This is the finding of the latest Australian Chamber of Commerce and Industry (ACCI) Business Expectations Survey released this month.

Key expectations indicators in the survey showed small improvements for the June quarter. Businesses are becoming slightly less negative about prospects for their own trading conditions, with the expectations index on General Business Conditions improving for the first time in two years.

The Expected Economic Performance index increased in the quarter albeit remaining in negative territory, signaling business confidence has improved from its recent low recorded in the second half of 2011. Business expectations for employment and overtime remain sluggish amid highly uncertain economic outlook and difficult trading conditions.

Comparisons by Size of Firm reveal that small businesses continue to experience the weakest performance relative to medium- and large-sized firms. All firms were experiencing negative General Business Conditions in the March quarter, with only small business expecting their trading conditions to remain negative in June.

Greg Evans, who is ACCI’s director of economics and industry policy, said that the March quarter survey showed business conditions and confidence were improving slightly from their recent lows.

“This suggests that while business in general appears slightly less negative about near term trading conditions in the quarter, some caution in forward expectations is still curtailing business hiring and investment decisions.

“Many businesses especially small business continue to experience difficult trading conditions as a result of greater competition in trade exposed areas but also poor confidence levels across many sectors,” Mr Evans said.

“ The business community believes that the ongoing weakness in current trading conditions and retreating inflationary pressure justifies the Reserve Bank delivering a rate cut in the cash rate  now and in the period ahead. Banks in turn should announce a commensurate adjustment in lending rates for households and small businesses in a timely fashion. Delays will only serve to frustrate the effectiveness of monetary policy in restoring flagging business and consumer confidence.”

The Survey covered the three months to March 2012 and had 2,822 respondents. A full copy of the Survey is available on the ACCI website at www.acci.asn.au

Like many Tasmanians, I am watching with great interest the transition of power from Senator Bob Brown to Senator Christine Milne as Leader of the Australian Greens. In particular, I hear Senator Milne’s apparent wish both to concentrate more on the economy and to embrace farmers as fellow travellers with the Greens.She has also chosen to distinguish between what she terms the ‘progressive’ elements of the Australian business community from the ‘rapacious miners’ and, presumably, she would include the ‘rapacious loggers’. She has made what she terms ‘the bush’ her first target for consultation and/or conversion.

To say that that this initial Milne strategy has not been universally welcomed is an understatement. The National Farmers’ Federation already has raised the question of whether Senator Milne is to be trusted in her pitch to rural Australia, citing the Greens’ promotion of the carbon tax and differences over the Murray Darling Basin plan. Meanwhile, the Australian Industry Group has criticised her ‘hardnosed ideological’ stance on some business issues.

Senator Milne has a different approach to Senator Brown to politics. Because he had a certain presence, he had the semblance of a conciliator; she is more inclined to hector. People find it more difficult to warm to her. If Senator Milne is seeking to re-engage the Tasmanian rural community, we welcome that. The door to the TFGA is open. We believe in consultation, but it is a two-way street. She’ll be judged on her delivery.

Farmers have been Tasmania’s long-term conservationists. They cared for and nurtured their environment long before the formation of the United Tasmania Group in 1972 (the precursor of the Australian Greens). The beautiful patchwork landscape on the north-west coast in which Senator Milne grew up is still there, still beautiful - thanks to farmers. Their stewardship has been self-funded. Farmers get little government assistance for caring for their land and nor do they expect it. What they do seek is to have the shackles of regulation minimised so they can maximise their productivity to meet world food and fibre demand. Which brings me to the issue of the private forest estate.

More than 26 per cent of Tasmania’s forest cover, some 885,000 ha is privately-owned native forest; more than four per cent of total forest cover is in plantation forests on private land. Farm foresters shoulder all the obligations of conservation, protection of streamside reserves, water quality, shelter, habitat as well as sustainable timber production and reafforestation.

Under the intergovernmental forest agreement (if it gets parliamentary approval) the acid will be on private forests to meet the shortfall in production from what had been delivered by Tasmania’s commercial public forests. What guarantees will the new Leader of the Greens give to Tasmania’s 1600 farm-foresters that they will not be the next target for shutdown?

Nikki Savva, writing in The Australian recently commented:

“Philosophically Milne and Brown are indistinguishable, yet in presentational terms one is from Pluto and the other from Mars. Thanks to his avuncular manner, Brown could declare war and make it sound like an invitation to a tea party. Milne is flinty. Sparks fly when she speaks. She comes across as more threatening than Brown …”

Many would agree with that assessment. Therefore, Brown and Milne may speak the same language, but the delivery is like chalk and cheese, Pluto and Mars, and we pray that the new leader forgets about Brown’s ‘Earthians’.

