Retail spending increased by 0.7% in July, following revised increases of 0.4% in both June and May, according to the latest figures from the Australian Bureau of Statistics. The biggest increase was in cafes, restaurants and takeaway food services, which recorded a 1.5% increase in sales, followed by food retailing at 0.4%, clothing, footwear and personal accessory retailing at 0.4% and other retailing at 0.4%. Department store retail turnover decreased by 0.4% during July. Victoria and New South Wales recorded the highest increases at 0.8% and 0.6% respectively, while Western Australian, Tasmania and the Australian Capital Territory all recorded declines.

Meanwhile, the ABS also reported a seasonally adjusted current account deficit of $5.64 billion in the June quarter, down from a revised deficit of $16.457 billion in the March quarter. The ABS said the decrease of $1.26 billion in the deficit in chain volume terms would contribute 0.4 percentage points to growth. It also said net foreign debt increased by 2% to $671.8 billion in the June quarter, while It was at $624.2 billion in the same period during 2009. The Bureau also said building approvals increased by a seasonally adjusted 2.3% in July, with a total of 13,732 buildings given approval, the first increase in three months.  The result comes after a Reuters poll indicated economists predicted a 0.7% decline in building approvals.

“Both (retail and building) are potential indications that some of the dead weight from rapid-fire rate rises earlier this year is starting to ease up,” Commonwealth Banking Group chief economist Micheal Blythe told Reuters.

“I think we are a long way from that (rate cut) nor is there enough here to say (that there will be) imminent rate rises either. There is plenty of information to come tomorrow, and the next month or two will be more important for that interest-rate story.” Centro Properties Group has recorded a loss of $652.7 million during the year to 30 June, but notes this is an improvement from the $3.54 billion loss recorded during the previous corresponding period.

The company said the improvement was due to lower property valuations and the impact of the strong Australian dollar. Chief executive Robert Tsenin said the company at $18.6 billion in investment properties and $18.4 billion debt.  “This is clearly an unsustainable capital structure,” he said in a statement. “Any restructure will be complex and must be critically linked to reducing the leverage and financial risks confronting us.”

“Subject to market conditions, it is expected that any restructure could take through to the end of 2011 to implement.”

Rapidly-growing education provider RedHill Education will brave the tough market conditions to launch a $27 million float that it says will help it grab a bigger slice of Australia’s $49 billion education market. The company, which was established in 2006, has two key businesses: in English language and teacher training institution Greenwich College and Go Study Australia, which provides agency services primarily in Europe and South America.

Part of the proceeds from the float will be used to acquire two more educational institutions: IT trainer the Academy of Information Technology, and the International School of Colour and Design. Chief executive Paul Tobin says talks with institutional investors are progressing well, with the company it has at least one cornerstone investor on board.

While market conditions remain choppy, Tobin says he is confident investors will see the strength of RedHill’s underlying business. “You can’t control the day-to-day stuff. The US housing data overnight was just one of those things that happens.”

RedHill says it is profitable and operating cashflow positive. It posted earnings before interest, tax, depreciation and amortisation of $3.7 million in 2009-10, and plans to increase this by over 30% to $4.9 million in 2010-11.

While Australia’s export education market has taken a battering in the last 12 months, with a number of education providers collapsing and the Federal Government changing the rules regarding student visas, Tobin says RedHill has weathered that storm.

“No one is immune but what the government is really trying to do is move from migration outcomes to a more quality-based outcome. That suits us, because we are focussed on that sector. We are not exposed to the sub-continent and that’s where the impact has been most felt.”

He says the company will also remain on the hunt for acquisitions after its IPO – providing he can find the right target.

“It’s a very fragmented market. There are more than 4,000 companies just in the vocational learning space, but the number of businesses that have high-quality management teams and terrific courses is low.”

The Superannuation bodies said that a failure to increase the Superannuation Guarantee to 12 percent, combined with a failure to raise the concessional caps for individuals over 50 and a failure to provide a super tax contribution rebate for low income earners would jeopardise the future of Australian workers.

