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News: Sunday Penalty Rate Cuts to be Phased In Over Four Years

The Sunday penalty rate cuts will be phased in over the next four years in a move that angered both employers and unions.

The Fair Work Commission ruled that the reductions to existing penalty rates for fast food, hospitality, retail and pharmacy employees will not take full implementation until 2019-2020.

Fast food and hospitality workers will have Sunday penalty rates cut by 5 per cent next month, and 10 per cent in 2018 and 2019. Their final penalty rate cuts will be 125 per cent and 150 per cent respectively.

Retail and pharmacy workers will take a 5 per cent cut this year, and a further 15 per cent every year until 2020. Their penalty rate cuts will be reduced from 200 per cent to 150 per cent.

Unions argue that the pay cut would devastate workers who sacrificed their weekends to earn money. “I think no matter which way you dress it up, you’re facing pay cuts every single year,” said Australian Council of Trade Unions secretary Sally McManus. “Australian workers are already suffering as a result of stagnant wage growth… They can’t afford a $1.42 billion wage cut.”

On the other hand, employers believe the reductions should be phased in two years instead of four. “Retailers need a break and they need it now,” said National Retail Association chief Dominique Lamb.

Russell Zimmerman, head of the Australian Retailers’ Association, also said the long phase-in period prevents businesses from employing more staff. “What this will do is create an incredible amount of extra work for retailers, who won’t be able to employ more people as quickly as they would like,” he said.

Employment Minister Michaelia Cash said the decision showed the commission’s impartiality. “Nobody got exactly what they wanted. The unions wanted it set aside, employer groups wanted a speedier transition process,” Cash said. “What this does now is give certainty.”

Nevertheless, Cash insisted that the cuts are helpful for small business while impacting only three to four per cent of Australia’s workforce. “The adjustments to Sunday penalty rates will even the playing field for Australia’s small businesses, which have to pay more for staff on Sundays than big businesses who do deals with big unions,” Cash said. “This will help thousands of small businesses open their doors, serve customers and create jobs on Sundays.”

How Much Should You Spend on Vacation?

We know that travelling is a great investment – it allows you to take a break from work, refreshes your mind and boosts your overall productivity. Furthermore, visiting new places and learning about other cultures can be a memory of lifetime. But how much is too much when it comes to spending on vacation?

According to Rubina Ahmed-Haq, a personal finance blogger with alwayssavemoney.ca, people should allocate no more than four per cent of their annual income for vacation. “Unless you have no debt, spending more than this amount will erode your long-term savings,” Ahmed-Haq told The Globe and Mail. That means if your take-home pay is $50,000, the holiday spending limit would be $2,000.

This limit is for a good reason – in case things go wrong on your holidays, you can still go home and survive. The recent Fyre Festival fiasco is a good example of this.

“Never charge your holiday on credit unless you have the cash already in the bank,” said Ahmed-Haq. “Want to spend more? Save longer.”

The four-per cent budget should cover everything, including entertainment, souvenirs and emergency fund.

“Keep a copy of your itemized budget handy in your wallet,” said Mandi Rogier at USA Today. “Check on it periodically to make sure you’re staying on track. If you find yourself overspending, you may need to cut back on tickets and souvenirs on the last few days of your trip.”

FactCheck Q&A: Does Australia Have One of the Highest Progressive Tax Rates in the Developed World?

Kathrin Bain, UNSW

The Conversation fact-checks claims made on Q&A, broadcast Mondays on the ABC at 9:35pm. Thank you to everyone who sent us quotes for checking via Twitter using hashtags #FactCheck and #QandA, on Facebook or by email. The Conversation


Excerpt from Q&A, May 15, 2017. Quote begins at 0.50.

Look, we just need to keep in mind that we have one of the highest progressive tax rates in the developed world at the moment. – Innes Willox, chief executive of the Australian Industry Group, speaking on Q&A, May 15, 2017.

When Q&A host Tony Jones asked if wealthy people should pay more tax, the AiGroup’s Innes Willox said that Australia already has one of the highest progressive tax rates in the developed world.

Is that true?

Checking the source

When asked for sources to support Innes Willox’s statement, a spokesman for the AiGroup clarified that Willox was referring to top marginal tax rates.

The spokesman referred The Conversation to OECD tax statistics, and two charts built using that data, saying that:

This shows that Australia has a relatively high top marginal tax rate (49%) but not the highest among OECD countries (Sweden is top, at 60%). The rub is that our top marginal rate cuts in at a relatively lower level of income than most other OECD countries (2.2 times our average wage).

You can read his full response and see those charts here.

Is it true? Not exactly

Looking at OECD data, Australia’s highest marginal tax rate is higher than the OECD median. Out of the 34 OECD member countries in this data set, Australia ranks 13th for the top marginal rate of tax, meaning 12 countries have a higher top marginal rate, and 21 countries have a lower top marginal rate.

