Parties set to brawl over election funding model

NSW Premier Mike Baird is in favour of taxpayer-funded elections. Photo: Edwina Pickles Liberal Party state director Tony Nutt has been in negotiations with the ALP and the Greens over possible changes to election funding laws. Photo: Jessica Hromas

Labor and the Coalition are at loggerheads over how to overhaul NSW political donations laws in time for next year’s state election, with legislation due to come before the Parliament next week.

Liberal party state director Tony Nutt has been in negotiations with representatives from the ALP and the Greens over the shape of possible new funding laws following allegations of illegal donations aired at the Independent Commission Against Corruption.

Premier Mike Baird said in August he wanted a proposal ready to unveil by the end of September, but it is understood that the slower-than-anticipated negotiations were the reason this deadline was missed.

As previously reported by Fairfax Media, Mr Baird and Mr Nutt are considering a system that caps and reduces the amount of private donations that may be raised by parties, coupled with guaranteed taxpayer funding at a rate based on each party’s election result.

Mr Baird is an advocate of full taxpayer-funded elections, but experts warn such a system would be vulnerable to a challenge in the High Court, hence the inclusion of some capacity for private donations in models under consideration.

The Greens, in a bill to be introduced by Balmain MP Jamie Parker next week, are pushing for a 10-fold increase to penalties for breaches of donations laws to $110,000, criminal sanctions and an increase to the period within which prosecutions may be pursued, from three years to 10 years.

The party also wants the amount of money that can be spent in each seat reduced, smaller caps on donations to parties and candidates, and more regular reporting of donations.

However, Labor appears determined to push for a system that would ban private donations.

Last week, opposition leader John Robertson restated his commitment to full taxpayer-funded elections.

“If the Greens are serious about meaningful donation reform they will support Labor’s push for the full public funding of NSW elections,” he said.

Mr Robertson is sticking to his position, despite the views of experts who warn such a system would almost certainly be unconstitutional because it would restrict freedom of political expression.

Last December the High Court found a ban on donations from corporations and associations introduced under the former premier Barry O’Farrell was unconstitutional for this reason.

A Labor source insisted the party was open to reasonable incremental reform proposals.

The government is expected to bring forward its bill when Parliament resumes next week. It will pass the lower house where the government has a significant majority, but will need support in the upper house to become law.

If Labor opposes the bill it could still pass with support of the Greens or three out of the four MPs from the Shooters and Fishers Party and the Christian Democratic Party.

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Liberals under more pressure to preselect a woman to upper house

Marketing executive and former journalist Dai Le. Photo: James Alcock Woollahra councillor Katherine O’Regan is one of four female Liberal candidates for next year’s state election. Photo: Tamara Dean

Pressure is building on the NSW Liberal Party to preselect a woman to its upper house ticket for next year’s state election, with four female candidates putting their hands up.

Marketing executive and former journalist Dai Le nominated shortly before the deadline of October 1.

She is joined by Woollahra councillor Katherine O’Regan, who served as chief of staff to former environment minister Robyn Parker, and Mary-Lou Jarvis, an adviser to Senator Concetta Fierravanti-Wells.

Their nominations follow that of Prime Minister Tony Abbott’s sister Christine Forster, who is a City of Sydney councillor.

Ms Le, who stood unsuccessfully for the Liberals in the seat of Cabramatta at the 2011 election, was a surprise non-starter for the south-western Sydney provincial spot on the upper house ticket this year. She is close to retiring upper house MP Charlie Lynn and was regarded as a strong contender to replace him.

Instead, a little-known motor mechanic and Wollondilly councillor, Lou Amato, was the only candidate to nominate for Mr Lynn’s position. He secured the winnable spot thanks to backing from local powerbroker Jai Rowell, who is the minister for mental health.

Mr Lynn told Parliament in May that he was “absolutely perplexed as to how a position that commands a six-figure salary with a secure eight-year tenure could attract only one applicant, apparently an unknown tradesman with an invisible history in the Liberal Party”.

“If the Liberal Party continues with a preselection system that discourages talented females from even applying to represent it in Parliament, we risk becoming a white-bread Anglo party of unrepresentative political hacks,” he said.

Upper house preselections are carried out by representatives of local branches and the party’s state executive, but Liberal Party bosses have nonetheless faced criticism over the prospect of having no women on next year’s  upper house ticket.

