Wednesday, October 12, 2016
Australia’s foreign debt levels rated ‘extreme’ by Standard & Poor’s
And the Labor party, which is responsible for the debt, resolutely obstructs all efforts by the Turnbull government to get the debt down. So taxpayer funds that could have gone to desperately needed road building will continue to go into the coffers of the banks as interest payments
Australia’s foreign debt has hit “extreme” levels that match the worst in the world, according to a startling warning from ratings agency Standard & Poor’s that will intensify the dispute over budget repair after years of political deadlock on major savings.
The global S&P executive who signs off on Australia’s credit rating has rung the alarm over the nation’s debt, suggesting the Turnbull government will need to find substantial new savings to avoid losing its coveted AAA rating.
As federal parliament resumes today to debate key budget bills this week, the ratings agency’s outlook ramps up the pressure on all sides of politics to avert a credit downgrade that would increase lending costs across the economy.
John Chambers, the chairman of the firm’s sovereign ratings committee, suggested the federal government risked losing the AAA rating if it continued to miss its fiscal targets.
“The government will point out that its fiscal position is strong — but it’s not quite as strong as it used to be,” Mr Chambers told The Australian, just days after he heard Scott Morrison emphasise Australia’s economic strength at a gathering in New York.
“And you don’t want to have your fiscal situation adding fuel to the fire on the external side.
“Australia would have one of the weakest external positions of the 130 sovereigns that we rate.”
The nation’s net foreign debt liabilities rose from $976 billion to $1.045 trillion over the 12 months to June — including federal, state and private sector borrowings — while net foreign equity fell from $70.1bn to $8.6bn over the same period, according to the Australian Bureau of Statistics.
The comments are a sign of deepening concern about Australia’s economic fortunes after similar warnings from Fitch Ratings and Moody’s Investor Services at a time when economic leaders are urging stronger action to head off a crisis.
Former Reserve Bank governor Glenn Stevens said the nation faced a “moment of crisis” if it did not act as soon as possible to reduce budget deficits, while former Treasury secretary Ken Henry said the “appeals to populism” in Canberra were undermining responsible fiscal policy.
Mr Chambers made it clear a downgrade to Australia’s credit rating was an option in the wake of S&P’s decision in July to put Australia on “negative outlook” in part because of concerns that the new Senate would make budget repair hard to achieve. “You’ve already hit an extreme measure of (foreign liabilities) so in terms of a trigger (for a downgrade), it would be more on the fiscal side,” he said.
Mr Chambers said the rapid increase in Australian house prices and property investment was similar, though not as pronounced as the surge in unproductive property investment in Spain more than a decade ago, before that nation’s credit troubles.
“For Spain to have patted itself on the back before the crisis is a little bit missing the point,” he said, noting that Spain’s public debt surged from about zero to 80 per cent of economic output in the wake of the global financial crisis.
Malcolm Turnbull and Bill Shorten return to parliament today with no sign of common ground on savings, as Labor holds out against unlegislated savings worth about $8bn over four years and more than $30bn over the decade ahead under forecasts from the Parliamentary Budget Office. Finance Minister Mathias Cormann stuck to the government’s plans yesterday despite Labor calls for an end to “zombie measures” that appear unlikely to be passed through a Senate where Labor, the Greens and the crossbenchers can join forces to veto any bill.
“If you look at what has happened over the last two or three years, a whole series of savings measures that Labor initially opposed — and opposed for quite an extended period of time — (Labor) eventually ended up supporting and voting in favour of,” Senator Cormann said.
He defended the Coalition’s record on annual government payments, which have swelled from $406bn to $445bn since the 2013 election, by insisting the outlays would fall as a proportion of gross domestic product.
“We have been able to stabilise spending as a share of GDP,” he told Sky News. “Over the forward estimates, we are projected to bring spending as a share of GDP down to 25.2 per cent.”
Yet the government has missed its targets in the past, with its first budget holding out the prospect of driving spending down to 24.7 per cent of GDP in 2016-17 while the most recent budget showed it would be 25.8 per cent instead. The change was largely the result of lower economic growth than expected.
In another sign of this challenge, the final budget outcome issued last month showed a deficit of $39.6bn in the year to June compared with an estimate of $12.2bn for the same period in the first budget after Tony Abbott led the Coalition to power.
Labor’s election platform proposed to deepen deficits by about $16bn over the coming four years.
This week’s agenda includes a budget reform backed by both major parties — a small tax cut for workers who earn more than $80,000 a year — but the political fight continues over the enterprise tax cuts Mr Turnbull put at the heart of his election campaign.