However, a straight comparison like this can be misleading. More than half (19) of the OECD countries impose “social security contributions”. The OECD defines social security contributions as “compulsory payments that confer an entitlement to receive a (contingent) future social benefit”. It notes that they “clearly resemble taxes” and “better comparability between countries is obtained by treating social security contributions as taxes”.

When social security contributions are taken into account, Australia’s “ranking” in terms of top marginal rate of tax drops to 16 out of the 34 OECD member countries – making it still higher than the OECD median top marginal rate, but not by much.

The other point noted by the AiGroup spokesman was that Australia’s top marginal tax rate applies at a relatively low level of income compared to most other OECD countries.

Australia’s highest marginal tax rate applies to taxable income above A$180,000, approximately 2.2 times Australia’s average wage. The AiGroup spokesman was right to say this is relatively low, with the majority of OECD countries (20 out of 34) applying their highest marginal tax rate at income levels higher than Australia (that is, at income levels higher than 2.2 times the average wage).

However, it is worth noting that based on the latest Australian Taxation Office statistics, for the 2014-15 tax year, only 3% of individual taxpayers fell into the highest tax bracket.

Where Australia does rank amongst the highest in the OECD is the percentage of total tax revenue that is derived from individual income taxation.

In 2014, 41% of Australia’s taxation revenue came from income taxation on individuals. This is the second highest in the OECD (the highest being Denmark at 54%) and significantly higher than the OECD average of 24%.

Verdict

The statement made by Innes Willox that “Australia has one of the highest progressive tax rates in the developed world at the moment” is an exaggeration.

Australia ranks 13th in the OECD for the top marginal rate of tax, and 16th if social security contributions are taken into account.

However, Australia does rely more heavily on personal income tax (when compared to other taxes) than all but one other OECD country. – Kathrin Bain


Review

I agree that the statement is an exaggeration. 13th out of 34 is higher than the median, but it would be equally true to say that more than one-third of the OECD countries have a higher personal marginal tax rate than Australia.

It is always problematic to try to compare tax data across different countries. Although the OECD does try to make the data comparable the differences between tax and welfare systems can lead to misleading comparisons.

It is generally well known that certain Scandinavian countries, such as Sweden and Denmark, have a very high marginal tax rate. However those countries also tend to have a different approach to social and welfare spending. Australia does not have a dedicated social security tax: pensions and income support are paid from general revenue. This structural difference in the tax-transfer systems does limit the comparison.

Australia does have a high reliance on personal income tax, and the top marginal rate is higher than the median OECD level. Although the top marginal rate is relatively low at 2.2 times the median wage, the fact that only 3% of the population are in the top bracket says that we, in fact, have a relatively flat tax structure, with most taxpayers in lower tax brackets. – Helen Hodgson


Kathrin Bain, Lecturer, School of Taxation & Business Law, UNSW

This article was originally published on The Conversation. Read the original article.

News: Rising House Prices Put Pressure on Sydney and Hobart Renters

Increasing house prices in Australia are putting pressures on renters as rental affordability in Sydney reached a record low.

The latest report from Rental Affordability Index found that despite the stability in some parts of the country, low- and moderate-income households are still largely priced out of all metro markets.

Sydney and Hobart are found to be the most expensive cities for renters while Melbourne and Perth are the most affordable. Sydney renters spend an average of 29 per cent of their household income on accommodation, while those in Hobart spend 28 per cent.

 

City Per cent of household income Six-month trend
Sydney 29 -3.8 per cent
Hobart 28 -5.4 per cent
Adelaide 25 -0.7 per cent
Brisbane 25 -0.3 per cent
Melbourne 24 -0.1 per cent
Perth 21 +6.2 per cent

Source: National Shelter, Community Sector Banking, SGS Economics and Planning

 

“Lots of frustrated renters can’t get into home ownership and they stay in the rental market,” said Adrian Pisarski, executive officer at Australia’s peak housing body National Shelter.

“Those people tend to rent down as low as they can so they can save a deposit to meet the gap in terms of housing purchase, and what that does is displaces lower income households in the rental market.”

The index found that despite the negative conclusions, rental affordability has remained stable in most parts of Australia.

“What we found overall nationally is that rental affordability has not improved, it hasn’t declined overall either, except in Sydney and Hobart, where it is worse than it was six months ago,” Pisarski said.

“For most of the rest of the country [it] is pretty stable, but having said that, rental affordability is very bad across the nation.”

Tenants NSW senior policy officer Ned Crutcher said renters, who made up one-third of households in the state, were largely ignored by the government. “Rents are going up and wages are not. On top of that, renters have very little security of tenancy – they can be kicked out at any time,” he said. “This stuff keeps people awake at night.”

