September 13, 2018 Edition.
Trump seems to be going from bad to worse and things really feel like they are spinning out of control. All the new tariffs he is planning are not a good thing and now even the world’s biggest company (Apple) is getting worried.
Brexit seems to have the British Political Class totally unable to cope and failing.
We have our new PM and are waiting to see how it all goes over the next week or two.
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Here are a few other things I have noticed.
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Major Issues.
- Sep 2 2018 at 4:11 PM
Hard lessons of the financial crisis
by Gillian Tett
One day in the early summer of 2007, I received an email out of the blue from an erudite Japanese central banker called Hiroshi Nakaso. "I am somewhat concerned," he began in typically understated manner, before warning that a financial crisis was about to explode because of problems in the American mortgage and credit market.
I was astonished. That was not because I disagreed with Nakaso's analysis: by June 2007, I had been writing about the credit sector for a couple of years as the FT's capital markets editor in London, and was uneasy. But I was surprised that it was Nakaso raising the alarm.
Tucked on the other side of the globe in Tokyo, he was working in the grey, fortress-like building that houses the Bank of Japan. His counterparts in the American and European central banks, close to the subprime markets, were not sounding concerned.
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- Sep 3 2018 at 10:03 AM
Sydney property prices fall the fastest in nine years: Corelogic
Property prices fell at their fastest pace in Sydney in more than nine years and their fastest in almost six years in Melbourne.
The residential market decline accelerated from July's 1.6 per cent national fall as continued credit curbs, along with unaffordable prices, caused values in Sydney to keep falling steadily and for the pace of decline to speed up in the Victorian capital, CoreLogic figures on Monday showed.
Sydney's annual pace of decline widened slightly to 5.6 per cent - a level it last saw in March 2009 - from 5.4 per cent, but the slump picked up faster in Melbourne, where the annual decline sped up to 1.7 per cent from 0.5 per cent, marking its fastest drop since October 2012.
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The ABS is under an Orwellian 'efficiency' siege
By Ross Gittins
3 September 2018 — 12:00am
You don’t have to be very bright to see that as we enter the information age, realise decisions need to be evidence-based, and glimpse the huge potential of “big data”, we need the Australian Bureau of Statistics to be at the top of its game. But you do have to be brighter than our econocrats and politicians.
They’ve been cutting the bureau’s funding every year for more than a decade – meaning both parties have been at it – in the name of increased efficiency. The Orwellian annual “efficiency dividend”, cutting up to 2.5 per cent off running expenses, is a flowing fount of false economy.
With the era of big data looming, it's the wrong time to cut funding for the Australian Bureau of Statistics.
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Trump: the golfing revolutionary
- 6:15AM September 3, 2018
There was quite a remarkable juxtaposition on Saturday, captured by a couple of photos I saw side-by-side on Twitter: America’s political establishment gathered in its entirety at the Washington National Cathedral for John McCain’s funeral service; next to that picture was one of Donald Trump at the same moment, alone, playing golf.
The speeches and eulogies for McCain, including by past presidents, criticised the sitting president either directly or by implication. Trump, meanwhile, was tweet-ranting between drives and puts about trade and the “rigged witch hunt”.
“Remember, NAFTA was one of the WORST Trade Deals ever made,” he tweeted. And: “There is no political necessity to keep Canada in the new NAFTA deal. If we don’t make a fair deal for the U.S. after decades of abuse, Canada will be out.”
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- Sep 3 2018 at 2:26 PM
The ticking time bomb that could trigger a new financial crisis
by Tom Rees
When hedge fund managers from FrontPoint Partners drove through a Florida suburb in the run-up to the financial crisis, they quickly realised the US housing market was built on sand. Anyone could grab a 2,000 square foot slice of the American dream in the Sunshine State.
These toxic subprime mortgages were then bundled together in collateralised debt obligations (CDOs), given top ratings from credit agencies, and sold on in a neat, explosive package to buyers unaware that the US housing bubble was about to burst. The famed hedge fund depicted in Hollywood blockbuster The Big Short would cash in on the market's over exuberance.
"The buyers of so-called triple A, double A, triple B, double B tranches in these collateralised loan obligations (CLOs) are making an investment off data that is dubious at best," says Robin Doumar, founder of credit manager Park Square Capital. Doumar is not casting his eye back to the housing bubble but calling out a new one that could be emerging in the risky leveraged loan market, which fuels private equity buyouts and bankrolls companies with poor credit ratings.
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Labor franking policy could push investors into riskier assets: Morgan Stanley
- 12:00AM September 4, 2018
Labor’s plan to limit the refundability of dividend franking credits could affect Australian securities worth $500 billion — almost a quarter of the Australian Securities Exchange — and it could lead some investors to take greater risks to replace lost income, according to Morgan Stanley.
Investors affected by the plan, mainly self-funded retirees focused on maximising after-tax income, may sell Rio Tinto, Wesfarmers and South32 in particular in favour of higher-yielding securities like hybrids, said Morgan Stanley’s head of wealth management research, Nathan Lim.
Based on Labor’s figure that it will claw back at least $5.6bn a year, and assuming a 3.95 per cent dividend yield for the S&P/ASX 300, franked at 57.5 per cent, Mr Lim said the value of shares and hybrid securities needed to generate such an amount of cash refund is well over $500bn.
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Our withering institutions are betraying us
When organisations are put on a pedestal and allowed to operate in secrecy, they will fail us.
By Stephen Bartos
4 September 2018 — 12:10am
Why are so many of Australia's important institutions letting us down? The list of previously trusted institutions found to be hiding dirty practices behind glossy facades is growing. AWB (formerly the Australian Wheat Board) paying bribes; banks and superannuation funds' mistreatment of customers, as exposed by Kenneth Hayne's royal commission; the Australian cricket team's ball tampering; clerical sexual abuse and cover-ups by people in power in church hierarchies – such institutional failings are shredding community trust in pillars of society.
Institutions in the broad sense are not just organisations – they are the building blocks of social relations. One of the defining characteristics of an institution is that we rely on and put our trust in it. So when institutions betray that trust – be it through cheating, bribery, abuse or any other unacceptable practice – the consequences go beyond the harm to individuals (great as that can be, especially in cases where people have suffered abuse or lost their life savings). We lose some of the glue that binds us together as a community and country.
The royal commission's work showed the "benefit of sunlight" by exposing banks' attitude of sales before customer service says Reserve Bank of Australia Governor Philip Lowe.
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Global debt soars, along with fears of crisis ahead
By David J. Lynch
4 September 2018 — 9:51am
Ten years after the worst financial panic since the 1930s, growing debt burdens in key developing economies are fueling fears of a new crisis that could spread far beyond the disruption sweeping Turkey.
The loss of investor confidence in the Turkish lira, which has surrendered more than 40 per cent of its value this year, is only a preview of debt problems that could engulf countries such as Brazil, South Africa, Russia and Indonesia, some economists say.
Global stock markets fell for a third straight day on Monday, hurt by worries over the escalation of trade disputes between world powers and a deepening sell-off across emerging market currencies.
"Turkey is not the last one," said Sebnem Kalemli-Ozcan, an economics professor at the University of Maryland. "Turkey is the beginning."
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Crony capitalism and corruption in our midst
Look for corruption in Australia and you'll never be disappointed. Indeed, it’s been normalised.
