December 10 Edition
Well, after a rather messy final week, Parliament has risen to the 2nd February, 2016.
Over the break we will see all sorts of interesting stuff such as the promised Innovation Statement (now released) and the release of the Mid-Year Economic Outlook (MYEFO). I note also there is a COAG meeting where all sorts of things like raising GST and the Medicare levy seem to be on the table.
We are also in the grip of Global Central Banks (the ECB and the FOMC) messing about even more with the Global Economy and worryingly in rather divergent directions.
2 weeks from now we will know where it is all heading and hopefully can have a restful Christmas!
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Here is some other of the recent other news and analysis.
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General Budget Issues.
No surplus in sight: Deloitte says budget billions worse than forecast as revenue crumbles
Date November 30, 2015 - 7:44AM
Gareth Hutchens and Peter Martin
The Australian budget is facing deficits $38 billion worse than forecast and on present settings will never return to surplus, an authoritative new analysis has found.
Released just a fortnight before Treasurer Scott Morrison officially updates the budget in the mid-year review, the Deloitte Access Budget Monitor finds this year's deficit will be about $40.3 billion rather than the forecast $35.1 billion, the next year's $34.1 billion rather than $25.8 billion, and the deficits in 2017-18 and 2018-19 $11.3 billion and $12.7 billion worse.
That line on the budget graph that shows the deficit disappearing, it never gets there on our projections.
Deloitte Access partner Chris Richardson
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China and Senate add $38bn to budget deficits
- The Australian
- November 30, 2015 12:00AM
Adam Creighton
There is now a further $38 billion hole in the federal government’s finances over the next four years.
China’s relentless economic slowdown and a Senate allergic to spending cuts have blown a further $38 billion hole in the federal government’s finances over the next four years, a new report argues, putting pressure on the Turnbull government to spell out a reform agenda that boosts growth and restores the budget to surplus.
Weeks before Scott Morrison presents his first budget update, Deloitte Access Economics analysis argues that the federal government faces $168bn in cumulative deficits over the next four years, $38bn more than assumed in former treasurer Joe Hockey’s forecasts in May.
The new estimate also assumes that the Senate ultimately passes all of the spending cuts budgeted by the government but still stalled in the upper house.
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Morrison not 'hairy-chested' about surplus
- By Colin Brinsden, AAP Economics Correspondent
- AAP
- November 30, 2015 8:31PM
SCOTT Morrison has no intention of being "hairy-chested" and making promises about budget surpluses.
BUT the treasurer says a new analysis on the federal budget highlights the need to grow the economy.
Deloitte Access Economics estimates the mid-year budget review will show the budget has deteriorated by $38 billion since May, largely because of China's economic slowdown which has hit Australian company profits and tax returns.
"It just highlights that you have got to grow the economy to fix the budget, you have got to continue to control expenditure to fix the budget," Mr Morrison told Sydney 2GB radio on Monday.
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Scott Morrison will no longer be able to claim there's no revenue problem
Date December 1, 2015 - 11:12AM
Peter Martin
Left unchecked, extraordinarily generous tax concessions on superannuation will land our tax system in danger.
The tax that gets away
Tens of billions of dollars in potential tax revenue escapes each year - Peter Martin explains the big concessions and how much the government could rake back.
About that revenue problem ... the one we don't have. Since the May budget, expected revenue has slipped by $4.6 billion for 2015-16, and $8 billion for 2016-17. Projected spending has hardly grown at all.
Deloitte Access, which has calculated the figures ahead of this month's mid-year budget update, reckons this year's deficit will be $5.2 billion worse than forecast ($40.3 billion rather than $35.1 billion), and next year's $8.3 billion worse than forecast ($34.1 billion rather than $25.8 billion). Subsequent years will be $11.4 billion and $12.7 billion bigger.
Superannuation taxes will raise just $7 billion next year – only slightly more than half the sum of $12 billion collected a few years back.
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No pension test on family home: Morrison
Published: 4:15 pm, Tuesday, 1 December 2015
The government says it has no plans to impose a pension assets test on the family home, despite a Productivity Commission recommendation.
The Treasurer has poured cold water on the Productivity Commission proposal to link the value of retirees homes-to their eligibility to get the Age Pension.
It would save the budget six billion dollars a year but Scott Morrison says the coalition's never ever policy hasn't changed.
