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Sunday, December 14

Actual teenagers: Nowhere Boys. Photo: SuppliedFREE TO AIR
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Nowhere Boys, ABC, 6pm

What a relief it is to watch a TV show made for teenagers that is not populated by 30-year-olds creepily passing for 16 or scrubbed-clean Disney princesses who are 10 years into their career and two years off a Britney Spears-style breakdown. Even better, Nowhere Boys is an Australian production filled with actual teenagers in a familiar bushy suburban setting that doesn’t look like the mono-culture that is Ramsay Street. Tonight, as the police search for missing Andy intensifies, Felix (Dougie Baldwin from Upper Middle Bogan), decides they need to find someone with another water element and “magical potential” to bring him back. Enter new girl Saskia.

Shaun Micallef’s Stairway To Heaven, SBS One, 7.30pm

As a young man, Mad As Hell’s Shaun Micallef considered joining the priesthood. And while the Catholic church’s loss (can you imagine the sermons!), has been TV’s gain, Micallef has since wondered if he missed out on an opportunity to find the answers to the big questions in life. What to do? Travel to India, of course, where 900 million Hindus can’t be wrong. He wants to meet people who are very certain about their faith and in doing so dips a toe into the Ganges, meets the King of Puri and looks to “find a guru to find me”. In lesser hands, this type of spritual quest could easily turn into self-indulgent fluff. Heck, even the Beatles succumbed to a little too much introspection when they hit Rishikesh in 1968. Micallef, however, is a deft hand at self-deprecation and his quest to discover if there is “greater purpose than being a semi-professional Australian TV personality” makes for a funny and watchable journey. A thoroughly thoughtful antidote to Christmas craziness and consumption.

Louise Rugendyke

After the Wave, SBS One, 8.30pm

Given the unimaginable tragedy of the 2004 Boxing Day tsunami, it may seem cruel or perverse to describe a documentary on it as haunting and beautiful. London-based Australian filmmaker Amanda Blue rounds up a handful of survivors who lost loved ones when the wave hit the resorts of Thailand, as well as the forensic scientists given the grisly task of identifying the remains of victims. What emerges is an emotionally charged account of people who have overcome loss and grief and created legacies for the departed.

Paul Kalina

MOVIES

The Fog of War (2003), ABC2, 10.45pm

Somewhat wary and definitely unwilling to give an inch of ground in his battle with the past, Robert S. McNamara, the former US defence secretary who was often described as the architect of the Vietnam War, is one sure-footed 85-year-old in Errol Morris’s Academy Award-winning documentary. The determined McNamara, who died in 2009, is the perfect subject for Morris, the pre-eminent documentary maker of the last 30 years. A director whose often-pointed sense of tone and eye for detail is allied with an investigative thrust, he captures McNamara in all his peculiar glory, both as an individual and a product of the age he lived through. Morris doesn’t pursue McNamara, he draws him out, knowing that the technocrat will attempt to instil his own view, his own governing logic, on each flashpoint in history he was witness to. Ultimately the film doesn’t indict McNamara; it proves to be so fascinating because of the depth of understanding it provides.

The First $20 Million is Always the Hardest (2002), Comedy Movies (pay TV), 8.30pm

A satire of Silicon Valley at the end of the hardware era – when chip design was crucial, Microsoft was an unparalleled giant and the internet was only just starting to find mainstream traction, Po Bronson’s 1997 book is a period piece, but it’s aged far better than Mick Jackson’s ungainly movie adaptation.

The First $20 Million takes the technological twists and black humour and turns it into the cliched archetype of a group of unkempt young men who triumph against an overbearing oppressor. It’s Revenge of the Nerdswith a PC.

Assigned to the scrapheap at a cutting-edge research facility, Andy Caspar (recent co-star of The Code Adam Garcia) and his oddball buddies stumble onto a paradigm-shifting solution to their unwanted assignment, which naturally creates a whole new set of problems. The book was about very smart people whose path to visionary status was tangled up in commerce and greed, but the film is about geeks we are supposed to find amusing.