By Michael McKinley
4 September 2018 — 12:09am
It's been exceptionally easy to acquire an education in corruption in Australia because the opportunities abound. In my case, I was blessed in this regard by teaching politics for six years in Western Australia in the 1980s leading up to the royal commission known colloquially as WA Inc. It was especially instructive to find one's former students receiving mentions in the despatches.
This education has also been greatly enhanced by well over 30 years in the university system. But whereas corruption in the former was high-end – criminal and frequently to the financial benefit of friends, family relatives, trusted colleagues and supportive organisations – the latter is more circumspect. It is far more subtle and curial, especially where official favour is an ongoing sensitivity and perhaps best exemplified by habits of mind still to be found in my own academic home, the Australian National University.
From its earliest days, it maintained such close relations with government that its vice-chancellor, in 1955, could assure the minister for external affairs (who, in turn, assured the prime minister, but urged him nevertheless to pressure the vice-chancellor), that the "right type of man" would be sought for appointment to the chair of international relations. Specifically and importantly, he was someone who would be selected on the basis of "qualifications other than professional". Yet, in the words of Shakespeare's Mark Antony, they were "all honourable men".
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Book extract: The Mess We're In
A drop in the quality of senior public servants has contributed to the many bureaucratic bungles of recent years.
By Bernard Keane
4 September 2018 — 12:05am
The Australian Public Service was once regarded as one of the best civil services in the world. And despite the disaster of the early 1990s recession – for which senior economic public servants were partly to blame – in the 1980s and 1990s, it helped political leaders put in place the basis for decades of economic growth and rising wealth.
But a rot set in during the Howard years – albeit drawing on developments under previous Labor governments – and Australia's federal public service has steadily declined under recent governments. While the criticism of increasing politicisation has often been made (by both progressives and conservatives) the bigger issue has been a growing problem of sheer incompetence – so much so that it is difficult to know where to start on the long list of major bungles of recent years. The worst offender has been the Department of Immigration (or "Home Affairs", as it now calls itself ), which under both sides of politics has offered staggering displays of incompetence, often involving offshore detention of asylum seekers.
The handling of maritime asylum seekers, and the need to deter them from trying to reach Australia via the highly dangerous mechanism of sailing from Indonesia or points further afield, is a complex policy challenge. Simply accepting tens of thousands of maritime arrivals who would have supplanted refugees from other parts of the world in Australia's limited (though, by international standards, very large) humanitarian program was unacceptable, especially when many died in the effort to reach Australia. And bureaucrats were also tasked with undertaking large-scale solutions to this challenge in extremely short periods of time, to suit the needs of politicians.
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Liberals host debate about whether the Coalition government is worth saving
By Latika Bourke
4 September 2018 — 11:31am
Disillusioned Liberal Party branch members are asking themselves whether the federal Coalition government is worth saving - literally.
The Roseville branch of the Liberal Party in Sydney's northern suburbs and the Northern Sydney Conservative Forum emailed members on Monday night, inviting them to a debate about whether the government is worth saving.
"Now that we have a new Prime Minister, our next function debate remains as relevant as ever: Is the federal Coalition government worth saving?" said the flyer.
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- Updated Sep 5 2018 at 7:37 AM
Wesfarmers chairman Michael Chaney sees recession risk in falling house prices
Wesfarmers chairman Michael Chaney has warned that falling house prices carry with them the risk of Australia falling into recession.
The influential business leader said it was not unrealistic to think house prices in Sydney and Melbourne could fall by as much as 20 per cent, which would have major ramifications for retailers and the wider economy.
Mr Chaney said any continued softening in the housing market would be greatly exacerbated by the prospect of a Labor government removing negative gearing.
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Why the banks will ignore customer anger and match Westpac’s rate rise
By Ross Gittins
4 September 2018 — 12:02pm
The other day I noticed a column I’d written in 1990 saying the banks’ abuse of their customers’ trust was getting them a bad name, so they should desist.
That was almost 30 years ago. It tells you the banks started playing up not long after the Hawke-Keating government deregulated them in the mid-1980s.
I was complaining about the way they’d offer new customers a better deal than their existing customers, then make no effort to tell their unsuspecting suckers they should change.
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Land Forces 2018: The army is equipping for the past
By Nicholas Stuart
4 September 2018 — 10:00pm
The Army’s top generals are in South Australia for the big, biennial exercise, Land Forces 2018. It’s Chief Rick Burr’s first significant chance to impress. He’s got a big task ahead of him.
That’s because there are two stories about our army. The first concerns the urgent attempts good people, including those at the very top, are making in a desperate struggle to keep the organisation functioning. The other’s just as real, just as problematic; the corollary of the first. It’s about an organisation beset with struc tural weaknesses, equipment issues, and with significant institutional and morale issues reaching deep into the very heart of the force.
I’m not in Adelaide at the moment so let’s go straight to the concerns, because they’re massive.
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- Sep 5 2018 at 10:26 AM
Why so little has changed since the financial crash
by Martin Wolf
"Here I am back again in the Treasury . . . but with one great difference. In 1918 most people's only idea was to get back to pre-1914. No one today feels like that about 1939. That will make an enormous difference when we get down to it."
John Maynard Keynes wrote this in 1942. It did make a difference. After the Great Depression and a second world war, people wanted change. They got it. France calls what followed les trentes glorieuses.
The stagflation of the 1970s brought a counter-revolution: the 1980s saw a radical change of ideas on the role of the state and markets, the goals of macroeconomic policy and the job of central banks. Again, the aim was a fundamental transformation.
So what happened after the global financial crisis? Have politicians and policymakers tried to get us back to the past or go into a different future? The answer is clear: it is the former.
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The next sharemarket crash is coming. Here's what to do about it
By Marcus Padley
4 September 2018 — 3:00pm
The US S&P 500 index has just recorded what is being described as the longest bull market in modern history and the index is now higher than the record in February, from which we saw an 11.8 per cent sell-off in 10 days. The US market is very close to being technically “overbought” once again, a rare occurrence for such a large index and it is now also trading at the top of its six-month trading range if not busting out to the upside.
Scanning the newswires it is also clear that one of the early indicators of a market top, the number of articles talking about a market top, is also on the rise. From one day on Livewire this week came the headlines “How to catch the top”, “Ageing bull market approaches seasonally weak September” and “When to hold and when to fold”.
As the market rises it is a natural human investor assumption that what goes up must come down, otherwise known as mean reversion, a financial theory suggesting that asset prices that spike or dive eventually return to the long run average. On which basis we are now watching the current equity market blow off and wondering when the sell-off is going to come.
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Economic growth smashes expectations with 3.4pc gain
- By James Glynn
- Dow Jones
- September 5, 2018
Australia’s economy grew solidly in the second quarter, supported by government infrastructure programs, strong consumer spending, and an upbeat business environment.
Gross domestic product climbed by 0.9 per cent from the first quarter and by 3.4 per cent from a year earlier, the Australian Bureau of Statistics reported Wednesday.
The year-on-year result is the sharpest rise since the third quarter of 2012.
The Australian dollar jumped on the better-than-expected figures and was trading at US72.09 cents at 12.38pm (AEST) up sharply from around US71.75c ahead of the GDP print.