Westpac Reports Cash Profit of $4.02 Billion

Westpac has reported an interim first-half cash profit of $4.02 billion, an increase of three per cent as expected by market.

Cash earnings from the consumer bank rose five per cent to $1.511 billion for the six month to March 31, while total loans were up six per cent and deposits seven per cent.

However, the bank said the demand for housing loans, which supported its performance in the consumer sector, is expected to slow down. “We remain positive about the Australian housing market, although we expect price growth to moderate through 2017,” said Brian Hartzer, chief executive at Westpac.

The interim dividend was set at 94 cents per share and will be paid on July 4.

News: Chinese Investment in Australia Reaches $15.4b, Highest Since GFC

Chinese investment in Australia has reached a record high since the Global Financial Crisis to $15.4 billion, a report found.

A record 103 deals were signed with Chinese companies in 2016, according to the report “Demystifying Chinese Investment in Australia” from the University of Sydney and KPMG.

Commercial real estate accounted for 36 per cent of Chinese direct investment, followed by infrastructure with 28 per cent and a record amount of $4.34 billion thanks to the purchase of stakes in Asciano and the Port of Melbourne. In agribusiness, there were 12 deals with a record of $1.2 billion invested, threefold of the 2015 amount.

Despite the high record, report co-author Professor Hans Hendrischke from the University of Sydney Business School said investment from China is slowing down.

“Australia has proven itself to be a preferred destination for Chinese capital, but we must be cognisant that the growth in investment is slowing compared to other parts of the world such as the United States and the EU,” Hendrischke told ABC.

The report found that Australia is the second biggest destination of new Chinese investment with a total of $US90 billion ($120 billion) since 2007, losing only to the US with over $US100 billion.

Australian Housing Market Has ‘Peaked’, According to UBS

The Australian housing prices boom has reached its peak, investment bank UBS said.

“After housing activity rose consecutively for over four years, its longest ever boom, we are now calling the top and think that housing activity has already peaked,” UBS economists Scott Haslem, George Tharenou and Jim Xu wrote in a note.

“Mortgage rates are rising, and sentiment of home buying collapsed to a [near] record low… Hence, we are ‘calling the top’, but stick to our forecasts for [dwelling construction] commencements to ‘correct but not collapse’ to 200,000 in 2017 and 180,000 in 2018.”

National house price growth is currently at 13 per cent, the highest in seven years, but UBS expected the growth to fall to 7 per cent this year, and 0-3 per cent next year. “We see a moderation ahead amid record supply and poor affordability, with the new buyer mortgage repayment share of income spiking to a decade high,” UBS said.

While house prices will still be out of reach from first home buyers, the bank said more rental options will be available following completion of units this year, allowing rents to rise more slowly than incomes.

The bank also warned that while the risks for housing slump are low, considering strong population growth and stable employment, the country’s record household debt and high housing prices could still cause trouble.

The Majority of Australians Are Not Saving Enough for Retirement

Roger Wilkins, University of Melbourne and Carsten Murawski, University of Melbourne

Only 53% of couples and 22% of single people are on track to achieve a comfortable level of retirement income, according to an in-depth study of the adequacy of retirement savings. The Conversation

The outcome of a collaboration between researchers at the University of Melbourne and Towers Watson, the study has found a significant number of Australians are not likely to achieve adequate retirement incomes, even when all sources of savings are considered.

The research sought to address the considerable uncertainty among policy makers and the broader community about the extent and nature of retirement savings deficiencies in Australia. To do so, we developed a set of metrics indicating the adequacy of retirement savings and applied those metrics to a large representative sample of the Australian population.

The clear finding is that most Australians are still not on track towards reaching a comfortable income during retirement, and will continue to draw a large part of retirement income from the age pension. The implication is that, despite superannuation reforms dating back over 20 years, the problem of inadequate retirement savings remains a significant public policy issue for Australia.

An important innovation of our study is that the metrics we developed take into account not only superannuation holdings (and projected growth in superannuation holdings through investment returns and future contributions) and the projected age pension entitlement, but also a variety of other household assets that could be used to fund retirement, including various financial assets and property.

Using this information, we are able to forecast a person’s expected income throughout retirement. We then compare this income to a “target” income, which is provided by the Association of Superannuation Funds in Australia (ASFA) Retirement Standard for a “comfortable” lifestyle. The ASFA standard for a comfortable lifestyle is a widely used benchmark, and specifies a minimum income of A$57,665 for couples and $42,158 for single people.

The ASFA benchmarks are very close to both current average income levels of retirees in Australia and the income levels that pre-retirement Australians on average believe they will need for a satisfactory lifestyle in retirement. While this concordance may seem reassuring, our findings for the projected retirement incomes of pre-retirement Australians were not.