ASFA CEO Pauline Vamos said that the majority of Australian voters are also superannuation fund members who will be disappointed with Tony Abbott’s promises of reviews and delays.

“The Coalition’s costings document highlights bottom line savings at the expense of Australian workers’ retirement benefits. Early investment in superannuation provides huge benefits for individuals and the Australian economy as whole,” said Ms Vamos.

AIST CEO Fiona Reynolds said that superannuation was critical to hedging against the costs of an aging Australia, also believing superannuation was central to cushioning Australia’s economy from the worst effects of the global financial crisis.

FSC CEO John Brogden said that research commissioned by the FSC shows that prospective retirement incomes for Australia are low by international standards, with a $695 billion gap between current retirement savings and what is needed to deliver the minimum adequate level of incomes in retirement.

Ms Vamos said Australians now look to superannuation to provide them with comfort and financial stability in retirement.

Results of recent polls reveal that almost 90 percent of working Australians believe that the Government made a good decision in increasing the Superannuation Guarantee  from 9 to 12 percent. The results were especially stark amongst women on middle to low incomes who and younger people whose support for increasing the Super Guarantee is almost universal. 

General Motors Company took a big step toward repaying a controversial taxpayer-funded bailout by declaring plans for a landmark stock offering that represents a critical test for the Obama administration.  The automaker said it planned to list the shares on the New York Stock Exchange and the Toronto Stock Exchange in an initial public offering that comes amid a still-weak global market for cars that is vulnerable to a further downturn.

The Obama administration wants to be able to cast its $50 billion GM bailout as a financial success in the face of public skepticism and Republican political opposition but some analysts are still wary of the offering. GM’s IPO could be the biggest since Visa Inc’s $19.7 billion March 2008 offering, and could raise up to $20 billion, though analysts cautioned that its size depends on still-untested investor demand for a restructured automaker with only two consecutive quarters of profits.

GM’s initial filing with U.S. securities regulators did not say how many shares would be sold or give an expected price range for the IPO. “We’re looking at a second half that is potentially weaker than the first half,” said Dennis Virag, president of Automotive Consulting Group. “That could certainly hurt the sale of the shares.”

“I don’t think this is a good time to be going public,” Virag said. “It’s more political than practical.” Trading in GM shares is expected to start between late October and the U.S. Thanksgiving holiday on November 25, according to people involved in the process. A stock offering in late October would mean trading would start just before the November congressional elections.

Government officials and GM executives have repeatedly denied any link with the elections. The 102-year-old onetime blue chip is expected to return to the NYSE under the “GM” ticker symbol it had before the government-funded bankruptcy. Adding a stock listing in Toronto underscores the role the governments of Canada and Ontario played as junior partners to the U.S. Treasury in keeping GM from liquidation.

The long-running confidential preparations for the IPO were dubbed “Project Dawn” by the group of bankers, Treasury officials and GM executives led by Chief Financial Officer Chris Liddell. GM Chief Executive Ed Whitacre, who steps down at the start of September, has said the automaker needs to distance itself from government ownership and the label “Government Motors” to build momentum in its turnaround.

“I just think that the risk of failure with the IPO is bigger than the risk of being known as Government Motors,” said Brad Coulter, a restructuring specialist at O’Keefe & Associates.

PART OF IPO TO RAISE CAPITAL

The U.S. Treasury said it would not include any of its preferred shares in the IPO and did not indicate how long it would take to shed its stake. The Treasury plans to sell about 20 percent of the 304 million common GM shares it holds, reducing its stake in the top U.S. automaker to under 50 percent, sources have said.

GM does not plan to sell new common stock in the IPO but plans to issue preferred stock that would generate proceeds for the automaker. Such an offering is a less-risky form of equity that could attract dividend and growth fund investors. Although bankruptcy eliminated about $40 billion in unsecured debt and other obligations for GM, the automaker still needs funds to restructure its money-losing Opel unit in Europe and address a pension shortfall of about $26 billion.

