Fed not thinking about rate hike until inflation ‘at least’ 2%, Clarida says



FILE PHOTO: Federal Reserve Vice Chair Richard Clarida reacts as he holds his phone during the three-day “Challenges for Monetary Policy” conference in Jackson Hole, Wyoming, U.S., August 23, 2019. REUTERS/Jonathan Crosby

September 23, 2020

By Howard Schneider

WASHINGTON (Reuters) – Federal Reserve Vice Chair Richard Clarida said on Wednesday that policymakers “are not even going to begin thinking” about raising interest rates until inflation hits 2%, comments aimed at cementing the public’s understanding of the U.S. central bank’s new approach to monetary policy.

“Rates will be at the current level, which is basically zero, until actual observed PCE inflation has reached 2%,” Clarida told Bloomberg Television, referring to the Fed’s preferred measure of prices. PCE inflation tends to be somewhat lower than the better-known Consumer Price Index.

“That’s ‘at least.’ We could actually keep rates at this level beyond that. But we are not even going to begin thinking about lifting off, we expect, until we actually get observed inflation … equal to 2%. Also we want our labor market indicators to be consistent with maximum employment … So that is the whites of their eyes.”

The Fed cut rates to near zero in March and took other steps to combat a recession that took hold as businesses shut down and consumers stayed home to fight the spread of the coronavirus.

Clarida said that with further government aid from Congress and the steps the Fed has already taken, the U.S. economy could return from the current “deep hole” of joblessness and weak demand in perhaps three years.

To aid that process, the Fed in late August revised its approach to monetary policy to commit to lower rates for longer periods of time, allowing the risk of higher inflation to try to encourage a stronger economic recovery and more job gains for workers. A follow-up policy statement last week gave more specific guidance about future decisions, but questions remain about what the new approach will mean in practice.

Clarida said there should not be any confusion: Rates will not increase until labor markets recover fully and prices hit the Fed’s target.

“So lower for longer, and we have given some observable metrics,” for judging when a rate hike debate might begin, Clarida said.

Decisions about any possible overshoot of inflation are “academic” at this point, he said, and can be made once the economy rebounds.

(Reporting by Howard Schneider; Editing by Andrew Heavens and Paul Simao)





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NSW’s unemployment rate is 6.7 per cent — but in these parts of Sydney it’s a very different story for young people


Geraldeen Ansumana has been looking for work since the start of this year.

The 19-year-old from Fairfield, in Sydney’s south-west, hears the same thing a lot: “We’re going to get back to you.”

“One place called me and said, ‘you’ve got a job, you need to have steel cap boots’,” she said.

“I got my boots and they never called me back.

“It’s quite difficult, because you’re having hopes like finally, I’ve got a job and I’m going to start working, and then they say, ‘we’re going to get back to you’,” she said.

Ms Ansumana is not alone.

According to the Australian Bureau of Statistics (ABS), the youth unemployment rate in Sydney’s south-west is 20.7 per cent.

Last week, the ABS said NSW’s unemployment rate dropped to 6.7 per cent, but the number of young people looking for work in Western Sydney tells a different story.

The data showed youth unemployment in Parramatta (15.8 per cent), Blacktown (15.4 per cent), and the Outer West/Blue Mountains (13.6 per cent) is a growing problem exacerbated by Australia’s pandemic-driven recession.

“One of the things that happens in a recession is the youth unemployment rises very significantly, and very quickly, and then it stays up for a very long period,” said Raja Junankar, a Professor of Economics at the University of NSW.

“And often the unemployment rate remains higher than before the recession,” he said.

He said there were also long-term issues that come with long periods of youth unemployment.

“It’s important to remember that for young people who become long term unemployed, that is unemployed usually for more than 12 months, it makes it even more difficult for them to find another job,” Professor Junankar said.

Raja Junankar says youth unemployment usually rises during a recession.(ABC News: Jonathan Hair)

He said the period of unemployment leaves the young person without work experience and a stigma that they might have a bad work ethic.

Thomas Lenthen lives in the Blue Mountains and wants to be a teacher.

But he also wants to take a gap year to bolster his finances before further study.

He’s expecting to be stressed over the next six months.

