Another budget built on shifting sands

Gyrations in the iron ore price can make a treasurer look like an economic wizard or somebody fumbling for an excuse.


That’s because a treasurer has no control over the price of arguably Australia’s most valuable mineral resource and it’s proved hard for Treasury and professional commodity forecasters to predict.

While pundits try to guess what might be in the May budget and what it will mean for a future surplus, the great unknown in recent history has been commodity prices.

Howard government treasurer Peter Costello enjoyed the fruits of the pre-global financial crisis mining boom as China began its urbanisation program.

It filled up Australian tax coffers and contributed to a string of budget surpluses.

In contrast, his Labor successor Wayne Swan suffered the consequences of the boom’s unwinding, its resulting investment drop-off and a subsequent steep decline in the iron ore price.

It meant Swan missed his much-promised return to surplus in 2013 after spending billions of dollars trying to prevent a recession during the 2008-2009 GFC.

Abbott government treasurer Joe Hockey suffered the same fate as the iron ore price continued its plunge from a peak of $US190 a tonne in 2012 to an eventual low below $US50, wiping billions and billions of dollars off potential government revenue.

Now Scott Morrison is reaping the benefit of a renewed price spike which already is putting in doubt Treasury’s conservative assumptions of just two months ago.

It seems destined to flirt with the $US100 barrier after hitting the mid-$US90s this week and its highest level since mid-2014 .

The turnaround started last year, in tandem with an even more stellar surge in the price of coking coal.

At the time of the mid-year budget review in December, Treasury said there was “very considerable uncertainty” surrounding the outlook for iron ore.

It assumed the iron ore price would drop from an average $US68 through both the March and June quarters of 2017 to $US55 in the September quarter.

Of course, that could still happen eventually.

National Australia Bank economist Tapas Strickland says the latest upswing is being driven by higher steel prices.

“It is speculated that Chinese steel mills are seeking to accelerate production ahead of likely production cuts in the lead up to the National Party Congress,” he says.

Reserve Bank governor Philip Lowe believes that while the price rise is good for the economy, he doesn’t expect it will lead to the type of pick-up in investment in the resources sector previously experienced.

“There has already been a very large expansion in supply capacity and we expect some unwinding of the recent increase in prices as supply increases,” he told a conference this week.

However, higher prices are providing a boost to national income, which is expected to have some flow-through effects to the rest of the economy.

Treasury secretary John Fraser and his economic team are likely to be quizzed on the outlook for commodity prices and its impact on the budget bottom line when he faces a Senate estimates hearing next week.

Senators are unlikely to be much the wiser given Fraser’s response when he faced the Senate economics committee last October, saying “nobody has a crystal ball” when it comes to commodity prices.

“The streets of Manhattan and Zurich and London are littered with the bodies of commodity traders who get it wrong,” he quipped.

Thankfully, while Australian politics is brutal, only reputations are at stake.

Jobs impact of penalty rate cut queried

Unions and employer groups say the decision to cut penalty rates will only have a modest, if any, impact on job creation.


The Fair Work Commission on Thursday ordered a cut to penalty rates for hospitality, fast food, retail and pharmacy workers.

The commission said in its decision there were likely to be “some positive employment effects” from the cut, but these effects were “likely to be reduced due to substitution and other effects”.

“Substitution” can include such things as part-time workers replacing full-time and younger workers replacing older employees, as well as new technology such as self-service kiosks replacing staff.

ACTU president Ged Kearney said the idea that cutting penalty rates would create jobs is a “complete furphy”.

“People whose pay is going to be cut will simply have to work more hours to make up that take-home pay,” she told reporters in Melbourne.

“It will put more pressure on the labour market. It will simply mean people whose pay have been cut will have to work more hours, work longer shifts.”

Australian Retailers Association director Russell Zimmerman said it would be “hard” to estimate how many jobs could be created.

“Even the (Fair Work Commission) president said that today,” he said.

“But they do believe, as we believe, and as we have been told from our retailers, that retailers will offer extended employment to people.”

Council of Small Business Australia chief Peter Strong said it would make it easier for businesses to hire more staff.

“University students, people who look after kids during the week and want their own money – now they have the opportunity,” he said.

“There will be more jobs. It might not be a lot, it might be 10,000. We don’t know how many but we’ll find out.”

The main effect could be casual employees being offered part-time work and part-time workers offered full-time jobs, he said.

Employment Minister Michaelia Cash told reporters in Perth on Wednesday she was pleased to hear employer groups saying it would have a positive impact on jobs.

Asked whether she expected a noticeable drop in the jobless rate and underemployment, she said: “Certainly, not overnight.”

But she said many employers – especially in rural and regional areas – would now be able to open on a Sunday, which would either provide more work for the under-employed or create a new job.

Far from Brooklyn, Iraq’s hipsters declare war on poor dress sense

But rather than the hipster neighborhoods of New York or London, this is Erbil, the capital of Iraq’s Kurdish region – just 100 kilometers (60 miles) from the grim battle to drive Islamic State fighters from their last bastion in the country.


Although an oasis of calm in a country torn apart by war since the US-led invasion of 2003, Erbil has been unable to provide its young people with the opportunities they crave, say the men who set up their club last year to change that.

“When we started we were in a bad situation, economic crisis and then an expected war against ISIS (Islamic State),” said Goran Pshtiwan, 26, wearing a three-piece suit and custom-made moccasins decorated with the club’s logo – without socks, naturally.

