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Hot stock: BHP

What’s new? To dig an enormous hole in South Australia, or not to dig? That is the question for the BHP Billiton chief executive Marius Kloppers.
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The company is due to make its final investment decision on the $US30 billion Olympic Dam expansion project by the end of this year, but it may delay the call.

As world economic growth slows, demand for commodities follows, bringing prices down. That changes the investment-return calculations for all resources projects.

Such a confluence of factors moving in the wrong direction is giving BHP cause for pause over not only the Olympic Dam expansion but possibly some of its other major projects – such as the outer harbour development at Port Hedland.

It is important to remember that BHP has a treasure trove of world-class ore bodies that will be developed when conditions are right. Chinese GDP growth is in a deliberate deceleration from above 10 per cent to the more sustainable target level of about 7.5 per cent, but BHP believes the long-term demand for steelmaking ingredients – iron ore, metallurgical coal and manganese – remains firmly entrenched.

BHP’s recent foray into the US shale-gas rush may face an embarrassing writedown on the investment, but here again the long-term prognosis for this industry is very appealing.

The US economy will use the enormous shale-gas reserves to reignite its industrial base, reduce its dependence on imported oil and transform its power and transport industries all based on cheaper fuel.


BHP is due to announce its annual financial result on August 22.

The numbers may not appear as eye-popping as the commodity price-spiked record result from last year, but they will be impressive enough.

The real interest will be in the commentary surrounding the company’s cash-flow forecast, which in turn will depend on the planned capital-investment program.

Early last year, the company was parading its plans to invest $US80 billion over five years across a range of projects based on the cash-flow boom from the previous few years. That strategy now looks like it needs to change.


From almost $50 a share in April 2011, BHP’s share price has steadily slipped to the low $30 mark and now sits just above that at $31.60.

The stock has underperformed the broader ASX200 index so far this year by 12.5 per cent.

Worth buying?

If your definition of long term is the time until your next flat white, this stock is not for you.

BHP’s assets take years to plan and develop, billions of dollars to build and then decades to extract the prodigious quantities of ore and petroleum.

If your superannuation portfolio is also a good few years away from harvesting, then make sure you have BHP in it.

Greg Fraser is an analyst at Fat Prophets sharemarket research.

This story Administrator ready to work first appeared on Nanjing Night Net.

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Tussle over transparency

The federal government and financial regulators want super funds and managed funds to disclose their portfolio holdings.
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The funds support transparency but are working on a way of disclosing their holdings that they say will be meaningful to fund members.

They are in negotiations with the government and regulators to finalise a protocol for disclosure in time for the start date of July 1 next year.

Meanwhile, fund members have been kept wondering how their super is invested. It is not an esoteric point. Would mandatory disclosure of investment holdings have stopped people from investing in Trio Capital and Astarra, for example?

Would the fraudulent super funds have attracted investors had those investors known that Astarra had more than $100 million invested through a company in the British Virgin Islands?

Could full disclosure by managed funds have increased the scrutiny of mortgage funds – funds that were frozen during the global financial crisis, with capital losses to retiree investors?

Some of the mortgage funds that failed were later found to have extensive related-party dealings. They were raising money from investors and lending it to property developers through corporate entities related to the mortgage fund or to the mortgage fund’s directors.

Disclosure among most super funds and fund managers is very limited – usually to the 10 biggest holdings.

Listing investments and the portfolio weightings for super funds will mean the listing of hundreds of investments, but they will help fund members and researchers assess risks.

Some funds argue it is expensive and the listing of hundreds of investments would be meaningless to fund members. But Morningstar Australia’s chief executive, Anthony Serhan, who has been pushing for full disclosure, says it is a matter of principle that super-fund members and investors in managed funds know how their money is invested.

”We are talking about a huge amount of money in retirement savings and a system of forced savings, and for those who manage retirement savings, there are expectations that they are transparent about the sort of securities they hold,” he says.

He says the costs would be minimal if disclosure was introduced gradually.

Some fund managers argue that disclosure of their portfolio holdings would allow investors to buy the shares the funds own and rob them of their intellectual property.

Serhan rejects that argument.