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Ramsay course offers stark choice to Australian universities
By Nick Riemer
6 September 2018 — 12:00am
Pared down to its essentials, the Ramsay Centre for Western Civilisation course confronts Australian vice-chancellors with a stark choice: are they willing to let their institutions’ authority to be used to bolster xenophobia and national chauvinism in our society?
The entire educational mission of the proposed Ramsay Centre is premised on the "civilisational" inferiority of non-Western cultures – the very ones Australian politicians go to war against in the Middle East, punish with interventions in the Northern Territory, stir up moral panics about and whose members they imprison in island camps when their boats come near our shores.
The Ramsay course has mainly been promoted by John Howard and Tony Abbott, the Ramsay board’s most powerful members. Their enthusiasm for studying the heritage of the West doesn’t spring from any newfound passion for Marcus Aurelius or Rousseau. Instead, the value of the Ramsay Centre to them lies in the intellectual legitimation it would confer on the other political agendas they champion. Tony Abbott, after all, has insisted on the need for the Ramsay Centre to be explicitly "right-wing".
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Key issues for federal parliament
The House of Representatives and Senate return for a fortnight of sittings on Monday, with a new prime minister, and ahead of another by-election.
Paul Osborne
Australian Associated Press September 6, 201810:47am
FEDERAL PARLIAMENT: WHAT'S HAPPENING NEXT WEEK
* First question time for Scott Morrison as prime minister.
* Greens to seek Labor and crossbench support for a motion of no confidence in Peter Dutton over au pair saga.
* Senate to receive a report of an inquiry into the Dutton au pair issue on Tuesday.
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Digital politics work for Trump but not Turnbull
- 12:00AM September 6, 2018
Malcolm Turnbull, Tony Abbott, Kevin Rudd, Julia Gillard — whatever their individual failings, they are not the cause of our decade-long political crisis but a symptom. They each have their faults, some grievous. But their successive failures are a clue to a much deeper crisis of our political culture.
They are victims of digital derangement. The overarching question of our age is whether we, mainstream society, are going to impose our standards on the internet or whether the internet is going to impose its (lack of) standards on us. In other words: is the digital world going to come under the rule of law?
In the digital universe — Twitter, Facebook, social media generally — the quality that commands attention is anger. Donald Trump is the perfect social media politician. He is not a throwback to a bygone age of white rich male privilege, bombast and boorishness. Rather he is the avatar of the social media age. For he does anger with conviction every day, with a mixture of new angers and old ones newly expressed.
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Top earners paying the benefits bill
- By Adam Creighton and Elias Visontay
- 12:00AM September 6, 2018
The top fifth of households by income are almost entirely supporting the bottom 60 per cent of earners, according to a report that argues the dwindling share of net taxpayers is making it harder for parliaments to govern wisely.
Analysis of the latest official survey of incomes and benefits, including in-kind health and education payments, shows the bottom 60 per cent of households received more in benefits than they paid in taxes, including GST and excise taxes.
Based on 2016 data, the top fifth of the nation’s nine million households, whose incomes averaged $269,000, were paying more than $1000 a week into the tax-transfer system, while the bottom fifth, whose incomes averaged $30,300, received $619 a week after subtracting benefits received, cash and in kind, from taxes paid.
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Scott Morrison's Sermon on the Murray. Love: it's for Australians
By Tony Wright
6 September 2018 — 4:09pm
Love, exhorted Australia’s latest Prime Minister, Scott Morrison, pacing like an old-time tent preacher. Love!
“I love Australia,” he cried.
“Who loves Australia?” he demanded.
“Everyone,” he answered himself.
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Banks push to close credit union, payday lender 'loophole'
By Clancy Yeates
7 September 2018 — 12:05am
Banks are calling for a "loophole" in consumer protections to be closed, saying all lenders should be required to meet new minimum behaviour standards when dealing with customers.
Such a change would require all credit businesses, including credit unions, building societies, and payday lenders to meet the same criteria as banks have committed to under the industry's revamped code of conduct.
Consumer advocates and small business ombudsman Kate Carnell backed the broad principle of customers having the same rights when dealing with different types of lenders, but did not go as far as endorsing sector-wide adoption of the Australian Banking Association (ABA) code of code of practice.
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Tony Abbott’s full nightmare laid bare: Inside the former PM’s disastrous legacy
ONE of the last remaining pillars of Tony Abbott’s failed plan for Australia is now dead. This is an inside look at his nightmare.
Shannon Molloy
ON A chilly Canberra afternoon just over four years ago, Joe Hockey and Mathias Cormann retired to the balcony of his Parliament House office to smoke cigars and celebrate.
The Treasurer and his Finance Minister had just put the finishing touches on the 2014 Federal Budget — the first delivered under Prime Minister Tony Abbott.
Before heading into the chamber a week later, Mr Hockey blared the American Authors song Best Day Of My Life and gleefully danced with his family.
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- Updated Sep 7 2018 at 11:00 PM
Why we should be worried about the next GFC
by Warwick McKibbin
The 10th anniversary of the September 2008 events that heralded an unprecedented collapse of global financial markets has prompted many to look back. But what have we learnt in the past decade?
In a very real sense the global economy today looks very much like the global economy in 2006 – but worse.
There has been a long period of low interest rates and a large build-up of public and private debt. The large Trump fiscal stimulus has generated a spurt in US economic activity. However, as interest rates rise, the distortions in the world economy built up over many years will begin to show signs of increasing stress.
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- Updated Sep 7 2018 at 11:45 PM
Hidden dangers in superannuation’s new financial order
by The AFR View
Ten years ago, Australia's big banks were about to be cut off from world's financial arteries. They had not indulged in the risky financial engineering that collapsed Lehman Brothers and seized up global capital markets. But, as a frontier economy, Australia depends on foreign capital. And Australia's banks relied on offshore capital markets to fund local lending, as Karen Maley reports today in our special Shockwaves series on the global financial crisis.
As the GFC hit, Australia's central bank supplied the liquidity required to keep the local banks operating. To prevent the sort of bank run that felled Northern Rock in the UK, the authorities guaranteed bank borrowings and deposits. And they prevented smaller bank failures by absorbing Bankwest into the Commonwealth Bank. It worked. Australia's banks and regulators stood up pretty well to the most intense global financial crisis since the 1930s Depression.
The lesson was that Australia's banks needed to build capital buffers fat enough to ensure they would remain "unquestionably strong" during the next shock. Yet, the crisis also generated a global wave of populist politics that, in Australia, focused on bank misconduct rather than financial stability.
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- Updated Sep 7 2018 at 11:00 PM
Revealed: How the RBA kept the banks afloat with a $4 billion daily lifeline
by Karen Maley
It's an eerie parallel. In early 2008, the forbearance of the newly installed government in Canberra was being sorely tested – as it is now – when the country's big four banks hiked their home interest rates in tandem, even though the Reserve Bank of Australia had not raised its official interest rates.
The then treasurer Wayne Swan urged customers to vote with their feet, just as Prime Minister Scott Morrison is advising borrowers to shop around.
But a decade ago the frictions were forgotten as the GFC hit. Now, for the first time, RBA leaders give a detailed account of how they worked side by side with the banks during those dark times, and how the banking guarantee turned into a "nice little earner" for Canberra.