Party sources expect two “at-large” upper house positions – those without direct responsibility for geographical areas – are definitely winnable at next year’s election.

A third – the 10th position on the joint Coalition ticket – is viewed as marginal.

Other candidates for the at-large positions are former City of Sydney councillor Shayne Mallard and former NSW Young Liberal president Scott Farlow, who confirmed his candidacy on Tuesday.

Mr Mallard has the support of the Left faction while Mr Farlow is backed by the Centre Right. As such, they are regarded as front-runners to fill the top two spots.

Also among the estimated 19 nominees are former Parramatta lord mayor John Chedid and Peter Poulos, who also works for Senator Fierravanti-Wells.

Ms Le declined to comment, citing Liberal Party rules that prohibit preselection candidates speaking to the media. Ms O’Regan and Ms Jarvis did not return calls.

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Rio Tinto will defend Glencore takeover bid

Australia’s biggest iron ore exporter Rio Tinto will fiercely defend any further takeover approach from Swiss commodities trading giant Glencore, after its board had unanimously rejected a shock formal approach from Glencore chief executive Ivan Glasenberg.

On Tuesday, Rio broke a long silence over growing speculation that Glencore was mulling an opportunistic merger attempt, revealing that it rejected an offer in August, Rio said on Tuesday morning that it rejected the offer in August, with its board, chaired by Jan Du Plessis, ruling a merger was not in the best interests of its shareholders.

But despite Rio rebuffing the approach, its ASX-traded shares surged to close 4.3 per cent higher at $60.07, as investors mulled a second Glencore approach.

While the deal would create the world’s largest mining company with a market capitalisation of $US160 billion ($182 billion), many in the market are perplexed as to why Mr Glasenberg is pursuing Rio, given a merger – or takeover – would likely be met by fierce opposition from Chinese customers and shareholders, competition regulators and the Rio board.

Some market observers are speculating that Glencore’s advance is designed to pile pressure on Rio, at a time when dramatic falls in the iron ore price has depressed the miner’s valuation. Iron ore prices have crashed about 40 per cent this year to five-year lows of about $US80 a tonne, amid a huge expansion in supply by the iron ore majors.

Mr Glasenberg could also be trying to force a shake out of Rio’s underperforming assets, which Glencore could snap up.

UBS analyst Glyn Lawcock said Glencore’s merger advances made sense as an opportunistic play that could allow Glencore to get its hands on Rio’s coveted iron ore business and merge Rio’s coal assets with its own.

“I think it’s a very smart move by Glencore to have a go but being successful is an entirely different matter,” he says.

“Why wouldn’t you want to own one of the world’s best iron ore businesses, one of the world’s best aluminium businesses, particularly at a time when the market is not ascribing full value, when it’s worried about iron ore prices, it’s worried about China, it’s worried about everything.”

It would boast market-leading positions in iron ore, copper, nickel, zinc and coal.

However, he said Rio was under no pressure to consider an offer, short of it being lobbed at an eye-watering price.

“Rio is in no way a distressed seller, they’ve got plenty of opportunities ahead of them to continue to add value for shareholders, and unless the deal is very attractive, why would you pursue it?”

Rio is the world’s lowest-cost producer of iron ore and draws about 85 per cent of its earnings from the commodity.

Mr Glasenberg is understood to have spoken in recent weeks to Rio’s largest shareholder, Chinalco, which holds a 9.8 per cent stake.

Gaining support from the Chinese state-owned enterprise and Chinese regulators looms as a major stumbling block to any deal, given it could deliver the merged entity a large amount of control over the coal and iron ore markets, two of China’s biggest imports.

Chinese regulators forced Glencore to sell its $6 billion Peruvian copper mine Las Bambas, to win approval for a $35 billion acquisition of Xstrata three years ago.

However, Mr Lawcock said Glencore views Chinalco as potentially supportive of a change of control at Rio after it failed to secure a board seat on the miner and because of the “limited progress” with the Simandou iron ore joint venture in Guinea.

Rio’s share price spike on Tuesday plays into Mr Glansenberg’s hands, given it could be read as support for his advances.

He may want to put the management strategy of Rio, headed by Sam Walsh, under the microscope and try to force the miner to consider selling, or merging, parts of its business.

Glencore executives have made little secret of their frustration that Rio will not push ahead with negotiations over a thermal coal joint venture in New South Wales’ Hunter Valley. Forcing Rio to reassess a joint venture or a merger in thermal coal with Glencore could be part of Mr Glasenberg’s agenda.

