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‘Remains tight': Why the RBA held interest rates in July

‘Remains tight': Why the RBA held interest rates in July

News.com.au6 days ago
A stronger than expected job market stopped the RBA pulling the trigger on a July rate cut, leaving struggling homeowners to wait a little longer for rate relief.
The central bank released its meeting minutes on Tuesday, showing the board decided to hold the cash rate despite inflation sitting within its target range.
'Recent monthly CPI indicator data – which can be volatile and do not cover all items in the CPI – were broadly consistent with this expectation,' the RBA board said.
But with more Australians currently in work, the RBA was wary the strong employment figures could lead to an increase in inflation.
'The labour market was assessed to have remained tight, with measures of labour utilisation little changed over the prior year,' it said.
'Growth in private demand had begun to recover, but was still subdued.'
The RBA had to work with May's unemployment figures, which showed just 4.1 per cent of eligible Australians were out of work.
When the June figures were released after the RBA meeting, it showed unemployment had jumped to 4.3 per cent, with 34,000 Aussies losing their jobs.
But households may not have to wait long for interest rate relief, with the RBA's meeting minutes seemingly clearing the way for further rate cuts.
'All members agreed that, based on the information currently available, the outlook was for underlying inflation to decline further in year-ended terms, warranting some additional reduction in interest rates over time,' the RBA minutes said.
A cautious RBA monetary board held the official cash rate at 3.85 per cent following its July meeting, with the shock move defying expert commentators and predictions from the money markets.
The board voted 6-3 in favour of the hold.
'A minority of members judged that there was a case to lower the cash rate target at this meeting,' the board said.
'These members placed more weight on downside risks to the economic outlook – stemming from a likely slowing in growth abroad and from the subdued pace of GDP growth in Australia.'
Fronting the media after the decision, Reserve Bank governor Michele Bullock said the votes were 'unattributed' and declined repeatedly to reveal her position.
She said the board wanted to wait for the full quarterly data to be released by the Australian Bureau of Statistics.
'By then we will know what the June quarter CPI is and if it comes in as we think it will – a little bit at the margin, we're a little bit worried about – but if it comes in as we think it will, continue to decline, then that validates our easing path,' she said.
Opinion remains divided as to whether the hold was the right decision.
Westpac chief economist Luci Ellis, who worked for the RBA for 15 years, says the central bank might have chosen to 'assert its independence' by bucking expectations of a rate cut.
'There was no real economic benefit to waiting five more weeks,' Ms Ellis wrote in an economic note released last week.
While the decision may have left homeowners frustrated, Ms Ellis said it was a low-risk decision for the central bank from a broader economic perspective.
'The dirty little secret of monetary policy is that small differences in the level of interest rates or the timing of changes make essentially no difference for inflation outcomes,' Ms Ellis said.
'If holding the cash rate 100 basis points lower for a year only boosts inflation by 0.2 per cent or so – broadly the result from the RBA's main model – then 25bp higher for five weeks is not even a rounding error.'
The RBA will next meet on August 12, with money markets widely forecasting a rate cut.
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Cheaper medicines and HECS top parliamentary agenda as tax debate ramps up
Cheaper medicines and HECS top parliamentary agenda as tax debate ramps up

