Industry News

Changes to the Australian superannuation system has sparked anger from the financial services industry.

The Government announced in the Budget it  will achieve a savings of $1,459.5 million over the forward estimates period by deferring the start date of the 2010-11 Budget measure Stronger, fairer, simpler tax reform — increasing concessional contribution caps for individuals over 50 with low superannuation balances by two years, from 1 July 2012 to 1 July 2014.

Under the higher concessional contributions cap measure, individuals aged 50 and over with superannuation balances below $500,000 will be able to make up to $25,000 more in concessional contributions than allowed under the general concessional contributions cap.

The two-year deferral means that for 2012-13 and 2013-14, all individuals will be able to make concessional contributions of up to $25,000 per year as permitted under the general concessional contributions cap. In 2014-15, the general cap is likely to increase to $30,000 through indexation, and the higher cap would then commence at $55,000.

The Financial Services Council (FSC) has said that the move to take funding out of the retirement savings system will significantly undermine trust in the super system.

“This Budget hits every saver aged over 50 years. Cutting the concessional contribution caps from $50,000 to $25,000 for two years undermines all Australians planning for retirement,” Martin Codina, Director of Policy at the FSC said.

“The Government has again confirmed that it is willing to use retirement savings to pay for other political objectives. This is the 9^th time since 2008 the Government hsa changed the rules, equating to $7.8 billion less in retirement savings.”

The Chairman of AMP Peter Mason has  called for the government to stop ‘tinkering’ with the Australian superannuation system, and criticized the budget decision to delay reinstating the $50,000 superannuation concessional tax cap for those over 50.

Speaking at AMP’s Annual General Meeting, Mr Mason said continual changes to the super system had undermined people’s confidence in it for their long-term planning.

“Constant changes to Australia's superannuation system, as we saw again in Tuesday's budget, undermine people’s comfort in saving within this system.

“We know from experience that any change, even when it doesn’t impact them directly, unsettles people, and makes them anxious about the future. The greatest contribution that the Government can make right now is to provide the certainty and security Australians need so they can save with confidence in the future,” he said.

Mr Mason said the delay in reinstating the $50,000 superannuation concessional tax cap for those over 50 would act as a disincentive for people to save for their retirement at the very time they were in a position to do so.

“Ironically, this constant tinkering by the Government risks undermining the very system Labor established, and which is now so widely admired around the world.

“Superannuation is a long-term response to a long-term demographic and economic challenge. It needs to be managed for the long-term, not continually modified to meet short-term budgetary objectives.

“It also needs to be a system that manages equitably the intergenerational challenges created by an aging population, without transferring an unfair burden to future generations of taxpayers – our children and grandchildren.

“That way, Australia will remain the envy of the world, with our people enjoying the retirements they deserve, and our nation capable of funding the infrastructure we need to provide an attractive standard of living for everyone.”

The Federal Governmenthas announced in the Budget it will increase the application fee to obtain an Australian financial services (AFS) licence to cover the costs of implementing the Future of Financial Advice reforms.

AFS Licence fees will increase from either $287 or $575 (depending on method of application) to $1,485 for a body corporate and from either $159 or $351 (depending on method of application) to $825 for a natural person, and the annual lodgement fee for an AFS licence holder will increase from $351 to $549 for a body corporate and from $144 to $225 for a natural person.

The fee increases will provide $23.9 million over four years to the Australian Securities and Investments Commission to facilitate the implementation of the Future of Financial Advice reforms.

Global professional services specialist KPMG has published a review of the country’s major banks, find they continue to perform well on the global stage, despite some negative effects in the global funding markets and ongoing structural change.

KPMG’s Major Australian Banks Half Year 2012 report found that the major banks have posted a healthy profit in the 2011-12 half year, with a combined cash profit of $12.6 billion after tax, an increase of 2.4 per cent from the second half of last year.

“The major banks’ profit clearly shows we have a strong banking system, however it must be viewed in light of the increased capital that the banks now need to hold. Return on equity (ROE) remains around 16% for most banks and shareholders will need to accept that this level of return is all they can expect for the foreseeable future,” said KPMG’s head of banking, Andrew Dickinson.

The banks posted a statutory profit before tax of $16.8 billion before tax, compared to $16.3 billion in the same period last year.

The banks’ biggest challenge is adapting their business model to cope with the competing strains of constrained lending growth, ongoing funding pressure, ever higher regulatory hurdles, and a transition to new mobile delivery channels and competitors,” Mr Dickinson said.

KPMG identified the high cost of funding as a major challenge for the major banks, which narrowed from an average of 229 basis points in the second half of 2011, to 221 basis points in the first half of 2012.

