Wednesday, November 23, 2016

Business Council boss Grant King says Australian credit rating needs to remain near AAA

Newly-appointed Business Council of Australia Grant King has warned that the government's AAA credit rating is at risk if efforts to repair the budget fail.

Mr King told the ABC's AM program that a ratings cut "just follows as a matter of logic" after Deloitte Access Economics forecast bigger-than-expected deficits over the next four years.

"If those budget deficits continue to expand then our credit rating will be at risk. I think that would be a correct statement," Mr King said.

"I think it is very important that Australia maintains a high credit rating. Whether it's AAA, it's certainly not much less than that.

"We are seeing indications that the deficit is deteriorating so it is going to be a challenge."

Mr King's warning of an imminent ratings cut came after the ratings agency Standard & Poor's reiterated that the Federal Government has six to 12 months to deliver on more budget savings and revenue measures.

Mr King underscored the importance of Australia maintaining the AAA sovereign rating to ensure it can deliver on services Australians have come to expect during the boom years.

"The government is like the community's insurer of last resort. We expect our governments to look after our community and our citizens if there's a disaster like cyclones in Queensland," Mr King said.

"In order for the government to have that capacity to support the community it has to maintain a good credit rating to be able to fund whatever those circumstances are."

The former Origin Energy chief executive of sixteen years is also expressed concerned that US president-elect Donald Trump will torpedo the Trans Pacific Partnership (TPP) by not participating.

Mr King says despite the absence of the United States, Australia need to find ways to encourage and improve global trade.

"Australia in a global context is a relatively small economy. We don't have a large domestic economy so trade is critical to Australia," Mr King said.

"We have to be an outward looking country. We can't run inwards and look to our own economy."

Mr King's appointment as Business Council president comes after criticism about the business lobby's power and influence from former Future Fund chairman David Murray and Liberal Party powerbroker Michael Kroger.

Former BCA president Catherine Livingstone and current chief executive Jennifer Westacott have been described as "out of touch" and "missing in action".

"Look I think there are many aspects of public debate out there that are making it more and more difficult for any organisation frankly to get its view across," Mr King said.

"So yes it might be right to say it's become more difficult. My hope is that in the next couple of years we can get better and better at that."

 Mr King also defended the government's plans for corporate tax cuts of $48 billion over ten years despite perceptions the money will go into shareholders pockets rather than create new jobs.

 "What the BCA's arguing for is a reduction in the rate of tax. Business would be happy to pay more tax in total but a lower rate is a key to doing that."

The business push for company tax cuts comes after confirmation that wages are growing at the slowest pace on record.

Thursday, November 17, 2016

Rio Tinto executives sacked over Guinea consultancy payments

Read my story on ABC News Online

Source: Rio Tinto statement

Indigenous Australians' wellbeing 'stagnating or worsening': Productivity Commission

Indigenous Australians are becoming more disadvantaged with alarming increases in imprisonment rates, mental health problems and self harm, according to a damning Productivity Commission report out today.

The Commission's "Overcoming Indigenous Disadvantage" report says despite some positive trends, the plight of indigenous Australians has "stagnated or worsened" in critical areas of wellbeing.

Read the Productivity Commission report

Among the findings, the national indigenous imprisonment rates have surged by 77 percent over the past fifteen years with hospitalisation rates for self harm up by 56 percent over the past decade.

Listen to my interview with Productivity Commission deputy chair Karen Chester

The report points to a failure of policy and oversight, with the Commission estimating that only 34 of a thousand indigenous programs are been properly evaluated by authorities.

Productivity Commission deputy chair Karen Chester told the ABC's AM program the findings are a wake up call for all levels of government about the reality of indigenous wellbeing and whether the $30 billion budget is being properly spent.

"You want to know that money is being spent not just in terms of bang for buck for taxpayers but that we're not shortchanging indigenous Australians," Ms Chester said.

"Of over a thousand policies and programs, we could only identify 34 across the whole of Australia that have been robustly and transparently evaluated.

"At the end of the day, we can't feign surprise that we're not seeing improvement across all these wellbeing indicators if we're not lifting the bonnet and evaluating if the policies and programs are working or not."

