Infinity electrical cable recall sparks wiring fears

Canberrans who had electrical work done in their homes or businesses between 2010 and 2013 are being urged to check with their builder, electrical contractor or appliance installer after the safety recall of an electrical cable.

The “Infinity” cable has been recalled by the Australian Competition and Consumer Commission after failing electrical safety standards due to poor-quality plastic insulation coating.

Tests found that the cable degrades prematurely and, if disturbed, could break and expose live conductors, potentially causing electric shocks or fires.

The defective cabling was sold through hardware stores and has been fitted in 40,000 premises nationwide. In the ACT, it was supplied through Masters Home Improvement, Project Lighting and Popes Electrical & Data Supplies from 2011 to 2013, but may have been used in 2010, with cabling available from suppliers in NSW at the time.

ACT Attorney-General Simon Corbell said Canberrans should heed the warning.

“The ACCC has advised there is no immediate danger, however stressed consumers should not attempt to inspect any electrical cables themselves and should engage a licensed electrical contractor to do so,” he said.

The recall applies to all sizes and configurations of Thermoplastic-sheathed cable (TPS) and orange round mains power cables sourced from Infinity Cable Co Pty Ltd and marked and supplied under “Infinity” and “Olsent” brands.

“While there is no cause for immediate concern in relation to Infinity cable, it is best in these circumstances to be safe and avoid potential issues in future,” Mr Corbell said.

“I urge property owners not to get into roof spaces or under floors themselves to check for the presence of Infinity cables; use the services of a qualified electrical contractor.

“Households and businesses that have had electrical wiring work carried out between 2010 and 2013 should contact the responsible builder, electrical contractor or appliance installer to confirm whether Infinity cable was used.”

The cable supplier should arrange for an inspection of the wiring and remediation of any installed Infinity cable that they supplied, free of charge to the consumer.

The ACCC has advised that any affected cable installed in accessible areas or near heat sources must be removed and replaced or sleeved in an appropriate conduit under the safety recall.

“Cables will age at different rates, depending on the ambient temperature and the load placed on them. The current expert advice we have received is that this cable may become brittle from 2016 onwards, and suppliers have been asked to assess and work on the oldest or highest risk installations first,” Mr Corbell said.

“If you are uncertain who installed the electrical wiring, you can arrange for a licensed electrical contractor to inspect your wiring. However, inspection costs are not recoverable from cable suppliers if Infinity cable was not installed or if the cable installer and supplier cannot be determined.”

Any unused or removed Infinity cable may be returned to the cable supplier for refund or replacement.

Carmichael coal to hire 5000 in construction phase

Carmichael mine developers Adani are now taking expressions of interest from people wanting work in the mining industry.

The indian-owned company said it plan on hiring 5000 people during the construction phase, with the first round of workers to be hired next year, double the estimates made when approval for the mine was announced.

The company has encouraged people to submit their details now at the Adani Mining website.

A spokesman for Adani said the company would favour local people from the Mackay and Whitsunday areas.

“As part of our local procurement policy, we will also maximise Australian participation by sourcing, where possible, from regional Queensland and Australian businesses,” he said.

“We recognise the need to make a positive contribution to the communities in which we operate.

The project will be hiring for coal exploration, coal mining, rail construction and operations, infrastructure construction, and port expansion and operations.

The announcement that gave hope to property investors in mining towns

An announcement this week gave hope to all those investors who own properties in mining centres.

Indian mining company Adani started advertising the thousands of jobs that will come with its $16 billion Carmichael coal mine in Central Queensland.

It’s a further indication that Adani is keen to move ahead quickly with its project, which will include the mine, plus rail links and export port facilities.

Every day I receive emails from people who own investment properties in places like Moranbah, Emerald, Blackwater, Mudgee and the towns of the Hunter Valley.

These places have lots in common. They’re all towns where property markets boomed when coal mining was thriving, with rents and property values rising strongly. Then two things happened: the coal sector turned south just as developers were heading north. Demand fell just as supply was rising.

Big vacancies caused rents to fall and property values followed. If you bought in any of these places two years ago, you will be feeling lots of financial pain.

Moranbah’s median price has dropped 40% in the past 12 months and rents are about one-third of their peak levels.

The common dilemma expressed in so many of those emails is this: should I cut my losses and sell, or should I hold on and hope it improves? One correspondent this week suggested things might be turning around in Moranbah but asked: “Is it just wishful thinking?”