 “Sustainable cost reduction remains a challenge for the major banks. While they are implementing a number of cost reduction measures, the full impacts are yet to flow through to the results. They need to make structural, long term changes that will sustain a lower cost base,” said Michelle Hinchliffe, KPMG’s Head of Financial Services.

The ROE for the majors is an average of 16.3 percent compared with 16.6 percent half year 2011. “Increased capital requirements from Basel III will continue, and while managing margin pressure remains important, containing costs while improving customer relationships will also feature highly in the majors’ strategy,” Ms Hinchliffe added.

Cost of funding continues to serve as the biggest hurdle for the country’s major banks, with uncertainty in global markets contributing to an overall tough market condition.

“The global crisis in access to funding has forced the majors ‘back to the past’ where they are wooing domestic deposits to boost their funding. This means deposit competition is intense, and depositors are now being paid 2% more (relative to RBA rates) than before the GFC. It is these increased deposit rates which are now having the strongest impact on bank funding costs.” Mr Dickinson said.

The University of Western Australia has opened the State's first laboratory to translate new scientific discoveries based on the latest research in cancer biology into new advanced pathology tests.

The $1.2 million Translational Cancer Pathology Laboratory based at the QEII Medical Centre will be used to "bridge the gap" between pure science and patient care.

Work in the laboratory will translate cancer cell biology into clinically applicable tests for "personalised pathology" to enable patient-specific cancer therapies.  As such, it will be of direct benefit to people with cancer and health care delivery in Western Australia.

Head of UWA's School of Pathology and Laboratory Medicine Winthrop Professor Wendy Erber said the laboratory will dramatically improve treatment for many Western Australians.

"Because each person's cancer is different, the work in this laboratory will enable us to further refine the drug treatment for individual cancer patients to provide better outcomes with fewer side-effects and more effective use of expensive chemotherapy drugs," Professor Erber said.

Major funding for the project has been provided by Lotterywest, the Cancer Council of WA and the State Government as well as additional support from the Peel region Zonta Club and Mr Chris Perrott of Nedlands, who has worked to raise funds for Myeloma research.

The Transport Workers Union (TWU) has publically hit out at Coles and Woolworths, saying the supermarket giants are responsible for ‘lethal pressures in the trucking industry and across the entire supply chain’.

“What we are seeing at Coles stores across Australia is TWU members, together with their families and their communities, demanding the giant retailer finally take its responsibility for safety seriously. For too long now, Coles has been squeezing truckies, pressuring them to meet impossible deadlines, making them queue for hours unpaid to load and unload at distribution centres and to deliver their goods for a pittance.,” Tony Sheldon, National Secretary of the TWU.

“The results of these pressures are all too tragically apparent. Truck driving is Australia’s most dangerous industry, with a death rate ten times the industrial average. One in three workplace fatalities occur in trucking. 330 people are killed on average each year in truck crashes and more than 5300 are injured.”

Woolworths Chairman James Strong hit out at the comments, branding them as irresponsible.

"I think it is not the best way to approach a problem," Mr Strong told the ABC.

"That sort of using sensational terms seems to be a trademark of the TWU and it is a pity."

Colonial First State has announced a major shake-up of its executive management team, with Chief Executive Officer Brian Bissaker reportedly leaving his post after the role being made redundant.

Group executive, wealth management, Annabel Spring confirmed the restructuring, saying that the changes were being made in response to regulatory impacts, the acquisition of Count Financial and the continued growth fo the advice business.

“I would like to thank Brian for his substantial contribution to Colonial Frist State over the past 10 years, including the development of a very strong team, reaching number one in satisfaction and attaining $59 billion in platform funds.” Ms Spring said.

Also announced in the restructure was Marianne Perkvic’s promotion to leading the Advice business, while Linda Elkins will assume interim responsibility for the remaining business units. 

The ANZ has released its job advertising figures for April, finding the total number of job advertisements have fallen 3.1 per cent in April after rising 0.7 per cent in March, meaning the results are about 1.7 per cent lower than the April 2011 level.

The results show that despite a continued weakness across all states and territories, except the NT, the mining states are continuing to show stronger labour conditions, with Queensland also enjoying a strong market.

The release of the data coincides with the ABS publishing unemployment details, which found a 0.2 per cent drop in the unemployment rate to 4.9 per cent.

The report can be found here

Mining giant BHP Billiton has announced it intends to continue the consolidation of its Stainless Steel Materials and Aluminum Customer Sector Groups (CSGs) into a single CSG to be named Aluminum and Nickel.

According to the company, the new CSG will be headquartered in Perth under the leadserhip of Glenn Kellow as President.  

The CSG will include all nickel and aluminum assets in the portfolio, including Nickel West and Worsley, Cerro Matoso, Mozal, Hillside and Bayside and two non-operated joint ventures, Alumar and Mineracao Rio do Norte.

