New cost discipline part of the wider corporate environment

One of the key features of the US economic recovery from the financial crisis has been the divergent performances of the business sector and labour market.

Although the unemployment rate of 6.3 per cent is well below its peak, the US economy is still a long way off full employment. Long-term unemployment – those out of work for more than 12 months – remains stubbornly high while the slow recovery in the participation rate points to still far too many discouraged workers.

Janet Yellen, the Federal Reserve chairwoman, recently reiterated that monetary policy will remain accommodative for as long as it takes to restore full employment to the US economy.

A flipside of considerable slack in the labour market has been a rapid recovery in the corporate sector. Profit margins and the profit share of GDP have continued to increase to reach record highs as has the S&P500, which is 20 per cent above its pre-GFC peak. The boom in profitability stems largely from near-zero interest rates and corporate America’s aggressive approach to trimming costs in the face of a weak domestic economy and anaemic revenue growth.

More recently, the penny has dropped for Australian firms that low nominal GDP growth and an anaemic revenue environment is the new normal. The economy has been stuck in a nominal recession for two years now, with nominal GDP growing by less than 4 per cent per annum in 2012 and 2013, the weakest consecutive years since the recession of the early 1990s.

Faced with the headwind of weak top-line growth, companies have sought to boost profitability by deferring capex, shedding non-core businesses, trimming costs and lifting efficiency. BHP and Rio Tinto have divested underperforming assets; Telstra, ANZ and QBE are just some companies that continue to offshore IT and other back-office operations, while the big banks have cut back on staff in areas burdened by excess capacity, notably business lending.

The relentless focus on cost control is now being reflected in generational change among senior management and boards. CEOs and chairmen who have a demonstrated track record of delivering strong acquisition-led growth during the boom years no longer command a premium in the managerial market, and are being replaced by more cost-conscious CEOs.

The new cost discipline is a welcome development following decades where CEOs focused on growing revenues and empire building, at the expense of profitability and shareholder value. The more ruthless approach is starting to pay dividends; gross operating surplus – the key economy-wide measure of profits – grew by almost 10 per cent in 2013.

From its quarterly statement of monetary policy released last week, it is clear the RBA expects nominal GDP growth to remain weak, due to further falls in the terms of trade and the view that the economy still has a fair degree of spare capacity.

The prospect that revenue conditions will remain soft for a while will therefore continue to focus the minds of CEOs on what they can control rather than chasing the pipedream of double-digit revenue growth and market share gains that destroy shareholder wealth.

Any risk that corporate Australia’s focus on cost control could lead to a shortfall in aggregate demand should give the RBA plenty of scope to keep interest rates lower for longer than many expect. Ultimately, the new cost discipline promises to be good news for investors, less so for workers and job-seekers.

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Picking mushrooms the safest way

Don’t risk it: Death cap mushrooms which are found in the ACT region. Photo: Jay Cronan

There are some foods that really speak of the changing seasons – soon as you see them, bam, a recipe pops straight into mind. Like in early spring, a box of asparagus has you thinking of the warming weather, of new growth and longer days. This time of year, a box filled with wild mushrooms plus a bag of freshly picked chestnuts has me thinking of frosty mornings, achingly clear cold days and late autumn food.

The mushrooms come from Tumbarumba and came with freshly dug onions, garlic, fennel seeds and oregano. Autumn in a box. The couple who supply this have a Scandinavian connection so knew a lot about foraging, saunas and pickling before it all became trendy. Every year they scour the pine plantations for saffron milk caps, aka the pine mushroom. Risky stuff: we have been told repeatedly not to pick wild mushrooms unless you have something like a PhD in microflora. Why? Because every year there are poisonings from death caps, so just buy packaged dried mushrooms if in doubt.

There are many great things that came out of Europe: our wine industry, clogs and Eurovision to name just a few. However we also got things we didn’t count on, such as Portuguese food, soccer and these death cap mushrooms. They grow around European oaks and can look similar to some edible mushrooms but they are nothing like pine mushrooms which, as their names suggests, grow around pine trees. Anyway, I trust my Nordic friends fully and welcome their autumnal gifts along with a half kilo of fresh killed venison. They directed me to make a meat loaf or a pie out of all this, which is exactly what I did, with an Italian twist.

