Telstra defends submarine move
As the debate on how to improve the poor state of Australia’s broadband network rolls on, Telstra has announced it will spend $300 million on an undersea telecommunication cable to the US.
Telstra says it is investing in the undersea telecommunications cable to the US because, unlike improved domestic broadband infrastructure, it is commercially viable to do so.
The cable will increase Australia’s capacity to download data from the US, the source of 65% of the internet content downloaded by Australians.
Labor last week announced that, if elected, it would spend more than $4 billion on a fibre to the node (FTTN) broadband network, prompting the Federal Government to begin talks with Telstra in an attempt to overcome the regulatory impasse that Telstra says it is preventing it from investing in FTTN broadband.
Telstra’s chief operations officer, Greg Winn, says the undersea cable investment shows there is “no doubt about Telstra’s willingness to invest in infrastructure where a commercial return on investment is available”.
Independent telecommunications analyst Paul Budde says the poor state of broadband in most of Australia is more of constraint on download speeds than any limitations on Australia’s data link with the US.
But, he says, the three to five year roll-out time for the undersea cable means work needs to start now so that Australia has the capacity to access US internet content once improved broadband infrastructure is in place.
He says increased competition between the existing privately owned data link to the US and any cable constructed by Telstra or other companies will result in improved prices for Australian broadband consumers.
“We’re not close to reaching our capacity from the US at the moment, but that’s not to say that in four or five years the capacity needed won’t be so large that we’ll need all the cable networks we can lay our hands on,” Budde says.
– Mike Preston
Howard’s tree change
Prime Minister John Howard explicitly ruled out setting short-term emission reduction targets and deep longer-term cuts yesterday. British climate change economist Nicholas Stern’s visit to Australia has increased pressure on the Howard Government to come up with an emission reduction target. Labor’s emission reduction target – 60% by 2050 – has the support of the Business Council of Australia.
Instead, Howard announced a $200 million plan to curb global deforestation by creating a global fund to invest in developing countries. The aid will be used to create incentives to scale back logging operations, such as those in Indonesia’s tropical rainforests.
Some environmentalists have criticised the plan as an attempt to shift responsibility for climate change to other countries.
– Jacqui Walker
Residential rents up, industrials flat
The growth rate of residential rents in Sydney and Melbourne has doubled since November 2006, but industrial rents across the country are on the decline, according to two reports issued yesterday.
Property management group Run recorded an average rental increase of 8.62% or $109.27 a month, on the 1775 residential properties it re-let in Sydney and Melbourne between November 2006 and February 2007, the Australian Financial Review reports. For more than 80% of properties leased over that period the rent rose, Run reported.
There is less to celebrate in industrial property, where a report released yesterday by Colliers International shows rental yields have declined across all Australian state capitals since 2005. Strong demand for space has not been able to compensate for soaring property prices, the report says.
– Mike Preston
Mortgage broker regulation crackdown
A strict new code of conduct for mortgage brokers to be introduced in Western Australia could soon be introduced nationally.
The new laws include a mandatory code of conduct that will require brokers to inform customers of the banks they deal with, all fees and commissions they receive and where they come from and any conflicts of interest, West Australian consumer protection minister Sheila McHale announced yesterday.
State and Federal Governments have already started discussions on how similar laws could be introduced nationally, a New South Wales Office of Fair Trading spokesman says.
A public discussion paper will be circulated by state fair trading agencies in the middle of this year setting out the options for national laws. Timing for introduction of the laws will be a matter for negotiation with the states, the spokesman says.
– Mike Preston
Labor proposal to freeze textile and clothing tariffs
The small business community was surprised when Labor late last year gave Craig Emerson responsibility for small business, the economy and independent contractors.
It appeared that Labor at last was coming to terms with a changing economy and the millions of small businesses and independent contractors would get a voice if Labor was elected.
But this week there are signs that Labor is bowing to unions.
First, it appears Labor has dropped some significant key wording in its draft party platform, which would have supported the casualisation of the workforce and independent contractors.