He also points out that Australia is one of the few countries in the world that doesn’t require fund managers to disclose their holdings.

The Australian Securities and Investments Commission is understood to favour a maximum 90-day delay in disclosing portfolio holdings for managed and super funds.

Such a delay would help protect intellectual property and give super funds – especially those with money in unlisted and more complex investments – time to accurately report on their holdings.

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Partners get results

Joining forces … the boards of not-for-profit super funds have a balance of staff and employers. Illustration: Karl Hilzinger Look around the world and one thing about Australia stands out (other than our obsession with sport): the way we’ve constructed and run our retirement incomes system.
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Most attention is usually paid to the sheer size of the retirement savings pool. We use figures I once thought were only used in astronomy – $1.4 trillion today, rising to $4 trillion by the mid-2020s – which will soon put Australia in the bronze, or even silver, medal class.

However, less remarked upon is the unique method Australia uses to govern not-for-profit superannuation funds, which account for $450 billion of the national super pool.

Long ago, in the 1980s, the basic plan was constructed to ensure the system was well managed and governed on behalf of Australia’s working population. It was, at heart, a simple idea: set aside, by law, some of each employee’s salary to provide for their retirement, elect an equal number of staff and employer representatives, make sure they are well trained, and give them the freedom and responsibility to invest the growing pot of money. These are the so-called industry and government funds with equal trustee representation on their boards that are pledged to return all profits to members – hence the name, ”not-for-profit”.

It’s been a great success by any measure. For more than 25 years, there has been spectacular growth among the industry and government funds. Collectively, they have easily outperformed the so-called ”professionals” running retail funds, who operate out of the major banks and insurance companies.

The regulator’s best estimate puts them ahead by close to 2 per cent annually.

There has been no major, or even minor, collapse or scandal in the sector, which certainly can’t be said of some parts of the financial system: ask investors in Trio, Storm Financial or Prime. This is largely thanks to close attention by regulators, and to the trustees’ determination to make sure Australia’s outstanding policy initiative of the 1980s isn’t squandered.

But in recent months, there have been shrill calls from certain quarters for this success story to be abandoned. What looks to me like a manufactured ”debate” has focused on the way industry-fund boards are constructed, with opponents calling for more ”independents”.

Now, no one could sensibly argue about the importance of independence. Like summer by the beach, cute kids and gold medals, it’s pretty close to being a universal verity. But the problem is, the boards of industry funds are currently as independent as the boards of any public company in Australia – more so, in fact, as few, if any, have representatives of management on them. So if that’s not the issue, what’s behind the push?

My best guess is commercial self-interest and old-fashioned anti-union prejudice. While the boards of the not-for-profit funds typically have equal representations of employer and employee trustees, it suits conservatives to call the funds ”union controlled” – something that is patently wrong.

The trustee boards of industry funds such as Australian Super, Cbus, Hesta, HostPlus – and my own fund, Media Super – have equal representation of employers and unions. In my experience, it has been one of the most successful experiments in getting labour and capital to work constructively together that you’ll find anywhere, any time.

Could the system be improved? Undoubtedly. As industries grow and develop, the way they are governed can improve. But getting the balance right is important. If there’s a need for some super-fund boards to seek special talents, they can under the current law.

Across the 80 industry and government funds represented by the Australian Institute of Superannuation Trustees, there are 60 ”unaligned” trustees who have been chosen by their boards to fill gaps in what the regulator calls a board’s skills matrix. Two industry funds have boards structured as three employer, three employee and three ”independent” directors. In other situations, boards have chosen a non-aligned chair. But forcing an influx of accountants, lawyers, financial planners or others from the professional-company-director class isn’t the solution.

Flexibility to manage the variations is already there. Most boards would be comfortable adding non-aligned directors as long as the core element of the successful model remains: equal representation on the boards of not-for-profit super funds. It’s worked a treat so far – and with far superior results to any other way of managing Australia’s precious natural resource, its retirement incomes savings system.

Gerard Noonan is chair of industry fund Media Super and a former editor of The Australian Financial Review.

This story Administrator ready to work first appeared on Nanjing Night Net.