The report is being billed by the Commission as "compulsory reading" and the most comprehensive report on indigenous wellbeing undertaken in Australia.

Aboriginal and Torres Strait Islanders were involved in the study which was produced by the Productivity Commission for a review into government service provision.

Despite the disturbing assessment, an number of case studies have been highlighted where good governance is contributing to the success indigenous organisations.

These include the Waitja Tjutangku Palyapayi Aboriginal Corporation in central Australia which helps communities to counter economic disadvantage and the Marius Project in the northern Victoria town of Swan Hill.

(Perhaps point to Things That Work chart on page 23)

The report says areas of health, economic participation, life expectancy and aspects of education have improved from the update two years ago with child mortality rates narrowing between 1998 and 2014.

The proportion of adults whose main income came from employment increased from 32 percent in 2003 to 43 percent in 2014-15.

But the Productivity Commission's Karen Chester says it is now up to state, territory and federal governments to take the report on board to determine what is working and what is failing.

"I think the clock has been ticking for a while already," Ms Chester said.

"We have the data, we have the analysis and we know what indicators are linked to the others."

While the report includes case studies of examples of "things that work" it says the small number available underscores the lack of indigenous programs that are being rigorously evaluated for effectiveness.

Friday, November 4, 2016

Cyber attack threats expose Australia to $16 billion risk, warns global insurer Lloyd's

The growing risk of cyber attacks leaves the Australian economy exposed to a potential $16 billion dollar damage bill over the next decade, according to one of the world's biggest insurance companies.

In a joint study with Cambridge University, the Lloyd's insurance giant has found that out of 301 global cities, Sydney ranks 12th in terms cyber attack exposure with $4.86 billion of economic growth at risk.

In its City Risk Index 2015-2025, Lloyd's says Sydney is the riskiest Australian city followed by Melbourne, Brisbane, Perth, Adelaide and Canberra.

Globally, Lloyd's warns that $294 billion is at risk as attempted and successful cyber attacks become more prevalent.

The warning comes after recent evidence of attempted cyber attacks at the Bureau of Meteorology, the Australian Bureau of Statistics and the Reserve Bank of Australia.

Lloyd's global chief executive Inga Beale told The World Today that dealing with the constant threat of cyber attacks is now critical for businesses of all sizes.

"It's not just for banks to worry about - it impacts retailers, travel and hospitality firms, education and healthcare providers, and any business with proprietary information worth protecting," Ms Beale said.

"Where a decade ago people would talk about preventing a cyber-attack, the reality is firms will be subjected to attacks. The issue is how you mitigate against that."

The Australian Cyber Security Centre recently said systems in government agencies had been hit with 1,095 cybersecurity incidents considered serious enough to trigger an operational response.

The Lloyd's study points to a report from the accounting firm PWC which highlights a 109% increase in detected security incidents in Australian companies, compared to a 38% global average.

Under proposed legislation before the Australian parliament, hacked companies that lose personal details, tax file numbers, medical records or credit card information would be required to report the incident and alert customers.

But Inga Beale warns that while big business and government agencies are at most risk, private individuals are at risk from personal information stored in smartphones and personal computers.

"We are living in a world where people carry a globally-connected supercomputer in their pocket and almost every important work document is stored in the cloud, on servers or online," Ms Beale said.

"The result is an explosion in the potential for cyber risk. The latest series of high profile data breaches is just the beginning. With the emergence of the Internet of Things the potential for cyber risk is enormous."

As one of the world's major insurers and reinsurers, Lloyd's is now seeing demand for cyber attack cover form a major part of its traditional business of insuring for global natural disasters and catastrophes.

Lloyd's says demand cyber insurance in Australia has increased by 16,828 percent in the past two years as businesses seek protection from current and emerging threats.

The Lloyd's index points to a range of other risks including power outages, terrorism, sovereign default, oil price shock, heatwave, drought and floods.

Thursday, November 3, 2016

Consumers need greater rights to private data, Productivity Commission urges

Australian laws regulating access to personal private data are out of date and need to be overhauled to get in line with the digital age, according to a report out today.

The Productivity Commission says a move to mandate unrestricted access to private data is in the national interest and wants the government to introduce legislation to force government agencies and the private sector to share private information.