“A lot of stress because of exams, but a lot more stress because there’s not a lot of work, and my economic and my family’s economic situation, is quite dire,” he said.

He had found a job at a cafe earlier this year but was let go when the pandemic hit.

“It was really demoralising, especially in the first couple of weeks of being hired,” he said.

A man holds is hair with one hand
Thomas Lenthen lost his job in the first couple of weeks of being hired.(ABC News: Jonathan Hair)

Professor Junankar said it was a common experience.

“A lot of employers work on the basis of ‘last in, first out’,” he said.

“Which means young people are usually the newest employees in the labour market … so they’re the first ones to get dropped out.

“Employers can be quite fussy during a recession because they have a queue of people who are looking for kinds of jobs that these young people are looking for.”

Liam Sherman wants to be a mechanic but keeps getting knocked back for work.

A man wearing a mask works on a car
Liam Sherman admits the next six weeks are going to be tough as he searches for work.(ABC News: Jonathan Hair)

“These next six months, they’re going to be tough,” the 21-year-old said.

“I go home and I’m just like, what’s the point?

“And I used to be so upbeat about work, it’s really hard and tough.”

He grew up in Padstow and has a message for potential employers.

“We’re here, we’re ready, please help us out.”



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Australia’s unemployment rate falls to 6.8% – but more Victorians are out of work | Business


Australia’s employment rebounded with 111,000 more jobs in August compared with July, but more Victorians are out of work due to the state’s second wave of Covid-19 and Melbourne’s stage-four lockdown.

The Australian Bureau of Statistics labour force data, released on Thursday, confirms Australia’s two-speed economy, with unemployment falling overall by 0.7% to 6.8% but rising in Victoria to 7.1% after the loss of 42,400 jobs.

The treasurer Josh Frydenberg told reporters in Canberra that although the figures show Australia’s economy is “remarkably resilient” and “fighting back”, the road to recovery will still be “long, hard and bumpy”.

The effective unemployment rate – including those who had left the labour market or worked zero hours – fell from 9.8% to 9.3% but “still remains high”, he said.

Before the release Scott Morrison defended the government’s decision to reduce jobkeeper wage subsidies and the coronavirus supplement from late September, suggesting they would be boosted by new job creation initiatives in the October budget.

Employment increased by 0.9% in August, the ABS found, but hours worked rose by just 0.1%. In Victoria hours fell by 4.8% compared with a 1.8% increase across the rest of Australia.

The rebound in jobs was stronger for women, with 67,000 more in work compared with 44,000 men.

Despite the improvement in unemployment, the underemployment rate remained at 11.2%, 2.4% above the level in March. The underutilisation rate, which combines the unemployment and underemployment rates, fell 0.7% to 18.0% but remained 4.7% higher than March.

The 111,000 boost to employment in seasonally adjusted terms resulted from a net increase in employment of 44,500 between July and August. This was driven by a surge of owner-managers without employees returning to work (50,200), dwarfing the minimal growth in the number of employees (up 2,600).

Employment grew in all states and territories except Victoria in August:

Paul Karp
(@Paul_Karp)

Employment: down in all states and territories in April/May; everyone up except NT in June/July; and since August everyone up except Victoria – as second wave and stage 4 lockdown hit. #auspol pic.twitter.com/T1VswT5VpL


September 17, 2020

Victoria also has the highest proportion of employed workers on zero hours (3.5%):

Paul Karp
(@Paul_Karp)

Although Victoria had comparable rates of people on ZERO HOURS (as a proportion of those employed) – by August it was an outlier. pic.twitter.com/XwdCsxpZrj


September 17, 2020

At the Covid-19 Senate inquiry hearing, Labor targeted the government over its decision to cut jobkeeper and jobseeker by $300 a fortnight from late September, with bigger cuts for part-time workers.

A Deloitte report released this week warned that reducing the coronavirus supplement would cost the economy $31bn and the equivalent of 145,000 full-time jobs over two years.

According to the McKell Institute, cuts to jobkeeper will take $9.9bn out of the economy by Christmas with a $1.52bn reduction in fortnightly support.

