The research also shows which bills Australians would miss if they didn’t have enough money to pay all their commitments1. The pay TV account and the mortgage came out on top, with 33 percent of Australians saying they’d miss their Pay TV bill and 25 percent indicating they’d skip their mortgage repayment. The mobile phone and electricity bills followed, with 19 and 17 percent of Australians respectively stating they would miss these bills.

Number of firms downgraded – March quarter 2009 and 2010

The research also reveals that downgrades have resulted in more than 36,000 Australian firms being classified as a high risk of experiencing financial distress in the coming 12 months.
According to Dun & Bradstreet’s Director of Corporate Affairs, Damian Karmelich, the latest figures are concerning, particularly when they are considered against the downgrades that occurred during the height of the global crisis.
“Close to 65,000 firms were downgraded over a three month period at the height of the most significant global crisis in decades,” said Mr Karmelich.
“Now, as the economic recovery in Australia continues to gather steam, close to 80,000 firms have been downgraded. It’s an important sign that risk remains prevalent and firms must be constantly vigilant.”
Sector

Examining the industries that have had the most significant number of downgrades reveals the forestry and electric, gas and sanitary services sectors lead the way. Both groups had more than ten percent of firms re-rated in the March quarter. However despite the significant number of downgrades, these two groups have smaller percentages of firms in the high risk category than their counterparts in the communications, transport, agriculture, fishing, mining and construction sectors. The electric, gas and sanitary services sector also had the most significant percentage of firms experience a downgrade to its payment rating, with more than 10 percent of firms in this industry earmarked as a high risk of paying their trade accounts severely delinquently in the coming year. This finding correlates with the latest trade payments data which shows this group was the slowest to pay in the March quarter 2010, a position it has held for more than 12 months. These trends reflect broader developments in the economy, with the agriculture sector facing pressure due to the high exchange rate and the construction sector impacted by rising interest rates. In addition, although large mining companies dominate the news headlines, this industry has a number of small players that are less able to withstand cash flow issues than their larger counterparts.
Location

Examining high risk firms by state reveals the Northern Territory, New South Wales, Queensland and the Australian Capital Territory were among the worst performing states. The Northern Territory and New South Wales also accounted for the highest percentage of downgrades. However, while the actual number of downgrades in the Northern Territory was relatively low compared to other states, New South Wales had in excess of 5,000 more downgrades than any other state. This result is largely a reflection of the significant portion of the nation’s firms based in the eastern state. New South Wales, Queensland and the Northern Territory also topped the list for payment downgrades, with these states accounting for the most significant percentages of re-ratings. However, New South Wales accounted for the greatest number of revisions, with in excess of 22,000 firms downgraded.
Size
Smaller firms are more likely to be rated a high risk of experiencing severe financial stress or failure than their big business counterparts and they also experienced the greatest number of downgrades during the March quarter. Smaller firms are often less able than their bigger counterparts to withstand cash flow challenges. In addition, they can face difficulties accessing credit to help them manage the period between the sale of goods and services and the receipt of funds from a customer.
Age
Younger firms are a greater risk of distress than their older counterparts. More than 15 percent of young firms (up to four years old) are currently rated a high risk of failure – this figure falls below 10 percent for all other groups. Examining the number of firms downgraded reveals that those firms up to four years old and those between 20-50 years old accounted for the most significant numbers of downgrades, both above 20,000. Those up to four years old also accounted for the largest number of payment downgrades, with close to 22,000 firms now a greater risk of paying their trade accounts delinquently.

Firms rated a high riskof financial distress in the coming 12 months by age

However, a larger percentage of bigger firms had their payment ratings downgraded in the March quarter, with those firms employing more than 50 staff experiencing the most significant portions of revisions. These findings correlate with the latest trade payments data which shows that big firms continue to be the slowest to settle their trade accounts following a deterioration in terms compared to the previous quarter. Mr Karmelich believes many businesses are underestimating the challenges an economic recovery presents.