The Adani announcement that expressions of interest are open for jobs on its Carmichael mine suggests that hope is not unreasonable.

Adani, which has state and federal approvals for its Galilee Basin mine, is planning to employ up to 5,000 people during the construction phase and 4,000 more during the mine’s operation.

A key beneficiary will be Emerald, a regional centre which sits amid the Galilee Basin to the west and the Bowen Basin to the east. Lots of coal, lots of big plans, but not much action at present.

I’ve often said to people: it will only require one of the half dozen proposed mega projects in the Galilee Basin to go ahead, for Emerald’s market to come storming back. I’ve always thought the Carmichael mine was the most likely to go first, because Adani wants the coal to provide for its own needs (its Indian power stations) rather than to supply the depressed global market.

The problem for investors sitting on empty rental properties is that these huge projects are slow-moving events. You need lots of patience and nerves of steel.

But this is life in mining towns. It’s not a new phenomenon. This is not the first time Moranbah has fallen into a trough (althought this one is deeper than any of the previous). It’s not the first time a boom in Gladstone has been followed by a bust.

Gladstone’s market experienced a major peak in 2008, followed by a couple of years of declining values, before rising to another peak in 2012, followed the another period of decline.

Mudgee in New South Wales had a peak in 2007, falling prices in 2008 and 2009, another peak in 2010, decline in 2001, another peak in 2013 and now another decline. The price graph for Mudgee looks like a mountain range.

Ditto Muswellbrook: since 2006 it’s been minor peak, minor trough, minor peak, mknor trough, major peak (2012), major trough (now).

When prices rise strongly in markets like this, the market always “give some back” before moving into the next up-cycle. Usually the market gives back less than it gained earlier, so the overall trend is upwards.

If you don’t have the temperament to deal with this kind of volatility, it’s best to stay out of resources-related markets.

SMSF property debt a risk to financial system, says Cooper

Self-managed super funds are accumulating too much property debt, which is a major risk to the financial system, warns Challenger’s Jeremy Cooper.

Mr Cooper said the interim report of the financial system inquiry led by David Murray was right to question whether borrowing by self-managed funds should be banned, and warned that housing debt was a risk to the stability of the financial system.

‘There’s enough leverage in society anyway,” said Mr Cooper, who is Challenger’s chairman of retirement income. “We leverage up our homes, the minute you buy a share you’re building leverage, there’s a lot of personal debt around and we’re seeing people going into retirement with more debt”

Mr Cooper, a former deputy chairman of the Australian Securities and Investments Commission, said he was against government policy allowing self-managed superannuation funds to highly gear into property investments, but it was hard to unwind.

“I don’t like it, but it’s tricky to allow something and then ban it,” he said. “It’s problematic because there’s a lot of illusions about geared property investment that people fall into. They forget the effect of inflation and fact that they have to pay stamp duty.”

Mr Cooper is also worried about the impact of a policy option released by Treasury that wealthy retirees may not have to withdraw as much money from their private pensions.

The Australian Financial Review on Tuesday reported widespread concerns that a reduction in the minimum drawdown from account-based pensions would be an easy way for the rich to preserve tax-free superannuation for their heirs. The Abbott government is looking at whether a reduction in the rate would give self-funded retirees confidence that their funds would not run out during economic downturns.

Mr Cooper said if the option was implemented, “like all policy changes it creates unintended consequences”.

He said there wasn’t clear evidence about whether people would spend the money or save it, but if retirees did bank up tax-free funds to later bequeath, it may then result in alternative policies such as a death tax.

“We need to be careful what we wish for,” Mr Cooper said. “They [the government] then may say, ‘well if you haven’t spent it by the end, we will hit you with a tax at the end [of your life]’, like they do in the UK.”

In Britain there is a 40 per cent “inheritance tax” on legacies valued above 325,000 ($583,000).

Mr Cooper said minimum withdrawals created a lot of heat during the financial crisis, but the bigger question was about risky investments.

During the financial crisis, the former Labor government temporarily reduced the minimum withdrawal amount. “These account-based pensions were so smashed up in the crisis that they needed the government to change the rate,” Mr Cooper said.

He said retirement products were “letting people down”. “It’s been widely said that the risk settings that people in retirement have are way too high and that’s why they blew up [during the crisis].

“If you have an account-based pension that has roughly 70 per cent of growth assets sitting in it and you have a major downturn, maybe that’s the problem.”

Mr Cooper called on the Abbott government to better sell its policy to increase the retirement age to 70. He said the average age of death was now 87, and one in 10 women currently aged 65 would live past 100.

