Monday, May 25, 2015

Another ALP in­fight as union heavy ques­tions Qld. re­cruit­ment pol­icy

A FOR­MER top union boss and suc­cess­ful state La­bor trea­surer has called for less union in­flu­ence in the party, say­ing the move­ment has a skewed hold over the party.  Ex-NSW trea­surer Michael Costa said La­bor was now dogged by “a ger­ry­man­der in favour of the unions”.

The La­bor stal­wart made the com­ments as Premier An­nasta­cia Palaszczuk and her Cabi­net col­leagues yes­ter­day in­sisted their move to re­quire pub­lic ser­vants to re­cruit new union mem­bers was noth­ing new.

The La­bor stal­wart made the com­ments as Premier An­nasta­cia Palaszczuk and her Cabi­net col­leagues yes­ter­day in­sisted their move to re­quire pub­lic ser­vants to re­cruit new union mem­bers was noth­ing new.

The qui­etly re­in­stated “union en­cour­age­ment pol­icy”, re­vealed yes­ter­day in The Courier-Mail, was blasted by Prime Min­is­ter Tony Ab­bott as “de­liv­er­ing for the unions”.

“I’m al­ways dis­ap­pointed when any gov­ern­ment gov­erns for one sec­tion of the com­mu­nity rather than ev­ery­one and this is a gov­ern­ment here in Queens­land which was elected on union money and on union cam­paign­ing,” he said.

Mr Costa said there should be a level play­ing field within the work­force, adding that his com­ments were rel­e­vant across the board and not just to Queens­land.

“Govern­ments shouldn’t ac­tively dis­cour­age union­ism, but they shouldn’t ac­tively en­cour­age it ei­ther,” he said. “There needs to be a re­duc­tion of union in­flu­ence in the La­bor Party.”

The Courier-Mail can re­veal union bosses played a role in push­ing for the pol­icy, which will boost mem­ber­ship. It comes at a time its num­bers within the pub­lic ser­vice are flag­ging.

It also comes just weeks af­ter The Courier-Mail re­vealed key union bosses were boast­ing about the in­flu­ence they now wield within the new Govern­ment.

The an­nual re­port for the To­gether Union, one of the big­gest pub­lic sec­tor unions, shows its mem­ber­ship num­bers have fallen to about 28,000 peo­ple, from more than 38,000 in 2012, its low­est level since 2006.

To­gether Union sec­re­tary Alex Scott ad­mit­ted to the union play­ing a role in dis­cus­sions around the union en­cour­age­ment pol­icy.  “We asked them to con­sider reis­su­ing the de­part­ment pol­icy to make it sim­pler as well,” he said.  “We ar­gued it was a le­gal en­ti­tle­ment ... it’s help­ful to have it as part of the de­part­ment pol­icy.”

But Mr Scott said it re­flected a clause within ex­ist­ing en­ter­prise bar­gain­ing agree­ments, which New­man gov­ern­ment laws had made un­en­force­able.

Shadow At­tor­ney-Gen­eral Ian Walker said the pol­icy saw bal­ance tip in favour of unions.  “There is a role for unions but it shouldn’t get to the point where the Govern­ment … be­comes their de facto re­cruit­ment agency,” he said.

Queens­land Coun­cil of Unions boss John Bat­tams said his or­gan­i­sa­tion played no role post-elec­tion in ne­go­ti­at­ing for or dis­cussing the pol­icy, but had raised it be­fore­hand.  “The role we played was to get the com­mit­ment be­fore the elec­tion. We just ex­pected it to hap­pen and it did,” he said.  “A Govern­ment keep­ing com­mit­ments shouldn’t be coloured as pay­back.”

He said there were more than 100,000 pub­lic sec­tor work­ers who were union mem­bers.

Depart­ment of Premier and Cabi­net di­rec­tor-gen­eral Dave Ste­wart has been charged with en­sur­ing all other di­rec­tors-gen­eral put the pol­icy into ef­fect.

Ms Palaszczuk said the pol­icy had been in place for a decade be­fore for­mer pre­mier Camp­bell New­man.


A dramatic testimony to the wreckage of the Australian economy by the Rudd/Gillard regime

While Rudd and Gillard were running up half a trillion in debt, and getting nothing for it, John Key was governing N.Z. prudently

Australia's warmer climate and higher wages have long lured droves of New Zealanders across the Tasman Sea with the aim of making a better life in the 'lucky country'.

But with Australia's economy stumbling and New Zealand's improving, the trend has begun to reverse.

New Zealand figures released Thursday showed that in April, for the first time in 24 years, 100 more people moved east from Australia to New Zealand than moved in the opposite direction.