ABC News

time24 minutes ago

  • ABC News

Cheaper medicines and HECS top parliamentary agenda as tax debate ramps up

The Albanese government will try to keep attention on its election promises as the new federal parliament returns for its second week, but will face further scrutiny about what new policies it plans to unveil at next month's economic roundtable. Labor will introduce legislation to cut the price of PBS medicines to $25 and will also seek to pass the HECS loan cuts introduced last week in what Anthony Albanese said was a deliberate prioritisation of cost-of-living measures. "What we've done very clearly in the first fortnight is concentrate on measures that make a difference to people's money in their pocket. We make no apology for that … That was the basis on which we were elected," he told the ABC's Insiders on Sunday. The $25-per-script price would start in the new year and reduce annual user costs by an estimated $200 million. The $7.70 script price for pension and concession card holders, frozen until 2030, would be unchanged. The policy was matched by the Coalition during the election campaign, so it is unlikely to be controversial, with the opposition also signalling it will likely support the HECS cuts. But there is no timeline for Labor to re-introduce its stalled proposal to double the earnings tax on superannuation balances for those with balances over $3 million, controversial because it would include the "unrealised" earnings of assets. Mr Albanese on Sunday dismissed the Treasury's advice that taxes would need to be raised to fix the budget, reported by the ABC earlier this month, and including an option identified by the department to "build on" the super tax. "Treasury, of course, will put forward advice to government from time to time. That's not government policy … Our starting point is the positions that we took to the election." 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Jovan Cvetkoski: Here's why every Australian worker should have income protection insurance
Jovan Cvetkoski: Here's why every Australian worker should have income protection insurance

West Australian

timean hour ago

  • West Australian

Jovan Cvetkoski: Here's why every Australian worker should have income protection insurance

Have you ever thought about what might happen to you and your family if you suddenly couldn't work? Whether that's due to an illness, accident, redundancy or a sudden but important caring role. How would you cope without an active income? Would you sell your assets? Rely on government payments that are considerably less than your current income or move back in with your parents? Most of us would never consider driving around in our car uninsured, yet only one in three Australians insure their most important asset — their ability to earn an income. Many people I talk to say: 'Well, I own my house.' But unless you're one of the very lucky ones, unfortunately you don't own your house — the bank does. A mortgage is not a financial plan. In Australia we protect our health with private health cover, we protect our cars with car insurance, our home with home and contents insurance, so why don't we protect our income? Because when you really get back to basics, your income is your biggest asset. It pays for your home, your family, your weekends, puts food on the table and pays for the kids' school fees. I believe Aussies are chronically underinsured. Here's why you need to consider income protection insurance Aussies are known all over the world for our laconic 'she'll be right' attitude and most of us truly believe it won't happen to us. And while you have to admire our optimism, it does indeed happen to many of us. Australians suffer from a bit of inertia when it comes to insurance. Many of us have a general lack of awareness about what types of cover are available and what they're for. There's also confusion over costs. Many Australians believe insurance is expensive, but in reality it's very affordable and has become less inexpensive in recent years as we tend to live longer. While it's often a difficult topic to broach as it involves thinking about getting sick or even dying, it's the best gift you can give your family because they won't have to worry about paying the bills. But unfortunately, when cost of living is tight, that's when things like insurance — often seen as a non-essential — get cut from household budgets. But it's also when we need it most. 1. Life and Total and Permanent Disability insurance Covers you for: 2. Trauma cover Covers you for: 3. Income protection Covers you for: I unfortunately see a lot of people who need to claim income protection and (for those with it) the financial stress is alleviated, allowing them to focus on recovery. This heavily depends on your circumstances, but you generally require enough cover to pay out a mortgage, cover funeral and medical costs, maybe keep the kids in private school and/or provide an income for your spouse. You will require the most cover in your late 30s to early 50s when debt is at its highest, living off one income and paying for school fees. Insurance levels, like other parts of your financial life, should be reviewed regularly. As kids get older and debt is reduced the level of cover required can often also be reduced. We never know what's around the corner for us, but having income protection insurance is one thing we can control, and it means no matter what happens we can always roll the dice in our favour. Jovan Cvetkoski is a financial adviser and director at Knight Group in Perth

How easy is it to trick the Australian Taxation Office?
How easy is it to trick the Australian Taxation Office?

ABC News

time3 hours ago

  • ABC News

How easy is it to trick the Australian Taxation Office?