Craig Mathieson

Economy: Not good but not disastrous

currencyDon’t drop your bundle. It’s not clear the economy has slowed to the snail’s pace a literal reading of the latest national accounts suggests. As for the talk of a “technical income recession”, it’s just silly.
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What is clear is that, at best, the economy continues to grow at the sub-par rate of about 2.5 per cent a year, a rate insufficient to stop unemployment continuing to edge up. This has been true for more than two years.

A literal reading of last week’s national accounts from the Bureau of Statistics says the economy – real gross domestic product – grew by a mere 0.3 per cent in the September quarter, down from growth of 0.5 per cent in the previous quarter and 1 per cent in the quarter before that.

But if we’ve learnt anything by now, it’s that it’s folly to take the quarterly national accounts too literally. They’re just a first stab at the truth, based on incomplete and often inaccurate data.

The initial estimate for growth in any quarter will be revised – up and down – up to a dozen times before the bureau is satisfied it has got it pretty right.

Reserve Bank governor Glenn Stevens referred recently to “the vagaries of quarterly national accounting”.

Frankly, I don’t believe the economy  slowed markedly in the three months to September, or the six months, for that matter. If it were true, surely we wouldn’t need to be told about it by the national accounts two months after the fact.

Since all individual economic indicators have their weaknesses and inaccuracies, meaning none should be taken too literally, the only adult way to proceed is to see if the signal coming from one key indicator fits with the overall message coming from the other indicators.

On the basis of what all the other indicators are saying, the forecasters – official and unofficial – expected growth in the September quarter of 0.6 per cent or 0.7 per cent, which would be consistent with the view we’re still travelling at about 2.5 per cent a year.

When the published figures turn out to be half that, this suggests either that all the forecasters got something badly wrong, or that it’s the published initial estimate that’s wrong and likely to be revised up to something closer to what we expected.

The way we’ll be able to tell whether the economy really has slowed to a crawl is by watching the rate at which unemployment rises in coming months. At the 2.5 per cent a year speed, it’s worsening at a rate averaging 0.1 percentage points a quarter. If that average rises, we’ll know things are much worse than they were.

As for the “technical income recession”, it proves little. Make a note that, in this context, the word “technical” is warning that what follows is based on an arbitrary rule with little sense to it.

“Technical” means two quarters of contraction in a row equal a recession. So one quarter of huge contraction isn’t a recession, and two negative quarters separated by a zero quarter aren’t a recession, but two consecutive negative quarters are a recession no matter how tiny the falls (or whether one is subsequently revised away).

“Real gross domestic income” is real gross domestic product adjusted for the change in our terms of trade during the quarter. Since, as we’ve seen, real GDP growth was weak in the past two quarters, the deterioration in our terms of trade in both quarters caused real income to decline by 0.3 per cent in the June quarter and by 0.4 per cent in the September quarter.

What happens to our terms of trade – and, hence, our aggregate income – is important. But, in this particular case, it’s hard to get too excited.

As Dr Shane Oliver, of AMP Capital, has explained: “There is a danger in dwelling too much on the slump in real gross domestic income flowing from the falling terms of trade . . . while swings in the mining and energy export prices are very important for resource companies, and hence for government revenues, their impact on the rest of the economy is far more modest.”

In other words, the main impact is on mining company profits, and mining is about 80 per cent foreign owned. More their problem than ours.

If I thought the economy was sliding into genuine recession I’d say so. But I don’t believe in exaggerating the bad news because it makes for more exciting betting on financial markets, makes a better story or because you’ve always hated whichever party happens to be in power at the time.

Ross Gittins is the economics editor.

Standards and commissions for financial advice ripe for change

The wealth industry needs to overhaul commission structures for financial planners and redefine misleading advice terms to protect consumers.
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Those were two of several ­recommendations outlined in David Murray’s inquiry, which argues the advice industry needs to take major steps to create a culture that focuses on consumer interests.

Mr Murray’s inquiry also pushes for higher education standards for planners, and stronger powers for the corporate regulator to crack down on wayward financial professionals, among others.

The federal government needed to mandate that planners hold relevant tertiary degrees and prove their competence in specialist areas such as superannuation, it found.