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Missing contributions

Sour taste … employees are missing out on billions of dollars of unpaid super. Illustration: Simon BoschMore than 19,000 people complained to the Australian Taxation Office in the past 12 months that their super was being paid late or not at all by their employer.
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The ATO can’t yet say how much money is involved, but the previous year nearly 18,000 complaints resulted in $329 million finally finding its way to its rightful owner.

That’s an average of about $18,200 a person – a big chunk out of anyone’s super when you consider it will be missing for at least a few months and the potential impact of such a gap compounded over many years.

Since 2005, the ATO has chased up some $1.7 billion in compulsory super (including interest for late payment). No wonder the Tax Office says in its recently released annual compliance program that, among other things, it will again be ”focusing on businesses meeting their superannuation obligations”.

It’s the fourth year in a row that its targets have included unpaid super.

The ATO will be scrutinising, in particular, cafes and restaurants, real estate agencies and home-building businesses: areas where people tend to work as casuals or subcontractors.

The chief executive of the Australian Institute of Superannuation Trustees, Fiona Reynolds, says she welcomes putting employers under the microscope.

”We should never forget that superannuation is actually deferred wages, which means it’s the employees’ money, not the employers’,” Reynolds says. ”And 9 per cent of anyone’s wage is a significant amount of money.”

While only a small percentage of employers don’t meet their obligations, it’s serious for the workers involved, with potentially far-reaching consequences for their retirement, Reynolds says.

However, she’s concerned the regulator isn’t resourced well enough to follow up all the complaints it receives. ”Complaints aren’t handled quickly enough,” she says.

Asked how long it takes to resolve a complaint, the ATO says that in the 2011 financial year the average time taken, including debt collection, was 97 days. That’s an improvement on the average of 196 days the previous year.

Reynolds says another issue is that it’s not always clear to people to whom they should complain. ”Moreover, as the complaint is about their employer, this can put the employee in a difficult position,” she says.

The ATO says employees should speak to their employer first, asking how often super contributions are being made and into which fund. They should then check the latest statement from their fund and contact the fund to confirm more recent payments have been arriving. If they still believe their employer isn’t paying enough, or any, super, they can file an inquiry at or phone the ATO on 13 10 20.


Reynolds says a number of industry funds use the Industry Funds Credit Control debt collection agency to chase up employers who aren’t paying.

”If you work in an industry where employer compliance is a known problem, it’s worth checking if your fund provides this service before signing up,” she says.

The chief executive of the Association of Superannuation Funds of Australia, Pauline Vamos, says compliance by employers is 96 per cent, which is unusually high by international standards. ”But that doesn’t mean we shouldn’t aspire to 100 per cent.”

One of the aspects of the Stronger Super program that the ASFA supports is the requirement for employers to report on payslips how much super is being paid and into which fund, she says.

This legislation was passed in June and the new rules will apply from July 1 next year.

”These sorts of details will give employees a much better idea of whether or not their employer is falling behind in contributions,” Vamos says.

Many super funds now offer 24/7 access to your account via the web, so people can also check this way that contributions are showing up, she says.

In addition, regulations requiring employers – large and small – to adopt electronic payment systems for superannuation are set to come into effect in 2014 and 2015.

According to Reynolds, both of these measures ”should make it easier for employers to meet their obligations”.

Reynolds says non-payment of super can be the ”canary in the coalmine” – an indication that a business is in financial strife. ”There is anecdotal evidence to suggest that some employers defer worker superannuation payouts as a way to deal with cash-flow problems,” she says.

In addition to withholding or delaying super payments until the 11th hour – in some cases, for up to a year – there are problems with so-called phoenix companies, particularly in the building industry, where businesses are actually set up to collapse before they pay their debts and super obligations, she says.

In response, there are now proposals for company directors to be held liable for unpaid superannuation.

Currently, employers who fail to make contributions face a superannuation guarantee ”charge”, which is made up of the contributions shortfall, 10 per cent interest and an ATO administration fee. Further infractions can result in the charge being doubled.

Salary sacrifice

The rules are clear when it comes to compulsory super: employers must make payments at least quarterly and the money must reach the fund within 28 days of the end of each quarter.