Earlier Morrison told reporters at BlueScope Steel in Port Kembla that jobkeeper needed to be reduced because “keeping the Australian economy on life support” was not sustainable, costing $11bn a month.

The government would use next month’s budget to announce “a lot of new plans, a lot of new initiatives, that will see us grow out of this Covid recession”, the prime minister added.

“We know the effective rate of unemployment is well over 10% and can peak a lot higher than that … Treasury advises it’s going to stay up around that 14% mark.

“It was falling before the Victorian wave hit us, and with Victoria opening up again we would expect to see that fall again.”

Labor’s shadow employment minister, Brendan O’Connor, said it welcomed the reduction in the unemployment rate but is concerned the figures “would convince the government not to do enough to help our economy and to help the almost 1 million Australian workers still out of work”.

“The government is foreshadowing that in just 10 days time they’re going to rip billions of dollars out of the economy, which could have very adverse effects on businesses and indeed on employment.”

On Wednesday, the OECD updated its forecasts for Australia’s economy, finding it is set to shrink by 4.1% in 2020, a 0.9% improvement on its June forecast, but grow by just 2.5% in 2021, down 1.6% on projections, indicating a slower recovery.

Frydenberg said the government would outline “the next stage of the jobmaker plan” in the October budget with a focus on tax, industrial relations, cutting red tape, energy, skills and infrastructure.

Luke Yeaman, the deputy secretary of Treasury’s macroeconomic group, told the inquiry that “in isolation” it was “undisputed” that tapering the jobkeeper and jobseeker rates “will take some income out of the economy”.

But Yeaman argued that “across large parts of the country”, except Victoria, economic indicators including the labour market had improved.





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Jobs figures show drop in unemployment rate


Australia’s unemployment figure has shocked pundits by unexpectedly falling to 6.8 per cent as the economy roars back to life in the states that have managed to reopen the economy.

Border closures and the coronavirus lockdown on Victoria have had a huge impact on the unemployment rate with some states that have reopened recording a surprise jobs boom.

According to the Australian Bureau of Statistics, total jobs increased by a surprising 111,000 jobs in August, a figure propped up by the creation of over 70,000 part-time jobs.

The topsy turvy results were much better than expected in some states.

While employment fell overall by 413,000 job since March, unemployment has only increased by 200,000.

That underlines the Prime Minister’s concerns that the “real” unemployment rate is much higher because thousands have simply given up looking for work.

The national unemployment rate fell from 7.5 per cent to 6.8 per cent in August in a result few economists saw coming.

But in Victoria, where millions of Melburnians remained confined to their homes and banned from attending work, unemployment rose to 7.1 per cent up from 6.8 per cent during the previous month.

RELATED: Follow our latest coronavirus updates

Treasurer Josh Frydenberg said the NSW economy, where borders remained open, was the stand out performer.

“What we do know is that closed borders cost jobs,’’ Mr Frydenberg said.

“We recognise that despite this fall today, in Australia’s official unemployment rate, many Australians are doing it tough. And the road to recovery will be long, it will be hard, and it will be bumpy.

“But we have seen over the last three months 458,000 new jobs being created. Those 458,000 new jobs, 60 per cent of those jobs have gone to women and 40 per cent have gone to young people.”

Mr Frydenberg said the effective unemployment rate, which takes into account not just those who are unemployed officially, but those who have left the labour force or seen their hours reduced to zero, has fallen from 9.8 per cent to 9.3 per cent.

It was a different story in Western Australia which closed its borders and controlled COVID-19 early, with unemployment falling from 8.3 per cent to 7 per cent with 32,200 jobs created.

WA Treasurer Ben Wyatt described the figures as “strong” but said there was “always more to do.”

Unemployment also fell in Queensland, which like WA has closed its borders to states still experiencing COVID-19 infections.

Queensland’s jobless rare fell from 8.8 per cent to 7.5 per cent.

The jobless rate fell in the Northern Territory from 7.5 per cent to just 4.2 per cent.

Today’s figures also challenge assumptions that women are hardest hit by COVID-19 lay offs with more women returning to the workforce after losing jobs in retail and hospitality as a result of shutdowns.

The new payroll figures suggest men are now just as likely to be out of work and are possibly taking longer to find work again after losing their jobs.