“Although the past couple of years have been difficult, the Federal Government stimulus package and low interest rates encouraged households to spend and businesses to invest. However, this silver lining is disappearing – interest rates are on the way up and the government is winding back the stimulus,” said Mr Karmelich.
“In addition, credit remains tight and the risk aversion practices that financial institutions fine tuned during the crisis look set to continue throughout 2010. With these factors in mind it is clear Australia’s executives need to maintain their risk management vigilance to ensure they don’t become another statistic on the failed business register.”

The decline in Housing affordability continued early in 2010 with higher house prices, increased interest rates, and the removal of the first home buyers’ boost according to the latest HIA-CBA First Home Buyer Affordability Report.
Housing affordability fell in the March 2010 quarter dropping by 4 per cent to be 28.7 per cent lower than 12 months ago. Through the quarter, affordability fell by 4.2 per cent in the capitals and 5.3 per cent in regional areas to be lower by 30.5 per cent and 24.8 per cent respectively compared to March 2009.

HIA Senior Economist, Mr Ben Phillips, said that further interest rate rises in April and May of 2010 will likely mean that the June quarter result will see affordability crash to the record lows experienced when interest rates were above 9 per cent in 2007.
“With the Reserve Bank insistent on further rate rises, housing affordability will once again be a key issue in the mortgage belt regions of Australia,” said Ben Phillips.
“We are yet to see the required level of co-operation between all levels of government to deliver critical housing infrastructure without hitting new home buyers,” said Ben Phillips.
“Higher interest rates, exorbitant infrastructure charges, an overly restrictive and time consuming planning system continue to fuel Australia’s affordability crisis. Overcoming these issues will go a long way towards restoring housing affordability in Australia,” said Ben Phillips.
Affordability deteriorated in most capital cities and regional areas in the March quarter. The largest falls were recorded across Victoria (-10 per cent and -15.9 per cent for Melbourne and Regional Victoria respectively), Western Australia (-6.6 per cent and -14.2 per cent in Perth and regional WA respectively) and regional New South Wales (-12 per cent).

In looking to set a Budget to take the Government to the next election, a brighter economic outlook appears to have delivered the funding for a range of tax sweeteners. While still essentially a “no frills” Budget, the Government has announced a 50% tax savings discount on up to $1,000 of interest earned by individuals and a standard $500 deduction for work-related expenses.

A summary of the major measures proposed in the Budget are included below:

From 1 July 2011, the Government will provide individuals with a 50% tax discount on up to $1,000 of interest earned by individuals, including interest earned on deposits held with any bank, building society or credit union, as well as bonds, debentures or annuity products. Importantly, the discount will be available for interest income earned directly as well as indirectly, such as via a trust or managed investment scheme, and is expected to benefit around 5.7m taxpayers in 2011-12. For a person earning an average pre-tax interest rate of 6%, the Government states that the discount would apply up to a savings balance of just over $16,500. Currently, the Government says there is considerable variation in the taxation treatment of alternative savings vehicles, with relatively higher levels of taxation applying to interest income. For instance, most interest income is currently taxed at the individual’s marginal rate, while certain capital gains can receive a 50% discount.

2) Adjusted taxable income

The Government states that taxpayers claiming the discount for interest income will have a reduced adjusted taxable income for the purpose of determining eligibility for transfer payments and other concessions. This may result in some individuals and families becoming eligible for transfer payments or eligible for a larger transfer payment. The Government noted that the consequential expense primarily affects Family Tax Benefit, but will also affect other payments such as the Baby Bonus, Child Care Benefit, Education Tax Refund, Commonwealth Seniors Health Card (CSHC) and the Pensioner Supplement (which is linked to eligibility for the CSHC).

The Government will provide individual taxpayers with a standard deduction of $500 for work-related expenses and the cost of managing tax affairs from 1 July 2012. The standard deduction will increase to $1,000 from 1 July 2013. Those taxpayers with deductible expenses greater than the standard deduction amount will still be able to claim their higher expenses, in lieu of claiming the standard deduction amount. According to the Government, this measure is an important step towards a “tick and flick” system of pre-filled tax returns that will make life easier for taxpayers at tax time. A standard tax deduction was recommended by the Henry Tax Review. The standard deduction will reduce individuals’ and families’ adjusted taxable income for the purpose of determining their eligibility for transfer payments and other concessions (eg the Family Tax Benefit, Baby Bonus, Child Care Benefit, the Commonwealth Seniors Health Card and the Seniors Supplement). This will make some individuals and families eligible for transfer payments or eligible for a larger transfer payment.