We projected retirement income levels for a large, representative sample of Australians aged 40 to 64 ­– drawn from the nationally representative Household, Income and Labour Dynamics in Australia (HILDA) Survey – and compared our projections to the income required to sustain a comfortable lifestyle.

Based on our calculations, only 53% of couples and 22% of singles are on track to achieve a comfortable level of retirement income.

Our study also shows the relative importance of different sources of retirement income. If we ignore all sources of retirement income other than superannuation, only 15% of couples and 5% of singles are projected to achieve the target. Indeed, applying the OECD poverty benchmark of half median income, most retirees would be living in poverty.

Factoring in the age pension improves projected retirement incomes for many people, but still only 32% of couples and 11% of singles are on track to have a comfortable retirement income.

Our calculations have several implications. First, they show that, for most people, superannuation is not sufficient to fund a comfortable retirement, even if they have contributed to superannuation for most of their working lives.

Second, it is important to take into account all potential sources of retirement income, including non-superannuation assets, when computing the adequacy of retirement savings. Omitting any of these sources will likely lead to substantial under-estimation of adequacy.

Third, single people are particularly under-prepared for retirement, being three times more likely than couples to have severely inadequate projected retirement incomes.

Fourth, there is a gap between expectations about the importance of the different sources of retirement income and the likely reality. Data from the Australian Bureau of Statistics show that over half of men and two-fifths of women expect superannuation to be the main source of retirement income. However, our projections show that the age pension will provide 61% of the retirement income of single people, and 39% of the retirement income of couples. Moreover, 96% of single people and 89% of couples aged 40 to 64 today are expected to receive at least a partial age pension at some stage during retirement.

Our analyses show that most people need to think ahead to their financial situation in retirement and, if possible, make some changes – the sooner, the better. The first step is to find out whether your savings are likely to be adequate – and you can now do this easily on the ASIC MoneySmart web site.

The site offers a calculator based on a simplified version of the algorithm we used in our study. It takes less than 10 minutes to enter the required information and obtain an estimate of the adequacy of your retirement savings.

Knowing now whether you need to save more towards your retirement is an essential first step towards a retirement in which you don’t have to fear running out of money.

 

Professor Kevin Davis contributed to this study, which began prior to his appointment as a panel member of the Financial System Inquiry.

Roger Wilkins, Principal Research Fellow and Deputy Director (Research), HILDA Survey, Melbourne Institute of Applied Economic and Social Research, University of Melbourne and Carsten Murawski, Senior Lecturer in the Department of Finance and co-head of the Decision Neuroscience Lab, University of Melbourne

This article was originally published on The Conversation. Read the original article.

Bank Regulators Hint Further Loan Curbs

Bank regulators may take further actions to limit home lending in an effort to mitigate risks from the booming housing market.

The statement came less than a week after the Australian Prudential Regulation Authority (APRA) introduced restrictions on interest-only loans to 30 per cent of all mortgage lendings.

In a speech in Sydney on Wednesday, APRA Chairman Warne Byres described the restriction as a “tactical response” to the growth in lending property investors, especially in the south-east Australian property market.

Byres said the rules were to ensure that banks hold bigger reserves in case of housing-related crises. The regulator would also review the lenders’ capital requirement for mortgages.

“The capital adequacy framework needs to address the concentration in housing lending that has built up in the banking system over time,” said Byres. “If we are going to put an increasing number of eggs into a single basket, we’d better make sure that basket is an unquestionably strong one.”

News: Tesla Shares Slump after Goldman Sachs Downgrade

Tesla’s shares slumped more than 4 per cent on Monday after Goldman Sachs downgraded the stock, citing concerns over the company’s cash needs and ability to deliver the launch of new Model 3 vehicle on time.

Goldman Sachs analyst David Tamberrino said worries over Model 3’s delayed production, along with the carmaker’s acquisition of SolarCity and expected stock sales to raise $1.7billion, led him to downgrade Tesla’s shares from “sell” to “neutral”.

“While we believe Tesla currently has a lead relative to OEM (original equipment manufacturer) peers with respect to vehicle technology adoption, electric vehicle architecture, and (potentially) battery scale, our concerns are more near-term oriented with respect to operational execution on the Model 3 launch, an unproven solar business, and cash needs,” Tamberrino wrote in a statement.

This pushed Tesla’s shares down 4.83 per cent to $244.52, cutting the company’s year-to-date gains to 15.2 per cent. Despite this, Tesla’s stock has jumped 30 per cent in the last 12 months, while the S&P 500 has gained only 22 per cent. Tesla’s shares have also gained more than 30 per cent since early December.