Sam Hawley: How easy is it to trick the Australian Tax Office? Well, for fraudsters it's not hard at all and plenty have done it costing taxpayers billions of dollars that have never been recovered. Today, Angus Grigg on his Four Corners investigation into the biggest GST scam in history and how the ATO dropped the ball. I'm Sam Hawley on Gadigal land in Sydney. This is ABC News Daily. Sam Hawley: Angus, you've been hard at work looking into what's going on at the Australian Tax Office. And you've really been having a deep look into this huge GST scam. Now, this unfolded in no other than Mildura in north-west Victoria. So, take me there and tell me about local resident Sarah. Angus Grigg: Yeah. Mildura is a really beautiful town, an irrigation town on the Murray in North West Victoria. And this GST scam really took off in Mildura. And it really was circulating within a sort of population that you might say is low socioeconomic groups, people on welfare, people with addiction issues. And we went to interview one person called Sarah. She was going through quite a bit of financial hardship at the time. I think she'd separated from her partner who was facing pretty serious charges at the time as well. And she was short of money because she needed to have some dental work done. So one of her friends showed her how to use a business that had been registered and an ABN linked to GST to claim GST refunds fraudulently. 'Sarah': The people that I was associating with at that time, they had done it and told me how easy it was to get a large amount of money quickly. And I just thought at the time it was a good idea because I was in a bit of financial trouble. Angus Grigg: She pretended, if you like, to be a hairdresser, despite the fact that she had no hairdressing qualifications. She'd never worked in a hairdresser, hadn't hired premises, had no equipment. And so she logged into her myGov account and first of all, claimed $15,000 and then did it a second time and got another $15,000. 'Sarah': I don't even really still understand how it went through. I was a single parent and then all of a sudden I'm a hairdresser that's getting this return put into my account with no other payments from clients or anything like that to balance it was needed. Like no proof. Angus Grigg: Now, bear in mind, the money went into the same account as her welfare payments and the money went within about 10 days without any verification, without any checks, without anyone from the tax office ringing and saying, what did you spend this money on? Do you have hairdressing qualifications? Have you hired premises? You know, she just absolutely couldn't believe how easy it was. 'Sarah': Yeah, I just couldn't believe it that it was just sitting there on my everyday access debit bank card. Angus Grigg: Now, the other thing to bear in mind, to receive a GST refund of $30,000, she would have needed to have capital expenditure or bought stock and other items for her hairdressing business of about $300,000. Now, surely a single mother living on welfare, getting family tax benefits, that should have been a red flag for the tax office. Sam Hawley: Wow. Okay. So Sarah, which is not her real name, just by the way, you've changed that for this story to keep her anonymous. She just tells the ATO she's a hairdresser and then the tax office falls for it. That's extraordinary. Angus Grigg: It is. And the fact that you don't need a receipt, you don't need any proof of the line of work you're in is extraordinary. And that's because the tax office basically fired most of the humans in the loop and started relying on algorithms or computers, if you like, to make these payments. They wanted to ensure the timely payment of GST refunds to businesses. But in doing that, they really opened the door up to fraud. Sam Hawley: Right. Sure. So the tax office wants to streamline things. But in the meantime, people like Sarah are all of a sudden dabbling in fraud. And as we've mentioned, she's not the only one. There's a lot of other people doing a very similar thing. Tell me about Linden Phillips. What was he up to? Angus Grigg: Linden Phillips, once again from Mildura, for us, he was like patient zero. It looks like he was the really one of the very, very early people in this scam. So what happens is that Linden Phillips gets out of jail in August 2021. And he already has a company registered. And so he reactivates his GST registration through his ABN and his MyGov account. And then within a couple of weeks of getting out of jail, he does what I'd sort of call a test run. And he claims $13,000 in GST refunds from the tax office. Once again, no documents, no receipts, no verification required. He gets that money within a couple of weeks and clearly then thinks, OK, I'm going to go for the big one. And so what he does is he lodges 46 backdated GST claims for an amount of $821,000 in GST. And the real kicker here is that for most of the period those GST claims are lodged, he's actually in jail. Sam Hawley: Oh my gosh. Angus Grigg: I know. He just couldn't make it up. Sam Hawley: What does he do with all that money? Angus Grigg: Well, of course, he spends