The Government did not make any changes to the currently legislated tax rates for 2010-11 (as previously enacted by the Tax Laws Amendment (Personal Income Tax Reduction) Act 2008). This means that for the year commencing 1 July 2010, the resident tax rates will be as follows:

The legislated current and 2010-11 personal tax rates and thresholds for resident individuals (excluding the 1.5% Medicare levy) are (with key changes highlighted in bold):

The main tax cuts to apply from 1 July 2010 will reduce the tax rate on incomes between $80,000 and $180,000 from 38% to 37%, providing tax savings of up to about $25 per week for those on $180,000. Also from that date, the low income tax offset will increase from $1,350 to $1,500 thereby increasing the effective tax-free threshold to $16,000 for people earning $30,000 or less.

5) Low income tax offset

For the current 2009-10 income year, taxpayers are entitled to the low income tax offset of $1,350 if their taxable income is less than $63,750. For 2010-11, this upper threshold will increase to $67,500 to accommodate the previously legislated increase in the offset to $1,500. The low income tax offset will continue to phase out at a rate of 4 cents in the dollar for every dollar of income over $30,000. As a consequence of the increases in the low income tax offset, the income level above which senior Australians (eligible for the senior Australians tax offset) begin to pay tax will increase. This will mean that eligible senior Australians will have no tax liability until their incomes reach:

• $29,867 for singles and $25,680 for each member of a couple in the 2009-10 income year; and
• $30,685 for singles and $26,680 for each member of a couple in the 2010-11 income year.

6) Medicare levy

The Medicare levy threshold amount for individuals eligible for the senior Australians tax offset will increase to $30,685 from 1 July 2010 (up from $29,867 for 2009-10). The Medicare levy threshold amount for certain couples eligible for the senior Australians tax offset, where the threshold for single senior Australians is not sufficient to ensure that they incur no Medicare levy liability until they incur an income tax liability, will increase to $44,500 from 1 July 2010 (up from $43,500 for 2009-10). The Medicare levy phase-in limit for individuals eligible for the senior Australians tax offset will also increase to $36,100 from 1 July 2010 (up from $35,137 for 2009-10). The Medicare levy phase-in limit that applies to certain couples eligible for the senior Australians tax offset, will also increase to $52,353 from 1 July 2010 (up from $51,177 for 2009-10).

7) Non-resident individuals

For the year commencing 1 July 2010, the non-resident tax rates are already legislated as follows:

The legislated current and 2010-11 personal tax rates and thresholds for non-resident individuals (excluding the 1.5% Medicare levy) are (with key changes highlighted in bold):

From the 2009-10 income year, the Medicare levy low-income thresholds will be increased for singles to $18,488 (up from $17,794 for 2008-09) and to $31,196 for those who are members of a family (up from $30,025 for 2009-10). The additional amount of threshold for each dependent child or student will also be increased to $2,865 (from $2,757). The Medicare levy low-income threshold for pensioners below Age Pension age will also be increased from 1 July 2009 to $27,697 (from $25,299). This increase will ensure that pensioners below Age Pension age do not pay the Medicare levy while they do not have an income tax liability.

The regulations affecting the calculation of the rebate threshold for the senior Australians tax offset (SATO) will be amended to correctly factor in the effect of the low income tax offset. The rebate threshold is the amount of rebate income an eligible taxpayer can have before the amount of SATO is reduced. The formula in the regulations for calculating the rebate threshold (in the Income Tax Regulations) currently fails to reflect the fact that the low income tax offset is reduced when taxable income exceeds $30,000. The regulations will be amended to correct this.

The regulations will be amended with effect from 1 July 2010.