* Jan Davis is chief executive of the Tasmanian Farmers and Graziers Association

Mr Nicholson will receive free natural gas for 12 months and a new hot water system courtesy of Tas Gas Retail for being the 10,000^th Tasmanian residential and business customer.

Robert Nicholson, the 10,000th customer to sign up to the Tas Gas network, and Tas Gas chief executive officer Richard Sheather.

A painter by trade, Mr Nicholson said a friend of his who was a plumber swapped to natural gas 12 months ago and “talked it up”.

“This same mate installed my current hot water system 12-years-ago which is now on the way out,” he said.

“Because he has been so happy with natural gas, he convinced me to have natural gas connected at the same time as I replaced the hot water cylinder.

“So I did my research and contacted Tas Gas to connect.”

Mr Nicholson, who has lived in New Town all his life and in his current house for the past 27 years, said it could get “quite cold” at his house during the winter months.

“Natural gas will be good for heating in the winter,” he said.

“I will be able to come home, ignite the heater and be warm within minutes compared to the old wood heater I had in the lounge room.”

Mr Nicholson said cheaper energy prices was also a consideration.

Tas Gas commercial manager Simon Himson said the Tas Gas network passed approximately 43,000 Tasmanian homes statewide making natural gas available to a limited market.

“While this is well short of the original target of 100,000 properties to have access to natural gas that was to be supported through funding assistance from the Tasmanian Government, our 10,000^th customer celebrations provide a timely reminder about the benefits of natural gas for those who have access,” he said.

“At the same time, on the eve of winter, it is important to reflect on the fact that electricity prices are set to increase, impacting further on the rising cost of living in Tasmania.

“The cost of living is the top issue for many Tasmanians who are not just facing higher electricity bills but who are paying higher prices for other goods and services.

“As has been widely reported in the local media, Tasmanian electricity prices have increased significantly and steadily over the past 10 years, and they will increase further in the coming months.

“Natural gas prices compare very favourably to electricity tariffs and the LPG equivalent price.

“Natural gas is an efficient form of energy.  It is also a clean burning fuel which is good for the environment and has a lower carbon footprint than electricity.”

TCCI CHAIRMAN

I HAVE recently returned from Western Australia after attending a meeting of the Australian Chamber of Commerce and Industry’s General Council.

It was fascinating to visit Perth (my first trip) and see the impact of Australia’s mining boom from near ground zero.What was interesting was the complete lack of indicators of trickle down wealth that the boom is apparently generating.

When I spoke to our colleagues from the Western Australian Chamber about this, they confirmed what I suspected, which is that there are many businesses in Perth teetering on the edge. In fact the only place that seemed busy was Perth Airport, as there was a flight to Karratha leaving as I arrived. Short of actually having a decent coffee shop (absent at most major airports) there seemed to be little that indicated Perth’s exalted status at the heart of the greatest wealth-generating boom in this country’s modern history.

Don’t get me wrong. There are a number of extremely large developments proposed for both Western Australia and the Northern Territory.

But what we need to do, and particularly the Reserve Bank of Australia and its Governor Glenn Stevens, who have been at the heart of perpetuating this myth, is realise that mining makes up less than five per cent of the national economy. That’s right, less than five per cent.

The reason that there is not unbridled prosperity in Perth, as both Treasury and the RBA are keen to assert, is that prosperity in five per cent of the economy is not enough to sustain the remaining 95 per cent where people are doing it very tough.

\The RBA is at the centre of this myth, perpetuating stories of prosperity far in excess of reality. Predominantly through a cost of money (i.e. interest rates) that is far in excess of what it should be. It appears the RBA has taken a leaf out of Tasmanian democracy, and has put the welfare of a small minority before the welfare of the majority. These mistakes surely cannot be allowed to continue. There are articles now daily, a most recent one from Solomon Lew (himself a former Reserve Bank Board Member) stating that interest rates are far too high, and the RBA has squandered the mining opportunity.

There can be little doubt that the perverse RBA obsession with inflation, demonised as the evil to end all evils, has left broad swathes of our manufacturing and retail sectors in tatters, and the even more chilling characterisation of the demise of the broad base of our economy by Canberra as the “structural adjustment we need to have” is foolhardy.

Unfortunately, Australia and its politicians aren’t very good at learning the lessons of the past.