The pasticcio pre-dates the pie by a few hundred years. A very thin, buttery, pasta-like pastry is filled with all sorts of meats and vegetables, baked and served with a bitter greens salad.Venison, wild mushroom and chestnut pasticcio pie

70g unsalted butter plus 50g butter (for bechamel)

12 roasted chestnuts, peeled

2 small onions, diced

2 cloves garlic, chopped

1 tbsp fennel seeds

1½ cup marsala

100g prosciutto fat, diced (lardo or even pork fat works too)

2 large chicken livers, chopped to a puree

3 tbsp tomato extract or paste

olive oil

500g venison shoulder, minced

300g pork belly, minced

100g dried pine mushrooms (or 20g dried porcini mushroom) soaked in a little hot water to soften

½ bunch parsley, leaves chopped

4 sprigs oregano, chopped

⅓ cup plain flour

1 cup milk

chicken or veal stock, as needed

3 eggs plus 1 yolk

200g finely sliced prosciutto

pasticcio pastry (see recipe above)

salt and pepper

Chop the chestnuts and saute in a little butter. Put them aside. Remove the mushrooms from the soaking liquid, saving the liquid for later, and saute in more butter on a low heat.

Remove the mushrooms and reserve with the chestnuts.

Add more butter to the pan and saute the onions and garlic until soft. Add fennel seeds and cook for another minute. Increase the heat and add the wine plus the soaking liquid for the mushrooms. Cook this down to a thick sauce, about ¼ of a cup. Stir in chicken livers, tomato paste and prosciutto fat, mix them together. remove and reserve. Clean the pan or, if you are like me, just keep using them until you have dirty pots and pans piled up.

Get the pan hot and add oil to just coat the bottom. Quickly sear the venison and pork in small batches. Add this to the onion mixture along with the herbs. Combine the two mixtures and season.

Make the bechamel. Heat the butter and cook until it stops sizzling. Add flour and mix with a wooden spoon to remove lumps. Cook for a few minutes until it turns a sandy colour. Add milk and whisk until smooth. Cook over a low heat for 20 minutes adding stock if it looks stodgy – it should be quite thick and creamy. Mix this alongside the eggs and egg yolk into the pie filling.

Roll two balls of the pastry out into thin discs just slightly larger than the 22cm spring form pan you have ready, buttered and lined. Roll the other ball into a 4cm wide strip that will go around the circumference on the pan.

Lay one disc on the bottom, press the strip of pastry around the edge of the pan so that it just folds over the top, sealing the edges and joins. Lay half the prosciutto across the bottom in one layer, cover with the filling, lay the rest of the prosciutto on top.

Cover with other round of pastry, fold and pinch the edges and poke a few air holes in the top. Whisk the egg yolk and brush all over the top.

Bake at 180C for an hour or until it is golden brown and tests at 65C internally. Serve with a green salad.Pasticcio pastry

3 cups strong flour (Petra 3 or high protein)

100g butter, melted

2 tbsp vodka or other white spirit

8 drops of lemon juice, no more, no less

2 egg yolks (extra large or 3 small)

1 tsp salt

It’s best to do this by hand. Make a pile of flour and scoop out the centre, mix everything else in a bowl and pour it into the flour. Take a fork and mix it all gradually into the flour, working in just enough to make a dough ball.

Knead this for 15 minutes until it is smooth and elastic. You can use a mixer but be careful not to add too much flour. Divide into three equal balls, chill for a few hours. Now it’s ready to use.

>> Bryan Martin is winemaker at Ravensworth and Clonakilla.

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Growing pecans in Canberra isn’t nutty

Stately: Pecans have been grown in Australia for more than 150 years. Photo: Supplied

Last Saturday I had a visitor asking me what nut trees could he plant in Canberra. Well, he came to someone who has tried to plant every possible nut tree, with mixed success. Almonds flower too early and the frosts seem to always nip the buds, so we have not gathered any crops and our early plantings of walnut trees have died.

However, one of the loveliest nut trees that can be grown is the pecan tree. It will grow into a large spreading tree, quite shapely in appearance with long, willowy branches and finely shaped leaves.

We did not plant pecans initially, preferring to plant an avenue of walnut trees along our driveway. Walnuts have a very deep tap root system and alas, we did not deep-rip our shaley soil alongside our driveway. So the 12 walnut trees struggled to grow and finally died.