The medical expenses rebate threshold will increase from $1,500 to $2,000 from 1 July 2010. Taxpayers presently receive a rebate equal to 20% of net unreimbursed eligible medical expenses above $1,500. This $1,500 threshold will increase to $2,000. In addition, from 1 July 2011, the threshold will be indexed annually to the Consumer Price Index.

The Government is proposing changes to the First Home Savers Account (FHSA) scheme. The current rules require that FHSA holders keep their savings in an FHSA for 4 financial years before they are able to use those savings to buy a home. However, if an account holder buys a home before the end of that 4-year period, the balance of their FHSA must be transferred to their superannuation (the logic here is that it thus remains in a concessionally taxed environment). The Government proposes that savings in an FHSA can be paid into an approved mortgage after the end of a minimum qualifying period, rather than requiring it to be paid to a superannuation account. The Government will release draft amendments for consultation over the coming months. The changes will apply for houses purchased after assent of the legislation that will give effect to this measure.

The Government will adjust the benchmark interest rate that applies to capital protected borrowings entered into from 7:30 pm (AEST) 13 May 2008 to the Reserve Bank of Australia (RBA) indicator rate for standard variable housing loans plus 100 basis points, instead of the RBA indicator rate for standard variable housing loans as announced in the 2008-09 Budget. The Government will also extend the transitional arrangements for capital protected borrowings entered into from 7:30 pm (AEST) 13 May 2008 from the previously announced 13 May 2013 to 30 June 2013.

The Government will phase down the interest withholding tax (IWT) paid by financial institutions on most interest paid on offshore borrowings. For local subsidiaries of overseas parents, the IWT rate will be reduced on such borrowings from 10% to 7.5% in 2013-14 and to 5% in 2014-15. The Government is favourably disposed to reducing this rate to zero, subject to its medium-term fiscal objectives.

The Government announced that it will look to permanently set the matching rate for the superannuation co-contribution at 100% and the maximum co-contribution that is payable on an individual’s eligible personal non-concessional superannuation contributions at $1,000. As a result, the previously-legislated increase in the matching rate to 125% for 2012-13 and 2013-14 (and 150% for 2014-15 and later years) will not proceed, if the Government proposal is enacted. In addition, the Government said it will freeze for 2010-11 and 2011-12 the indexation applied on the income threshold above which the maximum superannuation co-contribution begins to phase down. Under the superannuation co-contribution scheme, the Government currently provides a matching contribution for contributions made into superannuation out of after-tax income. The matching contribution is up to $1,000 for individuals with incomes of up to $31,920 in 2009-10 (with the amount available phasing down for incomes up to $61,920). This measure will freeze these thresholds at $31,920 and $61,920 for 2 years.

The Government announced that it will seek to make a number of minor amendments to improve the operation of the superannuation legislation. The amendments will include:

• allowing the Commissioner to exercise discretion for the purposes of excess contributions tax before an assessment is issued;
• clarifying the due date of the shortfall interest charge for the purposes of excess contributions tax;
• increasing the time-limit for deductible employer contributions made for former employees;
• permanently allowing a claim for a deduction for eligible contributions to be made to successor superannuation funds;
• providing new arrangements for public sector defined benefit schemes which fund benefits through “last minute contributions”.

The measures will apply from the 2010-11 income year.

The Government has announced that it will cap the annual Child Care Rebate to the 2008-09 level of $7,500 per child from the current annual cap of $7,778 per child. However, the Government states that the reduction in the Rebate will not alter the percentage of out-of-pocket expenses reimbursed by the Commonwealth. The Government has also announced that it will pause the indexation of the cap for 4 years.

The Government announced that it will remove eligibility for the War Widows (or Widowers) Pension for people whom before applying for the Pension, enter into a de facto relationship following the death of their veteran partner. According to the Government, the proposed amendment will remove an anomaly which allows widows (or widowers) who have entered into a de facto relationship following the death of their veteran partner to claim the Pension, whereas those who have since married cannot claim it. However, war widows (or widowers) who remarry or enter into a de facto relationship after claiming the Pension will not lose their entitlement under this measure, said the Government.