He called for a campaign to educate people about this reality and the impact it would have on federal revenue.

“Without a campaign… the government’s idea of pushing the pension age out to 70 is operating in a vacuum.”

Mr Cooper also slammed the way Treasury estimated the cost of superannuation tax concessions to the federal budget Treasury predicts superannuation tax breaks will cost $36.25 billion in 2014-15. It said the super concessions would cost $171 billion over three years.

Mr Cooper said this figure was inaccurate and Australia needed to come up with a better way to measure the revenue impact. The debate could then move on to how the super system could meet the needs of an ageing population.

“We need to come up with the proper model for what the super system is costing us,” he said. “The sooner we move on from all this bickering about $30 billion, which is not real, [the better].”

Property is in a tough place

THE only way is up. At the bottom of the property market cycle, the Mackay region is doing it tough.

The Daily Mercury yesterday reported that Mackay’s residential vacancy rates were the highest in the state, despite a positive drop to 6.8%.

Real Estate Institute of Queensland Mackay zone chairman Peter McFarlane said while many overseas and out-of-state investors were losing out with the downturn, many houses recently sold and currently on the market were owned by local mortgagees.

“In towns like Moranbah and Dysart there is a lot of activity with mortgagees selling their houses,” he said. “Those places have had a lot of repossessions.”

During the boom, popular house and land packages with guaranteed rental periods sold well; however, many properties with income guarantee periods are coming to an end, with investors unable to find tenants. Those that can are accepting far lower rents.

“When things were flying, the rent appraisals were very high and the figures reflected well in investment packages,” Mr McFarlane said.

Many of the houses developed to accommodate the resource boom are in Mackay’s Northern Beaches, where Mr McFarlane said a glut of available rentals now existed.

“The more recent developments in the Northern Beaches have had rent price reductions in the vicinity of 30-50%,” he said. “I would estimate that 80-90% of investors (in the Northern Beaches) were absentee owners.

Investors need to appreciate ups and downs. We are on the down of the property cycle. Building approvals have dropped something like 40%.”

Mr McFarlane said the resource companies’ fly-in, fly-out policy that has hurt Central Highlands’ communities has already had a significant effect on the Mackay market.

Australia approves Adani Mining’s rail line project

The Queensland State Government of Australia on Thursday said it has cleared the Galilee Basin rail line project to be executed by the Adani Group.

The approval follows the Australian Federal Government’s recent decision to give environmental approval to Adani Mining’s $16.5-billion Carmichael coal mine and rail infrastructure project.

Welcoming the decision, the Australian High Commissioner to India, Patrick Suckling, said the 300-km rail line would be a key link connecting the proposed Adani Mining’s Carmichael coal mine west of Moranbah to the port of Abbot Point.

“This is an important decision as it will enable the State to tap its rich resources’ potential. These decisions signal that Australia welcomes investments and is open for business,” he added.

The project will drive economic growth in the State, create additional jobs and develop the region through boosting export of coal. It will help in India’s development by providing electricity to an estimated 100 million Indians, he added.

The proposed standard gauge green field rail line will cost $2.2 billion and will be able to transport 100 million tonnes of coal a year.

“The decision also shows that comprehensive, robust and timely assessments can be undertaken on Australian resources projects, Suckling added.

(This article was published on August 14, 2014)

Coles, Woolworths accumulating consumer data as they prepare to compete with banks on home loans

Supermarkets are gathering an unprecedented amount of information on Australians’ financial situations and lifestyles as they prime for a clash of the titans with the big four banks.

The ABC’s 7.30 understands Coles and Woolworths are engaged in high-level talks about establishing banks and offering home loans.

Coles is keeping coy on persistent rumours it is applying for a full banking licence, but the supermarket group is already making an aggressive push into Australia’s trillion-dollar financial services sector, announcing a joint venture with GE Capital last month to deliver personal loans and credit cards.

7.30 has learned both Coles and Woolworths have been negotiating potential partnerships with Australian mortgage providers to enter the lucrative home loans market.

The supermarkets have already signed up more than 1 million Australians to their existing credit card and insurance products, and have registered the trademarks, Woolworths Money, Coles Money and Coles Financial.

Coles and Woolworths’ competitive edge over the banks is their treasure-trove of information on Australians’ shopping habits, budgets and lifestyles, gathered from their credit card customers and the 14.5 million members of the FlyBuys and Woolworths Rewards loyalty programs.