The surprise result comes amid warnings that Australia’s COVID-19 recession could last for four years, with economists predicting the jobs market may not return to normal until 2023.

Overnight, the OECD released new economic forecasts predicting the Australian economy will not get back to its pre-coronavirus level until 2022 with the Victorian coronavirus lockdown extending the recession.

ANZ economists have predicted it could take even longer to return to normal.

“We have downgraded our labour market forecasts, and now don’t expect employment to recover to pre-pandemic levels until 2023,’’ ANZ senior economist Catherine Birch said.

“The labour market outlook is very worrying. Without more fiscal stimulus, unemployment would rise to – and possibly remain at – an unacceptably high level, with damaging long-term consequences.”

RELATED: Scott Morrison offered Daniel Andrews help with hotel quarantine three times

The OECD warned that “localised lockdowns, border closures and new restrictions being imposed in some countries to tackle renewed virus outbreaks are likely to have contributed to the recent moderation of the recovery in some countries, such as Australia.”

“Put simply closed borders cost jobs and put the economy in a weaker position to recover,’’ Treasurer Josh Frydenberg said.

“The Morrison Government will continue to do what is necessary to cushion the blow and help all Australians get to the other side of the crisis.”

Labor’s treasury spokesman Jim Chalmers said the grim outlook underlined the risk of slashing payments for the unemployed and the wage subsidy JobKeeper.

“During the deepest recession in almost a century and an escalating jobs crisis, it makes no sense for the Morrison Government to be withdrawing support without a comprehensive jobs plan to replace it,’’ he said.

“The OECD joins the RBA and prominent economists’ calls for more support, not less. Instead of a jobs plan, Scott Morrison and Josh Frydenberg want to wind back JobKeeper, cut super, cut wages, freeze the pension, point the finger and shift the blame.

“This recession will be deeper and unemployment queues will be longer because the Morrison Government is leaving too many people behind in this first recession in three decades.”

A new analysis released today by the McKell Institute underlines the concerns.

It warns that the Morrison Government will rip $1.52 billion out of the economy every fortnight as a result of the reduced JobKeeper per fortnight payments.

By Christmas, this represents a $9.9 billion reduction in fiscal support than would have occurred if the Commonwealth maintained JobKeeper at its original rate.

An estimated one million part time workers will have their JobKeeper pay reduced from $1500 per fortnight to $750 per fortnight, while approximately 2,430,000 full-time workers will see their JobKeeper pay reduced to $1200.



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Return to pre-coronavirus JobSeeker rate could cost 145,000 jobs


Economists are warning of a $31.3 billion hit to the economy over two years if the Jobseeker welfare payment reverts to pre-pandemic levels.

A Deloitte Access Economics analysis commissioned by the Australian Council of Social Services (ACOSS) found winding back the supplement this month, and then removing it entirely in December, would reduce the size of the economy by $31.3 billion over two years — equivalent to almost 1 per cent of GDP.

The analysis also predicted a return of the JobSeeker payment to pre-pandemic levels of $40 a day would lead to about 145,000 job losses.

Economist at Deloitte Nicki Hutley said financial support for unemployed Australians and low-income earners would be critical to the nation’s economic recovery.

“If we take it away too soon and too harshly, we will end up adding to the unemployment queue,” Ms Hutley said.

Ms Hutley said every dollar invested in JobSeeker was generating significant economic return.

“If people don’t have the supplement, they can’t consume as much,” she said.

“That affects demand for all sorts products right across the Australian economy but particularly the services sector and that’s where we will see the biggest job losses.”

The Federal Government effectively doubled the JobSeeker payment — formally known as Newstart — by introducing a $550 “coronavirus supplement” when the pandemic first took hold and forced the mass shutdown of businesses.

Ms Hutley says low-income earners will be critical in helping the economy recover.(Supplied: Deloitte)

The temporary supplement will be cut by $300 a fortnight on September 25. The Government is yet to reveal what the future of the payment will be beyond the end of December.

ACOSS chief executive officer Cassandra Goldie reiterated the organisation’s calls for the Prime Minister to stop the imminent cut to the supplement and instead legislate a permanent increase.