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In Down Under Abbey, the political class is taking it easy
By Peter Hartcher
8 September 2018 — 12:10am
The better Australia's economy, the worse its politics. The bigger its boom, the smaller its politicians. And the greater the crisis in the world, the more trivial the crises that consume Canberra.
Australia's economy has entered its 28th year of growth, unprecedented for any developed country. At the same time, its federal Parliament pitched itself into its most dismal performance since coup fever took hold with sudden ferocity in 2010.
Australians are grimly familiar with leadership coups. There have been five changes of prime minister in the past eight years. Only one of those changes was decided at an election. The people have been usurped.
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Australia urges Donald Trump to rethink tariffs as tensions threaten to hit shoppers
By Eryk Bagshaw
8 September 2018 — 5:43pm
Apple shoppers could face price rises of between 10 and 25 per cent as US President Donald Trump threatens to double the size of his trade war with China in a $US500 billion ($703 billion) conflict that has sent markets spinning.
Australia's chairman of the Joint Standing Committee on Treaties, Stuart Robert, urged Mr Trump to back down from the all-out escalation between the world's two superpowers which would see a tariff applied to almost every product bought by the US from China.
"Australia would like for the US to act in accordance with their World Trade Organisation obligations," said Mr Robert, now the Assistant Treasurer. "We are very a strong supporters of the rules-based architecture."
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Good news story that we just aren't buying
By Matt Wade
9 September 2018 — 12:01am
Mark it down as a striking national achievement. The Australian economy has now officially completed 27 years without a recession.
The triumph was confirmed on Wednesday when the latest economic report card revealed a surprisingly strong burst of growth last financial year.
“They’re great numbers,” said the new Prime Minister, Scott Morrison.
GFC 10 years on: The day the music died for the world economy and capitalism
- 12:00AM September 8, 2018
In the Reserve Bank’s Martin Place eyrie the mood is pessimistic. And the regulator closest to the financial markets, the punk music-loving Guy Debelle, thinks the line of 1980s gloomsayers classic This is the Day — “you didn’t wake up this morning cos you didn’t go to bed” — best sums up the time Australia stared into the abyss.
“My memory of all of this is somewhat hazy … it’s like the 60s, if you can remember it you weren’t there,” Debelle tells The Weekend Australian.
“One thing I think which was remarkable particularly towards the end was just the number of decisions being taken by people who were just completely sleep-deprived,” he says, referring to the US officials he was in near daily contact with.
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Nuance to the numbers in PM's population pledge
By David Crowe
9 September 2018 — 12:05am
The federal government triggered a national debate on population two months ago when it revealed it had cut Australia’s permanent migration intake to 162,417 last year – a lower figure than some thought possible.
The debate revealed a sharp difference in emphasis between two cabinet ministers who would soon contest the leadership of the government.
In one corner was Home Affairs Minister Peter Dutton, who presided over the cut and warned of “dodgy” visa applications and “fraudulent” claims that needed to be stopped.
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Financial Services Royal Commission Issues.
Bank-owned super funds forced to slash fees in MySuper
By Clancy Yeates
3 September 2018 — 12:15am
Bank-owned superannuation funds have been forced to slash fees on no-frills accounts so that they are now equal to, and in some cases cheaper than, the charges imposed by industry funds, new research shows.
In a sign of the growing competition in the $2.6 trillion superannuation pool, funds owned by banks and for-profit wealth managers were for the first time on average charging lower fees than not-for-profit funds in the MySuper segment, Rainmaker said.
The superannuation regulator contacted AustralianSuper to ask about its participation in funding a controversial television advertisement, known as the fox and hen house commercial.
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New probe by APRA into banks’ superannuation rorts
- 12:00AM September 4, 2018
The superannuation regulator has launched a raft of fresh investigations into some of Australia’s biggest financial institutions, including the nation’s biggest bank, CBA, after being embarrassed by revelations of wrongdoing exposed during bruising royal commission hearings.
Australia’s biggest banks have scrambled to deny they have broken multiple laws requiring that they act in the best interests of super members, while hosing down suggestions they have treated regulators like doormats.
Revelations at the hearings last month included that NAB charged dead people fees, that AMP whittled away savings through high fees and that CBA committed at least 13,000 crimes by failing to move fund members from a high-fee fund to a low-fee MySuper fund.
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APRA savages IOOF chief Kelaher at royal commission
- 12:00AM September 4, 2018
The prudential regulator has launched a scathing attack on the fitness of IOOF chief executive Chris Kelaher to lead the company, throwing fresh doubts over its billion-dollar takeover of ANZ’s wealth management business.
In a submission to the financial services royal commission, the Australian Prudential Regulation Authority heaped pressure on Mr Kelaher to stand down, telling the banking royal commission he did not understand superannuation law or the obligations of a trustee and made an important “untrue” statement in a letter to it.
APRA said it had launched fresh investigations into IOOF and two other big financial institutions tarred in last month’s round of commission hearings into super, CBA and Suncorp.
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- Updated Sep 3 2018 at 11:00 PM
Paul Keating says all super funds should be non-profit
Former prime minister Paul Keating has called on the Hayne royal commission to recommend that retail super funds be stopped from putting profits ahead of super fund members.
"We need to be able to peer through the corporate entity to what is in the best interests of their members," he said.
"What the royal commission is revealing, and what I am trying to say, is that trustee structures should not be the overlord of the corporate organisation handing out contracts to related parties."
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- Updated Sep 3 2018 at 6:05 PM
Banking royal commission: Industry funds set record straight
by James Frost
Industry funds have used their responses to open findings submitted by counsel assisting the Hayne royal commission as another opportunity to promote the strengths of the model.
Barely a glove was laid on the sector as it sailed through the fifth round of hearings on superannuation, with a few coarse emails and some small-time rorting of expense accounts the best the inquiry could dig up during public hearings.
Hospitality workers superannuation fund HOST-PLUS rejected open findings that it had engaged in conduct that fell below community standards and expectations on two occasions.
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- Updated Sep 4 2018 at 10:45 AM
Banking royal commission shows super's best interest test is anything but simple
Superannuation is a magical sector where the very simple can be made to look incredibly complex.
Take the idea of acting in the best interests of fund members. Sounds pretty simple, doesn't it?
Don't do anything that could screw up things for your members or their savings, and if there's a potential conflict between the members' conflicts and your own, then they win – always.
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- Updated Sep 5 2018 at 12:00 AM
Bill Shorten calls for the banking royal commission to be extended
by Tom McIlroy
Labor has called on Scott Morrison to extend the banking royal commission or change its terms of reference to allow for more evidence from victims of misconduct.
Days after the Prime Minister admitted he had failed to properly understand the pain felt by Australians who had been treated badly by financial institutions, Opposition Leader Bill Shorten said the commission led by former High Court justice Kenneth Hayne should travel around the country and hold hearings outside the capital cities.
He called on the government to extend the February 2019 reporting deadline, request more hearings in regional centres, or establish a new mechanism to hear victims' evidence.
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'This must change': APRA demands pay 'consequences' for bankers
By Clancy Yeates
4 September 2018 — 2:00pm
The banking regulator has stepped up the pressure on banks by demanding senior executives feel a sting in their pay packets when scandals occur on their watch, saying lenders had "squandered" their reputations by focusing too much on profits.
The Australian Prudential Regulation Authority's (APRA) chairman, Wayne Byres, on Tuesday called for boards to put less emphasis on narrow financial goals when setting pay for top bankers.