The programs gather data on purchases and spending habits from Coles and Woolworths’ more than 5,000 supermarket, petrol and liquor outlets, as well as from partners including Telstra, Qantas, WebJet, health insurer Medibank and energy company AGL.

A senior Woolworths executive revealed how that data was being used to tailor finance products and premiums in an extraordinary speech last September.

Woolworths director of group retail services Penny Winn told a marketing industry event shoppers who buy milk and red meat could expect cheaper car insurance deals.

“Customers who drink lots of milk and eat lots of red meat are very, very, very good car insurance risks versus those who eat lots of pasta and rice, fill up their petrol at night and drink spirits,” she said.

“What that means is we’re able to tailor an insurance offer that targets those really good insurance risk customers and give them a good deal … and it helps to avoid the bad insurance risks.”

The man leading Coles’ charge into financial services, Richard Wormald, has told 7.30 the company cannot rule out using shopper data to tailor its premiums.

“We’re always looking for new ways of delivering better value but today, we actually use a very traditional mechanism, looking at types of car, where people live to calculate their insurance pricing,” he said.

“As technology changes, we will reassess that, but we set ourselves a very high bar in terms of the way that we store and collect data and we’ll try and be transparent with customers and clear in how we’re using that.”

‘Wet dream’ for marketers, ‘nightmare’ for privacy advocates

Consumer group Choice says the example shows Coles and Woolworths loyalty program members and credit card users are giving away more information than they signed up for.

“That’s really a level of sophistication, a level of data analysis that’s never been available before,” Choice’s Matt Levey said.

“If you then consider that they’re moving into markets such as credit cards, then into banking, then you start overlaying those sets of data, it starts to create businesses who have a degree of power and a degree of information about Australians that have never previously existed.”

IT security consultant and data expert Troy Hunt says shoppers should think twice about what information they are handing over to potential insurance and loan providers.

“Some purchases can be very explicit in terms of what condition you might be in so, for example, are you a female purchasing a lot of maternity related products?” he said.

“If you’re in the midst of applying for a home loan and perhaps your income is a significant proportion of that decision-making factor, could that influence the people providing the finance to say: ‘Well, this might be a different risk category to what we originally thought’.

“For marketers, it’s the wet dream of data. For privacy advocates, it’s a bit of a nightmare.”

Mr Hunt says consumers are effectively being profiled according to their shopping habits.

“What if you were buying a lot of medicines or vitamins specifically targeted to high blood pressure, high cholesterol? What might someone providing life insurance or health insurance think of that?” he said.

“There are other things like magazines which are about very discrete topics, so if someone is buying a lot of performance car magazines, might they be a higher risk for car insurance?”

Former ACCC chief backs greater competition for consumers

Coles and Woolworths’ push into finance is straight out of the playbook of the British supermarket giant, Tesco, which established a bank in the late 90s and became the third-biggest retailer in the world, with the aid of one of the biggest data gathering programs in Europe.

One of the masterminds of the plan was Andrew Higginson, who established the Tesco Bank. He says its database of shopper information proved invaluable in developing finance products.

“Simple examples would be, say, if you had a group of customers who tended to buy their fuel from Tesco in the same place every time, you could deduce that those customers might only travel short distances in their local neighbourhood,” he said.

“In a car insurance sense, that’s a lot safer. There’s a lower risk of accidents than someone who might be driving thousands of miles up and down the country every year.”

Former Australian Competition and Consumer Commission (ACCC) chairman Graeme Samuel maintains consumers will benefit from any push by the supermarkets into banking.

He says Coles and Woolworths’ ready access to data could be just what is needed to shake up the big four banks and bring about cheaper deals for consumers.

“We need to understand that profiling is already occurring across a range of areas at the moment with the development of new technology,” he said.

“Google, Facebook, Amazon and other major operators in the technology market will profile.

“Advertisements will be directed to the information, for example, that you might contain in your emails.

“It’s the way business is operating and the important thing is for customers to have a choice, to be able to say ‘We don’t deal with a business or a social media outlet that runs the risk of breaching the privacy standards that we set for ourselves’.

“Privacy is always an issue but so long as customers have a choice as to whether or not they deal with a corporation that runs the risk of breaching the customers own assessment of what they need in terms of privacy, that’s the fundamental issue.”

Growth Warning Emerging

The latest unemployment numbers released last week were disappointing to say the least: Australia’s unemployment rate jumped to a 10 year high and is now on par to when the GFC unfolded.