GM has posted two consecutive quarters of profit after slashing costs and debt in bankruptcy and dropping the Pontiac, Saab, Hummer and Saturn brands. The U.S. government currently owns almost 61 percent of GM after converting $43 billion of the $50 billion in funding to the automaker into equity.

TAXPAYERS MADE WHOLE?

The total value of the GM stock offering would be critical. For U.S. taxpayers to recover the $43 billion invested in GM, the market value of the automaker would have to be near $70 billion. After the offering, the U.S. Treasury and Canada will no longer have the right to designate board nominees. Treasury named four directors in July 2009, including Dan Akerson, who was named as Whitacre’s replacement earlier in August.

However, GM also said the U.S. Treasury would continue to influence executive appointments and compensation, its business strategy, employee and union decisions and debt and equity issuances after the IPO. GM said risks for potential investors included a still-weak global market for cars that could be vulnerable to a further downturn and the pressure it faces to roll out new models after cutting back on development spending in recent years.

Borrowing a page from the turnaround strategy that helped lift Ford Motor Co, GM said in its filing that it aimed to shift more than half of sales volume to global platforms by 2014. That would mark an increase from about 17 percent now and allow GM to slash costs and reduce complexity in its manufacturing operations. Republican Senator Charles Grassley has asked a special Treasury Department watchdog for an analysis of the GM IPO and how much money would be returned to taxpayers.

Bankers and credit analysts have offered a case for valuing GM as high as $80 billion, given projections from expected 2011 cash flow and comparisons with rival Ford. Ford, the only U.S. automaker to have avoided bankruptcy, has a market capitalization of just over $40 billion. Japan’s Toyota Motor Corp, which tops GM in global sales, has a value of about $121 billion.

PROBLEMS TO COME

Analysts see GM as being in the early stages of a turnaround, helped by sharply lower costs, recovering sales in the United States and growth in overseas markets, led by China. Despite the company’s progress, it still faces hurdles restructuring its money-losing Opel unit, which is struggling in a slack European auto market. GM’s 8.375 percent bonds due in 2033 were little changed after the filing at 35.375 cents on the dollar, according to MarketAxess data.

Those bonds issued by the pre-bankruptcy GM are being traded as a speculative play on the equity in the post-IPO GM. Bondholders who had been owed $27 billion received a 10 percent equity stake in the restructured GM through the bankruptcy. Morgan Stanley, JPMorgan, Bank of America Merrill Lynch and Citigroup Inc have been selected as the lead underwriters for what is expected to be one of the biggest global IPOs.

Copper mining and exploration company CuDeco is suing the controversial Hot Copper forum and two of its members for allegedly making misleading and defamatory remarks against the company, a statement revealed this morning. It isn’t the first time Hot Copper members have landed themselves in trouble, with one paying $30,000 earlier this year to security company DataMotion after being accused of defamation.

CuDeco said in a statement yesterday it will be filing claims in the Supreme Court of Queensland against the forum for misleading and deceptive conduct, and injurious falsehood.

“Chairman of CuDeco Wayne McCrae is to file substantial claims against “Hot Copper” and the “two posters” for defamation over a period of one to 12 months,” the company said in the statement. The Hot Copper forum plays host to several investors who use the board to discuss the ASX and various listed companies. However, like the infamous Whirlpool forums, many of its users criticise company management personally and the board is known to be a hotspot for rumours.

The announcement comes after CuDeco requested a trading halt yesterday due to an update expected on the performance of its Rocklands project. Earlier this year data security company DataMotion sued Hot Copper member Graeme Gladman after he allegedly made defamatory comments against company director Ronald Moir. The firm asked Hot Copper to reveal the identity behind Gladman’s username, but it refused. 

The case eventually went to court, with Gladman playing $30,000 in damages. At the time, Rostron Carlyle senior consultant Mark Jones told SmartCompany the case provided grounds for companies to pursue comments made on blogs and forums. Both CuDeco and Hot Copper were contacted for comment this morning, but no reply was received before publication.