BHP Billiton Chief Executive Aluminium, Nickel and Corporate Development, Alberto Calderon said: “Despite the current challenges, BHP Billiton is committed to Aluminium and Nickel as commodities that may benefit from later phases of economic development in the emerging economies.

“However, individually, Aluminium and Nickel are small divisions relative to the other businesses in BHP Billiton. The combination of these into a single business unit will provide appropriate scale within the BHP Billiton portfolio, as well as simplifying the functional structure of the business to assist in our efforts to make it a more efficient and competitive organisation.”

The Western Australian Government has expressed its concerns over the expected cut to GST revenue, with Premier Colin Barnett saying up to $500 million is expected to be removed from the state’s coffers.

Mr Barnett warned that the sharpest drop in funding is likely to be in the area of training, which Mr Barnett says could not come at a worse time.

"The commonwealth and state had been working well on training, but the commonwealth is now reducing its commitment in this state where we need to train people because there are jobs and labour shortages," Mr Barnett told reporters.

"For the coming year, the state has picked up that shortfall, but we can't continue to do that because we haven't got the GST share to help fund it.

"You're going to see impacts in a lot of those commonwealth/state partnership agreements, and I think that's unfortunate."

South Australian Treasurer Jack Snelling also expressed his concerns with the budget spending.

"What we've got will be the largest writedown in revenue a treasurer in South Australia has ever had to face," Mr Snelling said.

South Australia is likely to face a $2.8 billion hit to its budget over the coming four years as GST revenues and state revenues drop significantly.

"As a government, we are committed to producing a fiscally responsible and financially sustainable state budget.

"In the wake of these revenue falls, tough decision will need to be made."

Queensland has joined other states in voicing their concerns, with State Treasuerer Tim Nicholls saying the Federal Government forgot the state.

“Queensland has received no funding for critical road, rail and port infrastructure across the state,” Mr Nicholls said.

“We have also suffered a cut of $2.5 billion in Specific Purpose Payments (SPP’s) for the next financial year which will result in cuts to services like skills and workforce development, community services, affordable housing and environmental payments.” 

The Federal Court has ruled that Energy Watch breached consumer law over 80 times, misleading consumers in relation to its energy price comparison service and the savings that could be achieved through the service.

The Australian Competition and Consumer Commission (ACCC) pursued action against the company in the High Court, which found that former CEO, Benjamin Polis, was personally culpable through his role as the voice-over in the radio advertisements.

The High Court found that the advertisements mislead consumers in contravention of of sections 18(1), 29(1) and 34 of the ACL. They comprised of:

• 8 television advertisements broadcast in Melbourne and/or Brisbane,
• 9 radio advertisements broadcast in Brisbane,
• 33 print advertisements in The Age and Herald Sun newspapers,
• A wrap around to an issue of the AFL Record,
• Statements made on an Energy Watch website and other websites,
• 11 billboards in or around Melbourne; and
• Advertisements on a scoreboard at the MCG during 3 AFL games in the 2011 AFL season.

Energy Watch had also falsely represented that:

• It had an adequate basis to claim that it had saved residential customers $386 and business customers $1,878 in the 12 months following switching their energy retailer through Energy Watch;
• It would save residential and business customers those amounts in the 12 months following switching their energy retailer through Energy Watch.

“Energy Watch blatantly misled consumers about the service it provides and the savings they could obtain, as Energy Watch was earning commissions from its preferred suppliers for each customer who switched to them using the Energy Watch service,” ACCC chairman Rod Sims said.

FYX, a new New Zealand ISP, has launched its first internet services in the country, promising to negate geo-location blocking on US services such as Netflix.

The company, which describes itself as an ISP that is ‘all about open access and freedom’, has promised to allow its users access to global services that have been traditionally blocked by a system of geographic restrictions.

“There is a bunch of stuff on the internet that a few of us didn't have the freedom to access (without stealing it, and we aren't into that). So we decided to FYX the internet by removing some of the barriers that were getting in the way of great choice,” the company announced on its website. 

The Teach Next Program has been modified to provide additional support to facilitate involvement in the program while at the same time cutting the number of placement offers expected to be secured for 2012. The changes will result in savings of $2.0 million over five years.

Teach Next was allocated $18.1 million in the 2011-12 Budget to establish a new pathway into teaching for 450 career-change professionals with relevant qualifications and experience to address known critical teacher shortages in specialised areas such as mathematics and science.

Following consultation with stakeholders and providers, the Government has agreed to provide additional financial assistance to:

• program participants to assist with study costs and relocation;
• teacher employers to support participant selection, placement and mentor release; and
• providers to assist in meeting the costs of recruitment and course delivery.

