people will die from the flu are low. Advances in medicine and public health policy have made a big difference in the ability to monitor emerging serious illnesses. The fact that the new disease seems not to be terribly virulent outside of Mexico is another factor that supports the opinion that this will not be a major epidemic. However, in the minds of some analysts, the world can still look forward to trillions of dollars in financial losses and an economic depression.

Yep another trillion dollars down the drain. I understand it is the media responsibility to report on the outbreak of the Swine flu – which has had one or two confirmed cases in Australia – but I think at this stage our economy will remain in relatively the same situation based on other factors.

Published in: on April 28, 2009 at 9:56 am  Comments (1)  

Is Margin Lending still a safe bet?

I read a great article in the IFA – Magazine for Independant Financial Advisors – Has Margin Lending Gone too Far?

The article discusses how margin lending works and the pros and cons of it as a true wealth building strategy. At this point in time, with the economy and shares in recession, it’s probably not a great idea to add margin lending to your financial portfolio, however there are benefits of it if it is handled properly and monitoring closely by yourself and your financial advisors. This article gives varied opinions from financial advisors on the risks of margin lending, including interviews with Suncorp and the Professional Investment Services directors. 

Take a look at this article before you totally throw away the idea of margin lending after the Storm Financial fiasco. But ensure you recieve advise from a totally trustworthy source and you are aware of the risks it involves.

You can find this article in the March 02-08 / 2009 issue, or if you are a member of IFA you can access it online at

Published in: on April 22, 2009 at 9:37 am  Leave a Comment  

Hold onto your jobs – here comes more cutbacks

Financial Services company AXA has announced they will be slashing up to 120 jobs this month, in an effort to cut down on costs as the meltdown in global markets continue to affect their wealth management industry. The Age said that mostly operational roles were expected to be cut and the cuts are most likely to be made in Melbourne where the company’s head office is located.

The planned shake-up, understood to have been announced to staff this morning, follows around 90 positions – mostly among contractors – lost across AXA’s Australian operations late last year.

In Feburary AXA Chief Executive warned shareholders to brace themelves for another tough year as more than $700 million was wiped from it’s investment portfolio.

All we seem to keep hearing is numbers upon numbers of money. I find it hard to actually comprehend how much $700 million dollars is.

PMP also announced it will cut 67 permanent jobs at it’s printing centre in Melbourne as the recession slows the demand for printing. The Sydney Morning Herald said the announcement comes only 2 months after the company closed 2 presses in Adelaide and Brisbane to eliminate 76 jobs and remove some of it’s middle management.

But the company also warned its operating earnings would come in worse than previously forecast and fall below the $33.5 million reached in the first half, which means it is heading for a full-year slump in operating earnings of more than 21%.

With the unemployment rate getting higher and higher, and companies laying off workers left, right and centre, it’s any wonder how they can afford all these redundancy payments? The media has been critical of companies such as Qantas for making job cutbacks but who isn’t making necessary cutbacks these days? It seems most businesses are needing to, which is why the unemployment rate is so high, but why are these companies taking all the flack?

Published in: on April 21, 2009 at 8:19 am  Leave a Comment  

RBA Governor confirms Australia is in Recession

In a very predictable announcement today the Reserve Bank formally decalred that Australia has joined it’s global peers in an economic recession. The Australian said the candid admission by RBA Governor Glenn Stevens matched a similar message from Kevin Rudd and Treasurer Wayne Swan who both signalled this week that Australia was on track for it’s first recession since the early 1990s.

“Whether or not the next GDP (gross domestic product) statistic, due in early June, shows another decline, I think the reasonable person, looking at all the information available now, would come to the conclusion that the Australian economy, too, is in recession,” Mr Stevens said.

This article was only printed by The Australian today, although The Age reported on the admission at the beginning of April. The Age gave a much gloomier review of Treasurer Wayne Swan’s speech, saying that Australia had taken the first of two quarters of negative growth commonly taken to define a recession at the end of last year.

Treasurer Wayne Swan said the forecasts underlined “just how severe this global recession has become”. 

“The world economy is in the midst of its deepest and most severe recession in our lifetimes, and Australia will feel the consequences,” he said.