Paul Keating some 20 years ago was railing against Australia’s “Banana Economy”, in layman’s terms criticising our economy for being a one trick pony. Now we have public policy that is designed to encourage us to become exactly that, and we have the usual chorus of idiocy out of Canberra celebrating it as such. I also note that globally, economists and politicians have completely forgotten about Japan. The world’s last boom surplus economy prior to China, has been mired in financial problems for the past 20 years.

While there are many differences in the respective issues each of the two countries face, the reality cannot be lost that no matter how big your trade surplus, if your clients (people) who buy your goods are struggling, you will struggle as well.

Advocating public policy that only focuses on China is equally as foolish as managing your economy based only on the mining sector.

In the delightful words of Andrew Forrest whom I had the pleasure of listening to speak at a function in Perth: “Oh to have a Treasurer who can add up and subtract as easily as he deceives the Australian worker.”

Enough said!

An initiative of the Housing Industry Association (HIA), youthBUILD promotes the benefits of gaining practical experience in the building industry while still at secondary school.

Back row, from left, Ben Sablowski, Kaleb Smith (teacher), Ollie Toombs, Matthew Gillies, Ashley Minifie, Mathew Worsley, Grace Ford and Maddison Smith. Front row, Joshua Franklin, Dylan Figg and Ken Hannah.

The program operates under a partnership arrangement between Claremont College, southern high schools, the HIA, the Department of Education and the Tasmanian Building and Construction Industry Training Board (TBCITB).

Tasmania youthBUILD coordinator Jim Ransom said while the industry was aware that students were interested in a building career, the transition from a school environment to a building site was often daunting.

“The youthBUILD program was created to complement the current high school curriculum,” Jim said.

“It assists high school students to prepare for a career in the housing industry by providing a direct pathway into further training after year 10.

“The skills gained throughout the program enable them to make informed decisions about the role the industry will play in their futures.

“It also gives those students who may not fit the traditional high school model an opportunity for achievement in an area different to their everyday subjects.”

Now in its fifth year, the program teaches students core building and construction skills under Certificate I in Manufacturing, with an emphasis on occupational health and safety.

Other modules covered include an induction to the construction industry white card, hand and power tools, teamwork, ’setting up’ a job, construction techniques and building industry calculations.

Throughout the program, students apply their skills to a variety of building projects such as planter boxes, dog kennels, cubby houses and outdoor furniture.

Jim said the skills acquired throughout youthBUILD were important in enhancing job prospects and addressing skills shortages in the industry.

“Anecdotally, we have found that former youthBUILD students are very well equipped to succeed in further training or an apprenticeship,” he said.

“This training can be through either a college-based VET building and construction program or a polytechnic building and construction program.

“By enrolling in the youthBUILD course, they have already made a choice to pursue construction as a career and are aware of the expectations ahead of them.”

The Tasmanian Chamber of Commerce and Industry (TCCI) says the economy has been in a period of stagnation overall, with State Final Demand falling by 0.1 per cent in the June and September quarters and no growth in the December quarter 2011.TCCI chief executive Neil MacKinnon said this was not good news, but deeper analysis revealed hope.

“The main headwind against economic growth in the near-term is declining capital investment by government, falling by more than $30 million for each of the past four quarters as the stimulus package winds-up,” Mr MacKinnon said.

“But offsetting this has been a steady rise in business investment and household consumption.

“Tasmanian businesses may be surprised that household consumption has grown at more than $12 million per quarter for the past year. This is because all of this growth gone towards imports, as consumers make use of the high dollar and cheap Chinese goods.”

Mr MacKinnon said as a result some retailers were still seeing volume growth, but their profit margins were being eaten away.  Utilities were also taking a larger share of household budgets.

“But are we in a recession?  Technically we don’t know. Recessions are measured by the holistic ‘Gross State Product’ figure, published annually in November.

“What really matters are jobs.  The unemployment figure for February of 7.0% is concerning.

However, a real sign of hope is the strong growth in business investment. This is not usually seen during recessions, and is the basis for future job creation.

“What we need from government now is security for our natural resource sectors and strategic spending on things that boost economic performance, being infrastructure and education,” Mr MacKinnon said.

TCCI Chairman Troy Harper said the Chandler Corporation’s decision was a direct result of the Greens’ threats and the intervention and comments of Nick McKim, Bob Brown and their cohorts.“Their performance in this is an absolute disgrace, disloyal and destructive, and must be condemned in the strongest possible terms,” Mr Harper said.

“Tasmania has no future under the Greens influence. These are people who want to destroy our economy and the employment prospects of Tasmanians for their own selfish aims.”

Mr Harper said the Gunns pulp mill offered Tasmania unprecedented investment, growth and jobs. Its design would make it the cleanest pulp mill in the world and it would process only plantation timber.