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http://www.afr.com/news/politics/budget-update-will-be-hit-by-falling-iron-ore-price-20151130-glc165
- Dec 1 2015 at 11:45 PM
- Updated Dec 1 2015 at 11:45 PM
Budget update will be hit by falling iron ore price
The forecast iron ore price in this month's economic update will be significantly lower than the $US48 ($66) annual estimate in the May budget, punching a hole in expected revenues and delaying further any return to a budget surplus.
Confirmation of the downgrade came amid predictions ore could soon be trading at a spot price below $US40 a tonne as collapsing steel demand in China pushed the commodity to record low prices.
Ore with 62 per cent iron content delivered to Qingdao dropped 3.4 per cent to $US42.97 a tonne on Monday, the lowest level in daily data dating back to May 2008. It was the lowest since 2005, based on annual pricing that preceded the current spot-based system.
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- Dec 2 2015 at 11:37 AM
GDP jumps 0.9pc in quarter on export surge; Morrison shrugs off income squeeze
by Jacob Greber
Economic growth accelerated sharply in the September quarter as the biggest jump in exports in 15 years offset a slide in business and government investment.
Gross domestic product rose 0.9 per cent from the June quarter, when it rose an upwardly-revised 0.3 per cent, the Australian Bureau of Statistics said on Wednesday.
Annual growth accelerated to 2.5 per cent from 1.9 per cent.
Both figures beat economist's forecasts of 0.8 per cent and 2.4 per cent respectively.
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- Dec 2 2015 at 6:59 PM
- Updated Dec 2 2015 at 6:59 PM
GDP numbers show it's time to get serious about the deficit
by The Australian Financial Review
The September-quarter national accounts show economic growth running slightly above market expectations at 0.9 per cent for the quarter and 2.5 per cent for the year. But that was due to the biggest increase in quarterly exports in 15 years from good weather and the new stream of foreign sales from the now-retreating resource development boom. While record-low interest rates and the softer dollar are stimulating housing construction and inbound tourism, so-called net exports are accounting for a big chunk of the economy's sub-par performance. Even then, the slump in the iron ore price to not much above $US40 a tonne is driving down Australia's terms of trade and shrinking national income. On one measure, per-capita national income has fallen nearly 6 per cent in real terms since the iron ore price peaked at $US180 a tonne four years ago.
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Martin Parkinson's warning: our luck has run out
Date December 3, 2015 - 6:58PM
Jessica Irvine
Senior writer
Complacent, ill-prepared and in denial: Australia's next top mandarin didn't hold back in a recent paper on the challenges facing the Australian economy.
Malcolm Turnbull walks on water
Yes, he's the new Messiah. Hear his praises and take a look back at the best in 2015 politics sung by Denis Carnahan with animations by Rocco Fazzari.
Knights and dames, onions and flags.
Of all the missteps of the Abbott government, perhaps the most egregious in the eyes of serious economic types was the sacking of Treasury secretary Martin Parkinson.
Has the Lucky Country run out of luck? In short, if 'out of luck' means we have to rely on our own hard work to sustain and grow living standards, invest for the future and ensure fiscal sustainability, the answer is yes!
Former Treasury secretary Martin Parkinson
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Labor hits out as Scott Morrison lauds corporate tax avoidance deal with Greens
Date December 4, 2015 - 8:42AM
Gareth Hutchens and Nassim Khadem
Treasurer Scott Morrison says he and the Greens have achieved one of the most significant changes to corporate tax avoidance laws in 30 years, after striking a deal that will force Australia's wealthiest private companies to finally disclose their annual tax bills.
But Labor has accused the Greens of selling out, saying they let the Coalition to play them "like a banjo" in their attempt to feel politically relevant.
Up to 300 of Australia's biggest private companies will now be forced to disclose their annual tax bill for the first time after the Coalition struck a compromise deal with the Greens on contested tax transparency legislation on Wednesday night.
Greens leader Richard Di Natale said the deal defused a standoff and ensured passage through the Senate of the federal government's Combating Multinational Tax Avoidance Bill, to take effect on January 1.
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Treasury urges Scott Morrison to act on deficit
- The Australian
- December 5, 2015 12:00AM
David Uren
Treasury said Scott Morrison should place fixing the budget at the top of his priorities.
The Treasury department warned Scott Morrison that he should make repairing the budget his highest priority and that he cannot rely on economic growth to close the deficit.
A gloomy incoming ministerial brief to the Treasurer has been released to The Weekend Australian under Freedom of Information laws. The heavily redacted document, prepared at the end of September, told Mr Morrison he was taking on the economy at a difficult time.