18) Govt response to Henry Report

The 2010 Budget follows hot on the heels of the Government’s initial response to the Henry Tax Report released on 2 May 2010. The Government’s initial response to the 138 recommendations in the Henry Report focused primarily on the resources sector, superannuation, a reduction in the company tax rate and some benefits for small business. The Budget Papers contain various references to these previously announced Government measures in response to the Henry Report, including:

• a Resource Super Profits Tax that will tax non-renewable resource projects (at a rate of 40%) on their profits rather than just their production (taxpayers will be eligible for a credit for royalties paid to State and Territory Governments) – this will apply from 1 July 2012;
• a refundable tax offset (the Resource Exploration Rebate) at the company level, set at the prevailing company tax rate, for exploration expenditure in Australia incurred on or after 1 July 2011;
• reduction in company tax rate to 28%- small businesses will benefit from 2012-13, but it will be phased in for other companies (29% for 2013-14 and 28% from 2014-15);
• small businesses will be able to immediately write-off assets valued at under $5,000 (currently $1,000) and all other assets (except buildings) will be written off in a single depreciation pool at a rate of 30% – this will apply from 1 July 2012;
• super contributions cap concession: workers aged 50 and over with super balances below $500,000 will be able to make up to $50,000 in annual, concessional superannuation contributions – to apply from 1 July 2012;
• Superannuation Guarantee age limit will be increased from 70 to 75 from 1 July 2013;
• Superannuation Guarantee rate will rise to 12% by 2019-20 (to be phased in from 1 July 2013); and
• Government will provide a $500 annual superannuation contribution to individuals with an adjusted taxable income up to $37,000.

Source: Simon Rayner

Outlook for the September quarter 2010

• Selling price expectations are down four points from the June quarter index of nineteen
• Employment expectations remain in positive territory at an index of eight, down a point on
  the June quarter
• Capital investment expectations are unchanged (at an index of 16) and remain at the highest level in almost seven years
• Profits expectations are also unchanged at an index of 17, the highest level in five years
• Sales expectations remain high but have fallen five points to an index of 28
• Expectations for growth in inventories are down one point but remain at the second highest level in more than five years

Credit access, debt levels and lagging trade payments

• Twenty one percent of firms had less access to credit in the last quarter while 15 percent had much greater or moderately better access
• Twenty seven percent of firms expect to reduce debt in the next three months, 10 percent intend to increase debt and 54
• Thirty six percent of executives are being negatively impacted by lagging business to business payment terms, a seven percent fall since March

Issues expected to influence operations in September quarter 2010

• Thirty three percent of executives rank interest rates as the primary influence on their business in September quarter 2010. Meanwhile, 23 percent expect wages growth to be the primary influence – a fall of 16 percent since March. Seventeen percent believe fuel prices will be their main concern in the quarter ahead – a rise of six percent since February.
• Access to credit– a new issue added to the list in April – was seen by 17 per cent of respondents as the most important influence in the quarter ahead

Actual for March quarter 2010

• Capital investment was positive for a fourth consecutive quarter, dropping one point to an index of 11 – the second highest in more than six years
• Twenty nine percent of firms increased sales as compared to the March quarter 2009, while 25 percent experienced lower sales
• Thirteen percent of businesses increased staff and ten percent reduced employee numbers
• The profits index remains at an index of zero – 24 percent of firms increased profits and twenty four percent recorded lower profit numbers
• The selling price index fell by five points to an index of ten – eighteen percent of firms raised selling prices and eight percent decreased prices