Banks are now providing discounts to win SME customers, with one finance expert saying businesses should shop around and even pressure lenders into competing with each other to get the best deal. The comments come as the banking industry has been under fire over the past week, with Senator Steven Fielding labelling the Commonwealth Bank “greedy thieves” for posting a $6 billion profit for the full-year. Zenith Capital managing director Richard Korda says banks are providing discounts for as much as 125 basis points, and this is occurring among the four major banks.

The key here is being clear and direct about what your business can bring to the table. Korda says if you’re able to convince these lenders why you should receive a discount, then you may be successful. “It’s as simple as just putting it out there, and offering a really good case of what you have to offer. It also comes down to research, and going around and seeing what everyone else is offering, because you can shop around and ask them to match each other.”

“It’s occurring with most of the major banks. Basically, if the loans are large enough, the client is a good enough client and the bank is prepared to make a move, then these discounts are being provided at a pretty consistent rate.” But Korda says SMEs aren’t often receiving these discounts because they simply don’t ask. If they put forward their case and manage to talk one-on-one with a bank representative, there is a good chance they’ll be able to score a discount.

“I think for people going out there now, it’s natural to ask for a discount. You just have to ask the question, and I think the banks have big enough margins now that they’re able to service some of those customers by doing these sorts of deals.” Korda says he has a client which just received a discount rate of 0.97 points on a loan with a standard rate of 9.37, and has heard of discounts of up to 1.25 points – but lenders are hesitant to move far beyond that.

“I think that’s the maximum we are seeing, and in some instances we are starting to see those moved back a little as well. So it’s not moving far beyond that.” These discounts are being offered to existing clients, but Korda says there is definitely scope for new businesses looking for finance to ask for these types of rates.

“I don’t think there’s really a difference here where the discounts are being offered. It’s just that you have to be offering a credible project and you have to have a good deal.” “You also need to be talking with someone there, because it’s easy to get someone over the phone who can just be removed from the situation, so you want to talk to someone who knows business and understands your needs.”

The comments come after NAB chief executive Cameron Clyne said he is seeing more discounting in the lending market as business confidence increase, with executive general manager of NAB business Geoff Greer also seeing prospects for increased profitability among SMEs. “We’re seeing more radical pricing in parts of the business portfolio from peers in terms of percentage terms and returns,” Clyne told various industry analysts last month.

The Taxation Institute of Australia has asked its 13,000- strong membership to name their top three election policy issues. Taxing of trusts was nominated by 50% of respondents as a top tax issue for the election. The Institute has invited Treasurer Wayne Swan and Shadow Treasurer Joe Hockey to meet in a debate about tax policy. “The High Court of Australia recently noted that it has been more than 20 years since the courts first identified the need for legislative clarification in this area of tax- law”, says Mr. Jeremenko, senior tax counsel, tax Institute. Ongoing uncertainty over the tax treatment of trusts has emerged as the top election issue for Australia’s taxation professionals.

The Taxation Institute of Australia, which represents tax agents, accountants and lawyers working in tax, has asked its 13,000-strong membership to name their top three election policy issues.

Taxing of trusts was nominated by 50% of respondents as a top tax issue for the election.
Implementing a long term policy for the taxing of superannuation (47%), tax incentives for small business (46%) and reducing the number of state and local government taxes (44%) are the other main concerns.

The Institute has invited Treasurer Wayne Swan and Shadow Treasurer Joe Hockey to meet in a debate about tax policy.

Tax Institute Senior Tax Counsel Robert Jeremenko said the feedback about trusts reflected members’ concerns and was unsurprising given the outcome of recent tax cases and ATO views in relation to trusts.

“The High Court of Australia recently noted that it has been more than 20 years since the courts first identified the need for legislative clarification in this area of tax law,” Mr Jeremenko said.

“Members’ feedback confirms that legislative change is well overdue.

“The tax treatment of trusts has the potential to affect all taxpayers including individuals, small businesses, superannuation funds, managed funds and large businesses.”