Mr Byres told banks to lift their game on pay in a speech that argued banks had focused too much on profits, and failed to put enough emphasis on harder-to-measure non-financial risks.
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Public trust in AMP plummets
By John Collett
5 September 2018 — 12:00am
Bendigo Bank is the only bank brand to defy the fallout from the banking royal commission. It has managed to remain in the top-10 most trusted brands, despite high levels of distrust in the banking sector.
On the other hand, AMP, which has featured prominently in evidence before the banking royal commission has been affected badly by how consumers' view the wealth manager. It has a heavily negative 'net trust score' - which is the trust score minus the distrust score.
AMP's appearance before the royal commission in April included admissions it had misled customers and the regulator and had charged some of its superannuation customers fees for no service, as had the four big banks.
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- Updated Sep 6 2018 at 6:21 PM
ASIC's case against NAB super funds put trustees in the gun
by Chanticleer
It is the "who", rather than the "what", that makes the corporate regulator's latest case involving National Australian Bank's superannuation funds so fascinating.
The guts of this legal action taken by the Australian Securities and Investment Commission – over the charging of a total of $100 million of fees to more than 500,000 super fund members for services they did not receive – was explored in excruciating detail across the two weeks of the royal commission's round of super hearings.
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Super needs overhaul as retail funds lag industry rivals
- 12:00AM September 8, 2018
The total amount of money in the Australian superannuation pot is now $2.7 trillion, equal to the market value of two American companies, Amazon and Apple, but let’s not quibble.
It’s regarded by most as a gobsmacking amount of money, a great national asset, yet after 25 years of compulsory super, amassing the mighty sum of Amazon+Apple, the qualifying age for the Age Pension can’t be raised by three years to 70 without leaving millions high and dry. Hardly a triumph of national policy, you would think.
According to the ATO, 14.8 million Australians had super accounts on June 30, 2017. It’s probably now about 15 million. That’s $180,000 a person, which wouldn’t trouble anyone’s pension means test.
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Super managers’ credibility goes up in smoke
- 12:00AM September 8, 2018
The wealth management industry has been revealed to be taking advantage of superannuation retirement savings by automatically putting members into high-premium life insurance policies designed to cover smokers.
The new evidence of further gouging in the nation’s $2.7 trillion superannuation sector comes ahead of the royal commission’s next fortnight of public hearings, which will focus on the scandal-ridden life insurance sector.
It’s the latest reputational blow to the under-pressure life industry, which is having its revenue models torn apart by regulators, politicians and consumer groups after years of reaping billions of dollars in revenue from unsuspecting superannuation savers.
The industry has also been on tenterhooks over the potential for Kenneth Hayne’s royal commission to further up-end the sector.
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National Budget Issues.
- Sep 2 2018 at 10:00 PM
Can Angus Taylor cut prices and keep the lights on?
RIP the NEG. Energy and telecommunications vie for the winner's title among industries using a muddle of acronyms for services most of their customers don't really understand but just want to work.
So now that the national energy guarantee has been politically electrocuted as a casualty of the Liberal leadership revolt, the Morrison government is trying to be reassuring about what will replace it – without making it sound too complicated.
That's why Scott Morrison bestowed the snappy new title of "minister for reducing electricity prices" on Angus Taylor amid much talk of government "big sticks" .
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How property investments face falls under Labor government
- By Stuart Wemyss
- 9:18AM September 4, 2018
Property prices continue to fall. Last week we heard how house values just fell nationwide for the eleventh month in a row.
For investors, it is a difficult market. Perhaps one of the most difficult issues is trying to assess the potential impact of an ALP election win. On my numbers, you can expect the after-tax returns from property to fall more than a quarter if that happens. Here’s why.
Labor is proposing to scrap negative gearing on any investments in established property that are made after a yet-to-be-determined date. Existing property investments will be grandfathered. Negative gearing on new-build properties will still be permitted. If you do invest in established property after the yet-to-be-determined date, you will be able to carry forward the income losses and offset them against future property income or capital gain.
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- Sep 5 2018 at 8:55 AM
Scott Morrison dumps plans to lift pension age to 70
The last hangover from the notorious 2014 federal budget - a plan to lift the retirement age to 70 - has been dumped.
Prime Minister Scott Morrison announced on Wednesday morning that the policy, which was never legislated, will be officially abandoned next week when his new cabinet meets.
"Next week, cabinet will be ratifying a decision to reverse taking the pension - the retirement age - to 70," he told Chanel Nine's breakfast program Today.
"It will remain at 67.
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- Updated Sep 4 2018 at 6:00 PM
Inequality claims exaggerated: Treasury secretary Phil Gaetjens
Treasury secretary Phil Gaetjens has backed the view that inequality is being exaggerated but accepts certain parts of society have fallen through the cracks and need assistance.
In his first major speech, the recently appointed Mr Gaetjens agreed with a report released last week by the Productivity Commission saying the long period of economic growth has been broadly shared, due to the progressive income tax system and targeted welfare.
Mr Gaetjens, who worked previously as chief of staff to then treasurer Scott Morrison, was generally upbeat about the economic outlook, but warned there were headwinds.
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- Updated Sep 4 2018 at 11:00 PM
Power crisis more vibe than verity
"In summing up, it's the constitution, it's Mabo, it's justice, it's law, it's the vibe and, ahh, that's it, it's the vibe. I rest my case". – Dennis Denuto in The Castle.
"Now, for too long the energy companies have made out like bandits. In fact, some of the companies have tripled their profits as struggling Australian families have tried hard to meet their power bills." – Josh Frydenberg in real life.
As his grip on the Liberal Party leadership slipped fatally, Malcolm Turnbull decided that Australian power bills had become the "primary focus" of his disintegrated national energy policy.
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Nuclear offers an answer on cost and emissions
- 12:00AM September 5, 2018
The standout result from modelling of Australia’s power system carried out by “engineers” is that it is possible to have our cake and eat it too on power prices and emissions — with nuclear.
The nuclear option would be slightly more expensive than the existing coal-based system, but less than half the cost of the Australian Energy Market Operator’s existing plan and less than a quarter of the cost of a 100 per cent renewables utopia. Going nuclear would also cut power-sector emissions by 93 per cent.
The paper, prepared and circulated to MPs as a public service by what is claimed to be “a small group of professional engineers and scientists experienced in various aspects of electricity and distribution”, is an antidote to the drumbeat that wind, solar and batteries hold the only answer.
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- Sep 5 2018 at 3:39 PM
Low wages growth and household debt a threat to economic growth
by John Kehoe
The Australian economy is humming along at its fastest pace in almost six years, buoyed by robust employment growth and a remarkably resilient consumer.
The developed world-beating 3.4 per cent annual growth figure again defied the negative naysayers and topped financial market expectations, evidenced by an initial rebound in the Australian dollar and a big smile on the face of new Treasurer Josh Frydenberg who presided over the best outcome since the tailend of the mining boom in late 2012.
But buried beneath the stellar June quarter headline figures is a concerning plunge in the household savings ratio to a 10½-year low of 1 per cent, at a time of record high consumer debt, subdued income growth and a cooling property market.