A proposal has also been circulated calling for tariffs to be frozen if trading partners fail to meet their international obligations to free up textile clothing and footwear trade. The proposal has been prepared for next month’s ALP conference. The proposal has been rejected by some business groups, who claim it would set back economic reform.
It would also create great unease as many industry groups, while not approving of the phasing out of tariffs, have at least been able to plan with certainty.
– Amanda Gome
Liberals look back to business for support
NSW Liberal MPs have urged the party to work harder on building ties with the state’s business community.
They have called for a renewed focus on economic reform policies, as support for the Liberal leadership contender Barry O’Farrell firms over the man who led the party to defeat last weekend, Peter Debenham, reports the AFR.
– Jacqui Walker
IT News: New movie online partnership
The jockeying for position in the market for delivering video on demand online is well under way. Singapore-based Anytime, Fairfax Digital and ISP iiNet have announced a partnership to deliver movies online.
Anytime, which is backed by Columbia Pictures, Sony’s Entertainment Holdings, Fox Media Services, Warner Bros Entertainment Inc, Intel Capital and Macquarie Bank, is already delivering a service to Canberra homes linked to the high-speed TransAct network.
Users of this new service anywhere else will have to wait 90 minutes for a movie to download over a 1.5Mbps connection. All the players in this market, including Telstra, Foxtel, and ReelTime Media are counting on faster downloads in the future.
– Jacqui Walker
Residential trusts’ bad news
Some of the nation’s biggest financial institutions are getting into the residential property market. The new residential property trusts, it is perceived, will do all the work for investors at an appealing buy-in price. It is the type of properties funds are buying that is a concern.
Some so-called “vulture funds” are putting in offers to buy “distressed” apartment developments in Sydney and Melbourne. Many of these are the apartment developments that wiped out thousands of small investors who had put their money into off-the-plan projects before the Westpoint group collapsed.
This is second-grade property in an over-supplied sector of the market, sold off-the-plan and marketed with sweeteners such as rental guarantees and stamp duty concessions as a smokescreen for their lack of potential for capital growth.
Among the first of the new funds is Westpac Residential Property Trust, which has a $100 million fund holding surplus army houses, which have little propensity for capital growth. The Residential Property Trust of Australia, linked to St George Bank, has flagged its intention to buy 800 houses, many of which are being sourced in outer suburban and economically stressed areas of Sydney: the very stock that is most vulnerable to mortgage defaults.
It is concerning that funds will try to handle residential property using measures they are more familiar with, such as the price/earnings multiples applied to shares. If so, the reporting on performance of such funds will be totally inappropriate.
Unless private SMSF investors – and larger superannuation fund members for that matter – are savvy enough to question the content and measurement of any residential property trust or superannuation fund manager’s offerings, then the potential grab bag of investment disasters that is emerging could well combine into a very explosive soup.
– Monique Wakelin, of the Melbourne-based independent property acquisition and advisory company Wakelin Property Advisory. This story was first published in the Eureka Report, www.eurekareport.com.au.
Economy roundup
Job vacancies fell 2.3%, seasonally adjusted, between November 2006 and February 2007, and 11.1% in the year to February, Australian Bureau of Statistics figures released today show.
Job vacancies increased by 5.3% in South Australia and 4.8% in Western Australia, the states with the fastest job vacancy growth.
Australia has fallen from ninth to 12th in the Grant Thornton International SuperGrowth Index, released yesterday. The index measures the number of companies that grow much faster than average in each country. The US had the highest number of super growth companies, followed by Armenia and Ireland.
The S&P.ASX 200 was steady at 5929.3 at 12.15pm, up just 0.1% on yesterday’s close. The Australian dollar is trading at US80.62¢ at 12.15pm, up on yesterday’s Sydney closing price of US80.46¢.
And the prospects of an interest rate rise in the US appear to have increased with comments by Federal Reserve Governor Ben Bernanke overnight. Bernanke told a US Congress committee that “our policy is still oriented towards control of inflation, which we consider to be at this time to be the greater risk”.
– Mike Preston