But what about salary sacrifice – money you voluntarily contribute to super from your pre-tax income?

What stops an employer from dallying, holding on to the money to smooth their cash flow or to earn a bit of interest?

”Where contributions are voluntary, if it’s coming out of your salary, it should be immediately paid to the super fund,” the chief executive of the ASFA, Pauline Vamos, says. ”There are no rules around that, but it’s important employers understand it.”

So who do you turn to if you can’t resolve a salary-sacrifice issue?

It is far from simple.

The ATO says that with salary-sacrificed money beyond the super guarantee, employees ”may have rights to enforce payment of foregone salary or wages under industrial law”.

Key points

■ Non-payment of super totals millions of dollars a year.

■ Almost 20,000 complaints were made last year.

■ The Australian Taxation Office handles most complaints.

■ Voluntary salary sacrifice falls outside the ATO net.

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Reporting season could dim forecasts

Will analysts’ cheery dispositions withstand the blowtorch of reporting season?A CHEERY consensus looks like it has given way to an uneasy consensus in the near term, yet analysts in general have retained a cheery disposition for 2013 for the market in aggregate. It seems unlikely this view will completely withstand the blowtorch of the August reporting season.
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Professional investors and analysts have now entered the month-long bombardment of news, numbers and mind-numbingly long daily bulletins from research departments that is the August profit-reporting season.

The focus should be firmly on the outlook, although there will always be the odd surprise in terms of reported financials for the year or half-year that has recently ended.

A trend looked to have been set for the industrials last week when staffing, maintenance and project services group Programmed Maintenance Services cautiously noted weak market conditions, following laboratory operator Campbell Brothers’ report of ”real signs on the ground” of weakness in the global resources sector (for which Campbell Brothers conducts assays).

It will be interesting to see how analysts adjusted their forecasts overnight last night for Bradken, which makes cast, machined and fabricated components, primarily for the mining sector.

While Bradken yesterday reported a record order book and expected to maintain production at full capacity in the current six-month period, it noted ”limited visibility beyond that due to the global economic uncertainty” and said it would minimise capital expenditure ”until the outlook becomes clearer”.

These outlook statements were reminiscent of those that have been coming out of the US quarterly reporting season in recent weeks.

And drawing the two together, US-based engineering group Jacobs Engineering Group, a $5 billion market-cap company that is understood to have shed some professional staff in Australia recently, was a little downbeat with its succinct assessment of issues facing Australia following its own results statement last week.

A Jacobs executive told analysts: ”Australia is troubled, more so, I think, than most of the rest of the world. There’s a lot of games being played in Australia vis-a-vis the political situation and various taxes and royalties on the extraction of resources.

”And I think a couple of our customers are seeing that as an issue for where they’re going to invest. And so I’d put Australia a little bit on the negative side or at least not as positive as some of the rest of the world.”

Jacobs’ view appears to be at odds with that of construction leader Leighton, which stated in its half-year results announcement yesterday that ”contrary to commentary suggesting a decline in investment activity in Australia, the group’s addressable markets have never been stronger”.

Which brings us back to current expectations for earnings growth in the year ahead. Using calendar-year-adjusted data, calendar 2012 earnings growth expectations for resources segment of our market, as represented by the S&P/ASX 200 Materials Sector Index, have plunged from 4.4 per cent on June 30 to minus 10.1 per cent now. But growth expectations for 2013 have hardly moved at all.

The materials sector is somehow supposed to bounce back with just short of 22 per cent earnings-per-share (EPS) growth in 2013 – even though equity analysts’ colleagues across the hall in the commodities section are projecting the copper price to decline marginally in 2013 from its current level and nickel to just hold its own (while the Bureau of Resources and Energy Economics has projected an iron ore price decline of 3.6 per cent in the 2013 financial year after an 11 per cent fall in the current financial year.

For the overall S&P/ASX 200, the aggregate growth estimates tally to 1.9 per cent for 2012 and 11.4 per cent for 2013. Once again, these expectations represent a significant trimming for 2012 but not for 2013 (at June 30 the expectations were 8.1 per cent and 12.7 per cent, respectively).