Mr Murray, the former chief executive of Commonwealth Bank of Australia and chairman of the inquiry, called for the term “general advice” be renamed and planners disclose their ownership structures to make it clear to consumers whether they are receiving advertising or financial advice.

Mr Murray urged the federal government to change laws to make the cost of upfront commissions for insurance no more expensive than ongoing commissions.

“This would reduce incentives for churning [swapping customers from one insurer to another to get more expensive commissions] and improve the quality of advice on life insurance,” the final report, released on Sunday, said.

The recommendation comes after a damning report from the corporate regulator, which found one in three ­advisers focused more on winning commissions than serving their clients.

About nine in 10 advisers ­recommending life insurance are paid an ­upfront commission of between 100 and 130 per cent of the first year’s premium, plus between 10 and 13 per cent of the annual premium in ­following years.

Nearly six out of 10 life policies are sold through financial advisers, the Australian Securities and Investments Commission says. The Murray inquiry recommended a “level” commission structure, ­requiring that the cost of an upfront ­commission is not greater than the ongoing commission.

ANZ Bank’s chief executive of global wealth, Joyce Phillips, said: “We are supportive of an industry review into remuneration structures of life ­insurance that would look at addressing upfront commissions and the potential for conflicted remuneration.”

The Murray inquiry also called for the term “general advice”, which ­covers advertising and sales material highlighting the pros of financial products, to be scrapped. “Consumers may ­misinterpret or excessively rely on guidance  . . . when it is described as ‘general advice’,” it said.

Will Hamilton, a financial adviser with Hamilton Wealth Management, supported the change.

“General advice can be seen as product sales – it’s as simple as that. This is important for the consumer,” Hamilton said.

In its ­submission to the inquiry, the ­Commonwealth Bank of Australia said the term should be re-labelled “sales” or “product information” to improve consumers’ understanding of what they were receiving.

The Financial Services Council, which represents the wealth management arm of the big banks, said general advice should be changed to “general information”.

“We believe that general advice should be renamed to ensure that consumers have more clarity about what they’re receiving, as in some cases it is just factual information being provided from a research report or product seminar,” Ms Phillips said.

CLSA diversified financials analyst Jan van der Schalk broadly supported Murray’s recommendations for the wealth sector.

Potential saviour lines up for Pie Face

About 17 company-owned stores and two franchised stores have closed, reducing the chain to about 50 outlets.When reports emerged six months ago that the Pie Face franchise was in trouble, Stan Gordon reached out to founder Wayne Homschek.
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Mr Gordon, the chief executive of the Franchised Food Company – which has 180 franchised stores under brands such as Cold Rock Ice Creamery, Pretzel World and Nutshack – thought he could offer Mr Homschek some ­useful advice. He ran a hot pie business in South Africa almost 20 years ago and brought the concept to Australia when he emigrated in 1996. “I wanted to teach Australians about pies – I thought if it worked [in South Africa] it would work here,” Mr Gordon recalled.

“Australians knew more about pies than I did, [so] it failed miserably. I laugh about it today but at the time it wasn’t funny,” he said.

Mr Gordon reckons he knows what not to do now and is keen to give the hot pie business another red-hot go by taking over the collapsed Pie Face.

“We are a multi-brand operator. There are not many others who would be in a position to take it over,” he said.

“We have 180 stores and we understand the smaller types of franchises – the mom and pop operators who have put their life savings and homes on the line. And we understand the snack treat market.”

However, after making several approaches to Pie Face’s administrator, Jirsch Sutherland, Mr Gordon has yet to receive a response. He believes the administrator and Pie Face directors and investors are more interested in pursuing a deed of company arrangement and refinancing major creditor Macquarie Capital than finding buyers for the business.

About 17 company-owned stores and two franchised stores have closed, reducing the chain to about 50 outlets, and Pie Face’s administrators and ­management are in talks with landlords to reduce lease costs on remaining stores.

It is also looking at ways to cut costs and boost production in its Rosehill factory, including selling frozen, take-home packs through Woolworths.