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Economy surges as Australia's savings ratio hits 10-year low
By Eryk Bagshaw
5 September 2018 — 6:16pm
Australia's surging economy is being driven by a growing number of people raiding their savings, fuelling concerns that households already saddled with record levels of debt are over-extending themselves.
Treasurer Josh Frydenberg's first set of national accounts have delivered the Coalition the strongest set of numbers since the end of the mining boom, registering a bumper 3.4 per cent result and setting Scott Morrison up for an election fight based on his economic credentials.
But Wednesday's strong headline figure - which puts Australia ahead of the largest seven economies in the world - masks underlying concerns, including the reliance on high immigration numbers to drive employment growth and the fall in the household savings ratio to its lowest level in six years.
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Middle income Australians face a tax hit over next decade
By Eryk Bagshaw
The federal government will be forced to offer low and middle income earners another tax cut or workers will have to fork out thousands of dollars extra in tax by the middle of the next decade.
The Parliamentary Budget Office has found the 6 million Australians earning between $23,000 and $64,000 a year will be pushed into higher tax brackets at five times the rate of the 2.6 million earning more than $100,000 by 2027.
Even after the Coalition's decade long $144 billion tax cut plan was passed by Parliament in June, an adult full-time median salary earner currently on $66,000 a year would be handing over up to $1000 a year extra to the Tax Office by 2026.
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A beautiful set of numbers gets you only so far
By Ross Gittins
8 September 2018 — 12:05am
This week’s national accounts don’t leave any doubt that the economy grew strongly in the first half of this year. But whether it can sustain that growth rate is doubtful.
According to figures issued by the Australian Bureau of Statistics, real gross domestic product grew by 0.9 per cent in the June quarter and an upwardly revised 1.1 per cent in the March quarter, yielding growth of 3.4 per cent over the year to June.
For once, the bureau’s “trend” (smoothed) estimates tell the same story.
Annual growth of 3.4 per cent is well above the economy’s medium-term “potential” growth rate of about 2.75 per cent, suggesting we’ve started making inroads into our unused production capacity.
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Health Budget Issues.
WA Health corruption scandal: Acting chief Bryant Stokes ‘assumed’ successor David Russell-Weisz knew
September 2, 2018 2:00AM Tony Barrass
A FORMER acting director-general of WA Health said he “assumed” his successor — the embattled Health boss David Russell-Weisz — had been briefed about allegations of high-level departmental corruption when he took over the top job in 2015.
Speaking for the first time about the bribery scandal engulfing the department and its current boss, Professor Bryant Stokes said he forwarded an internal report about the corruption allegations to the North Metropolitan Health Service and the CCC six months before Dr Russell-Weisz took over.
“I had ... forwarded the investigation report to the NMHS for action and assumed that a report would come to the new D-G outlining action taken,” Professor Stokes told The Sunday Times.
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How 'inappropriate' surgeries are pushing up your health insurance premiums
By Esther Han
2 September 2018 — 7:30pm
Despite years of warnings, doctors are still performing thousands of inappropriate and unnecessary treatments and surgeries each year, placing patients at risk and ultimately pushing up health insurance premiums.
An analysis of HCF claims data for 21 procedures – including endoscopy in patients under 55 years of age, knee arthroscopy and spinal fusion – found up to 34 per cent of 32,900 admissions in 2016-17 were "low-value", unhelpful, and in some cases, potentially harmful.
The researchers from the Menzies Centre for Health Policy at University of Sydney found the not-for-profit health insurer had paid up to $26 million in benefits for the "low-value" services in one year, which could have been better used.
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Red flags raised over Medicare rorting
By Angus Thompson
2 September 2018 — 11:59pm
People suspected of defrauding Medicare by up to $30,000 could escape prosecution in a new measure critics say will encourage widespread rorting of the public purse.
In a recent directive seen by the Herald, Department of Health investigators were told that, unless an individual had been previously red-flagged, cases involving amounts less than $30,000 would be pushed to debt recovery rather than forwarded on to federal prosecutors.
A Department spokesperson on Friday denied a policy of setting minimum amounts for prosecuting fraud relating to the Medicare Benefits Schedule and Child Dental Benefits Schedule.
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Aussies losing their thirst for beer, alcopops and cider
- 12:00AM September 4, 2018
Beer is being shunned by more Australians, along with the alcopops that politicians once worried about, and the hipster’s choice, cider.
But while beer abandonment has seen overall alcohol consumption fall to its lowest level in 55 years, wine and spirits have proved more resilient, perhaps reflecting the changing tastes and demographic of Aussie drinkers.
Data released yesterday by the Australian Bureau of Statistics showed beer continuing its decline, which has averaged 2.4 per cent a year over the past decade even as imports and craft beers became the flavour of the month.
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South Australian budget: doctors earning $1m a year on repair hit-list
- 12:00AM September 5, 2018
Haemorrhaging expenditure in South Australia’s health and hospital services network will be stemmed with an $800 million bandage over the next five years as the Marshall government takes aim at highly paid public doctors.
This financial year’s blowout for the Central Adelaide Local Health Network was likely to equal last year’s $255m deficit, according to interim advice from turnaround specialists Korda Mentha, brought in by the new government earlier this year.
“The government had no option but to take corrective action. There’s a need for clear cultural change and financial change in CAHLN,’’ Treasurer Rob Lucas said. “They’re haemorrhaging taxpayers’ money within a culture that is not too overly concerned.”
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Millennials are getting sick of paying for baby boomers' health
By Hans Lee
6 September 2018 — 9:01am
Millennials have found another reason to resent cashed-up baby boomers: they're subsidising their health care.
Fed up with paying for insurance that mostly benefits older patients, young Australians are quitting private health cover in droves. For many of them, it's a no-brainer: premiums have soared as much as 70 per cent in the past eight years. The amount of insured people in their mid-to-late twenties alone has dropped 14 per cent in the past three years.
Fed up with paying for insurance that mostly benefits older patients, young Australians are quitting private health cover in droves.
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Health an ongoing budget headache in SA
The new South Australian government says continued overspending by the public health sector is a major concern.
Tim Dornin
Australian Associated Press September 4, 20183:34pm
South Australia's public health services continue to "haemorrhage" money with a culture of overspending an issue for the sector, Treasurer Rob Lucas says.
Delivering the state budget for 2011/19, Mr Lucas revealed private consultants have been sent in a bid to bring health's spending issues under control.
But he said the Liberal government recognised the savings in health identified by the previous Labor administration across the next four years could not be achieved in the context of delivering a high-class service.
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Health insurance funds to help government sell premium hikes
12:00AM September 6, 2018
Health funds will provide an unprecedented level of detail with their applications to raise premiums next year — including a statement of up to 500 words on the benefit of Coalition changes.
April 1 is not only the date for the next round of premium changes — Health Minister Greg Hunt will have the final say — but also the start date for gold, silver, bronze and basic categories intended to provide greater transparency over policies.
With a federal election due by mid-May, and Labor promising to take a much harder line on health funds, the start of next year will provide a litmus test of Coalition reforms and whether they have helped insurers or their members.
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Australia's IVF rates revealed: one in every 25 births an IVF baby
By Kate Aubusson
9 September 2018 — 12:00am
IVF success rates are climbing, with one in four embryo transfers resulting in a live birth, the latest IVF data from Australia and New Zealand shows.
More than 13,500 IVF babies were born in Australia in 2016/2017, the highest number ever recorded across the two countries, according to a new report released Sunday.