Given the current status of the global economy, we’re not convinced the aggregate 2013 expectations are realistic.

Interestingly, the aggregate consensus EPS growth rate for the smaller companies represented by the S&P/ASX Small Industrials is a far more robust 14.9 per cent for 2012, rising to 15.7 per cent in 2013.

We suspect these aggregates will also come under downgrade pressure but the starting point is far better than for the large, company-oriented ASX 200.

Martin Pretty is head of research at Investorfirst Securities.

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Default options

Juggling act … fund members need to weigh up whether the default is the best choice.Most superannuation savings are held in ”default” funds – the funds selected by employers to receive the superannuation guarantee – and most employees are happy to go along with that decision.
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But is it the best choice when factors other than performance may be given greater consideration?

Fund members need to be aware that other considerations come into play when that selection is made.

For workplaces covered by industrial awards, which cover about 1.5 million workers, the default fund is usually named in the industrial award.

These are mostly not-for-profit industry funds, the boards of which have equal representation by the relevant unions and the larger employers in the industry.

However, if there is no award governing the super guarantee contributions, the employer is free to select any complying fund as the default provider.

Not-for-profit funds are happy to be judged on performance. They have outperformed the retail sector – funds provided by the banks, insurers and master trusts – over the long term. (Although the gap in performance is closing as the retail sector launches lower-fee funds.)

A report recently released by Industry Fund Network, the umbrella group representing industry funds, found during the past 15 years (1996-2011), retail funds underperformed not-for-profit funds by more than 2 percentage points a year.

The report said: ”Over the 15-year period, if retail funds had earned industry fund returns, Australian retirement savings would currently be $75 billion higher.”

In June, the Productivity Commission issued a draft report after the government had asked it to look at whether there should be changes in the way that default funds are selected. The commission said that opening up default funds to competition would benefit members.

The retail sector has long labelled award super as anti-competitive and has been itching to be able to compete with not-for-profit funds to become default providers. Large employers not covered by industrial awards tend to hire asset consultants to select who should be the employers’ default providers. But for other employers, especially smaller ones, the costs of running a tender are too expensive.

Smaller employers are inclined to give the management of their employees’ super to the super arm of the bank with which it does business.

A senior consultant at Rice Warner Actuaries, Bill Buttler, says in most case default funds are ”pretty good” funds. The bottom line is it is not enough for employees to trust that their employer’s default fund is the best for them.

Buttler advises they read the product disclosure statement and check the website.

Reforms will improve offerings

From October next year, the government will require balanced investment options to meet MySuper criteria before they can be selected as an employer’s default fund.

Fund members are always free to choose any complying super fund.

Fund members who do not exercise ”choice” will, from October, have their super guarantee contributions go to their employers’ MySuper-compliant investment option. And, from the middle of 2017, members who do not exercise choice will have their balance shifted to a MySuper investment option.

MySuper investment options will need to have a broadly diversified investment strategy and offer a minimum level of life insurance to all fund members.

MySuper will have lower costs because commissions and ongoing financial advice fees will be banned.

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Ask Noel

We have an investment property with a mortgage of $750,000. We earn $30,000 in rent a year but the outgoings are $55,000. We have the capacity to buy another investment property as our annual combined pre-tax income is $400,000, but we do not want to be financially constrained. Is it sensible to reduce the loan to a more manageable amount of $500,000 before embarking on the purchase of another investment property? We own our home and have no other debts.
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Your current shortfall is only $25,000, tax deductible, so it should not be too much of a financial burden to borrow for another property once the income from the new property and the tax advantages of negative gearing are taken into account. Of course, major factors to consider are the capital-gain potential of any property you buy and the strength and reliability of your present income.

My partner and I are both 52. My income is $86,000 a year and my partner’s is $75,000. At present, our combined super equals $404,000, we own our home and have no dependants. We have two investment properties, which, when sold, will give us at least another $360,000 after the capital gains tax has been paid. We want to retire at 55, or at least scale down to three days a week until we are 56, then down to full retirement if possible. We feel we could salary sacrifice the full $25,000 to both super funds next year and possibly again in our final work year (although that isn’t a certainty). Would retirement at this age be possible?