The company tax cuts are forecast to sacrifice $48.7bn in revenue over 10 years.
Labor Treasury spokesman Chris Bowen said the government was trying to avoid responsibility for the worsening budget position: “The time for excuses is over.”
Mr Chambers spoke to The Australian on the sidelines of the World Bank and International Monetary Fund meetings in Washington DC.
Greenie pride: Airlift of generators rejected by South Australia
The Leftist government refuses to believe that their reliance on windmills is misplaced. And the thought of relying on DIESEL generators for anything is anathema to them. Report below dated Oct. 11
The Turnbull government has prepared an emergency plan to fly generators into South Australia to help major employers keep operating after the statewide blackout, mapping out a back-up plan as key industries wait for full power to be restored.
The Royal Australian Air Force is ready to fly the generators into key industrial areas such as Port Augusta or to major manufacturers like troubled steelmaker Arrium.
The “standing offer” remains on the table after being drafted two days after the September 28 blackout, but the South Australian government has decided it can get its electricity grid up and running without federal help.
The federal authorities prepared the plan behind the scenes on the Friday following the Wednesday outage after officials identified four large generators in Tasmania that could be flown to Port Augusta by RAAF transport planes at short notice.
Amid a furious row over how the state grid went black, the federal proposal highlights the divide between Canberra and South Australia and raises questions about the judgments made on whether to use the back-up power at a time when the state grid is yet to return to full capacity.
Arrium administrator Mark Mentha confirmed to The Australian that the offer was put to the company more than a week ago as an emergency measure to prevent the company’s furnaces “going cold” and wrecking its steel.
The plan involves four mobile generators capable of supplying a combined 100 megawatts of electricity, enough to run all of Arrium’s steel and mining operations and provide power for others.
The generators were sent to Tasmania earlier this year to help Hydro Tasmania provide power after the failure of the Basslink connection to Victoria, but they had served their purpose and were available to be taken to South Australia.
Industry Minister Greg Hunt helped prepare the plan in talks with Energy Minister Josh Frydenberg and Resources Minister Matt Canavan.
Mr Mentha, whose firm KordaMentha is overseeing Arrium after the company went into administration in April, was interested in the proposal but BHP Billiton, which runs the Olympic Dam mine in the north of the state, was planning to bring in its own generators.
The proposal could not proceed without formal approval from the South Australian government, which had to request the assistance under standing agreements between Canberra and the states. South Australian Treasurer and Energy Minister Tom Koutsantonis said officials assured him there was no need for the federal help.
“We could get the grid up before the back-up generators were operational,” he said. “If we’d needed the generators, I would have done it but all the advice was that we would have the network up in time.”
Mr Mentha said he had been impressed with the help from governments and power suppliers in the wake of the storm.
“The South Australian government and Tom Koutsantonis and SA Power Networks and ElectraNet have done everything possible for us — I couldn’t fault them,” he said.
But power remains out in key areas, with SA Power Networks warning of shortages in the north of the state and ElectraNet still working to restore all the transmission lines.
ElectraNet said late yesterday that repairs to transmission lines in the state’s Mid North had got one of the damaged lines back up and energised. “Another circuit will follow in a few days, provided weather conditions remain stable,” it said.
Steiner schools rising in popularity Australia-wide
They have some wacky ideas but they seem to be good for artistic kids. I visited a Steiner school years ago with the aim of seeing whether it might suit my son. I left in a rather stunned state. I sent him to a Catholic school instead
Steiner schools are rising in popularity across Australia with three new schools built in as many years, lengthy waiting lists, and the introduction of a degree in Steiner education at a Queensland university.
Australia's first Steiner, also known as Waldorf, school opened in 1957 at Castlecrag in Sydney.
The 1970s saw most of the country's 43 Steiner schools built, but Steiner Education Australia CEO Tracey Sayn Wittgenstein Piraccini said the system was experiencing another rise in popularity. "Over the years it's just grown and it's mushrooming," she said.
"Many of the schools are 30 or 40 years old now, and quite well established in their communities ... and three years ago we had three new schools start, and next year we have another school starting, so there's growing interest in what we're doing."
Steiner school principles
The most recent schools were built at Queensland's Moreton Bay, Victoria's Bairnsdale and Bowral in New South Wales.
Another is planned for Agnes Waters in Queensland next year, while several state schools in South Australia and Victoria have introduced Steiner-based streams to their classrooms.