Franchisees, creditors and investors at Pie Face’s first creditors’ meeting last week were told weekly ­outgoings across the group were still exceeding sales by about $150,000.

Directors are expected to submit a deed of arrangement before the second creditors’ meeting on December 30.

Creditors would need to be convinced the deed delivered a better return than liquidating the assets.

Mr Gordon believes Pie Face’s current model is unworkable but could be fixed by tweaking the product offer and repositioning the brand.

The current model pitted Pie Face franchises against independent bakeries, many of which baked hot pies, he said.

“They have the right ingredients, but they’re putting them in all the wrong places,” he said.

Pie Face was founded in Sydney in 2003 by Mr Homschek and his wife Betty Fong and it expanded rapidly, raising more than $35 million over the past five years from a string of ­high-profile investors, including retail entrepreneur Brett Blundy, ­Rothschild Australia chairman Trevor Rowe and former Austereo executive Brian Bickmore.

Angus Geddes, the founder of in­vestment newsletter and fund manager Fat Prophets, is estimated to have invested about $5 million into Pie Face for a 6 per cent stake. He said after the company’s collapse he was con­fident it could get out of voluntary administration quickly.

Banking sector reform will affect every Australian

A banker no more: Former Commonwealth Bank head David Murray conducted the government-commissioned Financial Services Inquiry. Photo: Christopher Pearce
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Treasurer Joe Hockey urges banks to co-operate with regulators

The Financial Services Inquiry is truly far reaching.

The new model former banker David Murray puts forward will affect every Australian. If you own a credit card, have a loan, a bank deposit, superannuation, an insurance policy or own shares in a bank, the tentacles will touch your financial position.

The massive overhaul of the Australian financial system is aimed to act as a bulwark to secure the system in the event of a future shock such as the global financial crisis.

It seeks to iron out many of the competitive inequities in the system that disadvantage smaller regional banks and acknowledge that the digital revolution is changing the financial landscape, ushering in new entrants that need to be accommodated within the regulatory framework

The inquiry has also exposed a structurally deficient superannuation system that is expensive for the consumer and lacks competition.

The new super system package recommended by the Murray inquiry has the potential to increase an average weekly earning-male by 25-40 per cent in retirement, according to the report’s authors. And changes recommended to credit card surcharges will see consumers pay lighter fees.

The price of bolstering the safety of the banking industry will come at a cost – particularly to the big four banks, Westpac, Commonwealth Bank National Australia Bank and ANZ – because they will need to carry a greater capital reserve buffer, one that will place it in the top ranks of their international peers.

It is a prospect the major banks have been aware of and on which they have already been mounting  a rearguard action.

It has set Murray and the major banks on a clear collision course. If implemented by the government, there is a clear suggestion that banks will pass on higher costs either by increasing interest rates to borrowers, decreasing deposit rates, or reducing dividend payments to shareholders.

Murray recommends our banks should be in the top quartile when measured by international standards but makes no explicit target. However, he suggests the major banks are in a range of 10-11.6 per cent  on a globally harmonised basis but this needs to go above at least 12.2 per cent to be in the top quartile.

The report says that if Australia experienced a shock that was in the range experienced overseas during the global financial crisis, it would be “sufficient to render Australia’s major banks insolvent in the absence of further capital raising”.

It could destroy 900,000 jobs and create large falls in the nation’s gross domestic product.

Based on international estimates, the cost to GDP of a crisis would equate to $300 billion to $2.4 trillion in Australia and further increase government debt..

The report said that while Australia’s resilience to the GFC reflected the strength of the financial service sector, many factors came into play including the government’s balance sheet and Chinese resource demand, that may not be present in the next crisis.

Murray’s view is that any banking system shortfall should not be funded by taxpayers

The risks associated with a crisis are further exacerbated by Australia’s highly concentrated banking system. “Disruption to the functioning of one major bank could be expected to impose significant costs to the economy particularly if it resulted in contagion to other Australian financial institutions.”

He said bank returns could be lower and still attractive to investors and generate sufficient return to promote economic growth. Thus Murray clearly thinks the cost on banks associated with ensuring systemic safety will be borne by their shareholders rather than their customers.