It’s impossible to give a definitive answer because how much you will need when you retire depends on a multitude of variables, including your spending habits, how long you will live and the rate of inflation. You have done very well to date but your top priority should be to sit down with a financial adviser and decide exactly how much you will need when you retire and what strategies you need to achieve your goals. I would certainly recommend salary sacrificing as much as you can until you retire.

We owe $398,000 on an interest-only loan over an investment property that’s valued at $350,000. Should we look at paying down the principal or just leave it as is and hope that in a few years, capital gains will take over? Is it worth setting up an offset account or is it better to continue maximising tax deductions?

The problem with paying down a tax-deductible loan is that the effective return on the money so invested is probably less than 4 per cent when tax is taken into account. If you don’t have a non-deductible home loan, I would opt for the offset account. Alternatively, make extra contributions to super, which can be withdrawn at some stage to pay off the debt.

I am 30 and earn $104,000 a year. I have $15,000 in savings but no other investments and have recently received a free house as part of my salary package. I have no debts or dependants. However, I need a new car and have the option to salary sacrifice. My goal is to save enough money to put a substantial deposit towards my first home in about four to five years. What would be your advice to help me achieve my goal?

If you don’t have concrete goals, it’s easy to fritter your hard-earned money away. My advice is to decide exactly how much you’ll need in four years for a home deposit and divide that by 48. Make sure that every month, that sum is deposited in a separate bank account. Do not touch this under any circumstances. You should also investigate the first-home saver account because that offers tax benefits for part of the deposit.

We have an investment property with a current market value of $720,000. We bought this property three years ago for $500,000. For the first two years, we lived at the property, which is currently rented out. We are now renting and bought land. We plan to start building soon. If we sell our city property and reuse the profits for our new home or another investment property, do we need to pay any tax on the profit?

Make sure you talk to your accountant before signing any contracts but based on the information you have given, you should be within the six-year capital gains tax exemption period, provided you lived in the house before you rented it out and have not claimed any other property as your principal residence since.

I’ve received a $65,000 inheritance. My husband and I are in our late 50s and have little super. Our mortgage is $180,000. What would you suggest is the best way for us to invest this amount?

At your stage in life, the best strategy is probably to pay it straight off the housing loan, as long as the interest on that loan is not tax deductible. You should then seek advice on the possibility of drastically reducing the amount you repay on your mortgage and substantially increasing the amount you salary sacrifice to super. This should be highly tax effective as salary-sacrificed contributions lose just 15 per cent in contributions tax.

I have two investment properties with a combined value of about $1.5 million and related investment mortgages totalling $950,000. In addition, I have a $130,000 blue-chip share portfolio invested in my unemployed wife’s name. Our family home is valued at about $500,000 and has a mortgage of $130,000. Is there a way of transferring the debt from the family home to either the investment property or against the share portfolio so the interest can be tax deductible?

The only way out is to sell investment assets and use the proceeds to eliminate the housing loan. Then you can borrow back against that house to buy other investment assets. As the purpose of the second loan is for investment, the whole of the interest on that loan would be tax deductible. Before you take any action, check out what transaction costs and capital-gains tax is involved. It is possible that the costs may outweigh the benefits.

Our mother lived in her house until her death 10 months ago. My brother and I are the beneficiaries. The house is worth about $850,000 and I understand that if we sell within two years, we will be excluded from capital gains tax. However, if I pay my brother $425,000 for his half, live in the house for 10 years and then sell, do I pay only half the CGT.

Assuming this house was your mother’s main residence, it was not being used for the purpose of producing an assessable income, and she bought it after September 19, 1985, your brother can sell it to you free of CGT within two years of your mother’s death. If you buy the property and use it only as your residence, you will be free of CGT when you sell it. If your mother bought the house before September 20, 1985, and it becomes your main residence for your entire ownership period, it will also be CGT exempt when you sell it.

