Thursday, August 4, 2016

Digital disruption could rock workplace agreements, report warns

In a world of digital disruption with the likes of Uber and Air BnB, the focus is turning to how rapid changes to business and lifestyles could translate to the workplace.

A report out today looks at likely challenges to legal rights for both employers and employees given the move to contracting and more flexible work arrangements.

The law firm Corrs Chambers Westgarth says businesses, governments and not-for-profits need to consider how they can adapt to the challenges of a fast changing digital economy.

Partner John Tuck told The World Today that navigating the rise of the sharing economy will be critical for Australian businesses and their employees.

"The nature of the impact is going to be very dramatic change in the way in which services are being delivered," Mr Tuck said.

"Couple that with automation and artificial intelligence, you can see that we are going to have a revolution in the way that work is being undertaken in Australia."

Mr Tuck agrees a major challenge is ensuring that workplace flexibility is not perceived as worker exploitation.

"Yes. And I think that any responsible business is set up in a way that is lawful and that they take notice of the proper regulation."

In its annual workplace report, the firm singles out the scandal involving the retail chain 7-Eleven where some employees were underpaid and exploited.

John Tuck says the 7-Eleven example highlights social and legal risks for companies that fail to ensure worker rights are protected in a flexible economy.

"The challenge for employers of course is how do we ensure that laws are being followed and that does create issues," Mr Tuck said.

"A prominent brand, a known brand may well have to put in new governance structures to ensure that those laws are being followed.

After the 7-Eleven revelations by the ABC and Fairfax Media, both major political parties ramped up policies to bolster employee protections and to impose higher penalties for breaches.

But with the rights checks and balances, the report says workers in the new economy can adapt while maintaining industrial protections.

"The new generations are going to embrace the portability and flexibility of new work opportunities as opposed to looking back through the rear vision mirror," Mr Tuck said.

Key challenges for employers are ensuring enterprises agreements are honoured while independent contractors understand superannuation laws and workers compensation laws.  


While the report recommends workplace reform, it says the close election result means there is limited prospect of any significant changes in the near term.

Wednesday, August 3, 2016

Investors, depositors big winners from RBA rate cut

The decision by major banks not to fully pass on the Reserve Bank's official rate to mortgage borrowers demonstrates the power of big investors at a time of tighter profit margins, according to interest rate analyst.


But Peter Arnold, director of data at the financial services monitoring firm RateCity, says the move by the Big Four isn't surprising and proves that the interests of shareholders is now the number one priority for major banks.

"Protecting those margins, holding back money as equity is now very important. But as a borrower, you're the one who's paying the price here," Mr Arnold told the ABC's AM program.

"There'd be a lot of pressure from shareholders. The bank profits are a big source of income for super funds so the typical Aussie is benefiting in some regards.

"But the big investors are certainly a force to be reckoned with."

The changing priority for banks is in contrast to the past decade when Federal Treasurers including Peter Costello, Wayne Swan and Joe Hockey publically urged banks to pass on rate cuts in full.

Bank chief executives were routinely carpeted in public and private when official rate cuts were held back to protect profit margins.

When the Reserve Bank cut rates in May on federal budget day, three of the four major banks delivered the full rate cut to borrowers.

But yesterday, major banks passed on around half the official reduction with the National Australia Bank handing over just 0.1 percent of the RBA's 0.25 percentage point reduction.

Instead term deposit rates have been sweetened by the Commonwealth, NAB, ANZ and Westpac to ensure depositors - who are hurting from record low rates - keep their money with banks.

Peter Arnold says banks are under more pressure than ever given demands from institutional shareholders along with the Australian Prudential Regulation Authority (APRA) which now requires banks to keep more cash in reserve to deal with potential shocks.

As economists question the Reserve Bank's strategy in taking rates to record lows, there are still fresh memories of banks raising rates independently in the leadup to the global financial crisis when bank funding costs spiralled.

Mr Arnold warns borrowers could be exposed to the scenario of independent rate hikes again in the event of a global shock.

"That could certainly happen again, " Mr Arnold told AM.

"We've seen it before and it's happened this decade. We saw some months where the RBA didn't move and the major banks added 0.1 to 0.5 percent extra on to home loan rates."

While the major banks have held back the full RBA cut, smaller banks without shareholders are better positioned to pass on the full 0.25 percent to borrowers.


The former credit union Bank Australia was the first to move, opening the door for other borrowers to do the same.

Tuesday, August 2, 2016

RBA tipped to cut rates to new low but urged to keep rates powder dry

                  
It's shaping up as a tight call but most economists think the Reserve Bank will cut interest rates to a new historic low this afternoon.

The majority of economists polled by Bloomberg are tipping a 0.25 percentage point cut to 1.5 percent as the RBA fights back against an outlook for slowing inflation.


If the RBA delivers on expectations, it will have cut the cash rate by 3.25 percentage points since November 2011.

But while money markets see a 70 percent chance of a rate cut at 2.30pm AEST, one economist is urging the RBA to keep its rates ammunition on hold to deal with potentially harder economic times ahead including a recession.

Annette Beacher, head of Asia Pacific Research at TD Securities in Singapore says now is not the time for the RBA to cut rates to deal with low inflation.

"While there is certainly a raft of expectations for the RBA to cut, we don't see any data or any situation in recent weeks and months to tip them over the line," Ms Beacher  told ABC News.

"Australia hasn't had a recession since 1991 and I do think the RBA would quietly like to keep some powder dry in case there is a real crisis.

"I think leaving a 1.75 percent cash rate in the bank might be sufficient powder for whatever occurs around the corner."

The Reserve Bank last cut the cash rate in May on fears about deflation, overshadowing the Federal Budget, in what was also seen as a close decision.

The Australian Bureau of Statistics released more evidence of soft inflation on July 27 with headline inflation up 0.4 percent in the June quarter and one percent over the year.

While headline inflation is well below the RBA's target band of 2 to 3 percent over time, the RBA watches core inflation with the trimmed mean measure rising to 1.7 percent over the year.

The RBA is also concerned about the rising Australia dollar which it has described as a “complication” in previous statements.

While it is lower today at 75.3 US cents ahead of the RBA meeting, it has been above 76 US cents after soft economic growth data in the US late last week and the reduced likelihood of a US rate rise this year.

Today's meeting is the second last for RBA governor Glenn Stevens who will chair his final rates decision in September before leaving the RBA on September 17.