Participants may also be eligible for a FEE-HELP loan to fund the difference between the Commonwealth's contribution and the cost of the course.

The changes to the program will also revise participant numbers downwards from 450 to 395 and will be managed in four separate intakes over the four years of the program.

Further information can be found here.

The Federal Budget has allocated $14.3 million over three years to expand the Teach Remote Program, an initiative of the National Alliance of Remote Indigenous Schools (NARIS).

NARIS consists of 170 schools from Western Australia, the Northern Territory, South Australia, Queensland and New South Wales, enrolling around 16,500 Indigenous students.

The Teach Remote Program is focused on establishing a remote teacher network and standardising professional development for teachers in core subjects relating to the teaching of Indigenous students in remote communities.

Under Stage 2 of the program, the Government will provide support for:

• salary supplements of $10,000 in the first year and $20,000 in the second year to attract and retain up to 200 teachers; and
• one‑off payments of $1,000 to teachers to undertake professional development training in best practice in working with Indigenous students in remote sittings.

The Government will also provide additional funding to NARIS to maintain existing streams of work and to undertake new work such as resolving teacher registration and mobility issues.

The Australian Government has announced it will amalgamate the National School Drug Education Strategy, and the Values Education and Values Drugs programs into one program to create the Student Resilience and Wellbeing Program, creating savings of $10.3 million over four years.

The government maintains that consolidation of these programs will achieve administrative and financial efficiencies and allow for the development of a national approach to building student resilience and wellbeing while still supporting the policy intent of the original programs.

Savings under this measure will offset an increase in funding to the Australian Curriculum Assessment and Reporting Authority for the development of, amongst other things, a Health and Physical Education Curriculum. The curriculum will provide opportunities to support students to develop the resilience, knowledge and skills to take responsibility for their health and wellbeing.

The Federal Budget has cut the reward payments payable to primary and secondary schools under the proposed Reward for School Improvement program.

Reward payments will decrease from $75,000 to $50,000 for primary schools and from $100,000 to $75,000 for secondary schools. The number of schools receiving payments is unchanged.

The Rewards for School Improvement Program will provide payments to schools that have shown the most improved performance over 12 months, based on the proposed National School Improvement Framework.

The Government has announced it will postpone implementation of the National Trade Cadetships (NTC) initiative by one year to 2013-14, saving revenues of $12.5 million over two years from 2011-2012.

In 2011-12 an NTC Advisory Panel was formed under the leadership of Professor Denise Bradley to guide the development and implementation of the NTC initiative.

From 2013, students from Year 9 to 12 will be offered a new Cadetship as an option under the Australian Curriculum. The Cadetship will be delivered through local Trade Training Centres and other eligible venues.

The Federal Budget has cut funding to the Digital Education Revolution (DER) project pool in 2011‑12 to to provide savings of $24.4 million.

The DER project pool was established to provide funding for national initiatives that support the aims of the DER, such as the National Digital Learning Resources Framework. Funding of $6.0 million in 2012‑13 and $4.0 million in 2013‑14 will be available to continue funding these national initiatives.

The Federal Government has outlined $233.7 million in Budget spending for the continued rollout of a national eHealth system.

The rollout will allow Australians to register to creat a personal eHealth record, which will serve to ensure they receive the care they need from 1 July.

“It will be much easier for Australians with complex and chronic health conditions to ensure that all their health practitioners are able to access their medical history, making diagnosis quicker and more accurate.”

“We have made good progress in the past two years in the development of Australia’s eHealth system. This Budget provides certainty as we move from its development to its operation.”

eHealth spending in the 2012-13 Budget comprises –

• $161.6 million to operate the Personally Controlled Electronic Health Record (PCEHR) system for the next two years, including registration and customer support, adoption support and benefits monitoring and evaluation;
• $4.6 million to maintain safeguards for privacy-related aspects of the PCHER system. This will mean that people can be confident that the privacy of their personal health information is fully protected; and
• $67.4 million as the Commonwealth’s share of joint funding with the states and territories for the National E-Health Transition Authority (NEHTA) work program for the next two years. This is to operate and maintain critical services and standards for the secure electronic exchange of health information, including healthcare identifiers, authentication services and eHealth standards.

The Federal Government has announced it will postpone the development of the Australian Baccalaureate for two years to save expenditure of $8.5 million over three years.

The Australian Baccalaureate is intended to be a voluntary internationally recognised qualification that will complement existing senior secondary school qualifications. Consultations for its development were due to begin in 2013‑14 with rollout expected in 2015 or 2016. However, components of the National Curriculum that are intended to support the Australian Baccalaureate have been delayed, which in turn will delay the rollout of the Baccalaureate.