“Our membership clearly believes it’s time for both sides of politics to commit to a legislative solution to provide clarity.”

Mr Jeremenko said the Institute’s proposal for a debate on tax was sent to the Government and Opposition well before the start of the election campaign. Both major parties are yet to respond.

The opposition has questioned the wasteful expenditure by the Govt. The government has promised to provide the tax receipts showing all expenditure details to show individual taxpayers where their tax dollars have been spent. The receipt of tax will include the details of government debit with a ‘thank you note’. Mr. Abott says “it will put pressure on the government to spend the revenue collected wisely. Right now taxpayers are feeling they are being ripped off”.    

What’s an election without a good prop? The Opposition has again attempted to attack the Government for its wasteful spending practices by promising to produce personal tax receipt statements to show individual tax payers where their tax dollars have been spent.  Opposition treasury spokesman Joe Hockey has also promised taxpayers the receipt, which would include details on government debt, would be accompanied by a “thank you” note.

“This initiative will help put pressure on government to ensure that tax revenue collected is spent wisely,” Mr Abbott told reporters this morning. “Taxpayers have a right to know exactly how their money is being spent and this will force the government to be more accountable to taxpayers who rightly feel they are being ripped off.”

Abbott has also promised to establish an “office of due diligence” that would examine government spending initiatives for waste. Abbott, who faced a confrontation with former Labor leader-turned-reporter Mark Latham today, is riding high after claiming a “win” in the wash-up from the leader’s town hall style meetings, held last night in the Sydney suburb of Rooty Hill.

Prime Minister Julia Gillard and Abbott took to the stage separately to answer questions from a room full of apparently undecided voters. While both leaders appeared polished in their presentations, a poll of the audience taken straight after the event suggested Abbott had been more convincing.

However, there are now claims the audience was “stacked” in favour of Abbott, after it was revealed the son of a former Liberal MP was part of the audience.

Polling company Galaxy says it will investigate the claims. Gillard was in Tasmania this morning to flick the switch on the Tasmanian leg of the NBN, but not before Communications Minister Stephen Conroy announced the maximum possible download speeds on the government’s NBN would now be 1 gigabyte per second, 10 times higher than the originally promised. 

The timing of the announcement is clearly designed to put pressure on the Opposition over its plan to abandon the NBN, but some experts have questioned whether there is demand for speeds of this level. The Government has also unveiled a pitch to voters in Western Sydney, promising to fund 80% of a $2.1 billion railway linking Epping and Parramatta.

But the Coalition has countered by releasing a letter from New South Wales Transport Minister John Robertson to Deputy Lord Mayor of Parramatta Councillor Chiang Lim, which says the rail link is not a project on the 10-year horizon of the state government.

The dollar hovered within sight of a 15- year low versus the yen on Wednesday after the Federal Reserve announced plans to boost a flagging economy by reinvesting money from maturing mortgage bonds in government debt. The move did not come as a complete surprise to the market but it marked a policy shift for the Fed, which only a few months ago debated how to start winding down some of its monetary stimulus programmes.

The Fed’s pledge to maintain asset purchases and shift to Treasuries does suggest it may boost the size of its already massive $2.3 trillion balance sheet if the economy loses momentum, market players said. The dollar dipped 0.1 percent from late U.S. trade on Tuesday to 85.37 yen, edging back toward an eight-month low of 85.02 yen hit on trading platform EBS last week. A drop under November’s low of 84.82 yen would take the dollar to a 15-year low. “The dollar could fall below 85.00 yen at any moment,” says Shuichi Kanehira, head of FX spot trading at Mizuho Corporate Bank.

Market players cited talk of stop-loss offers in the dollar near 85.00 yen, 84.80 yen and 84.75 yen and large option barriers at 84.75 yen and 84.50 yen, suggesting that the dollar’s drop against the yen could gain momentum if such levels are hit. Given the contrast with the BOJ’s decision yesterday, we seem to have entered a situation where the yen is likely to rise,” said Akira Hoshino, chief manager for the Bank of Tokyo-Mitsubishi UFJ’s foreign exchange trading department. The U.S. central bank acknowledged economic growth had slowed in recent months and reiterated its intention to hold benchmark interest rates at record lows for an extended time.