Ms Sayn Wittgenstein Piraccini said she believed the system's rise in popularity was because of a combination of parents being drawn to the holistic approach of Steiner education, as well as being dismayed with many aspects of traditional, mainstream institutions.
"I think parents are really investigating what they want for their children," she said.
"Many years ago parents just sent their children to the school down the road ... because the world is changing at such a rapid rate, the old forms of schooling just aren't working.
"We're seeing children with mental health problems, depression, obesity problems, and parents are seeing their children unhappy at school and not engaged in their learning and so they're seeking different ways."
The demand has also resulted in the introduction of a Graduate Certificate and Masters in Steiner education at the University of the Sunshine Coast next year.
"Our plan is to really engage with mainstream education and work alongside our peers in education to try and actually bring impulses from Steiner education into all aspects of education," Ms Sayn Wittgenstein Piraccini said.
"We want to have good dialogue so that all children benefit from an excellent education and are engaged in their learning and are lifelong learners.
"That will bring about a better country for Australia — not narrow standardised testing and data-driven policy that is just impacting on teachers at every level."
She said the demand for Steiner education was particularly high in the Byron Shire, in northern New South Wales.
There are currently two kindergarten to year 12 Steiner schools in the region and waiting lists that could justify the establishment of a third.
Cape Byron Steiner School principal Nerrida Johnson said there were 370 students at her school and a waiting list of more than 500.
"It's hard to tell people that we don't have a place for them, particularly when they're trying to get into kindergarten and they've been on our list for a long time," she said.
"We do encourage people to stay on our lists, stay in touch with us and stay involved with the school."
Ms Johnson said expansion was not an option for her school because of land restrictions, but there may be a case for starting a new school.
"We love the fact we know each of our students, so it works well for us to be a single stream school and to have the lower number of students, but I also know there's a lot of pressure in this shire for more," she said.
"I don't know what the future is going to hold — maybe at some point there might be a possibility of opening a senior campus or something like that so we can provide more opportunities for students.'
Parent explains appeal
Tanja Nelson has two children at Cape Byron Steiner and a third who has graduated. She said she began investigating the system after being impressed by work experience students from a Steiner school who had volunteered at her graphic design business.
"Those kids were so much more capable of being independent in their roles in our business," she said. "They had eye contact, self-initiated projects, they were just a world apart from the other kids from state and private schools."
"By that stage we only had a one-year-old child and we said 'that's a really interesting system, where are these kids coming from, why are they so different?'"
She said the best way to describe the Steiner approach was as "holistic". "It's very hard to realise with one little snapshot what actually goes on, but when you watch these children move from kindergarten all the way to year 12 and you see them grow holistically," Ms Nelson said.
"And I really mean holistically — the whole person is educated and supported."
"There's this backwards and forwards between the community and teachers, and this co-operative process to educating the child that makes these amazing people at the end of the journey.
"That constant communal approach to educating the child has very profound impacts for the children.
"This is something that I think parents from other schools or education systems will look at and they can see there's something different in our kids, but not understand what it is or why it is."
You must not have a stroke after business hours, say NSW health bureaucrats
A Sydney hospital with 24-hour stroke care refused to perform a life-saving procedure on a patient because he arrived 45 minutes after business hours.
Prince of Wales Hospital administrators would not allow Shellharbour resident Nick Taousanis to undergo an endovascular clot retrieval in August, despite clinicians being on-site and ready to operate, because the support team had finished their shift, his family were told.
Mr Taousanis died four days later.
The incident is one of several instances in which patients who could have benefited from an endovascular clot retrieval died or were left disabled because their stroke occurred out of hours, despite claims by NSW Health that the state has a 24-hour service for the procedure.
Fairfax Media has confirmed the details of two other cases, and doctors claim 250 to 400 patients have died or been left incapacitated under similar circumstances.
Endovascular clot retrieval is a cutting-edge procedure that involves manually extracting the blood clot that caused the stroke through a tube fed into a major artery and is suitable for up to 25 per cent of patients who suffered an ischaemic stroke.
The first line treatment for most stroke patients is clot-busting medication and this remains available 24 hours.
But hospitals have not been resourced to provide endovascular clot retrieval around the clock since trials proved its superiority over standard drug treatment and it moved into mainstream medical practice in late 2014.
INR specialist Jason Wenderoth said doctors were aware of two deaths in the last few months and other cases where people had completed their strokes and ended up in a nursing home because the theatres could not be opened after hours.
Doctors reported each of them to health administrators as "SAC-1" events – the most serious category of clinical incident. But in each case they were downgraded by the local health administration, which meant they were not forwarded to the ministry.