“Yet it is being threatened by this self-interested minority who are only intent on bringing Tasmania to its knees.

“Tasmanian business calls on our national government and national business leaders to wake up and take notice of what is happening in our state.

“Today it is the Tasmanian forest industry under attack. As sure as night follows day, it will be the coal and mining industry next and aquaculture, agriculture and any other industry the Greens decide they do not want. It will not only impact on Tasmania, but throughout Australia.

“If any further evidence was needed, this decision by the Chandler Corporation following on from the Greens destructive and falsely-based attacks on export markets clearly demonstrates that they are destroying investment and with it any hope of economic and employment growth.

“It is time for Tasmania and indeed Australia to wake up and end the influence of this destructive minority,” Mr Harper said.

From left, Melinda Thomas (Skills Institute), Brooke Tsakirakis (HGC) and Nerinda Lade (MEGT)

Guests had the opportunity to see and hear about Ronald McDonald House and what it does in the community.  At the same time, the evening as an opportunity for guests to network with colleagues and other business representatives and to give a 30-second outline on their own business.  While TCCI networking nights are free, members and guests at the event were asked for a donation to go towards Ronald McDonald House.

TCCI CHAIRMAN

THE TCCI had an opportunity to have Premier and Treasurer Lara Giddings address a luncheon around the budget mid-year results.

While the lunch was a resounding success, the mid-year accounts were less successful.

The highlights (or perhaps lowlights) in short were:

1.     An increase in the deficit of the net operating balance of $142 million to take the annual deficit to $246.1 million

2.     A deficit of $428 million over the next four years, which when adjusted to take out one-off federal government programs is a deficit of $765 million over the next four years.

3.     Stamp duty revenues have fallen by $26.6 million or 16 per cent this year, showing a significant decline in capital purchases

4.     Wages and superannuation still account for 46 per cent of total government spending or $2.26 billion.

5.     The unfunded superannuation liability covering State Government employees has now reached $5.1 billion.

6.     Government borrowings will reach $253 million at the end of this financial year to fund this deficit

These numbers should leave every Tasmanian feeling uncomfortable. They are no longer the exclusive problem of business, the taxpayers or the public service and special interest groups. Every single Tasmanian is going to have to face up to the challenges that a financial problem of this magnitude presents.

In short, we cannot continue further down this path without destroying any hope of job creation for our children.

We have a public service that we believe we are entitled to, rather than a public service that we can afford.

Our creditors in Western Australia, New South Wales and Victoria who fund the gap through GST subsidy payments between what we can afford and what we spend have had enough. Publicly we are branded the ‘mendicant’ state, and privately, with 30 per cent of our people on welfare, the description is pretty accurate.

Publicly we accept the insanity of unelected radical groups shutting down our forest industry and privately put our hands out to the Federal Government for more welfare to cover the cost of them doing it.

Clearly something needs to change, and not just superficially. If we do not unite to fix these problems, change will be forced on us by unhappy creditors, and it won’t be pretty.

The burning question is can we fix the State? The answer is happily yes. Is it as simple as a pulp mill, not even close?

What the State requires is exactly that which has been lacking for the last 60 years - real structural change.

Tasmania has three distinct problems to resolve to make it a sustainable jurisdiction. The first is that we raise on a per capita basis, less than half of what every other state raises in state taxation. Coupled with that the single biggest government department, Health and Human Services, eats up nearly 36 cents of every dollar the State receives.

To give you an idea of what that means, the State raises around $900 million in local taxes and spends around $1.6 billion on health.

The third problem is tax severity. The taxes we have are unnecessarily severe and have significant deadweight losses associated with them as people modify their behaviours to avoid the impost. This is not a matter of adopting the simple socialism of the Greens and increasing existing taxes on the relatively affluent.

My personal belief, and that of the Chamber is that Tasmania must be financially sustainable as well as environmentally and socially sustainable.

This means that Tasmanians should rightly foot the bill for running Tasmania. We need to accept the hard reality that the services the government provides are not free, and in many cases such as health the reality is quite the opposite.

The question of efficiency cannot be lost here. The State will never be able to raise enough money to cover profligate wastage.

To give you an idea of how massive is the health budget, each working age Tasmanian (all 325,000 of us) would have to pay $4900 each to cover the annual cost of public health care.

Now ask yourself how many people you know who have used the health service this year?

The State Government exists only to provide services to Tasmanians on behalf of Tasmanians. As such it is right and proper to question why large portions of the State pay no state taxation yet consume their share of services.

This is not a social argument, despite the tendency to paint it as such. This is a question of community, and everyone paying their fair share. But it is not happening at the moment.