Any merger would also have to overcome some cultural issues. Management at Rio Tinto, and arch rival BHP Billiton, have been know to see Glencore as a trading house with second-tier mining assets, rather than a fully fledged miner.

Mr Glasenberg has been critical of Rio and BHP’s plans to rapidly expand iron ore production despite the sharp drop in the price.

Some fund managers have suggested Mr Glasenberg is hoping the spotlight on a potential merger could trigger a rerating of Glencore’s struggling share price, which has fallen to around £3.40, from £5.30 pounds on listing on the London Stock Exchange in mid-2011.

Citigroup analyst Clarke Wilkins says that a Glencore “merger” with Rio would likely be a paper bid, and would be an “overall positive” for Glencore.

But the big question remains, at what price would Rio agree, if at all.

“We believe it’s likely to be a paper transaction, if it happens, given Glencore’s high gearing,” Mr Wilkins wrote.

“Interestingly this would place Glencore-Rio on an opposing trajectory to BHP, which is trying to simplify the portfolio by spinning [off] non-core assets.”

Glencore stands to gain a DLC structure from the deal and “a global platform that competes with a BHP Billiton”, Citigroup says.

Rio said it was no longer in talks with Glencore.

“The board’s rejection was communicated to Glencore in early August and there has been no further contact between the companies on this matter,” Rio said. 

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RBA keeps rate on hold, doesn’t mention house prices

Tight-lipped: RBA governor Glenn Stevens kept his thoughts about the housing market to himself yesterday. Photo: Glenn HuntABS backflip on August jobs surge

The Reserve Bank has been talking about surging house prices for months.

It has been warning it may take steps later this year to rein in bank lending to keep house prices under control.

It has talked loudly about the consequences of unwanted investors jumping into Sydney and Melbourne property markets with the hope that prices keep rising so they can book the capital gains.

But on Tuesday, when governor Glenn Stevens left the cash rate at 2.5 per cent – for the 14th month in a row – he hardly mentioned them.

“Credit growth is moderate overall, but with a further pick-up in recent months in lending to investors in housing assets. Dwelling prices have continued to rise over recent months,” is all he said.

It was unremarkable. And as one economist noted, it was a bit of a let down. “The biggest ‘disappointment’ [in the governor’s statement] was the absence of discussion about the hot housing sector, the role of ;unwanted’ investors and the rising risks to financial stability and the macro-economy down the track should house prices fall,” Annette Beacher, from TD Securities, said on Tuesday.

“Given the emphasis on this topic from various senior RBA officials in recent weeks, we were surprised that there was no mention at all today. Perhaps, like last month, that discussion features in the [upcoming] RBA board minutes [of the meeting] rather than the official monthly board communiqué.”

Ms Beacher made an interesting point, even if it was a little exaggerated. House prices are the thing that everybody is talking about at the moment. The more they rise the harder it will be for the RBA’s cash rate to keep economic growth balanced across the country.

The talk of macro-prudential policies is getting louder. It’s understandable that people want to know what the RBA is thinking about the topic.

But not all economists share Ms Beacher’s view that Mr Stevens ought to talk about it in his interest-rate statement.

Citi Australia’s chief economist, Paul Brennan, argued that it does not mean macro-prudential policies won’t be deployed to dampen house prices just because Mr Stevens made a passing reference to them.

“The board’s statement wasn’t the place to discuss the application of macro-prudential measures, particularly as they ultimately will be decided and implemented by the Australian Prudential Regulation Authority,” Mr Brennan said.

“In any case, the recent Financial Stability Review and assistant governor Malcolm Edey’s comments made clear the bank’s concerns about rapid investor lending and we expect some form of increased capital requirements on housing investor loans if this lending doesn’t slow soon,” he said.

And whatever the argument, it is clear that the RBA is still concerned about the housing sector, so watch this space.

On the decision to leave the cash rate at 2.5 per cent, the RBA’s behaviour is understandable.

The most recent survey data indicate that business conditions have been gradually improving, with some recovery in household sentiment from a soft patch earlier in the year.

The RBA believes this suggests “moderate growth” is occurring in the economy.

But it also notes investment spending in the resources sector “is starting to decline significantly,” while investment intentions in other sectors of the economy are continuing to improve, though “these areas of capital spending are expected to see only moderate growth in the near term.”