The trend has been emerging for some time. Two years ago, a net 34,000 New Zealanders moved to Australia. That fell to 11,000 last year and to 1,900 in the most recent data for this year.

An agreement between Australia and New Zealand allows citizens of both nations to live and work in either country.

In New Zealand, the loss of its people over decades to its larger neighbor has proved a political sore point.

In 2008, when the current prime minister John Key was the leader of the political opposition, he stood in an empty sports stadium in Wellington to illustrate the thousands of people who were leaving each year and vowed to turn that around.

Robert Muldoon, who was prime minister in the 1970s and '80s, once quipped that the exodus raised the average IQ of both countries.

But now, the turnaround may pose new political challenges. The figures released Thursday show record annual immigration of 57,000 people to New Zealand, which added more than 1 percent to the population of 4.5 million. Many people believe immigration is helping fuel skyrocketing home prices in the largest city, Auckland.

Australia's economy has been struggling after the price of iron ore, its most lucrative export, slumped due to a slowdown in China's economy. Still, Australia's debt level remains low compared with most countries and its standard of living higher than in New Zealand.

New Zealand has been enjoying relatively strong economic growth, and its unemployment rate has dropped to 5.8 percent, below Australia's rate of 6.2 percent. But it, too, faces economic challenges, including lower prices for its agricultural exports due to the slowdown in China.


Australian food companies feed investor returns

Buttressed by demand from the emerging economies to the nation's north, Australia's $50 billion agribusiness sector is burgeoning. But the paradox for the sector is that it struggles to attract capital from Australia's super funds.

A recent survey of 114 superannuation funds, commissioned by accounting group BDO and conducted by the University of Queensland Business School's commercial arm UniQuest, found that Australia's super funds invest on average just 0.3 per cent of their assets in the agriculture sector.

In contrast, overseas pension funds are "very keen" on Australian agribusiness assets, says Tim Biggs, founding partner and chief investment officer at agribusiness investment firm Laguna Bay Pastoral Company. "We find that the North American pension funds really 'get' the Australian agribusiness investment opportunity.

"Australia's real natural advantage is that it produces some of the highest-quality agricultural products in the world, both bulk and niche, with an impeccable record of safety and traceability, it is on the doorstep of the emerging consumers in Asia who want traceable, repetitively deliverable high-quality product, and it has excellent logistics to export that produce," Biggs says.

US-based pension funds are even more conscious, says Biggs, of the institutional investor's holy grail: authentic uncorrelated returns. "Agricultural investments are generally negatively correlated to financial investments, stocks and bonds. They have different return streams, and thus can diversify an investment portfolio more widely."

US investors also have concerns about the drought in California, he says. "Ninety per cent of the world's almonds come from the San Joaquin Valley in California. That has always given the Australian producers a classic counter-seasonal export opportunity, but now in the US, they're thinking, 'What if we don't have the water to feed our crops?'" If the water situation in California gets worse, investors will be looking at Australia, he says.


The final piece of evidence in Australia's favour is that when the pension funds investigate this market they see "probably the most sophisticated water trading market in the world," says Biggs. "Australia confronted the value of water a long time ago, and we price water appropriately." Producers in the US are being forced to confront the value of water, he says.

The water market in Australia can offer investors uncorrelated returns, but it is still small, says Cullen Gunn, director and CEO of farmland and water investment manager Kilter Rural. He says about $1 billion of water is traded annually, most of it in the Murray-Darling Basin, which produces one-third of Australia's food, almost all of its rice and cotton, and 45 per cent of its dairy output.

"The Australian water market channels water up the economic value chain, to where it finds its highest-value use," says Gunn. "The primary vehicle is a water entitlement, which is a perpetual share of water available in the system. Then there is the secondary vehicle, the allocation, which can differ depending on the amount of water in the system.

"They're both tradeable, but the allocations trade much more readily, and are a lot more volatile. They're sold to producers who need water for their crops. The sale of allocations creates yield," he says.

Kilter Rural manages both water and farmland investments for super funds, and says the "uncorrelated returns story" is slowly gaining traction, as is the level of returns. But he says many funds consider the market to be too small.

"If we're trading $1 billion a year, that is, pardon the pun, not liquid enough for most super funds, who simply like to invest in bigger licks," says Gunn. "They know that given the emerging demand from Asia for food, as an investor, holding agricultural land and water rights makes a lot of sense, but they'd like to see the market a bit bigger."

Gunn says holding entitlements and selling allocations will deliver between 4 per cent and 7 per cent a year, but it's volatile between seasons. "We're moving more towards generating investment products built around leasing water, where there is an indexed lease rate that is really the same as a commercial office lease." The leases generate between 5 per cent and 8 per cent a year, indexed and reviewed annually, he says, with a diversity of clients; dairy farms, nut and fruit growers.