Walnut trees need good drainage and the opportunity to penetrate deeply into the soil below. The best walnut tree I have seen growing in Canberra is near Bert Hauptmann’s house at his Pialligo orchard in Beltana Road, growing in the alluvial soils close to the Molongo River.

We can see the difference in growing conditions when we visit our son Stephen and his family in Leeton. The newly established walnut grove on the eastern outskirts of Leeton is doing very well where the soil structure of the Murrumbidgee Irrigation Area is so different from our highlands-based soils.

Pecan trees are native to North America. Coming from the hot and dry parts of the continent they are suitable for our land. They have been grown in Australia for more than 150 years. They need to be able to send their roots down deep into the soil, so if you decide to plant a pecan tree you will need to allow plenty of space, remove any rocky substrata, ensure good drainage and show plenty of patience in the coming years. They can take up to 10 years to begin producing a reasonable crop of nuts. And when the crop is on the tree, it will need regular summer watering to fill out the nuts. In addition, remember that they are typically biennial, so you can only expect a big crop every second year – and that is only when we have a long hot summer. However, they are long lasting trees, very graceful in appearance and they will probably outlive your grandchildren.

As with most other nut trees, pecan trees produce both male and female flowers on the same tree. However, there is just a small window of reception with the female flower so effective fertilisation really needs two or three varieties where the male flower is available at the right time. This is a very similar story to that of cherry trees, so that a single tree will look beautiful but not yield much of a crop.

The male pecan flowers are produced on the previous year’s wood, in the form of long stalky catkins. Female flowers are produced at the end of small shoots that have grown in the most recent season. And with the pollination being windborne, it is best to plant the primary pollinator on the north western side of the group of pecan trees, as that is the prevailing wind direction for Canberra.

Pecan trees need long warm to hot summers but also need some 600 plus chill hours during winter to properly set the flowers. From the last spring frost they need between 180 to 220 days of frost free weather to produce a mature nut (the time difference relates to the variety). The nut matures in late April and through the month of May, so you will have the case of leaves falling and nuts still hanging on the trees.

There are few problems with growing pecans, but their long growing season means that they are an easy target for birds, especially cockatoos. The biggest plantation of pecans is located in Moree and they have even resorted to using helicopters to chase the birds away.

Western Schley is the main variety planted in the commercial plantations to our north but this has a long maturing period, of around 230 days so is not really suitable for Canberra. Cheyenne is a high yielding variety with only 180-200 days for its growing season. It is a smaller tree than most pecans and it produces good quality, smallish sized nuts. It does require very regular waterings to fill out the nuts in late summer and autumn.

Cherokee is another high-producing variety with under 200 days in its growing season. Cherokee does produce large quantities of medium-sized nuts. If it is growing on fertile soils, it does require regular pruning. Shoshoni is another early maturing variety, producing a large nut. Tejas is the fourth suitable variety, with a short growing season. Its nuts are small in size but normally well filled. It acts as a good pollinator for Cherokee and Cheyenne.Pecan pie

20g ground pecans

200g shortcrust pastry

75g pecan nuts, shelled

2 large free range eggs

100g brown sugar

50g maple syrup

250g golden syrup

½ tsp vanilla essence

Mix the ground pecans into the shortcrust pastry then roll it out. Line a shallow pie dish. Blind bake for 20 minutes at 190C, making sure to weigh the pastry down with rice.

Remove and allow to cool. Layer the shelled pecans onto the pastry. Beat the eggs and add in the brown sugar. When well mixed, add in the maple syrup, golden syrup and vanilla essence. Then carefully pour the mixture over the pecan nuts.

Bake at 220C for 10 minutes then reduce the heat to 180C and bake for another 30 minutes. Cool and place in the refrigerator for one hour before serving with thick cream.> Owen Pidgeon runs the Loriendale Organic Orchard near Hall.

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Federal budget 2014: Young to wait until 25 to get dole

Federal budget 2014: Full coverageFederal budget 2014: Interactive data explorerFederal budget 2014: Where will your tax dollars go?

Young people wishing to sign onto the dole will be forced to wait six months before they receive a cent of government money, after which they will have to work for the dole for another six months before either getting a job, or getting cut off again for another six months.