The Reserve Bank had been predicting a positive growth up until Feburary this year so this is the first announcement of recession from any RBA official.

The Sydney Morning Herald also reported today that Australian shares suffered their biggest fall in six weeks after US stocks plummeted: a result of the Bank of America’s earning reports. The Age confirmed this yesterday describing NAB’s estimation that the big four banks would be unable to refinance $190 billion dollars of commercial property debt without the help of the state-created “RuddBank.”

From all the other media attention I kind of figured we were already in an economic recession – but perhaps the RBA governer didn’t want to worry everyone until it was fully confirmed.

Published in: on April 21, 2009 at 7:59 am  Leave a Comment  

Bill O’Reilly and the American Economy

I think you might find this video clip quite interesting.

Bill O’Reilly conducted this interview in September 2008, and he looks at one reason why the American Economy has fallen into recession. It’s a very debateable reason but I think it does need to be considered – are our overextended bank loans and credit card debts responsible ? O’Reilly has a habit of really laying into his interviewees and this is no different. While he may cross a few lines his argument is justifiable and worth our attention.

Let me know what you think of O’Reilly’s video.

Published in: on April 20, 2009 at 6:41 am  Leave a Comment  

Watch out for the Storm!

Storm Financial Office Photo: ABC

Storm Financial Office Photo: ABC

The one thing I’m grateful for this year: not getting advise from Storm Financial.

With the biggest financial collapse in Australian history Storm Financial have suffered a collective loss of $3 billion! Yes that’s correct – 3  billion dollars! I know the economic recession is affecting financial instituions around the world but I don’t think that’s the real reason this company went under so easily.

The Townsville Bulliten reported that fraud and criminal behaviour could be uncovered in an investigation into Storm Financial with failures occuring not only with Storm’s financial model but with also with their regulation and behaviour. Out of 130 staff only 10 are FPA members! And now several of the firm’s advisors are back in business employed by Infocus money management. Storm’s founder, Emmanuel Cassimatis’ employment history is even more interesting. The Sydney Morning Herald reports:

And while it’s been regularly mentioned that Cassimatis’ worked for MLC before setting up Storm, what’s not reported is that MLC parted ways with him after having trouble with Cassimatis over-gearing clients who could not reasonably be expected to be able to service their loans. Other advisers dumped by MLC ended up in the Storm stable.  

SMH also says that Storm was ripping ridiculous fees out of gullible clients, giving dangerous advise and double-dipping on comissions. So who is really to blame? As SMH puts it – the inexperienced and financially uneducated clients? Or the manipulative advisors?

The ABC News gives us a little insight into how the clients are feeling at the moment. One couple has been left high and dry owing $370,000 on their house and another $10,000 on a margin loan.

The bank’s blaming Storm and Storm is blaming the banks and somebody is not telling the truth and hopefully ASIC [the Australian Securities and Investments Commission] will find out the truth.

 The fact that the ASIC is conducting the inquiry doesn’t inspire much confidence – considering they investigated Storm last year and found nothing wrong! How very ironic.

Published in: on April 20, 2009 at 6:18 am  Leave a Comment  

Union’s Steel Plan: closure of Port Kembla’s steel mill

Port Kembla's Steel Mill

Port Kembla's Steel Mill Photo: Illawarra Mercury

The head of the Australian workers mill has warned that steel mills across the globe may be closed down, including the mill located at Port Kembla. The Illawarra Mercury described the unions 21st century steel plan as a federal intervention which highlighted the serious position the steel industry is in.

“Australia needs to urgently adopt a 21st century Steel Plan. We need a stratagem to save a key industry in the face of the global economic crisis,” [AWU National Secretary Paul Howes] said.

Earlier this month BlueScope chief executive Noel Cornish said the viability of the Port Kembla steelworks – along with the 12,000 jobs it supports – would be under threat if the scheme took effect in its present form.

Despite Howes’ comments, the Mercury also reported that the announcement was a just presumption and that no final decision was going to be made any time soon. I just heard the 12,000 workers take a sigh of relief.

Published in: on April 15, 2009 at 10:50 am  Leave a Comment