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Health Budget Issues.
Government gets it right on mental health
Date November 29, 2015 - 10:44PM
The federal government has done the people of Australia a crucial and long-overdue service by moving to restructure the mental health system. Changes announced in recent days by Prime Minister Malcolm Turnbull and Health Minister Sussan Ley are in line with recommendations delivered a full year ago by the National Mental Commission and are designed to shift the emphasis to prevention and early intervention.
The commission's comprehensive report, which echoed a raft of such examinations over more than decade, concluded that the system is fundamentally failing – and wasting billions of taxpayers' dollars – by focusing too much on emergency, hospital-based responses.
Starting next year, the government will implement over three years changes that will devolve control from Canberra to a series of community-based public health networks that will commission on a case-by-case basis the services each patient requires.
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Medicare safety net changes shelved until next year, government fails to gain Senate support
Date December 1, 2015 - 12:54PM
Jane Lee
Legal affairs, health and science reporter
The Turnbull government is putting off plans to change the Medicare safety net until next year, after failing to attract enough support on the Senate crossbench.
The bill - which will lower the thresholds needed to access benefits for out-of-hospital services while capping the amount payable for individual services once these have been reached - has faced fierce opposition from psychiatric, oncology and IVF groups concerned it will make services unaffordable for some patients.
The changes would have had to be passed this week - the final parliamentary sitting week of the year - in order to take effect from 1 January, 2016, as the government had planned. They were expected to save the government $266.7 million over five years.
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- Dec 1 2015 at 3:41 PM
- Updated 39 mins ago
Australian health system faces 'triple whammy', says KPMG health expert Mark Britnell
Global health expert Mark Britnell says Australia's world class healthcare system could be at risk of failing to care for ever older and sicker patients because of a "triple whammy" of structural problems.
Britain-based Mr Britnell warned that although Australia's healthcare system has "served it well", political blame games had thwarted real rejuvenation.
More importantly, he stressed, the split between federal and state governments, which sees the Commonwealth fund and manage primary care like doctor visits and blood tests, while the states run and fund hospital care, is not suited to the needs of modern healthcare.
These functional and funding splits between the two tiers of government constitute the first two parts of the issue.
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Australia ranks among top countries in global efficient healthcare rating
- The Australian
- December 1, 2015 3:59PM
Sarah-Jane Tasker
Australia ranks among the top countries in a global efficient healthcare rating, beating the US and the United Kingdom.
Data compiled by Bloomberg has placed Australia in the eighth spot among 55 countries, with an efficiency health score of 63.1 per cent, with Australians paying on average $US6110 a year on healthcare. Out of the 55 countries listed, only five have a higher average spend on healthcare than Australia.
Australia’s 2015 healthcare efficiency rating was two below what Bloomberg estimated it would have ranked in a similar table in 2008.
It also outlined the average life expectancy in the country was 82 years.
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Review of medical benefits schedule could hit growth of health stocks
- The Australian
- December 1, 2015 12:38PM
Sarah-Jane Tasker
The Australian government’s review of the medical benefits schedule is likely to uncover a lack of clinical evidence to support certain items on the list, which could soften growth in pathology services and private hospital numbers, analysts warn.
Credit Suisse outlines that Ramsay Health Care, Healthscope, Primary Health Care and Sonic Healthcare could all be impacted by a lower growth environment.
The bank said the recent release of the Australian Commission on Safety and Quality in Health Care report, Australian Atlas of Healthcare Variation, served as a leading indicator of what the MBS review could reveal.
“That is, a lack of clinical evidence to support volume and growth in certain MBS item numbers, with recommendations for the implementation of referral rule restrictions,” Credit Suisse analyst Saul Hadassin said.
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Government policy, not consumer behaviour, is driving rising Medicare costs
December 2, 2015 4.28pm AEDT
Stephen Duckett
Announcing the ill-fated 2014 budget initiative to introduce a consumer co-payment for general practice visits, the then health minister, Peter Dutton, lamented that annual Commonwealth health costs had increased from A$8 billion to A$19 billion over a decade. He described the increase as “unsustainable” and used it to justify the budget’s bitter pill.
The implication of his announcement was that consumers were driving the increase in costs and that action to change consumer behaviour was necessary to rein them in.