it, right? Within a couple of weeks, the money's completely gone. He buys himself a second-hand Porsche. Somewhat endearingly, he buys his mother a house. But the really damning thing here is that the tax office notice it. Finally, someone, there's a human in the loop and they pick up the fact that, hey, maybe something's a bit wrong here. And so they ring him up and he says, oh yeah, no, it's all legitimate. I'll get my accountant to call you. The accountant never calls. They send him some emails. They write him some letters. He ignores them all. And the really damning thing here is the tax office does nothing for four months. And in that four month period, this scam absolutely explodes. So what we did is we went back and we deconstructed, if you like, the tax office's narrative. And the narrative was that this fraud took off on social media. The tax office noticed it. They cracked down really hard, really quickly, and they brought it under control. Now we sort about testing that idea. Sam Hawley: So the ATO says it did this great job. It cracked down on this fraud. But what actually happened? Because you actually had a look at that and discovered, in fact, the ATO didn't do much at all. Angus Grigg: No, exactly. So Linden Phillips does finally get caught, but it has absolutely nothing to do with the ATO. It all comes down to the smarts of a local detective in Mildura named Vanessa Power. Now, she is attending Phillips's house on a drugs and gun charge, and she searches his premises, his house, and she confiscates a phone. And using the sort of smarts that the ATO should be employing, she sees that on his phone there appears to be a pretty elaborate GST scam. And in fact, it looks as though that Linden Phillips had helped 60 other people perpetrate this scam. Linden Phillips is arrested. And then a few weeks later, the ATO finally launch what they call Operation Protego, which is to crack down on this GST scam. Sam Hawley: Wow. Okay. And at that point, of course, Sarah, who we spoke about earlier, she was also arrested back in December 2022. But the thing is, the money, it's sort of gone, right? 'Sarah': I can't pay it back. It's not even an option at the moment. Or it probably never will be. Sam Hawley: Is there any way the tax office can actually get these funds back? Angus Grigg: Well, this is the point, right? In the end, $2 billion was stolen from the tax system by 56,000 people. Now, the ATO tell us that of those 56,000 people who perpetrated this scam, just 120, I think it might be 122 now, have been convicted. Secondly, of the $2 billion stolen, the ATO tells us that only 160 million, or around 8% of that, has been recovered. Sam Hawley: And, Angus, that money, it really is just a drop in the ocean, right? Because you've also looked at all the other funds that the ATO hasn't managed to collect, and you've spoken to Karen Payne. Now, she's a former Inspector General of Taxation. She basically says if the ATO had collected what it was owed, then we would all be paying less tax. Angus Grigg: Yeah. Karen Payne, she really focused on what's called collectible debt. And that is this sort of giant number that the ATO doesn't like to talk about. And when she started looking at it, it was about $30 billion. Then it rose to about $50 billion. The figure is now $53 billion. And that is the amount of money or taxes that the ATO has levied, if you like, but not collected. Karen Payne, Inspector General of Taxation, 2019-24: The large percentage of the debts that were due were in fact owned by a very small number of taxpayers or they're related to a small number of taxpayer accounts. So you'd kind of think it's a small number of people you need to be chasing. Angus Grigg: And the point that Karen Payne was making is that if we collected all that tax, perhaps we would not have to pay as much tax, all of us, but also we'd have more money to spend on really basic things like schools, roads and hospitals. Karen Payne, Inspector General of Taxation, 2019-24: The fact that it keeps rising is troubling. So it's fundamental, I think, that we've got good administration of the tax system because the integrity of the tax system is fundamentally important to all of us. It pays for all of the services that we benefit from. Sam Hawley: Angus, despite everything that you have said, which is frankly really concerning, the ATO itself thinks it's doing a pretty good job, right? Because Chris Jordan, who was the tax commissioner up until 2024, he's been putting a rather positive spin on the ATO's work. Angus Grigg: Yeah. This is the really extraordinary thing. Despite all these scandals, the ATO tells us they are doing a great job. Just before Chris Jordan stepped down as tax commissioner, he did a victory lap, if you like, at the National Press Club, and he pointed out all the great, terrific things that the ATO has done. Chris Jordan, Tax Commissioner, 2013-24: We've successfully charted a massive program of transformation. We've cut red tape and we've modernised our administration of the tax system as part of the digital revolution to make tax just happen.

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