Market wipes out 2007 gains

The market is plummeting. More selling in Australian stocks this morning has all but wiped out the market gains achieved over 2007.

By 12.20 pm the falls had continued to leave the S&P/ASX 200 on 5503.1, down 3.2% on yesterday’s close.

At 11.41 am this morning that S&P/ASX Index was down to 5650.70 and set for its lowest close since December 27, according to Bloomberg.

The main trigger for this morning’s big fall is a statement by RAMS Home Loans Group acknowledging that it has been unable to refinance $5 billion in short term debt on US markets overnight.

“Due to a lack of market liquidity, RAMS was unable to affect these rollovers and, as a result, the two programs totaling $6.71 billion have been extended and the refinancing period has commenced,” the RAMS statement says.

RAMS shares have slumped as much as 41% on the announcement – at 11.19 am its shares had fallen to 83c, compared with $2.50 paid by investors before the stock listed on July 27, according to Bloomberg.

And as speculation continues on whether the international credit squeeze will have an impact on the real economy, Treasurer Peter Costello has this morning acknowledged there could be flow on affects.

“The exposure of the US economy to the sub-prime market is about 15%, if it starts affecting consumer sentiment in the US that results in economic weakness, that will affect global growth and have an affect on Australia,” Costello says.

Mike Preston

Tax man names his targets

The tax man has just revealed the targets for 2007-08. Exiting business owners, high net worth individuals, self managed super funds and cash traders are among those who will be targets for the ATO this year. Today at midday in Sydney Commissioner of Taxation Michael De Sousa announced who will be in the ATO’s sights.

For all the details see our story Tax Targets for 2007-08.

Jacqui Walker

Business turns to hedging as dollar volatility hits

Businesses are increasingly moving to insure themselves against big movements in the value of the Australian dollar as the effects of currency market volatility start to hit.

At 11.30 am the Australian dollar has dropped below the US82c mark to US81.66c. Less than a month ago, on July 20, the Australian dollar pushed through the US88c mark for the first time in over a decade, with some currency traders predicting at the time that it could go beyond US90c.

Rapid currency movements such as those experienced over the past month can have a huge impact on the cash flow of businesses exposed to foreign currency, Travelex regional director of foreign exchange, Basil Payn, says.

“The New Zealand dollar has been even more volatile that the Aussie and we have seen a pick up in businesses using currency insurance products there, so we are likely to see that trend follow through in Australia – it’s like fire insurance, nobody wants it until they see the house next door burn down, and then all of a sudden it makes sense,” Payn says.

And it is likely that there will continue to be further big moves in the dollar in the month ahead. Commonwealth Bank currency strategist Besa Deda says the Australian dollar could well go below US80c if market conditions continue to deteriorate.

“There is heightened risk aversion among global investors and that means they are moving away from the Aussie dollar and towards sage haven currencies and assets,” Deda says.

Traders are also unwinding carry trade positions, which involve buying cheap currencies such as Yen and buying currency linked assets in Australia, further deflating the Australian dollar, she says.

“In the short term the Aussie will remain under pressure as long as credit concerns remain high. It’s difficult to know how low it will go in the current environment because every day there is new news hitting the markets,” Deda says.

Mike Preston

Entrepreneur Rebuilds

Entrepreneur Sue Ismiel, an international success for building her hair removal company Nads, was aiming to have a business with revenue of $50 million this year. Instead she is now rebuilding her company.

Ismiel reveals today on SmartCompany that when she stepped away from running Nads in 2005, the new chief executive set out to professionalise and expand the business quickly including taking the company in a new direction and away from the Sue and daughter, rags to riches story.

Revenue fell and Ismiel, back on board, reveals her new plans for the company. Click here

Amanda Gome

Labor Unfair Dismissal Uncertainty

It’s the rumor that won’t go away. There are fresh reports this morning that opposition leader Kevin Rudd is telling business that Labor might exempt small business from unfair dismissal.

This follows reports last Thursday that senior people in the party including Opposition leader Kevin Rudd had been testing views in the party to gauge the mood for an approach to IR that goes beyond the policy announced in April.

But when we called Rudd’s office, we were told to speak to Gillard. And then we are told nothing has changed from the policy Forward with Fairness released in April.

But it begs the question: why does this rumor keep resurfacing? Gillard looks and sounds like she is under pressure. Is she being sidelined? Is Rudd changing his mind on IR as Prime Minister John Howard’s scare campaign to business groups and boardrooms on Labor’s IR policy starts to take effect?

What do you think? Send your comments to feedback@smartcompany.com.au

Amanda Gome

NSW business taxes under review

Business taxes are likely to be a key focus of a review of taxes in NSW to be announced by NSW Premier Morris Iemma today.

The Australian Financial Review reports that Iemma will today announce that the state’s Independent Pricing and Regulatory Tribunal will conduct an inquiry into NSW tax rates and look at ways to make them more competitive with other states.

NSW’s high payroll tax rate of 6% has long been a bugbear for businesses struggling to succeed in the state, which often lags much of the rest of the nation in economic conditions.

Payroll tax rates of 4.75% Queensland 5.05% in Victoria mean NSW are at a clear disadvantage to their interstate competitors, New South Wales Business Chamber spokesman Paul Ritchie says.

“In the last state budget the Government got an additional $4.5 billion in payroll taxes, and overall revenue is set to increase by 25% in the next three to four years, so clearly there is room to reduce the tax burden on businesses,” Ritchie says.

Mike Preston

Franchise Code changes tabled

The long-awaited amendments to the Trade Practices Act designed to strengthened franchisees rights against franchisors were introduced into Parliament yesterday.

The changes follow well-publicized disputes in the franchise industry in the Midas, Bakers Delight and 7 Eleven franchise chains, and a review by Graeme Matthews of the disclosure provisions of the Code.

The changes, which include a requirement for franchisors to provide the names, location and contact details of previous franchisees to prospective franchisees, and will compel franchisors to disclose more information to prospective franchisees, will come into effect on March 1.

These changes follow the review by Graeme Matthews of the disclosure provisions of the Code. But not all franchisees and franchisee groups will be satisfied. As SmartCompany has previously reported, a growing number of franchisees from big name chains, including Bakers Delight, Midas and Lenards, are working hard to make protection of franchisees an election issue. They have won the support of parliamentarians on both sides of the house. National Senator Barnaby Joyce, government whip Joanna Gash and West Australian Labor MP Graham Edwards have all spoken out on behalf of the disgruntled franchisees.

The ACCC has also been attacked for inaction, despite a recent settlement deal with failed sandwich chain Quiznos that will see franchisees get a small proportion of their investment returned.

“This is a great step forward for small business,” Small Business Minister Fran Bailey said today. “These reforms will make for a more effective code; and where there has been illegal conduct against a franchisee under the Code, there will be no excuse for inaction by the ACCC,” Fran Bailey said.

Fran Bailey, who has also bee criticized for not doing enough to help disgruntled franchisees, emphasised in a media release she was committed to further enhancements to the franchising industry.

“My door is always open to advocates for continuous improvement in the franchising industry. I will continue to consult with the franchising industry on how we can make a good industry even better,” Bailey says.

The Trade Practices (Industry Codes – Franchising) Amendment Regulations 2007 (No.1) [registration number F2007L02475] may be found on www.frli.gov.au.

Jacqui Walker