“There are a lot of things that are not in our control in this pandemic but one thing that the Government does have control over is ensuring that everyone has enough to cover the basics of life, including a safe place to live,” she said.

“Not only is this the right thing to do, it’s one of the best things we can do to support jobs now and on the long, hard road to full recovery.”

Prime Minister Scott Morrison previously said he was “leaning heavily” towards extending the supplement in some form beyond the end of the year.



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England brings in more local restrictions as COVID-19 rate soars


According to a government-backed surveillance project, the infection rate is rising across all age groups, apart from those over 65, and cases are no longer clustering in hospitals or care homes as they were a few months ago.

The researchers at Imperial College calculated the reproduction “R” number of COVID-19 infections in England, which measures how many people an infected person will pass the disease to, is at 1.7, indicating the epidemic is growing.

The government’s official R estimate for the whole of the United Kingdom released on Friday is between 1 and 1.2.

The United Kingdom reported 3539 confirmed new cases of COVID-19 on Friday, up by one-fifth from Thursday’s figure, and the highest level since mid-May.

“This is a massive blow to the government’s strategy to contain the spread of COVID-19,” said Simon Clarke, an expert in cellular microbiology at Britain’s University of Reading. “It’s likely that the coronavirus is circulating more freely out in the community again, meaning we are likely to need greater restrictions on our lives to push the transmission rate back.”

The signs of a new wave of infections emerged at the end of the summer as people began resuming parts of their pre-coronavirus lives, travelling overseas and socialising in cafes, restaurants and parks.

Some people, especially the young, have been accused of relaxing their vigilance and not following rules on social distancing.

Matt Hancock, the health minister, urged people not to jeopardise hard-won gains made against the virus during a two-month lockdown earlier this year.

“The pandemic is not over, and everyone has a role to play to keep the virus at bay and avoid further restrictions,” he said. “We’ve seen all across the world how a rise in cases, initially among younger people, leads to hospitalisations and fatalities.”

The United Kingdom has suffered more than 65,000 excess deaths from coronavirus, according to the government’s statistics office, with a surge that lasted longer and spread to more places than those in other hard-hit European nations like Italy and Spain.

French PM: no new lockdown over COVID-19 resurgence

French Prime Minister Jean Castex said on Friday his government was not planning a new, nationwide lockdown to contain a resurgence in COVID-19 cases, but would instead implement a raft of less radical measures.

He said these would include fast-tracked COVID-19 testing for priority cases, and giving local authorities the power to make some businesses reduce opening hours.

France’s Prime Minister Jean Castex said there would not be a new lockdown following a surge in virus cases.Credit:AP

The French government is under renewed pressure to curb the spread of the disease as the country faces a sharp spike of infections since the beginning of the month.

Health authorities reported 9843 new confirmed coronavirus cases on Thursday, beating by almost 900 a previous record of 8975, set six days earlier.

In March, France had imposed a strict lockdown. That succeeded in preventing the hospital system from being overwhelmed by COVID cases, but also dealt a severe blow to the economy. That lockdown was relaxed towards the start of May.

Daily US virus deaths decline, but trend may reverse in autumn

The number of daily US deaths from the coronavirus is declining again after peaking in early August, but scientists warn that a new bout with the disease this autumn could claim more lives.

The arrival of cooler weather and the likelihood of more indoor gatherings will add to the importance of everyday safety precautions, experts say.

“We have to change the way we live until we have a vaccine,” said Ali Mokdad, professor of health metrics sciences at the University of Washington in Seattle. In other words: Wear a mask. Stay home. Wash your hands.

The US has seen two distinct peaks in daily deaths. The nation’s summertime surge crested at about half the size of the first deadly wave in April.

Deaths first peaked on April 24 at an average of 2240 each day as the disease romped through the dense cities of the north-east. Then, over the summer, outbreaks in Texas, California and Florida drove daily deaths to a second peak of 1138 on August 1.

Some states – Florida, Georgia, Mississippi, Nevada and California – suffered more deaths during the summer wave than during their first milder run-in with the virus in the spring. Others – Michigan, Pennsylvania, Maryland and Colorado – definitely saw two spikes in infections but suffered fewer deaths the second time around.