I’m 32 and earn $105,000 a year. I have super worth $150,000 with employer contributions of 15.4 per cent and I add an extra 5 per cent. I’m currently renting. I have an investment property worth $270,000 with an interest-only loan. After rent, it costs me $500 a month. The property isn’t appreciating and I’ve been unable to sell it. I’m considering taking it off the market. I have a consolidated line-of-credit owing $38,000 separately to my home loan, with the ability to redraw $12,000. I also have $10,000 in credit-card debts. I have no savings (just $500 in shares) and have spent a lot on luxuries and travel. Would my voluntary super contribution at $200 a fortnight be better used reducing the debt on the cards or line-of-credit?

In view of your young age, I would certainly prefer you reduced your debts than contributed money to super, where it may be inaccessible until you are 60. However, your main priority should be getting your finances in order – if you don’t do this, you’ll spend the rest of your life on the debt treadmill. Remember, it is not how much you make – it is how you spend it.

Noel Whittaker is the author of Making Money Made Simple and numerous other books on personal finance. His advice is general in nature. Readers should seek their own professional advice. Email: [email protected]南京夜网.

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Minister rejects uni push to set own fees

Fred Hilmer: Fee deregulation, with fairness, vital for unis
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CLAIMS that universities are poorly funded and could slide into debt are ”alarmist and inaccurate”, Tertiary Education Minister Chris Evans says.

Mr Evans warned that increasing university fees would push higher education beyond the reach of students from poor backgrounds and those in regional Australia.

His comments come after the leader of an elite group of universities urged the government to allow institutes to set their own student fees. Group of Eight chairman Fred Hilmer said some universities could lose up to $100 million unless they received more funding.

But Mr Evans said student debt would balloon if universities set their own fees.

”What we know about deregulation of fees is that we see a vast increased cost to the student and we don’t see any real competition on price,” he said. ”We believe we are now funding universities adequately by increasing their income by 50 per cent since we came to office. That allows them a capacity to properly educate Australian students.”

He said it was crucial to Australia’s economic growth that 40 per cent of young people completed a degree. ”I don’t believe and the Labor Party doesn’t believe that making education prohibitively expensive … is the answer.”

The federal government caps university fees under the current system. But Professor Hilmer said the current model should be scrapped.

The Group of Eight includes Australia’s most prestigious institutes including Monash and Melbourne universities.

Professor Hilmer, who is the University of NSW’s vice-chancellor, has previously said universities should be free to determine fees. He said his university faced a $100 million deficit over the next three years if international student numbers and federal funding remained steady.

”It’s unlikely UNSW is alone in this situation given that all universities are funded broadly in the same way and are facing the same uncertainty around the revenue stream from international students,” he told The Age.

The National Union of Students has rejected his push. Union president Donherra Walmsley said students would pay more for education if universities set fees.

Universities Australia chief executive Belinda Robinson said the funding model needed to be examined after major changes to the sector, including declining revenue from international students. She said Canberra’s decision to remove caps on undergraduate enrolments from this year had also presented challenges.

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Private Media launches career women’s title

AT A time when much of the media is contracting, one outfit, Eric Beecher’s Private Media, is expanding. Its latest title, Women’s Agenda, will be launched today.
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Aimed at career-minded women who want to keep their finger on the workplace pulse, the free online magazine will be the seventh to emerge from the Private Media stable as it eyes audiences and communities that it says have been abandoned or ignored by mainstream media.

With a target of between 100,000 and 200,000 women readers a month, Women’s Agenda will be Private Media’s second-largest title after Crikey and help drive its overall footprint of readers closer to 1 million a month. Crikey, which Mr Beecher bought from Stephen Mayne, was the foundation of his business.

Another title is in the pipeline, Crikey is to be relaunched next month, and the group is exploring ways to charge readers for bolt-on services, said its chief executive, Amanda Gome.

Access to Private Media’s sites – with the exception of Crikey – will remain free, said Ms Gome, who views the erection of paywalls around some media sites with some scepticism.

She says readers are not prepared to pay for news that has been commoditised.

”If you look at the audience of the Herald Sun, the majority of them are not going to pay for news. You have to match the audience with the product,” she said.

She has much the same view of Fairfax Media’s chances when it puts paywalls around parts of its news websites next year.

”I think that the number of people who will be prepared to pay will be small and that is going to affect their overall numbers and their advertising proposition,” she said.

