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  

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  

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  

Qantas slashes 1750 jobs

Alan Joyce Photo: SMH

Alan Joyce

We knew it was coming!

Qantas has formally announced that they will be cutting 1750 jobs, grounding 10 aircrafts and defering the delivery of jumbo A380 aircrafts. The Sydney Morning Herald reported on the announcement, saying that the Qantas airline was suffering the most of all Australian airlines, reducing fares by up to 50%

“Market conditions have deteriorated, especially in our international business,” [Alan Joyce] said today. “We are experiencing significantly lower demand, particularly in premium classes, and considerable price pressures with extensive sales and discounting by all carriers.”

The Australian Financial Review also reported that Qantas would be reviewing their 2008/2009 full year profit which is likely to be downward from $500 million to $200 or $100 million.

I kind of feel for the airline at the moment; I hope Joyce is able to pull the airline out of the hole the recession is pushing them into. They have been receiving quite  a lot of negative media attention over the past year and while it is unfortunate that they will be making all these cutbacks I think the media needs to remind the public that a majority of companies are making these sorts of necessary cutbacks. Qantas just seems to be in the line of fire.

Published in: on April 14, 2009 at 3:44 am  Leave a Comment  

Qantas announces a second wave of redundancies

Qantas is rumored to be announcing a reconstruction plan this week which will include a second wave of redundancies within a year. The Financial Times reports that the airline plans to make cuts in senior and middle management, a decision made under new chief executive Alan Joyce.

 Staff and unions will be told the job losses are needed to match reduced capacity requirements as passenger revenues have deteriorated.

Over 100 senior jobs are likely to be cut in addition to the 1500 cuts that Qantas announced last year.

An analyst for the Sydney Morning Herald said that the airline was too overstaffed in its senior executive ranks.

What has Qantas got? They’ve got a chief executive, chief financial officer, a treasurer, they’ve got a couple of people in investor relations, a few in media relations, then there is government relations….

They were set up for a slightly different era as they were once a government department and these things take years and years to unwind.

Airlines around the world have been witnessing a massive drop in passenger loads in February, with Singapore Airlines reporting one of its biggest monthly drops on record. European airlines Air France-KLM and Lufthansa also announced more capacity reductions. 

The Centre for Asia Pacific Aviation, an industry consultancy, last week warned that airlines in Asia could only be weeks away from grounding up to 10 per cent of their fleets as they contend with weak revenues, falling passenger loads and excess capacity. 

While Australian Airlines are all suffering under the economic recession, the news will only further damage Qantas’ reputation with the Australian public. It’s hard to find positive articles about Qantas at the moment, but seeing as they are Australia’s largest airline (and would probably employ the largest amount of staff) it’s no wonder the media is critiquing their recent job cutbacks.

Published in: on March 23, 2009 at 11:20 am  Leave a Comment