Treasurer Joe Hockey says a key component of tax reform must be aimed at cutting personal income tax rates to end the “stealth” of bracket creep.

The treasurer will use a speech on Monday to warn of the impact on the economy if bracket creep is allowed to continue unabated.

Bracket creep occurs when people are pushed up into higher tax brackets merely as a result of wage inflation.

“If people are left in this higher tax brackets, this can lead to negative financial and economic outcomes, for individuals and the nation,” Mr Hockey will tell a conference in Sydney.

Personal income tax brackets have not been significantly adjusted since changes were announced by the Howard government in 2007, aside from an increase in the tax free threshold in 2012.

If no action is taken, in the next two years about 300,000 Australians will move into the second highest tax bracket.

The average income earner on around $77,000 pays a marginal tax rate of 32.5c in the dollar, but would rise to 37c once earning above $80,000.

Australia’s highest marginal tax rate is 47c, compared with 33c in New Zealand, 20c in Singapore and 15c in Hong Kong.

In the case of New Zealand, it is benefiting from a stronger economy, more jobs and a government that lives within its means, making it a more attractive investment destination with a low top tax rate and no payroll tax.

“Sounds like a pretty workable model, doesn’t it?” Mr Hockey will tell the Tax Institute and Chartered Accountants of Australia and New Zealand conference.

Reducing taxes will put money back in people’s pockets and encourage them to “have a go”.

Lower tax rates will also encourage budding entrepreneurs to make something of their ideas.

“It will give people the jolt they need to get better qualifications; it will provide incentive to go for that promotion – to climb the ladder of opportunity,” he will say.

Article source: http://www.theaustralian.com.au/business/latest/hockey-warns-on-bracket-creep/story-e6frg90f-1227495721759

The minutes of the Reserve Bank of Australia’s (RBA) August monetary policy meeting, released yesterday, have reinforced the view among Australia’s largest banks that the RBA is unlikely to touch interest rates in the year ahead.

A simple word search of research reports received from the CBA, ANZ and NAB yesterday reveal one common theme throughout – the word “hold”.

CBA economist Gareth Aird

Here’s Aird on his perception of the minutes. The view expressed by the RBA on the unemployment rate having “stabilised” is consistent with no changes to monetary policy, in his opinion.

“It’s essentially our views on the labour market and inflation that underpin our thinking on the cash rate. While rate cuts are still ‘on the table’, a flat unemployment rate is normally consistent with no changes to policy. In addition, the AUD now looks quite content to be in the low 70s which we view as the ‘sweet spot’ for the RBA. We see the RBA on hold at 2.0%.”

Bill Evans, chief economist, Westpac

While Evans expects Australian economic growth will likely undershoot forecasts offered by the RBA, should that not eventuate, “rate increases would quickly move onto the radar screen”.

“The Reserve Bank Board next meets on September 1. There is very little chance that the Board will choose to move rates. Westpac expects that rates will remain on hold over the course of the remainder of this year and in 2016.

It is notable that the Reserve Bank’s forecasts in its recent Statement on Monetary Policy include a 3% growth forecast in 2016 lifting to a “heady” 3.75% in 2017. We are much more circumspect about the growth outlook in 2017. If, however, it became clear through the course of 2016 that the 3.75% growth outlook was likely to be achieved, and even exceeded”.

Felicity Emmett, co-head of economics, ANZ

While she believes the the RBA are “firmly on hold”, Emmett believes that there’s still a greater chance that the RBA will cut interest rates over the next 18 months rather than increase them.

“The minutes of the RBA August board meeting revealed a marginally more positive tone to the commentary. Given that the Board meeting pre-dates the release of the comprehensive Statement on Monetary Policy (SoMP), they don’t provide significantly new detail, but the tone suggests that interest rates are firmly on hold.

Does this mean the Bank has moved to ‘neutral’? We don’t really think so. While the RBA is certainly wishing and hoping that it won’t have to cut rates again, over the next 18 months there is still a greater risk of a further cut in the cash rate than a hike.”

Ivan Colhoun, chief economist, NAB

Colhoun believes that the minutes had a more positive slant to them, and suggests there will be an increased focus on Australian labour market trends in the months ahead.

“Overall, the Minutes had a more positive slant to them than has mostly been evident in the past six months. This likely reflects the improved labour market outcomes of recent times. The market is likely to have an increased focus on labour market trends over coming months as any significant changes in this data could cause the RBA to rethink its outlook, which increasingly looks like being for an extended period of unchanged Australian interest rates at 2%.”

While Australia’s big four all suggest the RBA are likely to be on hold over the next 12 months, that view is certainly not universal in nature. According to a recent survey conducted by Bloomberg, Macquarie Bank, Morgan Stanley and Capital Economics all forecast a 25bps rate cut from the RBA in November.

Looking further out, the divergence in views becomes even greater. Taking a 12-month view, Capital Economics predict the cash rate will sit at just 1.50% in the September quarter 2016. At the other end of the spectrum, AMP Capital Investors expect the cash rate will rise to 2.75% over the same time period.

Others forecasting higher by the September quarter of 2016 include Barclays, Markit Economics and Societe Generale.

At present, markets are evenly split on the prospect of the RBA easing rates at its February 2016 meeting. Last week, an easing at this meeting had been fully priced.

Article source: http://www.businessinsider.com.au/australias-big-four-banks-are-unanimous-interest-rates-are-on-hold-for-the-next-12-months-2015-8

A DEVELOPMENT report to be released today will be the “go to” resource for investment opportunities across the region, according to Townsville Enterprise. The development authority will release the report, Opportunity Townsville North Queensland, at a Townsville Bulletin Business Breakfast at Jupiters hotel.

The report finds there are scores of major projects set to begin in Townsville, including a $30 million makeover of the Jupiters hotel and casino and $40 million upgrade of the Townsville Airport, as well as billions of dollars worth of projects which have been completed or have started.

It says year-on-year growth of 2.1 per cent equates to a gross regional product of $12.59 billion.

Townsville Enterprise general manager economic development Tracey Lines said the report was a consolidation of all projects across the region. She said they would be leveraged to attract additional investment.

“What we have developed is a comprehensive resource that will be distributed across the country to showcase the significant level of ongoing investment in the region as well provide investors with a list of potential investment opportunities,” Ms Lines said. “It is very important to showcase not only what we have to offer but also what successes the region has seen in recent times.

Ms Lines said investment into current projects came from both the public and private sectors and was spread across all sectors of the economy including heavy industry, transport and logistics, resources, agriculture, retail, services, health and education and tourism.

“While the region may have experienced a few tough years economically, what this report shows is that the fundamentals of the diverse and dynamic economy this region prides itself on are still there,” she said.

The report will be published twice a year.

Article source: http://www.townsvillebulletin.com.au/news/townsville/townsville-enterprise-to-lure-investment-through-major-projects/story-fnjfzsax-1227487517472