From January 1 next year, all under-30s who want to sign onto the dole (Newstart) or Youth Allowance ”Other” (the present, lesser payment for unemployed people up to 22) will be subject to the new system, which will save the budget $1.2 billion over four years and which is aimed at getting the young ”earning or learning”.

In addition to the six-month waiting period, the eligibility age for Newstart will rise from 22 to 25 years. Newstart is worth about $45 more a week for a single person living apart from their parents than the Young Allowance ”Other” payment.

During the mandatory six-month waiting period the young unemployed person will be required to participate in a government-funded ”job search and employment services activities”. If he or she has previously been employed, the six-month waiting period will be discounted – for every year of previous employment, a month will be taken off the waiting period.

Once the six-month waiting period is over, the unemployed youngster will have to do at least 25 hours a week in Work for the Dole activities for another six months, before either getting a job or going back through the whole cycle again, meaning another six months of no government money whatsoever.

Employers who pick workers off the dole queue will be eligible for a wage subsidy – meaning the young person’s dole payment would be re-directed to his or her employer for six months.

In addition to these changes, threshold tests for the dole will remain frozen for three years from July 1, as opposed to rising in line with the CPI. The actual rates of Newstart and Youth Allowance will also be frozen.

Some jobless under-30s will be exempt from the tough new scheme, including those unable to work more than 30 hours a week, carers and parents, part-time apprentices and Disability Employment Service clients.

Young people on the Disability Support Pension also face a crack-down. All DSP recipients under 35 who signed onto their pension between 2008 and 2011 (when tougher eligibility criteria were introduced by the previous Labor government) will be reassessed under the new, tighter system.

People with a ”severe or manifest” disability will not have to re-apply, which appears to leave the way open for recipients with a mental illness to be reassessed. Those recipients under 35 who are assessed as being able to work for at least eight hours a week will also be given a ”participation plan”, meaning they will have to engage in labour market activities of some sort, such as Work for the Dole, work experience or education and training. People who do not comply will be sanctioned, although the budget papers do not specify how.

Disability Support Pension recipients will not be able to leave Australia for more then four weeks and keep collecting their pension overseas. This will save the budget $12.3 million over five years.

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Federal budget 2014: Greatest family tax benefit sting in threshold for part B

Family tax payments will be tightened from 2015, with families on sole incomes – those who currently receive family tax benefit part B – to be hit hardest.

The new income threshold test for recipients of FTB part B will be reduced to $100,000 and these families will be cut off from the payment when their youngest child turns six, a drastic change from the current situation where it stops when the youngest child turns 16.

This change reflects the government’s view that assistance should be limited once a child is in school, and will save the government $18 million over two years.

FTB part B was a pet policy of the Howard government and targets families with stay-at-home mothers. ”Staying at home should be a parents’ choice but there are limits to how much support the taxpayer can give,” the Treasurer Joe Hockey said in his budget speech.

The policy changes were designed to help boost female workforce participation, he said.

The effect of this measure is softened for the poorest single parents by a supplementary payment of $750 per year for each child aged between six and 12 years old.

The reduction in the FTB B income threshold will save the government $4 million in 2014-15.

Recipients of family tax benefit A have also been slugged, with the income threshold for eligible families reduced from a maximum of about $150,000 to a new maximum of $94,316. The FTB A and FTB B end-of-year supplements will be reduced to $600 and $300 respectively, a measure which will save the government $3 million over the next two years.

Although these changes will not be implemented until July 2015, the payment rates of the two benefits will be frozen for the next two years.

There are two million families currently receiving family tax benefit A or B, and most families who receive one of the FTBs receive the other as well, a fact Mr Hockey said on Tuesday was a surprise to him when he began the Expenditure Review Committee process.

Family tax benefit payments account for well over half the family assistance budget, and will cost $19 billion in the 2014-15 budget year.

Families and those wishing to start them will still be able to access a range of other payments, from the large-family supplement of up to $314 for the fourth child and subsequent children, and a newborn supplement and upfront payment of up to $2,001 per child.

The government was also keen to advertise its ”genuine” paid parental leave scheme, which budget papers confirm will be reduced from a maximum income threshold cap of $150,000 to a threshold cap of $100,000.

The scheme will be introduced from July 1, 2015 and will include superannuation. It provides up recipients up to 26 weeks pay at their replacement wage at no less than the minimum wage.

With Matt Wade

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