One in 25 Australian babies are now born via IVF, one in every classroom, said Professor Michael Chapman, President of the Fertility Society of Australia, which funded the report.
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International Issues.
- Updated Sep 3 2018 at 2:10 PM
ABC blocked by China's 'great firewall', accused of breaching internet laws
China has blocked access to the ABC after the country's cyber security regulator claimed the broadcaster breached its internet laws. The move coincided with the Australian government's announcement of new rules that stop Chinese telco Huawai from being involved in Australia's 5G network.
The ABC's online presence, including its website and mobile apps, have been blocked by China's "great firewall' since August 22, according to the ABC, prompting the broadcaster to seek further information from Chinese authorities. Other Australian news websites remain available.
The ABC said that after repeated requests for clarification, an unnamed official from the Office of the Central Cyberspace Affairs Commission said China reserved the right to censor information that may "endanger state security and damage national pride".
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- Sep 4 2018 at 9:39 AM
How long can the US stock market defy the rest of the world?
by Jacob Greber
Washington | Trade wars, an export-sapping US dollar surge, rising US interest rates, and worsening turmoil in Argentina and Turkey may as well be on another planet as far as US equity investors are concerned.
As a superlative-busting northern summer rally extends into autumn, US stock market indices have been shooting out the lights.
The S&P 500 index just posted its fifth straightly monthly rise, hitting a record 2916.5 points last week to be up 13 per cent in just four months. The Nasdaq just recorded its biggest August gain in 18 years.
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'Trump is checking out of Asia': What Australia should do about it
By Peter Hartcher
4 September 2018 — 12:05am
Donald Trump is checking out of Asia. He's cancelled a planned November trip to the continent's two biggest annual summits. With them, he's cancelled any prospect of a side trip to Australia.
This just serves to confirm the impression from his various policy ventures into the region. His much-ballyhooed breakthrough meeting with North Korea's Kim Jong-un was a breakthrough all right. For Kim.
Kim still has every bit of the nuclear destructive capability he had before the Singapore summit, but the solid wall of sanctions surrounding North Korea has collapsed. The Trump meeting cleansed North Korea of pariah status. That gave political licence to other countries to trade with it. So the Kim regime now has essential economic oxygen. The pressure of sanctions eased. Trump zero, Kim one.
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What a coincidence: ABC news website blocked in China
By Kirsty Needham
3 September 2018 — 5:43pm
Beijing: In China, coincidences are common. Clear explanations of what has just happened can be harder to find.
The Australian Broadcasting Corporation's website has been inaccessible in China for a fortnight. Although China has famously erected a "Great Firewall" around its online population to block internet users from accessing many western websites and social media apps including Google, Twitter and Facebook, it is unusual for an Australian media website to be blocked.
Australia's government on Thursday banned major Chinese telecoms firm Huawei Technologies from supplying equipment for its planned 5G mobile network, citing risks of foreign interference.
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- Updated Sep 4 2018 at 5:55 PM
Donald Trump faces fight with Canada over NAFTA
by Shawn Donnan
Washington |President Donald Trump's effort to force Canada into signing on to a new NAFTA on his terms is facing new hurdles thanks to growing opposition at home to his threat to proceed without the US's northern neighbour.
Trump's frustration spilled into the open over the holiday weekend as he railed against Canada on Twitter - as well as its many supporters in both political parties. The president has threatened to leave Canada out of a new trade deal already negotiated with Mexico, but without congressional support he lacks leverage to force Ottawa to make concessions in talks that are due to resume on Wednesday.
"There's going to be a lot of pressure to get a deal with Canada," Mark Sobel, a former US Treasury official and now American chairman of the research group OMFIF, said. "Canada's the main trading partner for many states; quite a bit of our economic fortunes are entwined with Canada."
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- Updated Sep 4 2018 at 5:05 PM
Theresa May vows to take on Eurosceptic Conservatives
by George Parker
London |Theresa May has vowed to take on Eurosceptic Conservative MPs as they try to derail her Brexit strategy, in a political struggle that could determine Britain's future in Europe and her position as prime minister.
Mrs May convened her first cabinet since the summer break on Tuesday, after insisting that she is providing the "serious leadership and serious plan" needed to secure a smooth Brexit next March.
But Eurosceptic Tory MPs will also gather to draw up a rival Brexit plan, styled on Canada's free-trade agreement with the EU, after former foreign secretary and arch Brexiter Boris Johnson claimed that Mrs May's "white flag" approach would lead to "disaster".
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- Sep 5 2018 at 5:59 AM
We're in 'crazytown' as Washington's political wars continue
by Jacob Greber
Washington | Hopes that John McCain's death would inspire a new mood of civility in Washington have been dashed in less than a week, with a Supreme Court confirmation starting in bitter partisan acrimony and yet another high-profile book detailing the "nervous breakdown" of Donald Trump's presidency.
Written by legendary chronicler of every president from Richard Nixon to Barack Obama, Bob Woodward's 448-page book has landed like a bomb on the capital.
It reveals Donald Trump's most important advisors swiped and hid vital papers from his desk so he wouldn't sign them. One would have ended a critical trade agreement with South Korea and jeopardised America's ability to detect North Korean missile launches.
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China waives debt, promises 'no imposition of will' on African nations
By Kirsty Needham
4 September 2018 — 4:27pm
Beijing: Chinese President Xi Jinping has pledged to waive debts for the least developed African countries that have both high debt burdens and diplomatic ties with China.
The move comes as China is seeking to dispel criticism that its Belt and Road Initiative is a form of "debt trap diplomacy" that has left African and Pacific nations with high debt levels after accepting loans from Chinese banks for infrastructure projects.
Speaking at the opening of a summit with African leaders in Beijing, Xi said his country would offer an extra $US60 billion ($83 billion) in financing to African countries.
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The craziest Republicans are those who keep Trump in office
By Max Boot
5 September 2018 — 10:56am
Washington: If you take seriously the revelations in Bob Woodward's book Fear - and how can you not, given Woodward's nearly half-century of scoops about Washington's elite? - then it's time for President Donald Trump to be removed from office via the 25th Amendment because he is clearly "unable to discharge the powers and duties of his office."
That will never happen, because the Cabinet is packed with Trump toadies who compete with each other to deliver the most fawning praise of their supreme leader. But on the merits, it should happen.
Of course, it doesn't take Woodward's revelations to demonstrate Trump's unfitness for office. Trump demonstrates it on a daily basis with his campaign-rally rants and Twitter tirades.
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- Updated Sep 5 2018 at 11:14 AM
Bob Woodward describes a 'nervous breakdown' of Donald Trump's presidency
by Philip Rucker and Robert Costa
John Dowd was convinced that President Donald Trump would commit perjury if he talked to special counsel Robert Mueller.
So on January 27 the president's then-personal attorney staged a practice session to make his point.
In the White House residence, Dowd peppered Trump with questions about the Russia investigation, provoking stumbles, contradictions and lies until the president eventually lost his cool.
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- Sep 5 2018 at 2:09 PM
Contagion or not, these emerging markets hold key to sell off
by Srinivasan Sivabalan and George Lei
This year's global emerging-market selloff has its roots in a slew of mini-routs as the era of easy-money came to an end. Consider Turkey, now paying the price for its refusal to follow orthodox monetary policy; Argentina, facing a crisis of confidence just four years of its last default; China, targeted in a trade war; and South Africa, the emerging-market proxy punished for crisis in any corner of the asset class.