Australia Unemployment Graph

Now, unlike then though we don’t have a mining boom to insulate our economy or a government predisposed to spending our way to prosperity.

I noted with interest that for the first time since 2007 our unemployment rate of 6.4% is higher than the US (6.2%).

We are now on par with the UK, but their employment situation is improving whereas ours is worsening.

Peering behind the headline stats makes for pessimistic analysis, especially if you’re 15-24 years old as youth unemployment is presently 14.1%.

Apparently the culprit is a slump in part time work opportunities, but whatever the cause, the story behind the story is that the Aussie economy seems to be on the skids and the Federal government appears bereft of strategies on how to stop the rot. What ideas they do have have been poorly received by the public and aren’t going to be easily actioned as the Senate is now dominated by headline grabbing idealists.

While we remain in this political deadlock and vision vacuum (which started during the Gillard – Greens alliance) it’s hard to see much of a silver lining to gloomy economic cloud hanging over our heads.

So how does this affect the outlook for the Aussie property market?

One of my real estate mentors, Stu Silver; a man with 30 years experience investing in real estate and survivor of several downturns, once said this to me: “Steve, as goes jobs, so goes real estate.

With this in mind, although long term I remain a firm believer in the Aussie real estate growth story (because we simply aren’t building enough houses to cater for demand), in the short and possibly medium term it’s hard to mount a case for expecting house price growth above inflation.

There is also the possibility we could be at the precipice of a sustained real estate decline as forecast by the likes of economist Steve Keen. If so then I’m reminded of the words of Warren Buffet: be greedy when people are fearful, and fearful when people are greedy.

Here are three friendly suggestions to consider:

1. Build a cash buffer.

Now is a a risky time to be living on the financial edge, and for that reason I’ve decided to increase my personal cash holdings.

As a minimum it would be sensible to hold cash reserves of at least three to six months living expenses so if something unexpected happens you are not in immediate financial hardship.

Action: Calculate how many months living expenses you have right now.

2. Exit marginal and unprofitable property deals.

A softening real estate market means real estate takes longer to sell, so your ability to exit a bad deal on price and terms of your choosing is closing fast.

If you have a dud deal in your portfolio you’re carrying then be careful it doesn’t become the millstone that causes you to drown.

Action: Review your asset portfolio and identify the poor performers.

3. Remain alert, not alarmed.

Financial ignorance leads to loss, so even though the news may be ordinary, don’t be spooked by it or ignore it. There is always opportunity for those who bother to look.

Action: Keep up to date with the latest economic news.

Perhaps a joke will help…

A man is flying solo in a hot air balloon and realises he is lost.

Spotting a man below he lowers the balloon and shouts, “Excuse me sir, but can you help me? I promised my wife I would meet her half an hour ago, but I don’t know where I am.”

The man below says, “You are in a hot air balloon, hovering approximately 30 feet above this field. You are between 50 and 52 degrees N. Latitude, and between 62 and 64 degrees W. longitude”.

“You must be an economist,” says the balloonist.

“I am,” replies the man. “How did you know?”

“Well,” says the balloonist, “everything you have told me is technically correct, but I have no idea what to make of your information, and the fact is I am still lost.”

The man below says, “You must be a politician.”

“I am,” replies the balloonist, “but how did you know?”

“Well,” says the man below, “you don’t know where you are, or where you are going; you have made a promise which you have no idea how to keep, and you expect me to solve your problem. The fact is you are in exactly the same position you were in before we met, but now it is somehow my fault.”

Author: Steve McKnight


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ATO cracks down on dodgy developers

Investors using trust structures to hide income from developments may face steep fines, the Australian Taxation Office has warned.

The ATO has undertaken to audit developers to ensure their adherence to regulations.

Increasingly, some people are using trusts to mischaracterise their development activity and claim a discounted tax rate, deputy commissioner Tim Dyce said.

“A growing number of property developers are using trusts to suggest a development is a capital asset to generate rental income and claim the 50 per cent capital gains discount,” he said.

“Our enquiries indicate that these arrangements are contrived and some property developers are inappropriately claiming capital gains tax concessions.”

ATO scrutiny over these activities is set to increase this year, Mr Dyce announced.

“The ATO has already raised millions in adjustments from people who exploit the system and our current compliance activity shows we are likely to make many more adjustments in the coming months,” he said.

He warned investors to declare their income from their construction activity or risk severe penalties.

Fines of up to 75 per cent of the tax avoided may apply to those found to be misusing special purpose trusts, the ATO stated.