There are signs monetary tightening by the Reserve Bank and the end of the Government’s stimulus package are having the desired effect on inflation with Australian executives reporting lower expectations across a range of indices for the start of the new financial year.
The latest Dun & Bradstreet Business Expectations Survey, which examines expectations for the September quarter, reveals executives are expecting slower growth in sales, employment, inventories and selling prices compared to the June quarter. In positive news the decline in selling price expectations is a sign that there may be some easing of inflationary pressures as firms respond to the impact of rising interest rates.
The expected sales index fell five points to 28 returning to the level of the March quarter. However, the sales index remains high and is up 76 points on the June quarter 2009 trough. Thirty nine percent of firms expect an increase in sales and 11 percent anticipate a decrease in the September quarter 2010. Wholesale executives have the highest sales expectations (an index of 39) with 46 percent expecting an increase and seven percent a decrease.
The decline in sales expectations is also having an impact on employment expectations. Employment expectations are down one point on the June quarter 2010 but remain 34 points up on the June quarter 2009, the lowest employment expectations recorded since the survey began in 1988. Fifteen percent of firms are planning to increase staff levels and seven percent expect to reduce employee numbers in the quarter ahead.
Profit expectations remain strong. The profits index is now at its highest level in five years, unchanged from the previous quarter and 74 points higher than the trough in of the June quarter 2009. More than a quarter of respondents (27 percent) expect their profits levels to increase in the September quarter. The retail sector regained its position as the sector with the highest profit expectations (an index of 23), with 31 percent of executives expecting an increase and eight percent a decrease.
Expectations for capital investment remain on par with the March quarter signalling executives are still keen to invest in their businesses if they can access credit. However, one in five executives are reporting they had less access to credit than in the previous quarter. Nineteen percent of firms expect to increase capital investment, while just three percent are planning to decrease spending in this area. Non-durables manufacturers have the highest of capital investment expectations (an index of 27) and durables manufacturers the lowest (an index of four). Business investment is seen as a critical factor in Australia’s future economic success so maintaining the turn around in capital investment since the lows of mid 2009 is a positive sign that executives believe the recovery will be sustained.
All sectors continue to have positive expectations for growth in employment numbers, the third time this has occurred since the June quarter 2008. Wholesalers have the highest index at net 18, with 22 percent expecting to increase employment and four percent expecting to decrease staff numbers.
Selling price expectations have fallen by four points to an index of 15. One in five (20 percent) firms expects to raise prices in the September quarter, while five percent expect to lower prices. Concerns over the impact of rising selling prices on underlying inflation were seen as a key factor for triggering the latest interest rate by the Reserve Bank of Australia (RBA).
However in response to the slight decline in sales expectations inventories expectations are also down slightly on the previous quarter. This is coming off a high base with expectations for growth in inventories for the latest four quarters the highest in more than four years. Seventeen percent of executives expect to increase inventories in September quarter, while nine percent plan to reduce stock levels. The expectations of non-durables manufacturers have reached the highest level in eight years with a net 19 percent of firms expecting to increase stock levels in the September quarter.
Actual capital investment in the March quarter 2010 is down one point on the December quarter which was the highest level in more than six years. There have now been four positive quarters of capital investment after five negative quarters from March 2008 to March 2009. Fourteen percent of firms invested more in capital and three percent invested less than in the March quarter 2009. All sectors had actual capital investment growth in positive territory in both the December and March quarters.
The preliminary index of the net proportion of firms with actual increases in inventory levels is two for March quarter 2010, down one point from the December quarter. However this is only the second positive quarter of inventory levels after seven negative quarters. The increased contribution of stocks is an important indicator of business confidence and represents a significant improvement since the low (actual index) of -11 for the March quarter 2010.