"There are plenty of doctors, but they won't fund doctors, nurses and technicians to work after hours," Dr Wenderoth said.
"[Endovascular clot retrieval] is the most significant breakthrough in my career in medicine. It is 10 to 15 times as effective in getting patients back to normal as stenting for coronary artery disease."
Australia pitches for a trade deal with Brexit Britain
"UK will dump Australia”, warned the stark headline. Australian newspapers did not beat about the bush in the 1970s – much of the economy was geared to supplying Britain, and suddenly the UK was going to turn its back on an old friend.
“The nation’s trade, immigration, cultural development, inflow of capital and standard of living could be seriously affected,” the Canberra Times reported in 1970 when the UK was in serious talks about joining the EEC, which would mean taxes and quotas on Australian imports.
It may have been an uncertain situation at the time but we know Australia has since prospered, outperforming the UK for instance by avoiding a recession during the financial crisis. While GDP per capita was higher in Britain than Oz in 2008, now the picture is reversed – Australia’s figure stands at more than $45,500 (£36,565) on a purchasing power basis, above the UK’s $41,300.
A shift towards Asia and other economic partners has bolstered Australia in the 40 years since the UK joined with Brussels. Now Britain is leaving the EU and seeking to find new allies around the world.
Now Britain is leaving the EU and seeking to find new allies around the world.
Luckily, the government in Canberra does not appear to bear grudges. Luckily too, Australia is very experienced in striking trade deals. Commerce has helped make the country rich and it is now something of an evangelist for free trade – a rarity in a world of Donald Trump and EU protectionism.
A working group is being established to begin talks, with one expert already in the UK scouting out the terrain ahead of a full negotiation.
The fewer industries Britain wants to protect, the faster a trade deal can be done, says the country’s High Commissioner, Alexander Downer.
“It is called a free trade agreement (FTA) for a good reason – we look for a high quality FTA, without tariffs and without quantitative restrictions, so without quotas,” he says, speaking in Australia House, the spectacular embassy on London’s Strand.
“We look for an agreement with an absolute minimum of carve outs. I can’t think of any restrictions in our trade in goods and services with New Zealand. With China, well over 90pc of our trade is tariff-free.”
“Our starting point is always that free trade means free trade, to borrow a phrase,” laughs Downer, in a nod to Theresa May’s definition of Brexit.
“People often ask me about the timescale. It depends how complicated you want to make the negotiation. If you’re going for a high-quality FTA without a lot of restrictions, it should be quite easy.”
May meets Australian PM to talk post-Brexit trade deals Play! 01:04
The prime ministers and trade ministers have already met, and two former Australian ambassadors to the World Trade Organisation have briefed UK civil servants.
“Australia isn’t a country that wants to put in place a lot of obstacles, we’re a free-trading country,” says Downer, who served as foreign minister from 1996 to 2007.
Once, such an economically liberal message would have raised no eyebrows, but the global political environment has changed. Britain was seen as the EU’s champion for free trade, yet some obstacles to an Australian deal may already be visible.
The UK has promised its farmers a continuity of EU subsidies, indicating a degree of protectionism is expected. As Australia is a big exporter of food, that affects one of its major markets. So the High Commissioner follows up his pitch with an appeal to shoppers.
“We’re happy to import high-quality, low-priced products because that is one of the ways we build our living standards,” he insists, clearly irritated by the focus of politicians on export markets while forgetting the imports. Downer himself sings the praises of British cars sold in Australia.
“Since the UK imports 70pc or so of the food it consumes, Australia is potentially once more a very good source of high-quality, low-price food” – not a bad offer when wages are growing slowly and inflation could pick up following the pound’s tumble.
Migration is another top post-Brexit issue. When Britain joined the EU, as well as harming trade with Oz, it also shut the door on its migrants.
While Australia has its points-based system to accept only those with favoured skills, Britain lets in anyone from the EU but is choosier about those from further afield – “a discriminatory system” in Downer’s words, not that any British leader would enjoy that description.
“Emotionally, Australians have felt uncomfortable with this idea that you give preferential migration access to people from Europe,” he says.
Noting Australia’s support for the UK in the world wars as well as the British ancestry of many citizens “I think people in Australia… I wouldn’t overstate this, but it is something they notice,” Downer says carefully. “We hope Australia would get a fair deal.”
Behind the diplomatic language, the message is clear: Mrs May’s officials will be faced with demands for better treatment for its migrants.
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