NEW ENGLAND NEWSLETTER FOR DECEMBER 2015
It is not surprising that the nation’s financial position is not what had been hoped for. Commodity prices have been in serious decline – when the Coalition government came to power the iron ore price was around $120 a tonne, but in the month preceding MYEFO the average price was $39 a tonne. This has caused a revenue write-down of almost $34 billion. The government has identified about $2 billion worth of future savings through scrutiny of welfare fraud. Whilst the current fiscal position is not ideal it is a reminder to all of us that just like our household budget we cannot spend what we don’t have.
LEGISLATION TO STRENGTHEN LIQUIDATOR REGULATION
The Insolvency Law Reform Bill was introduced on the final day of sittings. Here is part of the Assistant Minister’s speech “It is designed to raise the standards of professionalism and competence of insolvency practitioners, and identifying and removing the ‘bad apples’ from the industry. The process for registering corporate insolvency practitioners will be strengthened to require applicants to be interviewed and assessed by a three-person committee, and the registration will need to be renewed every three years. To have the registration renewed the practitioner must demonstrate regulatory compliance and prove they have maintained their insurance coverage. A disciplinary committee will have a broad range of powers in addition to deregistration and suspension, including being able to prevent an insolvency practitioner from accepting further appointments for a specified period and issue public reprimands. Where a rogue practitioner is struck off, in appropriate cases they may also be banned from working in the industry for another practitioner for up to 10 years.
The penalties for a range of offences relating to the practitioner misconduct have also been increased to better reflect the seriousness of the breaches and to provide a more appropriate deterrent. In particular, the penalties for failing to maintain adequate and appropriate insurance, as well as failing to comply with rules regarding the banking of administrations funds, have been significantly increased. Creditors will be empowered under the bill to remove a practitioner appointed to a personal or corporate insolvency through a simple resolution of creditors at any time, and without court involvement”. I launched the parliamentary inquiry so I am pleased to see this legislation finally introduced after years of driving reform. I have had many meetings with the relevant Ministers and advisers to determine what the legislation should include.
NATIONAL ICE TASKFORCE
The final report of the National Ice Taskforce has been presented to the government. Proportionally, it revealed that “Australia uses more methamphetamines than almost any other country, and the number of users continues to grow. More than 200,000 Australians reported using the crystalline form of methamphetamine (commonly known as ‘ice’) in 2013, compared with fewer than 100,000 in 2007. These figures are conservative and already dated. Today, evidence suggests there are well over 200,000 users. The quantity of ice seized at the Australian border has increased dramatically in recent years. In 2014, customs intercepted more than 50 times as much ice by weight than in 2010. In 2013-14 there were over 26,000 arrests related to the distribution or possession of amphetamine-type stimulants, including ice.” In response the Prime Minister has announced over $300 million will be ploughed into the fight, principally through Primary Health Networks.
NATIONAL STRONGER REGIONS FUND
Applications for funding in Round Three open on the 15th of January and close on the 15th of March. Grants of between $20,000 and $10 million are available, so for guidelines go to www.infrastructure.gov.au/nsrf.
PETROL PRICE GOUGING?
The ACCC has noted that there have been significant increases in the past six months in the margin between what retailers pay for petrol and what they charge at the pump. The price paid by motorists “was, on average, 11.8 cents per litre more than the wholesale price of petrol - the largest such margin recorded by the ACCC since it began keeping records in 2002”. In the quarter ending September 30, the difference between retail petrol prices in the five largest capital cities compared with regional areas increased from .7 cents per litre to 5.3 cpl. At the height of the fuel gulf in January this year the difference was 17.6 cpl.
FTA’S DELIVER IMMEDIATE BENEFITS
The China- Australia Free Trade deal took effect on the 20th of December. This delivers two tariff cuts in a row on agricultural exports – the first on December 20 and the second on the 1st of January. Coking coal, Australia’s third largest export to China, will have its 3 per cent tariff eliminated and the 6 per cent tariff on thermal coal goes within 2 years. Exports of non-coking coal to China are worth $3.5 billion in 2013-14. China is Australia’s third-largest export market for wine, worth $201 million in 2013-14. Under ChAFTA, tariffs of 14 to 20 per cent on Australian wine imports will be eliminated within 4 years. Tariffs on beef imports currently ranging from 12-25 percent will be eliminated within 9 years.
After 12 months in operation the Korea Australia Free Trade Agreement has seen a 700 percent jump in sales of fresh navel oranges. Almonds are up almost 390 percent, fresh and frozen beef sales have increased by 30 percent and lamb sales are up 35 percent. The third round of KAFTA tariff cuts will come into force on the 1st of January.
INSOLVENCY IN THE CONSTRUCTION INDUSTRY
The Senate Economics References Committee has handed down its report into insolvencies in the construction industry. There were some alarming revelations – the industry accounts for between one-fifth and one-quarter of all insolvencies in Australia and each year it is burdened by nearly $3 billion in unpaid debts. Illegal phoenixing is a problem and the committee says there is a growing culture among some company directors of a disregard for the corporations law. “The economic cost of insolvencies in the construction industry is staggering. In 2013-14, ASIC figures indicate that insolvent businesses in the construction industry had at the very least a total shortfall of liabilities over assets accessible by the creditors $1.625 billion. The construction industry rates as either the highest or second highest for unpaid employee entitlements”.
INTEREST CHARGES ON CREDIT CARDS
The Senate Economics References Committee has also handed down its report into the interest rates charged on credit cards compared with the cash rate. Dr Edey from the RBA told the committee “the average rate for borrowers who incur interest on credit cards is currently about 17 per cent. Once you deduct from that banks' cost of funds and the cost of credit losses, that would equate to an interest margin of more than 10 percentage points.” The extent of our use of credit cards is highlighted in the 2014-15 statistics where Australians made 2.2 billion credit card payments, with a total value of $285 billion. At the end of June 2015, the total outstanding credit card debt was $51.5 billion. Of this total, $33.1 billion was accruing interest. The Committee has made 11 recommendations based around better education for consumers, more proactive action by credit card providers when they see a problem developing, and that the government consider introducing a credit card minimum repayment requirement and alternative means of reducing the use of credit cards as long-term debt facilities.
Written and authorised by Senator John Williams, 144 Byron Street, Inverell 2360
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