Now about 700 Americans are dying of the virus each day. That’s down about 25 per cent from two weeks ago but still not low enough to match the early July low of about 500 daily deaths, according to an Associated Press analysis of data compiled by Johns Hopkins University.

The number of people being treated for COVID-19 in hospitals in the summertime hotspots of Florida and Texas has been on a steady downward trend since July.

UAE daily coronavirus cases surge to near peak level

The United Arab Emirates health ministry reported on Friday 931 new daily cases of the coronavirus following a recent surge in infections that are near the highest since the pandemic broke out.

Until last month, there had been a generally falling trend since the UAE’s new daily cases peaked at 994 in May, but numbers have surged from 164 cases on August 3.

The Gulf Arab state has recorded 77,842 infections and 398 deaths from COVID-19. The government does not disclose where in the country of seven emirates the infections or deaths occurred. About 10 million people, mostly foreigners, live in the UAE.

A health ministry official on Thursday asked the public to adhere to social distancing and avoid gatherings and mixing with people known to have the virus, which she said accounted for about 88 per cent of cases.

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The UAE had earlier enforced strict measures to curb the spread of the novel coronavirus, including locking down tourism hub Dubai for a month and months-long evening curfews nationwide.

Most business and public venues have now reopened with some restrictions, and people must wear a mask outside homes.

Dubai reopened to foreign visitors in July, although airports in the rest of the country remain closed to visitors.

Abu Dhabi, the UAE capital and the largest and richest emirate, has restricted movement into the area to those with a negative COVID-19 test.

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Bank of Canada holds rate at 0.25%, warning of slow and choppy recovery ahead



Central banks pride themselves on their ability to keep their eyes on the horizon, no matter the distraction.

The Bank of Canada stayed true to form on Sept. 9, acknowledging a faster-than-expected rebound from the economic collapse that followed the COVID-19 lockdowns, while sticking to its story that the recovery, ultimately, will still be bumpy and drawn out.

“The bank continues to expect this strong reopening phase to be followed by a protracted and uneven recuperation phase, which will be heavily reliant on policy support,” the central bank

said

in a revised policy statement. “The pace of the recovery remains highly dependent on the path of the COVID-19 pandemic and the evolution of social distancing measures required to contain its spread.”

Governor Tiff Macklem and his deputies on the Governing Council left the benchmark lending rate at 0.25 per cent, the lowest setting ever, and restated their commitment to purchase at least $5-billion worth of government bonds per week with newly created money. Those two policies form the core of the central bank’s efforts to keep borrowing costs uncommonly low until the recovery is “well underway.”

Policy-makers reiterated that the benchmark lending rate will remain pinned near zero until the central bank’s two-per-cent inflation target is “sustainably achieved,” an unusually explicit promise meant to give businesses and households confidence that they needn’t worry about a surprise jump in borrowing costs. They added that asset purchases will be “calibrated” to keep market interest rates at levels that “support the recovery and achieve the (Bank of Canada’s) inflation objective.”

The Consumer Price Index (CPI)

increased

only 0.1 per cent in July from a year earlier, and the Bank of Canada’s

latest projections

imply it will be at least a couple of years before the economy gains enough strength to put sustained upward pressure on prices.

“CPI inflation is close to zero, with downward pressure from energy prices and travel services, and is expected to remain well below target in the near term.,” the statement said.

To be sure, the Bank of Canada’s forecast specialists were conservative in July when they helped their bosses construct a “central scenario” of how Canada’s economy might recover from an epic collapse. The summer Monetary Policy Report assumed that gross domestic product free fell at an annual rate of 43 per cent in the second quarter, and would rebound at a rate of about 31 per cent in the third quarter.

GDP dropped at an annual rate of about 39 per cent between April and June, Statistics Canada reported on Aug. 28. The extraordinary level of government support for households appears to have offset a significant amount of the immediate damage from effectively closing the economy for most of the spring. That should mean a stronger “reopening” phase as lockdown measures were eased heading into the summer.

The Bank of Nova Scotia’s “nowcast,” which estimates the current quarter’s growth rate by assembling key indicators in real time, suggests the economy is growing at an annual rate of about 49 per cent, significantly better than the central bank’s July estimate.