“There was no business activity so we started with the idea to gather and make something different and unique and change the look of the people and the way that they are thinking.”

As well as regular meetings where they dress in different styles, from smart casual to black tie and traditional Ottoman-time attire, the club aims to support local tailors and craftsmen who help make their outfits.

Accessorised with purple-trimmed handkerchiefs, pocket watch chains and selfie-sticks, the men, in their 20s and 30s, hold photoshoots at local beauty spots, posting the results on Instagram where they have more than 60,000 followers.

The buzz has surprised co-founder Omer Nihad, a 28-year-old former stock trader, who said Star Trek actor George Takei, who has more than 2 million Twitter followers, had mentioned the club.

A recent video they shot received 5 million views, he said.

While a boy’s only club, Mr. Erbil uses its internet platform to promote women who are working to improve rights and opportunities for girls.

The group has about 40 members and is receiving so many requests that the founders are considering toughening the admission requirements which already set demanding standards for fashion taste.

Nihad said the club aimed to launch its own clothing brand, set up a shop and collaborate with fashion houses. And he would love to see Mr. Erbil featured in a high fashion magazine.

“Of course, we don’t want to be on the front page,” he said. “It is okay if we were in the middle!”

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Britain names Cressida Dick as London’s first female police chief

Dick, 56, becomes the most senior officer in the country, heading a force of some 43,000 officers and staff and controlling a budget of more than 3 billion pounds.


“I am thrilled and humbled. This is a great responsibility and an amazing opportunity,” said Dick, who has been working for Britain’s Foreign Office after leaving the London force in 2015.

London Mayor, Sadiq Khan, welcomed the appointment “on behalf of all Londoners”.

On behalf of all Londoners I warmly welcome Cressida Dick as the new Commissioner of @metpoliceuk. I look forward to working with her. pic.twitter长沙桑拿按摩论坛,/LE72TJqFBk

— Sadiq Khan (@SadiqKhan) February 22, 2017

The Oxford University graduate had been the favourite to succeed Bernard Hogan-Howe who steps down as Metropolitan Police Commissioner this month after five years in charge.

In speeches to mark his departure, Hogan-Howe said budget pressures meant there would be fewer officers in future and that the force was struggling to recruit the extra firearms officers likely to be needed to deal with any terrorist attack.

Dick will also have to decide how to police the upcoming state visit of U.S. President Donald Trump which has already generated anger and is likely to be dogged by protests.

Highly respected and popular with ordinary officers, Dick joined the London force, known as Scotland Yard, in 1983 as a constable and made her way up the ranks including a spell back in charge of her hometown of Oxford.

In July 2005, she headed the operation that led to Jean Charles de Menezes, 27, being shot dead by police at Stockwell underground station in south London after the Brazilian electrician was mistaken for a would-be suicide bomber.

Only the day before, four Islamist militants had tried unsuccessfully to bomb London’s transport network and police wrongly thought he was Hussein Osman, one of the attackers on the run, who lived in the same apartment block as de Menezes.

British security services were already on a high state of alert as two weeks earlier four young British Muslims had killed 52 people and themselves in suicide bombings on three underground trains and a bus.

Not culpable

The force as an organisation was later found guilty of breaching health and safety laws, but the jury said Dick herself should not be held culpable, a decision upheld by the European Court of Human Rights last year.

The family of de Menezes told the BBC in Brazil Dick’s new appointment was offensive and that they had asked London Mayor Sadiq Khan to veto it.

“Cressida Dick was in charge of the operation in which an innocent man was killed and her actions were at least incompetent,” the family said.

But two years after the killing, as an indication of how well she was thought of by colleagues, she was promoted to Deputy Assistant Commissioner, putting her in charge of the protection of the royal family and other senior individuals.

She later became Britain’s most senior counter-terrorism officer and was the national director for security during the 2012 London Olympic Games.

Her appointment means the most senior jobs connected to policing in Britain are now held by women, while the minister with responsibility for police and security is Home Secretary Amber Rudd.

New Australia Post CEO to pocket far less

Australia Post’s next top executive is unlikely to take home the same pay packet as his predecessor, Ahmed Fahour, who announced his resignation on Thursday following a furore over his $5.


6 million salary.

The Turnbull government has announced a tribunal will now determine the pay and conditions of future Australia Post managing directors.

The Remuneration Tribunal was announced the day of Mr Fahour’s shock resignation, and will require the Australia Post Board to justify the future CEO’s salary is proportionate to the responsibility of the role.

His take-home pay has been the subject of recent critics, however Mr Fahour says it had not forced his decision to sign off on his seven-year term.

“It’s time. My job is done,” he said. “I’ve achieved everything I needed to achieve.

“I’ve had a pretty fair innings. It is time to give someone else a go.”

Australia Post’s resistance to release executive pay details because it feared it would attract unwarranted media attention and may lead to “brand damage” was a red rag to parliamentary bulls.

They argued the chief executive of Canada Post takes homes less than $500,000 a year and the prime minister earns just over $500,000, so why should Fahour get 10 times the pay packet?

The prime minister entered the fray earlier this month, personally raising the issue with Australia Post chairman John Stanhope.

“I think Ahmed should step back and say ‘you know, here in 2017, in an economy where a lot of people are doing it pretty hard, where budgets are tight, this is too much to be paid as CEO of a government-owned postal company’,” Mr Turnbull said.

Mr Fahour defended the way he ran the organisation, saying it did not take “one dollar from the taxpayer” and in fact had delivered $4 billion in dividends to the Australian public.