The growth numbers were presented as part of the government’s then mantra of a “debt and deficit disaster”, and massaged to create maximum shock and awe. The minister’s numbers did not adjust either for population growth or inflation.
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Patient enrolment to be centrepiece of CDM reform plan
The first details of the new funding blueprint for GP chronic disease care have emerged.
Australian Doctor has been told that the Primary Healthcare Advisory Group’s reform paper is complete and due to be handed to the Federal Health Minister before December 4
It is understood it recommends the formal creation of the so-called 'medical home' via a voluntary enrolment scheme for patients with chronic conditions.
Access to Medicare funds for the creation and implementation of management plans, as well as access to Medicare-funded allied health services, would be dependent on these patients being enrolled.
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Patient enrolment to be centrepiece of CDM reform plan
The first details of the new funding blueprint for GP chronic disease care have emerged.
Australian Doctor has been told that the Primary Healthcare Advisory Group’s reform paper is complete and due to be handed to the Federal Health Minister before December 4
It is understood it recommends the formal creation of the so-called 'medical home' via a voluntary enrolment scheme for patients with chronic conditions.
Access to Medicare funds for the creation and implementation of management plans, as well as access to Medicare-funded allied health services, would be dependent on these patients being enrolled.
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The true cost of fat: Obesity a $130 billion drag on our wellbeing
Date December 5, 2015 - 8:31AM
Matt Wade
Senior writer
The cost to Australia's wellbeing caused by obesity has leapt by 84 per cent in the past decade to more than $130 billion a year.
The Fairfax-Lateral Economics Index of Australia's Wellbeing – which uses a range of indicators to measure our collective welfare – reveals the huge social and economic toll of obesity.
It estimates the annual wellbeing cost of obesity is equivalent to about 8 per cent of gross national product. In the September quarter alone obesity's wellbeing cost reached a record $34 billion, double the corresponding quarter 10 years ago.
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Your insurer wants to know everything about you
Date December 5, 2015 - 9:09AM
Ruth Liew and Tim Binsted
Suddenly insurers want to know everything about you. Everything.
When you go to bed. They want to be there. Alongside you on the cardio machine at 6am in the gym they want to track how many steps you take.
I believe there will be people who will be disadvantaged.
Dipak Sahoo, Capgemini
Speeding down the highway in your Mitsubishi Lancer to get to work on time, they're coming along for the ride. Packing your shopping, they're peering in your basket.
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An Open Letter to the Minister for Health concerning private health insurance
Marie McInerneyon: December 01, 2015
The Federal Government’s “landmark national public consultation” asking views on private health insurance and how they think it can deliver better value for money for patients closes this Friday. Here’s the survey and some vital background reading before you fill it out. Health Minister Sussan Ley has also been holding “targeted consultations” with a variety of stakeholders – including private health insurers, hospitals, doctors and consumer and health representatives – based on an issues paper published by the Health Department.
As this Guardian Australia article points out, there’s grave concern that the government is laying the groundwork for changes in the sector that could jeopardise the universality of the Australian health system.
Thanks to John Menadue for permission to cross-post this letter, sent last month to the Minister and posted on his Pearls & Irritations blog.
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Superannuation Issues.
Older Australians too cautious about their finances, says Productivity Commission
Date December 1, 2015 - 7:06AM
Peter Martin
Economics Editor, The Age
There's such a thing as too much caution. Older Australians could enjoy far higher standards of living and could cut their reliance on the aged pension if they just ate into just a portion of the $1 trillion tied up in their homes, a new Productivity Commission study has found.
But it says few of them are interested.
Contrary to the myth that retirees fritter away their superannuation lump sums in order to get the pension, the study finds that most are too cautious with their money, engaging in too much "precautionary saving" and dying with their houses and savings intact.
"When faced with lower incomes, older Australians are more likely to cut expenditure than draw down on their wealth, Productivity Commissioner Karen Chester said. "This means not accessing the wealth embedded in their family home."
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Productivity Commission: aged-care reform call to match wishes
- The Australian
- December 1, 2015 12:00AM
Sean Parnell
Australians increasingly view residential aged care as an end-of-life option and regulatory reform is needed to help home-care providers and retirement villages adapt to the trend.
A Productivity Commission report out today finds red tape limiting the ability of retirement villages and other housing providers to meet changing consumer demands, complicating decisions for those “driven by ill health and frailty”.
The age of admission to residential aged care is increasing, currently 83 years on average, with higher care needs and average tenure of about two to three years. The commonwealth recognises the demand for more in-home care, but the commission believes change is needed in all living arrangements.
