The CBA Viewpoint report shows that from December 2008 to December 2009, the percentage of 18-24 year olds receiving Centrelink jobless benefits rose 13.6 per cent, while increasing only 7.3 per cent for 25-34 year olds.

“The state of the labour market prompted employers to hoard labour, which impacted upon recruitment” said Commonwealth Bank Chief Economist Michael Blythe. Also “Older workers whose retirement savings had been damaged stopped exiting the workforce,” he said.

Centrelink benefits for 35-44 year olds rose 8 per cent over December 2008-December 2009, while for 45-54 year olds the increase was only 4.1 per cent.

“Lower retirement rates meant fewer jobs were freed up for new, or younger, workers,” Mr Blythe said.

The salaries of older workers fared better through the crisis, as well, with an 8.1 per cent increase in monthly salary payments going to 55-64 year olds, while 18-24 year olds saw the weakest increase of only 2.5 per cent, just above the inflation rate of 2.1 per cent.

Workers aged 25-44 experienced a 4.9 per cent increase in monthly salary payments, not as high as the 5.8 per cent increase enjoyed by 45-54 year olds.

“The fact that older age groups showed greater increases in salary receipts than younger age groups suggests younger workers, with lower levels of skills and experience, may not be able to negotiate pay increases during a period of economic downturn; or that younger workers are more likely than older workers to have their hours reduced.

The data in the report is drawn from a 1.3 million household sample of Commonwealth Bank’s customers along with 2000 interviews.

article excerpts smh.com.au

Total commercial finance fell 12.9 per cent, seasonally adjusted, to $27.066 billion in the month, from $31.086 billion in March, the Australian Bureau of Statistics (ABS) said.

Overall personal finance commitments, though, rose 0.2 per cent in April, seasonally adjusted, to $6.270 billion, from $6.260 billion in March, the ABS said.

Housing finance for owner occupation was one area of growth, rising 1.9 per cent to $16.050 billion in April from $15.750 billion in March.

Lease finance fell 8.4 per cent in April to $422 million, compared with $461 million in March.

article excerpts smh.com.au

Invoice financing allows customers to borrow up to 80% of the value of outstanding sales invoices, relieving cashflow pressure for many businesses.

The Institute for Factors and Discounting estimates that the total turnover recorded for discount invoicing was $62.7 billion in the year ending March, a 16% increase from the previous year.

ANZ’s decision to abandon the practice comes after BankWest’s similar move out of the market last year. The other major banks continue offering discount invoicing.

 
Interestingly,  a number of  company liquidations and insolvencies performed by Liquidation Direct involve factoring finance.
The number of companies turning to this form of finance is increasing at present perhaps because of the impact of the economic downturn on other businesses and the inability of companies to manage their cash flow due to being unable to collect debtors in a timely fashion.
While factoring may be an appropriate form of finance for many businesses it should only be taken up with extreme caution, appropriate professional advice and a clear understanding of the significant costs and impact of the financing contract particularly where debts sold are not able to be recovered.

A Dun & Bradstreet (D&B) business expectations survey found 58% of executives expect profits to fall in the March quarter of 2009.

Moreover, 54% of respondents said they were preparing for a drop off in sales over the same period.

“The decline reflects the slowdown in consumer spending, which has been noticed by 28% of firms, and the poor results experienced in the first three quarters of 2008,” the report, released on Monday, said.

D&B said the there was hope among executives that the RBA’s actions would help promote spending but the size of recent cuts “indicates that the current downturn is likely to impact Australian businesses into 2009”.

Although recent falls at the pump has eased the impact of petrol prices, the cost of fuel remained at the forefront of executives’ minds, as did the volatile Australian dollar.

The report found 73% of executives said their businesses had been hurt by the local currency’s dramatic fall from 98.49 US cents in mid-July to about 60 US cents in late October, with wholesalers suffering the biggest impact.

The global liquidity crisis has also resulted in significant cash flow challenges for some businesses and forced many organisations to postpone growth plans as access to credit has dried up.

While economists believed the threat of inflation had receded and was now expected to fall, the survey found selling price pressures remained alive and well.

The survey’s measure of selling prices rose 17 index points to† 79 points – its highest reading in the history of the survey – with† 82% of firms expecting to raise prices, compared with 3% expecting a decrease.

Liquidation Direct has noticed a number of companies fail with dramatic fall in sales. Areas involving discretionary spending such as restaurants &†retailers are struggling with many companies entering into voluntary liquidation or voluntary administration.