How do we address this through the current taxation framework? The simple answer is that we can’t.

We desperately need to accomplish two things with our tax-base and the first is to broaden it.

This is easily accomplished, but won’t be popular. We have a ready tool to efficiently raise money off the populace. It is land tax and we need to apply it to all properties at a very low rate. In essence it becomes a state-based GST. If you live in Tasmania you pay towards its upkeep. It is fair and as detailed by the Henry Review and numerous other studies, it is non-distortional.

A properly implemented land tax policy will allow us to repeal a number of particularly inefficient taxes detailed following.

If at this point you are starting to curse, I would urge you to go back and read the points under paragraph two of this column!

My second point: We need to eliminate deadweight losses and punitive taxes on investment and employment that discourage people to invest.

What is a deadweight loss you may ask? Is it just econo-nonsense? Put simply a deadweight loss is where the government creates a second, duplicate structure to administer something, where in the private sector one administrative structure would do.  It, as suggested, doubles the cost base of the service the government provides and is particularly inefficient.

The prime example of this is the Health Department. Anyone who has read the State Budget will understand that the cost of health is not free as some would suggest.

Understanding this logically means that you appreciate that there is the expenditure of health, and the income required to pay for health. If you were going to set up a health business from scratch you would have clients who use health services, and recover the costs of providing the services from them.

Income would be collected at the point of service to cover the expenses. It would be in a word, efficient.

That’s not what we have now. We have one bureaucracy that spends the money, and we have a number of other bureaucracies that try to recover the money. In short a duplication or triplication of administration, and a deadweight loss to the taxpayer for the provision of health services.

Please, before the social naysayers are rioting on the lawns of parliament house, we are not talking about equity. We are talking about efficiency. The matter of looking after the least able in our community is still an achievable outcome in an efficient system.

Again, if we are looking to provide health services to Tasmanians, shouldn’t it be Tasmanians who pay for it?

How about we do something radical and logical? Having recognised that health is not free, and Tasmanians need to pay for it, we actually look to try to recover at least some of the costs from the people who use the service. This would also lead to a very important change in behaviour. If we put a price on health, we would also be putting a value on health. Presently as health in public system is free, its cost to users is nil, and having no cost to users means they have no incentive to address or contain wastage.

Again, before going to the garage and getting out your placard, please read the points under paragraph two of this column.

The final component to the reform of tax ties in with how we intend to kickstart the State.

We have been looking for years for a silver bullet to kick start Tasmania, what I like to call ‘werewolf economics’.

The reality that continually seems to escape government is that we have plenty of good small businesses here, and that it is infinitely easier for each of these businesses to increase their turnover by 10 to 20 per cent each than it is to find a massive new investment project for Tasmania.

The catch for government is that stimulating every business in the State requires real work - regulatory and taxation reform, not simply overt support for big companies. We need to get rid of seriously inefficient taxes such as stamp duty and payroll tax, and put simply, make Tasmania the best possible state for investment.

Yes it’s a big statement, but yet again I ask you to read the dot points in paragraph two - big problems need big solutions.

In summary, I hope that I have at least stimulated some debate on the problems firmly facing the State, and the importance of tax reform in addressing those problems, and ultimately stimulating the Tasmanian economy.

As I hope all Tasmanians now realise that we cannot keep doing the same things over and over again and expect a different or improved outcome.

The TCCI says the Labor and Liberal parties must come together more to counter the Green threat to responsible budget management.It welcomed the Liberals’ Future Directions announcement as a constructive addition to the economic debate.

TCCI chief economist Mark Bowles said the Opposition was differentiating its economy policy by providing clearer support for natural resource sectors than the Government.

“We have called on the Government to be stronger in defending industries such as mining, forestry and tourism from attack by powerful extreme green movements. We are pleased that the Opposition has listened to this plea,” Mr Bowles said.

“We wholeheartedly support the aspiration to become more self-reliant.

“However, we want to see more bi-partisan support for responsible budget management.”

Mr Bowles said that ensuring the value of Tasmania’s natural resources could be unlocked responsibly was critical.

“Education is also, rightly, a core focus of government.

“However, governments present and future need to beware of tunnel vision for favourite industries of the day, because market-driven opportunities can be missed and productivity reduced.

“There are more than 38,000 businesses in Tasmania that can all generate wealth and have flow-on benefits for other industries. They need equal support from government,” Mr Bowles said.

The TCCI’s position on sector development is detailed in its Economic Development Plan Submission, available at: http://www.tcci.com.au/tcci/index.php?c=166