Here's a look at what's actually behind declines in markets most vulnerable in the current geopolitical and monetary environment.
Argentina
South America's No. 2 economy has a benchmark interest rate of 60 per cent and inflation tops 31 per cent. The real policy rate now ranks among the world's highest and is pushing the economy back into recession. Economic activity fell 6.7 per cent in June. New taxes announced this week to restore a balanced budget would only compound the suffering.
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- Sep 6 2018 at 8:50 AM
NY Times opinion piece by White House staffer reveals insiders protecting US from Donald Trump
by Jacob Greber
Washington | Donald Trump is being managed by a "quiet resistance" of staffers protecting the nation from damaging aspects of the president's agenda and "his worst inclinations", according to an extraordinary op-ed by a "senior administration official" published online by The New York Times.
The situation and instability has become so bad that there were "early whispers" within the cabinet of invoking the 25th Amendment, which allows for the vice-president to replace a president found to be no longer capable of doing their job, the person wrote in a bombshell essay published by the Times on Thursday (AEST).
The writer warns that Mr Trump is facing a test to his presidency unlike any faced by a modern American leader because he "does not fully grasp" that many of his own officials are acting to "preserve our democratic institutions while thwarting Mr Trump's more misguided impulses until he is out of office".
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I Am Part of the Resistance Inside the Trump Administration
I work for the president but like-minded colleagues and I have vowed to thwart parts of his agenda and his worst inclinations.
Sept. 5, 2018
The Times today is taking the rare step of publishing an anonymous Op-Ed essay. We have done so at the request of the author, a senior official in the Trump administration whose identity is known to us and whose job would be jeopardized by its disclosure. We believe publishing this essay anonymously is the only way to deliver an important perspective to our readers. We invite you to submit a question about the essay or our vetting process here.
President Trump is facing a test to his presidency unlike any faced by a modern American leader.
It’s not just that the special counsel looms large. Or that the country is bitterly divided over Mr. Trump’s leadership. Or even that his party might well lose the House to an opposition hellbent on his downfall.
The dilemma — which he does not fully grasp — is that many of the senior officials in his own administration are working diligently from within to frustrate parts of his agenda and his worst inclinations.
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As Amazon soars, US market is entering a dangerous twilight zone
By Stephen Bartholomeusz
6 September 2018 — 12:05am
Amazon has joined Apple in the trillion-dollar club. Is that the bell tolling for the bull market?
The FANGs’ – Facebook, Amazon, Netflix and Google – have, with Apple and Microsoft and others, had profound and broadly positive effects on industries and economies even though some blame them for under-employment, low real wage growth, weak investment and a rise in inequality within developed economies.
The Nasdaq fell more than 1 per cent on Wednesday, dented by technology stocks after Facebook and Twitter executives defended their companies before skeptical US lawmakers.
The stockmarket, however, unreservedly loves them and particularly Amazon, with its remarkable long-term compound annual growth rate in sales of about 27 per cent.
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‘The sleeper cells have awoken’: Trump and aides shaken by ‘resistance’ op-ed
Anonymous Trump official pens ‘resistance’ op-ed
President Trump and his aides reacted with indignation Wednesday to an unsigned opinion column from a senior official blasting the president’s “amorality” and launched a frantic hunt for the author, who claims to be part of a secret “resistance” inside the government protecting the nation from its commander in chief.
The extraordinary column, published anonymously in the New York Times, surfaced one day after the first excerpts emerged from Bob Woodward’s new book, in which Trump’s top advisers painted a devastating portrait of the president and described a “crazytown” atmosphere inside the White House.
Taken together, they landed like a thunder clap, portraying Trump as a danger to the country that elected him and feeding the president’s paranoia about whom around him he can trust.
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- Updated Sep 6 2018 at 5:16 PM
JPMorgan, BlackRock warn contagion hitting emerging markets
by Ben Bartenstein
First came the Argentine selloff. Then Turkey. And before long, assets from South Africa to Brazil and Indonesia were getting hit in a stampede of selling across emerging markets.
It's a phenomenon that has a cadre of investors and strategists from JPMorgan Chase to BlackRock reaching for a single word: contagion.
The argument goes like this: while the asset class may offer value over the long haul, investors will sell relatively safe holdings to cover losses in more vulnerable markets or, worse, treat all emerging markets the same and sell indiscriminately. A herd mentality has taken over, meaning no matter what the relative risks and potential returns are in individual countries, investors who choose to buy run the risk of being trampled.
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'Time to restore sanity': Obama accuses Trump of 'abuses of power'
By John Whitesides
8 September 2018 — 5:20am
Urbana: Former US president Barack Obama assailed President Donald Trump and Republicans on Friday, urging Democrats to restore a "semblance of sanity" to politics by voting in November's elections.
In an unusually blistering attack on his successor, Obama said Americans were living in dangerous times and accused Republicans of threatening democracy, dividing the country, undermining global alliances and cozying up to Russia.
Former US President Barack Obama says President Donald Trump is capitalising on the same resentments, fear and anger that politicians have fanned for years.
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Donald Trump's trade war will cost Australia's economy at least $36 billion
By Eryk Bagshaw
Australia is bracing for a $36 billion economic hit as Donald Trump prepares to unleash his biggest strike yet in a trade war with China, with warnings a further escalation could cost thousands of local jobs.
Trade Minister Simon Birmingham called for calm, telling the superpowers to uphold the international order or risk derailing the global economic recovery.
"Australia urges all parties to respect the long established rules of international trade and to avoid action that could ultimately damage their economies and those of other nations," he said.
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Apple warns Trump's China tariffs will boost its product prices
By Mark Gurman
8 September 2018 — 11:57am
Apple has warned the proposed US tariffs on $US200 billion worth of products imported from China will raise prices for some of its popular consumer goods such as the Apple Watch and AirPods headphones - and that's before counting in President Donald Trump's latest salvo in the trade war.
The Mac mini desktop computer, Apple Pencil stylus accessory for iPads, various chargers and adapters and tooling equipment used to manufacture and design some products in the US will also be affected, the California-based company told the Office of US Trade Representative in a letter dated September 5.
The letter did not mention the iPhone, which accounted for about two-thirds of Apple's $US229 billion in revenue in its most recent fiscal year. It also made no mention of the iPad, which brought in $US19.2 billion in sales in the most recent year, or most of its Mac computers, which generated $US25.8 billion.
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Trump, escalating trade war, threatens tariffs on all goods from China
By Steve Holland & David Lawder
8 September 2018 — 6:39am
US President Donald Trump has warned he is ready to slap tariffs on virtually all Chinese imports into the United States, threatening duties on another $US267 billion ($375 billion) in Chinese goods on top of $US200 billion in imports now primed for levies in coming days.
His latest salvo rocked Wall Street, with top US executives having made a last-minute push to convince the president to not impose fresh tariffs. Major currencies including the Aussie slumped against the US dollar.
The moves would sharply escalate Trump's trade war with Beijing over his demands for major changes in economic, trade and technology policy. China has threatened retaliation, which could include action against US companies operating there.
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I look forward to comments on all this!
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David.
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