“As the economy reopens, the bounce-back in activity in the third quarter looks to be faster than anticipated in July,” the central bank said. “While recent data during the reopening phase is encouraging, the bank continues to expect the recuperation phase to be slow and choppy as the economy copes with ongoing uncertainty and structural challenges.”

Few, if any, economists expect the current pace will be sustained. Aid programs are scheduled to be tapered off or ended during the autumn and elevated levels of joblessness and bankruptcies will dent the economy’s ability to generate wealth. The virus will continue to weigh on confidence until a vaccine is discovered and produced at scale.

Jean-François Perrault, Bank of Nova Scotia’s chief economist, still estimates that Canada’s GDP will decline 5.7 per cent in 2020, and grow only 4.8 per cent in 2021, an outlook that aligns with those of most of his peers.

“The economy has much work to do to absorb all of its excess capacity,” Arlene Kish, director of Canadian economics at IHS Markit, advised clients in a note last week.

•Email: kcarmichael@postmedia.com | CarmichaelKevin





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Goulburn Mulwaree Council says rate peg suits economic times | Goulburn Post


news, local-news, Goulburn, rate peg, Warwick Bennett, Goulburn Mulwaree Council, emergency services levy, election costs

This year’s rate peg is “realistic” in the tough economic climate, says Goulburn Mulwaree Council’s general manager. But Warwick Bennett makes no secret of the fact he’s no fan of the system under which the State restricts councils’ general revenue. The Independent Pricing and Regulatory Tribunal (IPART) announced this week that councils could increase revenue by a maximum two per cent in 2021-22. ALSO READ: Asbestos discovery puts outdoor pool opening off three weeks Tribunal member Deborah Cope said it recognised that councils faced higher costs for their 2021 local government elections. “We have included an adjustment of 0.2 per cent for election costs based on the expected costs for the average council in NSW,” she said. “The adjustment will be reversed through the 2022/23 rate peg, to ensure that ratepayers are not overcharged in subsequent, non-election years.” ALSO READ: Relay for Life powers ahead over the airwaves The peg is based on the annual change in the Local Government Cost Index, which measures the average costs faced by NSW councils. Councils then decide how they disperse this across the various rate categories. Ms Cope said the rate peg was lower than previous years, which was a “positive outcome” for ratepayers. Mr Bennett agrees now is not the time to hit people with higher charges. “It’s a case of us needing to tighten our belts to meet the current circumstances,” he said. But he remained opposed to rate pegging, saying ratepayers, rather than the state government, should decide if they would pay more for services. In addition, he said the state’s continued cost shifting was placing great financial pressure on councils. ALSO READ: Dean Cross awarded The Good Initiative Last year the council was hit with a $100,000 increase in its emergency services levy. Over four years it will pay $600,000 to help cover volunteer and career firefighters. Following lobbying from the local government sector, the state issued assistance grants. Goulburn Mulwaree received $73,000 in 2019 and $197,000 this year. READ MORE: Goulburn Mulwaree escapes emergency services levy hike in 2019 “Those grants will not be available again and ratepayers will have to cover the levy,” Mr Bennett said. He hoped “commonsense would prevail” with a further government offer of help. Mr Bennett said the state had also shifted compliance responsibility for fuel site decontamination on to councils, which had increased costs. Next year’s council elections are estimated to cost $290,000, which will be shared between Goulburn Mulwaree, Upper Lachlan and Yass Valley Shires. The GM said while his council set aside funds each year for this, costs could be dramatically reduced with a move to electronic voting. ALSO READ: Goulburn to Canberra bus service to be suspended, commuters say Mr Bennett has ruled out a special rate variation to cope with increased costs. “It would be unreasonable in the current environment to put that on the community. It is well off the agenda,” he said. Meantime, IPART announced that it would not set a limit on percentage variations for annual domestic waste charges made by councils for 2021-22. However, it is currently seeking feedback on its recently released discussion paper on these charges, which may impact future decisions. Fact sheets on the rate peg and domestic waste charges are available on IPART’s website. People are invited to have their say by October 6, 2020. We care about what you think. Have your say in the form below and if you love local news don’t forget to subscribe.

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