According to Dun & Bradstreet’s CEO Christine Christian, the impact of rising interest rates and a reduction in government stimulus is having the desired effect on inflationary pressures.
“The reduction in selling price expectations is a positive sign to ease government concerns about growing inflation,” said Ms Christian. “Given that the RBA has listed rising selling prices as a key trigger for interest rate rises, this may reduce the need for further immediate action by the central bank.”
Ms Christian also believes that despite a slight fall across a number of indices Australian executives have generally maintained the same positive outlook in 2010.
“Despite a slight fall in confidence levels in key indices such as sales and employment the overall outlook for Australian executives remains positive and substantially better than at the same point in time in 2009. The question now is how long will this positive outlook continue?”
Business-to-business payment days are still having a negative impact on one in three (36 percent) firms, a fall of seven percent since March. Dun & Bradstreet’s Trade Payment Analysis reveals that a deterioration in payment terms in the March 2010 quarter has taken terms up to 54.1 days. This has led to concern that the payment behaviours of Australian firms could de- rail the economic recovery, with terms deteriorating for the second consecutive quarter despite improving business conditions.
Thirty three percent of firms rank interest rates as the major influence on their business and 23 percent consider wages growth to be their primary concern. Only 17 percent of executives believe fuel prices will be the primary influence on operations in the quarter ahead. Access to credit also scored a vote of 17 percent as the most important influencing factor on their business in the quarter ahead.
With the continued improvement in profits expectations, 27 percent of executives plan to reduce their current business debt levels in the next three months, 16 percent reduce significantly and 11 per cent moderately. Only 10 percent expect to increase their business debt and 54 percent plan to maintain current debt levels.
According to Dr Duncan Ironmonger, Dun & Bradstreet’s economic consultant, the latest D&B survey shows Australian business executives will start the next financial year with strong expectations for their firms business performance in the September quarter. Investment expectations continue at their highest levels in almost seven years.
“Although expectations for growth in profits are at the highest in five years, expectations for growth in sales have declined a fraction. Consequently, executives have made small downwards adjustments to their intentions to make increases in staff numbers, selling prices and inventories,” said Dr Ironmonger.
“After the rises in official interest rates in six of the last eight months the Reserve Bank is likely to leave rates unchanged for the next month or two. This should enable business and household borrowing to stabilise with interest rates at about average for the decade.”

The D&B index for expected sales is down five points to 28, with 39 percent of executives expecting an increase in sales and 11 percent expecting a decrease. The profits index is unchanged at 17, with 27 percent of executives expecting profits to rise and 10 percent expecting a fall.
Employment expectations are down one point an index of 8, with 15 percent of executives expecting an increase in staff and 7 percent expecting a reduction. Capital investment expectations are unchanged at an index of 16, with 19 percent of executives expecting an increase and 3 percent expecting to cut spending. Inventories expectations are down one point to an index of 8. The selling prices index is down 4 points to an index of 15, with 20 percent of firms expecting to raise prices and 5 percent expecting to decrease them.

In a worrying sign for a sustainable housing recovery, the number of new home loans hit a 12 month low in March said the Housing Industry Association, the voice of Australia’s residential building industry.
HIA Chief Economist, Dr Harley Dale, said there is a disturbing downward trend in new home lending that does nothing to instil confidence in the prospects for a recovery in new residential construction that extends beyond this year.
“The March ABS Housing Finance result marks the fifth consecutive fall in loans for construction and the sixth consecutive decline in total lending,” said Harley Dale.
“We have a debilitating confluence of higher interest rates, tight credit availability, and obstacles related to land supply, planning, and infrastructure charges and taxation.
“These forces are standing in the way of a sustainable lift in new construction in 2011 and beyond that would allow inroads to be made into Australia’s large and growing housing shortage.
“A circuit breaker is urgently required to expedite progress in reducing supply side barriers and easing credit conditions. Otherwise the financial strain on renters and entry level buyers will only worsen and upward pressure on interest rates will intensify.
The number of loans for construction fell by 7.3 per cent in March 2010 to be down by 15 per cent over the quarter. Loans for the purchase of new dwellings fell by 3.2 per cent in the month of March to be 14 per cent lower over the quarter.
“Clearly the first stage new home building recovery was driven by first time buyer-related activity. In the March 2010 quarter the first home buyer loan market was nearly 50 per cent down on the same period last year, but the non-first home buyer market was weakening rather than filling the void left by the removal of the First Home Owner Boost,” said Harley Dale.
In seasonally adjusted terms the total number of owner occupier loans in March 2010 fell by 4.1 per cent in New South Wales, 3.5 per cent in Victoria, 1.8 per cent in Queensland, 5.6 per cent in South Australia, 6.8 per cent in Western Australia, 2.2 per cent in Tasmania, 12.1 per cent in the Northern Territory, and 4 per cent in the Australian Capital Territory.