With public spending likely to remain subdued, the Bank says it still expects growth to be “a little below trend” over the next 12 months.

The thing it is watching is the unemployment rate which has increased recently to sit about 6 per cent despite “some improvement” in most other indicators for the labour market.

“The bank’s assessment remains that the labour market has a degree of spare capacity and that it will probably be some time yet before unemployment declines consistently,” Mr Stevens said.

Wages are growing so slowly they are not keeping pace with inflation. The bank expects wages growth to remain “relatively modest over the period ahead”. This “should keep inflation consistent with the target even with lower levels of the exchange rate”.

The RBA’s inflation target band is between 2 per cent and 3 per cent.  It expects inflation to be consistent with that target over the next two years.

The Reserve Bank believes financial conditions remain “very accommodative”, and that long-term interest rates and risk spreads “remain very low”.

“Volatility in many financial prices is currently unusually low,” Mr Stevens said.

“Markets appear to be attaching a very low probability to any rise in global interest rates or other adverse event over the period ahead.”

The bank is still concerned about the level of the exchange rate.

“The exchange rate … remains above most estimates of its fundamental value, particularly given the declines in key commodity prices,” Mr Stevens said, so it “is offering less assistance than would normally be expected in achieving balanced growth in the economy.”

That last sentence has been repeated ad nauseam for the last couple of years. But thankfully, it has lost some of its power because the dollar has recently to around US86.7¢.

Economists are hoping it drops further, to around US75¢, which just happens to be the dollar’s long term average.

If that happens, the RBA will be very pleased.

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Centuria sells prime St Kilda Road office

The off-market sale has poured $82.1 million into Centuria’s coffers.Centuria Property Funds has sold a prime St Kilda Road office for $82.1 million as it prepares to the launch its $200 million Metro Diversified Fund.

The off-market sale of the seven-storey building at 441 St Kilda Road, considered one of the boulevard’s best, set a new benchmark for the street.

Centuria purchased the property for $58 million on behalf of the Over Fifty Guardian Friendly Society in 2012. It was sold to a private entity associated with the Dymocks family, industry sources said.

The group will launch its new diversified fund in the coming month, chief executive Jason Huljich said.

The fund will own an initial eight industrial and commercial properties, with a focus along the eastern seaboard.

It will be run by Nick Collishaw, the former head of Mirvac, and will form the listed platform for the Centuria Property Funds empire. It will aim for a yield of about 8.25 per cent and low gearing of about 25 per cent.

Mr Huljich said the listed vehicle would add diversity to the group, which also has 21 wholesale funds, with assets spread throughout NSW and Victoria.

He said the latest acquisitions of 175 Castlereagh Street and 10 Spring Street, Sydney, have been leased 100 per cent through recent deals at competitive rents.

“In the two properties, we have separated the vacant floors into speculative suites to cater for the demand, in capital cities, of small-to-medium tenants, including the listed financial services group Azure and financial commentator Peter Switzer,” he said.

“The leasing markets in the small-to-medium sector remains strong, particularly from legal and financial consultants, accountants and the new property entrepreneurs.”

Mr Huljich said while there are companies looking for large spaces, incentives in rents remain competitive.

Those seeking such large apaces include Google, UBS and Insurance Australia Group, which is reported to be looking at Darling Park Tower 2 or 680 George Street, Sydney.

Westpac’s excess staff from 275 Kent Street, which are not included in the move to Barangaroo, are reported to be considering a move to the 40,000-square-metre Grocon development at Darling Harbour, known as the Ribbon.

The leasing and new fund launches, including GPT’s recent Metro Office, comes as valuers, fund managers, property financiers and property analysts see foreign investment as a significant to very significant driver for the current increased demand and prices for Sydney and Melbourne residential property, according to the respondents in the Australian Property Institute’s 33rd survey on property directions.

The survey found that commercial property in Sydney is seen as being the furthest along the rise of the property cycle, with Melbourne beginning to rise and with Brisbane at the bottom of the cycle.

API NSW president Tyrone Hodge said market values were expected to increase at a faster rate than predicted in May for Melbourne’s central business district and suburban CBD commercial, industrial and retail property. “Market rents for Melbourne CBD and suburban CBD commercial property are expected to decline, but at a slower rate than in May, while increasing slowly for industrial and retail property,” he said.

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