Private Media’s websites are tightly targeted at distinct audiences – the wealthiest 20 per cent of households in the country – and have a distinct role. SmartCompany is aimed at the small business market, Property Observer at the property investor and Women’s Agenda at the nation’s career women.

Its publisher, Marina Go, said there would be significant cross promotion to drive traffic.

She said the internet is going down the same path as magazines, which started with generalist, mass-market titles only to fragment into smaller, special-interest titles.

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Pressure mounts on reluctant Reserve Bank to rein in surging dollar

Nanjing Night Net

PRESSURE is building on the Reserve Bank to follow the lead of the Swiss central bank and move to ease Australia’s soaring currency.

The dollar, which touched a four-month high yesterday, has been blamed for hobbling exports while crimping local producers as they compete in markets flooded with cheaper imports.

Central banks from Russia to Germany have been snapping up the Australian dollar, with the currency emerging as a haven in the face of Europe’s financial woes, particularly as Australia is one of just seven countries with a top AAA-credit rating and stable outlook.

The dollar traded as high as US106.03¢ after the RBA, as widely expected, opted to keep interest rates steady yesterday and said its settings for monetary policy were appropriate for now.

However, in a statement following its monthly monetary policy meeting, the central bank suggested it was taking closer scrutiny of the currency. It noted the dollar had “remained high” despite falling commodity prices and the weaker global outlook.

The Aussie rallied after the release of the RBA statement to its highest since March 20. Last night it was trading at US105.8.¢

The strength of the currency, up more than 70 per cent against the US dollar since the depth of the GFC, has been blamed for recession-like conditions in industries such as manufacturing and some retailers.

“The RBA has powers to intervene in markets if the currency is noticeably out of sync with the fundamentals,” said Australian Industry Group chief executive Innes Willox. ”In the current environment, one would expect that the bank has been considering the level of the currency and its options to influence its levels.”

Most of AIG’s members are manufacturers and engineering companies.

Meanwhile, Cochlear managing director Chris Roberts said yesterday that the rising dollar was partially to blame for the hearing implant maker posting a 68 per cent slump in profit. ”It’s a competitive, tough environment out there,” Dr Roberts said yesterday.

Morgan Stanley strategist Gerard Minack has calculated that Australia’s ”safe” status has added US10¢-15¢ to the dollar.

”Suggestions that the RBA intervene to cap the currency make sense, in our view, but we don’t think Reserve Bank action is imminent,” Mr Minack said.

Currency traders say the Russian Central Bank has been an active buyer of the currency in recent months – a move the cashed-up central bank foreshadowed earlier this year. Others including Germany’s Bundesbank and the Banque de France have also reportedly been adding to their holdings.

HSBC Australia chief economist Paul Bloxham said the RBA was likely to defer to monetary policy rather than dumping its holding of dollars, if it felt the high currency was straining the economy.

”The continued high level of the Australian dollar, despite recent falls in commodity prices, possibly provides further motivation for a further rate cut,” he said.

Still, National Australia Bank chief economist Alan Oster expects the dollar to remain high even if official cash rates are cut.

”You’ve got all these European central banks who might say that they’re going to stay with the euro, but they’re just doing a bit of insurance,” Mr Oster said.

The RBA is notoriously reluctant when it comes to currency intervention. Since a float in 1983, the bank has not targeted a level for the dollar.

Debate about possible intervention emerged in recent weeks after former RBA board member Warwick McKibbin reiterated his call for the central bank to do more to limit damage caused by the strong dollar.

In September last year, Switzerland vowed to peg the soaring Swiss franc against the euro in an attempt to protect its economy from the European debt crisis. The Swiss National Bank, in effect, devalued the franc, pledging to buy ”unlimited quantities” of foreign currencies to force down its value.

The RBA last stepped in to support the dollar when the collapse of Lehman Brothers in 2008 triggered a 40 per cent slide in the currency.

Following yesterday’s monetary policy statement, economists were tipping the RBA to push through a further 25 basis point rate cut by October. The central bank remains wary about Europe’s debt issues, a point repeated yesterday by RBA governor Glenn Stevens.

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