There are real insolvency issues in the economy at present and directors need to understand their roles and responsibilities in difficult times.

Liquidation Direct operates a 24 hour insolvency advice line that is answered by an insolvency expert at all hours.

Call 1300 767 525 for free and confidential insolvency advice.

GM and Chrysler are†still discussing a merger that could combine the struggling automakers,†both are†forced to cut costs more aggressively than had been anticipated to survive the sweeping economic downturn.

Analysts see threats to†both automakers’ survival.

“The global credit crisis has had a dramatic impact and new vehicle markets in North America and Western Europe have contracted severely,” GM Chief Executive in a letter to employees.

Results from Germany’s Daimler, South Korea’s Hyundai Motor and Fiat in Italy added to the gloom facing the automotive industry as recession clouds spread throughout the developed world.

Facing a US market expected to tumble the†GM said†there was†“an increasing need to conserve cash” and that GM†would begin dismissing salaried and contract staff as it also cuts benefits.†

Chrysler said it would close a Delaware SUV plant a year earlier than planned, cutting 1,825 jobs, after posting a loss of more than $US1 billion ($1.5 billion) in the first half.†

The maker of Mercedes-Benz cars and the world’s biggest truckmaker lowered its expectations for the year and said its own forecasts were guesswork.

“The (Daimler) figures are even below our very cautious estimates.”

Fiat said global demand for its products could drop 10 to 20% and its profit could tumble by as much as 65% in a “worst-case” scenario.

At Hyundai, South Korea’s top car maker, emerging-market demand is expected to fall next year.

In Paris, Renault posted a 2.2% drop in third-quarter sales, blaming a sharp fall in European markets in the second half.

Global carmakers face a sharp drop in sales as consumers put off major purchases on fears of a recession and credit becomes more expensive or unavailable.

Production cuts are also pushing parts suppliers to the brink of liquidation. German Rheinmetall†also lowered profit guidance due to plummeting orders for pistons, valves and oil pumps.

Car manufacturing†is traditionally one sector hardest hit by recession.

Hyundai, the world’s No. 5 automaker along with affiliate Kia Motors Corp, posted a 38% fall in third-quarter net profit. Its future outlook was gloomy.

As consumers stop spending, obviously the manufacturers of big ticket items are the first to feel the pinch. It should be noted that the Australian car market is also suffering badly with the closure of Australian manufacturing plants in SA and a dramatic slowdown in new car sales. This has a direct impact on car dealership, suppliers to the car industry and so it goes as it filters down to smaller businesses.

And then, employment is impacted – there are some suggestions that unemployment could rise to 10%.

If you are feeling the pinch and need insolvency advice, call the insolvency experts – Liquidation Direct – anytime on 1300 767 525. Free insolvency advice, help with Voluntary Administration, liquidation and bankruptcy for individuals. 24 hours.

Reuters article excerpts and comments

Woodside followed up Tuesday’s Rio Tinto profit blockbuster with a 67% jump in headline profit to just over $1 billion in its June half, and a near-doubling of underlying earnings compared with the June half last year. That result was on the back of the rise in oil and gas prices towards record highs in the June half ó but oil is now 20% below its July 3 high, and the tide Australia is holding back was evident in the result posted by the world’s biggest shopping centre owner, Westfield.

The group Frank Lowy built is in robust shape, with total assets of $51.8 billion and liquid funds $7.3 billion after some precautionary capital raisings, including one of $3 billion in June last year, before the global credit crisis and economic downturn emerged in their full-blown form.

But Westfield’s earnings report shows that Australia is increasingly an island of prosperity in a turbulent sea.

Operating earnings in the June half rose a solid 14.7% to $928 million. But total profit, which includes the impact of property revaluations, was 35% down to $1.285 billion, as property revaluations fell from $1.19 billion to $247 million.

The Westfield revaluation story was similar to the one revealed by GPT, which downgraded its earnings outlook at the end of the first week in July, and confirmed it yesterday in its own profit report.

Top-quality commercial, industrial and retail property values in Australia actually edged up in the June half, because the economy was strong enough to keep buildings and shopping centres fully tenanted and rents rising, even as the market squeeze pulled down generally on property sale prices.

Overseas, however, it is a different story: the economic downturn is manifesting itself unambiguously, occupancy rates and rents are coming under pressure, and property values are being adjusted downwards.

In GPT’s case, properties in Europe and the US took valuation hits, and Australian property values were flat overall, and with retail, office and industrial property posting a modest increase. At Westfield, the value of Australian properties was increased by $393 million, but British property values reduced by $154 million, and US properties by $180 million.