Standard Variable Rate

The standard variable is the most common of all home loans. The rate is based on the official Reserve Bank of Australia (henceforth called RBA) and varies during the term of your loan, depending on market fluctuations. If the RBA’s rate goes up then you could find your rate increasing also, thus increasing your monthly repayments. On the other hand, however if times are good and the RBA drops their official interest rate then your repayments will be decreased. This type of loan is the most flexible and normally will include optional features such as being able to make extra repayments, split the loan, redraw funds and it is often possible to incorporate an introductory (or honeymoon rate) for the first 12 months. At the end of this 12 month period your rates will increase back to the standard variable rate. Reduce Loan’s standard variable is one of the cheapest on the market at time of writing, choosing a standard variable rate from Reduce Home Loans will ensure that your rate is always REDUCED.

Basic Variable Rate Home Loan

A Basic Variable Rate loan is usually a ‘no frills’ version of the Standard Variable loan, good for the budget concious who are reading this. It can sometimes offer a lower interest rate than the Standard Variable but there are normally restrictions that come with having a cheaper rate. Some of these can be less options and sometimes extra fees. As with the Standard Variable the Basic Variable rate is determined by the Reserve bank’s official interest rate.

Fixed Rate Home Loan

The Fixed Rate Loan offers a fixed rate, as opposed to the two variable loans mentioned above this loan has a predetermined rate as opposed to rising and falling with the market. Fixed Rate loans are based on a set interest rate for an agreed time period. Fixed Rate loans can range anywhere from 6 months to 10 years. The main idea behind these loans is to protect your rate from rising with the Reserve Bank, however being immune to rate rises also means you do not benefit from when the Reserve Bank’s rate goes down. This means you could potentially be stuck paying a much higher interest rate than the current market.

Fixed rate loans aren’t as flexible as the Variable Loans, and sometimes do not provide you with the option of additional repayments.

Honeymoon Rate Home Loan

Honeymoon Loans offer a lower interest rate than the standard variable rate, for an initial period of time. In general this time is normally the first year of the loan. This rate can be a fixed or variable rate once the honeymoon period ends. The advantage of a honeymoon rate is to ease new home buyers into the massive burden that comes with a mortgage. It also helps with the principle loan amount if your loan terms allow you to make extra repayments as during the first year the money you save can used to Reduce the principle loan amount.

Lo Docs vs Full Docs

Before Lo Docs people who were self employed had a hard time proving their income and getting a loan. Providing documentation is a big part of the loan process as lenders may not loan money to someone who may be unable to make repayments. A Full Doc loan refers to a loan where all documentation required is given to the lender. There are several different types of Lo Doc loans, some allowing customers to simply state their income while others do not require any information about income, assets or any existing debts.

Lo Doc loans will normally require a higher level of deposit or a higher interest rate due to the significant risk of lending to someone without documentation proving their financial situation. However most Lo Doc loans are able to be swapped back to a conventional variable rate after a period of time, without the need to provide full financial statements, assuming they have maintained good credit history.

Split Loan

A split loan offers the best of both the Variable and Fixed rate loans mentioned above. If you are concerned about rising interest rates but want to maintain the ability to make additional repayments without being charged, then a split loan might be the product you are after. Essentially you split the loan in half, one portion having a fixed rate and the other a variable. How the loan is partitioned is up to you, but typically a 60/40 split is most common.

All in One Loan

The all in one loan combines your home loan account with your everyday spending account. This allows you to have your salary deposited into the account then withdraw funds as you need them. The major reason for taking out this loan is to decrease the interest charged on the loan by keeping your salary, savings and other income in the account for as long as possible. This can be a downfall however, if you were undisciplined with your budgeting and withdrew more funds than you put in you could fall behind on repayments.

As a result, this loan suits only disciplined first time borrowers or seasoned investors.

Line of Credit Home Loan

Line of Credit loans, sometimes referred to as an Equity Loan offers high flexibility, it is set up similar to a credit card. The lender assigns a credit limit secured against your property and when you need cash for bills or other spendings, you simply draw against that limit. As you pay the loan the money becomes available to you again.

If you’d like more information on which loan is right for you call the team on 1300 733 823

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