While there have been some reforms to residential aged care, especially around price transparency and the decision to separate accommodation and care costs, the commonwealth’s supply of places is still “tight and inflexible” and hinders the ability of providers to adapt to recent trends.
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Retirement won't be easier any time soon
Date December 1, 2015 - 9:00PM
Ross Gittins
The Sydney Morning Herald's Economics Editor
Glenn Stevens, governor of the Reserve Bank, is used to getting letters from angry citizens. Aside from the ones demanding to know why the Reserve can't solve all our problems by just printing more money, in days past most would have come from small-business people complaining about the latest increase in the official interest rate, which had taken their overdraft rate to ruinous levels.
These days, most come from angry retirees complaining about yet another cut in rates. Doesn't he realise people are trying to live on the interest on their savings?
That's the trouble with interest rates, of course, they cut both ways – a cost of borrowers, but income to savers. The media assume we're all borrowers, so they boo rate rises and cheer rate cuts, adding insult to the oldies' injury.
Like all central banks, the Reserve raises interest rates when it wants to slow the economy by discouraging borrowing and spending, and cuts rates when it wants to speed things up – as now. It jumps that way because households' and businesses' debts total a lot more than their savings.
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Health Insurance Issues.
Health funds serve wish-lists to Health Minister Sussan Ley
Date December 3, 2015 - 5:35PM
Tim Binsted
Health funds are calling on the federal government to clamp down on $500 million of waste on prosthetic devices and to do more to encourage younger Australians to take out private health insurance.
Submissions to the federal private health insurance review are due on Friday and health funds, including Medibank Private, Bupa, and nib, are agitating for changes to stem surging healthcare costs and spiralling policy premiums; but the review also presents an opportunity to alter the industry structure in their favour.
Bupa health insurance managing director Dr Dwayne Crombie said prosthesis pricing used by the government is "ridiculous".
He said an external consultancy, commissioned by the industry, found insurers pay about $1.7 billion a year for all medical devices and prostheses, but the real cost should be about $1.2 billion.
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Medibank’s plan to fix private health insurance
- The Australian
- December 4, 2015 3:33PM
Medibank Private has recommended healthcare reforms it says will save around $3 billion in annual health costs and help reduce future insurance premium increases by up to 16 per cent.
The insurer says the reforms, outlined in its submission to the Commonwealth Department of Health’s review into private health insurance, would deliver much needed transparency, affordability and value for consumers in the healthcare system.
Medibank’s (MPL) outgoing managing director George Savvides said it was clear that substantial reforms were required.
He said customers had been telling the insurer it needed to look much more closely at how it could improve transparency, the affordability of premiums and the overall value it provided.
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Medibank eyes $3b in savings from health insurance overhaul
Date December 4, 2015 - 5:35PM
Tim Binsted
Medibank Private says $3 billion could be slashed from Australia's healthcare costs if the government cracks down on overpriced prosthetics and cost-shifting from public hospitals to the private system, among other measures.
In its submission to the federal review into private health insurance, Medibank, Australia's biggest health fund, said its recommendations would improve "transparency, affordability and value" for private health customers and check skyrocketing policy premiums.
"It's clear that substantial reforms are now required," Medibank managing director George Savvides said.
"Our sensible measures would unlock as much as $3 billion in additional value for consumers annually. That's good for Medibank customers and for the long-term sustainability of our world-class health system generally."
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Sussan Ley to end exorbitant health insurance premium rises
- The Australian
- December 5, 2015 12:00AM
Sean Parnell
Health Minister Sussan Ley has vowed to “break the vicious cycle” of health insurance premiums rising beyond inflation every year, demanding that insurers hand over their financial statements to prove they are not profiteering.
Amid an ongoing review, Ms Ley has signalled that the federal government will no longer sign off on massive premium increases for health funds that have significant cash reserves or are rewarding shareholders with large dividends.
The minister has also conceded, for the first time, that affordability has become such an issue members can no longer shop around for a better deal when premiums increase.
Members have been hit with increases of about 6 per cent a year for the past decade, but analysis by Credit Suisse recently argued that health funds had the capacity to absorb costs and pass on increases of just 2.5 per cent over the next three years.
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Health is also clearly under review as far as its budget is concerned with still a few reviews underway and some changes in key strategic directions. Lots to keep up with here! Enjoy.
David.
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