“(The Fed’s) decision should be seen primarily as a signal to financial markets, consumers and businesses that the FOMC is ready to start a second round of quantitative easing if the Committee sees a double dip around the corner,” Rabobank analyst Philip Marey said in a research note, referring to the U.S. central bank’s policy-setting Federal Open Market Committee.

YEN ON THE RISE

The Bank of Japan kept interest rates steady and held off on new policy steps on Tuesday, saving its limited firepower in case the currency’s rise accelerates. Fears that the yen’s rise could accelerate hit Tokyo shares, with the Nikkei share average .N225 sliding more than 2 percent. The fall in share prices had a feedback effect on the yen, helping to lift it against higher-yielding currencies and other major currencies.

The Australian dollar shed 0.8 percent against the yen to 77.44 yen, the euro slid 0.7 percent to 111.85 yen, and sterling fell 0.6 percent to 134.72 yen. The low-yielding yen is a funding currency for carry trades and tends to rise in times of market stress. A dollar drop below 84.82 yen could trigger more market speculation about the possibility of Japanese intervention. Traders think the yen will eventually test those levels as Japan is unlikely to intervene to curb the yen unless dollar/yen falls closer to 80 yen, or its moves become more volatile. The euro fell 0.6 percent to $1.3099, pulling away from last week’s three-month peak of $1.3334. But the euro could be poised to rise in the wake of the Fed’s decision and economic assessment, analysts said.

“With further policy moves now a clear possibility, the USD will come under pressure beyond the impact of U.S.-Euro area growth divergence alone,” analysts at JPMorgan said.

Nick Sherry, Assistant Treasurer in the Labor government, has announced that, if re-elected, the government will reshape the governance of Australia’s taxation system and establish an advisory board at the Australian Taxation Office (ATO).

The Tax System Advisory Board (TSAB), as it will be known, will inform the Tax Commissioner and ATO Executive Committee on the strategy, direction, organisation, management, compliance planning, staff profile and information technology plans at the ATO. It will also to provide a new, direct and in-built voice for the business and taxpayer communities in relation to ATO decision-making and culture.

The Tax System Advisory Board, which will be similar to a strategic private-sector style board, will be made up of non-government members and will begin with a review of the ATO’s management practices to ensure the highest level of corporate governance.

Sherry pointed out the recent Henry review found that the governance of Australia’s tax system is fundamentally sound and there is general confidence in it. However, the review also identified ways to further increase the responsiveness, accountability and transparency of how the tax system is administered.

He said that TSABs already exist in the United Kingdom, the United States and Canada, and establishing such a board was the key governance reform recommended in the review. A detailed consultation with the tax community on the TSAB will occur within 2010.

At the same time, he confirmed that the Tax Commissioner would remain the independent head of the ATO with responsibility to undertake the administration of aspects of Australia’s tax system and deliver the ATO’s commitments to government and manage the ATO as a government agency.

A re-elected Labor government will also recommit, he added, to a principles-based approach to tax design to deliver a simple, transparent, responsive, accountable and accessible tax system, including continuing work to deliver Australia a single modern Income Tax Assessment Act.

Sherry said that the Board of Taxation has grown to become a well-respected part of Australia’s tax system, particularly by the business community. It provides both a business and broader community perspective that helps to improve the design of taxation laws and their operation. The Board has also shown itself to be capable of providing advice to improve the integrity and functioning of the taxation system.

A re-elected Labor government would therefore boost and reshape the role of the Board of Taxation by empowering it, in consultation with the government, to initiate its own reviews to examine how current tax policies and laws are operating.

The government’s reform agenda to date has included the establishing of a permanent Tax Design Advisory Panel made up of private sector advisers to assist with the design of new tax measures; and of a Tax Issues Entry System for the public to directly raise issues relating to the care and maintenance of the Australian tax and superannuation systems.

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