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Proposals to cut sunday penalties raise political problems for tony abbott




ANALYSIS

The thousands of Australians fretting over the fate of their Sunday wages might be reassured by the politics of pay packets.

Prime Minister Tony Abbott faces the prospect of having to recommend slashing the weekend wages of tens of thousands of Australians just as the countdown to a 2016 election begins.

In the wake of yesterdays draft Productivity Commission report recommending the ditching of Sunday penalty rates for retail and hospitality workers, the Prime Minister can be sure he will also face the accusation whatever his response that he has gone to the industrial relations graveyard at midnight and dug up WorkChoices, the notorious Howard government workplace package he had declared dead and buried.

In addition, there is the 2013 election promise made by Mr Abbott and his Employment Minister Eric Abetz that Under our policy, no Australian worker will be worse off and businesses will be encouraged to grow.

Service industries, which include shops and eateries, are doing well already.

The Australian Industry Groups services sector index for July, released today, was at 54.1, the highest level since February, 2014.

The growth and wage objectives are not mutually exclusive but business groups, including the increasingly powerful Council of Small Business Organisations Australia is arguing growth in many sectors will be aided by changes to the wages system. And that means targeting penalty rates.

It also means workers relying on the pay premium for Sunday labour would be worse off, as proposed in the interim document from the Productivity Commission yesterday.

The draft proposes an enterprise contract which would be based on a no-disadvantage test to distinguish it from the Australian Workplace Agreements of the Howard era.

More contentious, the Productivity Commission recommends reducing Sunday penalty rates in retail and restaurant outlets to Saturday levels to reflect changing consumer patterns.

Australian society expects to be able to shop, go to a pharmacy, and eat at cafes and restaurants on weekends, said PC chairman Peter Harris.

The value of supermarket shopping on Sundays now exceeds some weekdays.

The bottom line is we are pretty confident from analysis that [cutting Sunday penalty rates] will increase overall employment in those services industries and provide consumers with additional benefits.

The final PC report will be delivered in November.

Tony Abbott has no intention of reviving WorkChoices and was never convinced it was a winner in its original form close to a decade ago.

But trade unions will make sure the ghost of that policy will a hover over whatever the Prime Minister decides.

Should we scrap the 100 note


IS IT time to get rid of the $100 note?

Investment bank UBS thinks so. With India this week moving to demonetise its two highest denomination bank notes, UBS says Australia should follow the lead.

Indias prime minister Narendra Modi said the decision was aimed at curbing the use of fake money and corruption. While no longer legal tender, people can still deposit the Rs1000 and Rs500 notes into bank accounts until December 30.

India plans to release new Rs500 and Rs2000 notes, but no date has been set.

In a research note on Monday, UBS said it would be a positive for the banks due to the rapid growth in deposits, the boost to digital and cashless payments, and the reduced reliance on branch networks over time.

And in a country where only 1 per cent of people pay tax, the move in India is expected to lead to lower interest rates and could uncover large amounts of taxable income currently hidden in the cash economy, UBS analysts said.

While concerns with the cash economy in Australia may not be as significant as in India, UBS makes the following points. Firstly, there are 300 million $100 notes in circulation, although they are rarely seen. Second, there are almost three times as many $100 notes than $5 notes by number in circulation. And thirdly, 92 per cent of all currency by value is in $50 and $100 notes.

Given the increasing level of digital transaction penetration we believe Australia could move to remove larger denomination notes, UBS said.

RBA data suggests the use of cash for transactions continues to fall. Since 2009 ATM transactions are falling at 3.4 per cent per annum while credit card transactions are growing at 7.3 per cent per annum driven by tap-and-go and NFC technology.

We believe removing large denomination notes in Australia would be good for the economy and good for the banks.

According to UBS, benefits may include reduced crime (difficult to monetise), increased tax revenue (fewer cash transactions) and reduced welfare fraud (claiming welfare while earning or hoarding cash).

From the banks perspective there would likely be a spike in deposits if all the $100 notes were deposited into banks (ignoring hoarded $50s), household deposits would rise around 4 per cent. This would likely fill the banks Net Stable Funding Ratio (NSFR) gap and reduce reliance on offshore funding.

It comes after Prime Minister Malcolm Turnbull said he was open to scrapping the 5c coin, after Treasurer Scott Morrison was earlier this year grilled by news.com.aus Malcolm Farr on why we still make the little silver piece.