Read the Productivity Commission report

Under the proposed reforms, consumers could demand access to private data held by banks, GPS providers, insurer companies, doctors, health insurers and social media giants like Facebook.

In a world is rocked by digital disruption and a deluge of private data being held by governments and private companies, the Commission points to a data overhaul as top ten economic reform to the Australian economy.

Listen to the full interview with Productivity Commission chairman Peter Harris

While existing privacy laws would remain in place, the draft report says greater data sharing would create better competition, allow consumers to know more about their digital lives and maybe even get a better deal with a bank or on their power bills.

The Commission is proposing greater data access rights for consumers with the creation of a "Comprehensive Right" which would also include a greater ability for people to opt out of data collection activities.

Productivity Commission chairman Peter Harris told The World Today that while data is a major asset to Australia's economy, consumers currently have limited rights on accessing and levering their own personal information.

"Surprising though it may be to many, individuals have no rights to ownership of the data that is collected about them," Mr Harris said.

"Data is increasingly an asset, and when you create an asset you should have the ability to use it, or not, at your choice."

The data law reforms would give consumers the right to direct government agencies and private companies to transfer their information to a third party as part of a major shift in competition policy.

The Commission says the transfer of data would help consumers strike a better deal by making sectors such as financial services and energy utilities compete for business.

"This will give people and businesses who want to be active consumers genuine control over their data and will allow innovative businesses and governments the chance to offer those consumers better services," Mr Harris said.

The report also points to greater opportunities for improved health care, safer and more efficient infrastructure and machinery maintenance through "data driven" competition.

However the report warns it is a misconception that cyber risks will be limited if consumers continue to be denied access to their personal data.

"The risks from the proposed reforms are no greater than the risks today that are managed by any consumer who chooses to click a mouse and buy or subscribe to a product," Mr Harris said.

"And the same advice applies: be very choosey about who you share your data with."

The Commission warns Australia is "rapidly falling behind" other developed economies like the UK, US and New Zealand in reforming data access laws.

The proposed reforms are likely to be opposed by government agencies and private companies.

The Commission is calling for submissions and will hold public hearings on the proposed reforms later this month.

Thursday, October 20, 2016

Bank owned super funds accused of gouging by delaying switch to default schemes

Banks are being accused of gouging customers by delaying the transfer of superannuation accounts into lower cost default superannuation funds.

Under new rules, retail funds have been given four years to switch accounts nominated as "default" into cheaper My Super products with a deadline of 1 July 2017.

But research out today suggests bank-owned funds are dragging their feet by leaving default super in high cost legacy funds for as long as possible.

A study by Rainmaker Information commissioned by Industry Super Australia says banks are profiting by between $800 million and $1.8 billion in fees by stringing out the transition to approve default funds.

Rainmaker says given the aim of MySuper is to provide a default option for "disengaged passive members", the motivation of bank-owned funds need to be examined.

"The core question is to what extent have funds expedited this transition," the research suggests.

"This question is crucial because Rainmaker's annual superannuation fee surveys have revealed that MySuper products are on average 30% cheaper than regular corporate retail solutions.

"So the sooner members transition across to these lower cost products the sooner they start saving fees."

Industry Super Australia chief executive David Whiteley told the ABC's AM program the behaviour of bank-owned and retail funds was "unconscionable" and undermined public confidence in the compulsory superannuation system

"The retail and bank-owned super fund practice of leaving members' accounts languishing in more expensive legacy products requires greater scrutiny," Mr Whiteley said.

"The regulator would do well to ask if the product trustees are fulfilling their legal duties to put the interests of members over profits generated by wealth businesses inside the banks."

The research shows that although not for profit funds completed the transfers to MySuper by June 2014, retail funds are lagging with just 43 percent of funds switched by June 2016.

The Financial Services Council, which represents bank-owned and retail funds, maintains there is a clear timeline for the transfer to default funds.

FSC director of policy Andrew Bragg told the ABC that all existing money in the default super system must be transferred by June next year under longstanding legislation.

However, Mr Bragg said more competition was required as recommended by reviews conducted by Jeremy Cooper in 2010 and David Murray in 2014.

"Until there is competition for the $10 billion default contributions each year, MySuper will be an unfinished reform, " Mr Bragg said