Westfield’s global retail sales overview showed another aspect of the phenomenon. Sales in Australia were up 5.6% in the year to June 30, but US specialty store sales were down 0.2%, and British sales were up by a soft 3.2%, with sales outside London virtually stalled.

Since then the internal evidence that demand has slowed appreciably has mounted to a point where the markets now expect that a cut in the 7.25% cash rate on Tuesday is more likely than not.

As the resource boom continues to cool, however, the question arises as to whether the Reserve has waited too long, particularly given that the booming profit results the resource companies are posting are to a considerable extent lagging indicators.

Contract prices that are set once a year, such as coal and iron ore, jumped again in the June half, with iron ore contract prices rising by 85% on average, and coking coal prices by 215%.

That flood will flow into company and national earnings in the new financial year, but freely traded commodities are now well below their peak. In July, base metals in the Reserve’s index of commodity prices were almost 16% below their March high in Australian dollar terms, for example, and 12.5% lower in US dollar terms.

Prices have eased further since July, with London Metal Exchange-quoted copper falling by 5.9%, for example, and LME aluminium falling by 7%. Two of the industrial metals, zinc and nickel, now generate price charts that resemble the Matterhorn: zinc topped out in November 2006, and is now 60% lower, and nickel is 61% below its peak in May last year.

The global slowdown is both a byproduct and a contributor to declining values for assets generally, including property and commodities, and while it has been fashionable to argue that Asia’s economy is “decoupled” from the global downturn, the reality is, as usual, more complicated.

China, the key force behind the commodity price boom is, for example, still sourcing about a third of its economic growth from exports to the rest of the world. The slowdown in its growth from about 11.5% last year to less than 10% now, with further declines in prospect, is therefore still substantially due to the West’s slowdown, and if it continues, Australia’s growth will inevitably weaken.

All of which is food for thought for Rio Tinto’s chief financial officer, Guy Elliott, and the institutions he will meet in Sydney today to show off Rio’s profit and argue that it renders BHP Billiton’s takeover offer redundant.

The metal price outlook will no doubt get a run: Rio bet the house last year by paying $US38 billion for Alcan, an aluminium producer that has so far underperformed. Elliott and his colleagues are long-term bullish, but the takeover is going to be decided before Alcan starts kicking goals.

The Maiden family owns BHP Billiton shares.

mmaiden@theage.com.au

He pulled no punches yesterday, telling Parliament fallout from the economic downturn was impacting on ordinary mums and dads.

Poll: Who do you blame for your being worse off?

But he said it was not Labor’s fault – instead it was the global economic slowdown and mismanagement by the previous Coalition Government.

“The challenges we face as an economy are in part globally driven and are in part a product of some of the economic conditions we inherited – that is just the truth,” he said.

Mr Rudd also warned there was no quick fix with more “uncertain global economic times ahead”.

The sobering assessment came as economic management and the Coalition threat to block Budget measures in the Senate dominated the first Question Time of the new session of Parliament.

During the eight-week break there has been a raft of poor economic figures and some economists are warning Australia is on the verge of a recession.

The Reserve Bank is set to slash interest rates next week in a bid to turn around the economy.

Mr Rudd went to the election last year promising “to ease the financial burden” on working families but has now been forced into a major change of direction.

He will today deliver a major speech to the National Press Club laying out his future plans and there is expected to be a strong economic flavour.

Opposition Leader Brendan Nelson yesterday used the first question of Question Time to accuse Mr Rudd of letting down voters.

“Prime Minister, why are Australians worse off since the election of the Rudd Government?” he asked.

Mr Rudd did not blink and launched into his grim assessment of the Australian economy, saying Australia was being dragged down by the global credit crunch, the world oil shock and a jump in food prices.

On the domestic front, he said households were being buffeted by inflation at a 16-year high, 10 interest rate rises in a row and the second-highest rates in the developed world.

“Look carefully into the eyes of Australian mums and dads and those who are seeking to make ends meet out there and ask the cumulative impact of 10 interest rate rises – it’s significant,” he said.

Later Dr Nelson ramped up the fears of tough economic times ahead, especially outside the boom states of Queensland and Western Australia.

“We might well have a very hard landing in South Australia, Victoria and Tasmania, and NSW. Very hard.”

But he was contradicted by his shadow treasurer and leadership rival Malcolm Turnbull, who painted a much rosier picture saying the Australian economy was still strong.