"It's a terrific asset, because you're investing in the major input to meeting the export demand for Australian food, but you're not taking the agricultural risk of producing that food."

Michael Dundon, CEO at the $13 billion not-for-profit super fund VicSuper, has invested in water holdings and environmental remediation through Kilter. While mostly happy with the experience, Dundon sees the problems that other super funds may have in making similar forays.

"We're getting close to generating 9 per cent a year, after tax, which is where we wanted to be with a long-term investment, and it is uncorrelated return," Dundon says. "But at the same time, there is a scale question, and it's probably fair to say that super funds find themselves fairly constrained in that market. Large funds tend to want to invest more than the market can accommodate. We've yet to work out how much further would we be prepared to go."

One factor that may induce more super funds to consider these types of investments, he says, is that the return is "truly" uncorrelated. "A lot of what are considered 'alternative' investments, which purport to offer uncorrelated returns, are in reality hedge funds and absolute-return strategies, and that's not truly uncorrelated, in our view," says Dundon.

VicSuper does not consider its agribusiness and water holdings as part of its "alternative investments" exposure: it allocates them to "real assets", along with infrastructure and direct property. "We would have 7 per cent to 8 per cent in real assets, and within that, probably about 2 per cent of the fund would be in agribusiness/water.

"In this asset class, I think funds are going to want to invest directly. If they view it as a 'real asset' play, they're probably not going to want to go through ASX-listed stocks," he says.

Shane Kelly, principal at agribusiness corporate advisor Latitude 232, says the next generation of investment products will offer super funds exposure to agribusiness, without the need to take on operating and commodity risk. "Super funds that have previously had bad experiences in agriculture were primarily involved in owning and operating farms. Super funds need stable returns, so it makes sense for them to steer clear of operating and commodity risk and focus on buy and lease back investment models that deliver regular income and long term capital growth," Kelly says. 

"There is opportunity for super funds to own the underlying land assets, which will be leased to good operators, such as a blue-chip, large-scale family company or a corporate agribusiness. In some instances this may involve taking land off-balance sheet, while in others it will support an expansion of the area under management. This approach ensures that the people who have the experience operate the farms, while the super funds can earn stable returns from leases that will vary from 4 per cent to 10 per cent, depending on the risk weighting applied to the commodity sector and the quality of the counter-party involved."

Another potential approach is the "agri private equity" style of fund, such as the new Food and Fibre Fund offered by 3F Asset Management. "We're concentrating on assets that sit in the supply chain, between the farm gate and an Asian consumer," says 3F director Craig Anderson. "That could be on the input side – such as services that get supplied to farmers, machinery businesses, agronomic services, technology providers that increase efficiency and effectiveness of Australian agriculture – and then on the output side, from storage to logistics to wholesaling, cold-storage and transport and even distribution assets in Asia."

Anderson says the fund would either buy or invest in those businesses, "like a normal private equity player would".


Australia could miss out on second LNG boom, Chevron says

Natural gas exports have been touted as Australia's great white hope to replace plunging iron ore earnings, but oil major Chevron has warned the nation risks missing out on the next wave of investment.

Among the problems were too much regulation to get approvals, an inflexible industrial relations systems, high labour costs and taxes and government policies that don't support investment, said Chevron's Australian managing director Roy Krzywosinski.

He also took a veiled swipe at Australia's services companies that supply the industry, suggesting they needed to lift their game and better support oil and gas producers.

Australia's march to soon becoming the world's largest exporter of liquefied natural gas was a success story but its rapid growth was unprecedented and testing the capacity of those services industries, he said.

There was a potential $US100 billion ($127 billion) waiting in the wings with the associated economic benefits if the next wave of investment could be attracted.

However global competition was increasing, particularly with the new waves of US LNG projects due to an abundance of gas there driven by the onshore shale boom.

Not enough co-operation on logistics between LNG projects was occurring either to drive down costs, as mostly occurred in the Gulf of Mexico and North Sea, he said.

"We need to recognise there has not been a final investment decision on an Australian LNG development since 2012," Mr Krzywosinski told the Australian Petroleum and Exploration Association conference.

"As many of us forewarned, the second wave of LNG investment for Australia - which promised to deliver further benefits - is at serious risk of not happening, at least in the foreseeable future.

"A major contributor is Australia's falling international competitiveness."

Seven new LNG plants are due to come online over the next three years to add to the three current ones, with Chevron involved in building two of them: Gorgon and Wheatstone in Western Australia.


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