June 30, 2022 Edition
-----
In the US the news on Ukraine has been totally drowned out by the decision re: Roe v Wade declaration on national abortion regulation being passed back to the states. The repercussions will be very large.
We also have a number of Global Summits - NATO, G7 etc. which a setting up the scene for a new Cold War - The West vs China and Russia. A worrying trend! Much of this triggered by the was in Ukraine.
In the UK Boris is still there.
In OZ we have calm post election except for some stupid provocation of cross benchers by cutting their resources to do their jobs. Could be a real problem.
-----
Major Issues.
------
Independent review for RBA as Chalmers overrules Lowe
John Kehoe Economics editor
Jun 20, 2022 – 5.00am
Treasurer Jim Chalmers has overridden Reserve Bank of Australia governor Philip Lowe’s wishes and will appoint a panel of independent experts to review the central bank, including a monetary policy expert from overseas.
Dr Lowe, who the treasurer has said he has a “mountain of respect for”, has pushed for a joint RBA-Treasury review of the central bank, similar to a model employed by Canada, to ensure the RBA’s independence from politics and to protect its reputation.
The RBA has come under scrutiny for its pre-pandemic policies and incorrect forward guidance during COVID-19 that interest rates were not expected to rise until at least 2024.
Official interest rates rose in May and June this year, including a super-sized 0.5 of a percentage point rise this month.
-----
Why all investors will feel the pain from the crypto carnage
It’s becoming increasingly clear to backers that global sharemarkets will feel the chill winds from the “cryptocurrency winter”.
Karen Maley Columnist
Jun 19, 2022 – 6.26pm
As bitcoin plunged below $US20,000 ($26,360), more conservative investors might be quietly congratulating themselves on their sagacity in not succumbing to the crypto craziness.
But their smugness may be premature. That’s because the sharp drop in the bitcoin price will inevitably rattle global equity markets.
According to an IMF research note Cryptic Connections, “the analysis suggests that crypto and equity markets have become increasingly interconnected across economies over time”.
The Global Financial Stability note, published in January, provides some indication as to the pain that shareholders are likely to feel from the brutal bitcoin sell-off.
“Spillovers from price volatility of the oldest and most popular crypto asset, bitcoin, to the S&P 500 and MSCI emerging markets indices have increased by about 12 to 16 percentage points since the onset of the COVID-19 pandemic, while those from its returns have increased by about 8 to 10 percentage points.”
-----
Middle-aged and educated: the voters who cost Scott Morrison power
Andrew Tillett Political correspondent
Jun 19, 2022 – 10.00pm
Middle-aged and highly-educated voters deserting the Coalition en masse were the major demographic drivers of the Morrison government’s defeat, according to the first major independent analysis of the May 21 election result.
But the impact of female voters abandoning the Coalition was actually lower than the popular narrative would suggest, the Australian National University survey found.
This was because the Coalition over successive elections has lost favour among women and damage from this loss of support had already been done.
The ANU survey of more than 3500 voters also found Anthony Albanese’s victory has improved the national mood, with 73.3 per cent of voters saying they were satisfied with the direction of the country, compared to 62.4 per cent in April.
-----
Defence poised to slash armoured troop carriers order by a third
Andrew Tillett Political correspondent
Jun 20, 2022 – 5.00am
The Defence Department is examining slashing billions of dollars from the purchase of hundreds of armoured troop carriers by cutting the order by a third, freeing up funds for other projects including drones.
The Australian Financial Review understands the two contenders for the project, which is worth up to $27 billion, have been told to resubmit their bids based on Defence buying 300 infantry fighting vehicles instead of 450.
But Defence sources warn any savings may prove illusory, with industry also suffering from inflationary pressures in its supply chain and higher wage and energy costs.
Known officially as Land 400 Phase 3, the planned purchase of the tracked infantry fighting vehicles is the single most expensive acquisition project in the army’s history.
-----
Model for republic ready to debate when throne passes from Queen to Prince Charles
12:00AM June 20, 2022
The Queen’s Platinum Jubilee and Matt Thistlethwaite’s appointment as Assistant Minister for the Republic in the Albanese government has brought the future of the monarchy into sharper focus. Australians will not vote on a republic any time soon, but these events do mark the slow journey of the issue back to national prominence. This follows the path of other nations. Barbados became a republic last year, and Jamaica will remove the Queen as its head of state by 2025. New Zealand Prime Minister Jacinda Ardern also sees her nation one day becoming a republic.
Two decades ago, Australia was at the forefront of former British colonies seeking to sever their links to the monarchy. The 1999 referendum was an opportunity to make the change. However, voters rejected the model put to them, despite polls showing majority support for a republic. Many voted no because they wanted a president chosen by the people rather than by parliament. In the years since, interest in a republic has waxed and waned. It is currently a second-order issue, with the government making clear that its priority for constitutional reform is an Indigenous voice to parliament.
This quiet period for republican debate in Australia will at some point abruptly end. Leaders across the political divide have stated repeatedly that the question of who should be our head of state will come to the fore when the throne passes from Queen Elizabeth II to her son Prince Charles. Australians will then naturally reassess their status as a monarchy and whether it is time to become a republic with an Australian head of state.
-----
Australians should be prepared for more interest rate increases: RBA governor
Cecile Lefort 21-06-2022
Reserve Bank of Australia governor Philip Lowe said he was committed to doing what is necessary to ensure that inflation returns to the 2 per cent to 3 per cent target range over time.
“High inflation damages the economy, reduces the purchasing power of people’s incomes and devalues people’s savings. It is also regressive, hurting most those who are least well equipped to protect themselves.”
Dr Lowe said medium-term inflation expectations have been well anchored at around 2 to 3 per cent, so far, suggesting that people believe we will get back to target. “We want to do what we can to make sure this remains the case.”
“Australians should be prepared for more interest rate increases,” the governor said. “The level of interest rates is still very low for an economy with low unemployment and that is experiencing high inflation.”
------
Labor reviews Coalition’s super benchmarks and ‘best interests’ tests
Ronald Mizen Economics correspondent
Jun 21, 2022 – 5.00am
Assistant Treasurer Stephen Jones is set to announce a review into the Coalition’s superannuation fund performance benchmarking and best financial interest duty, a move likely to raise the ire of the Coalition.
At the same time, Mr Jones said the Liberal Party’s election rout last month, which ended the careers of key critics of compulsory retirement savings, was a chance to strike a treaty to end the superannuation wars.
Mr Jones downplayed any major overhaul of performance benchmarking, but indicated there were flaws in the current system.
“There is absolute agreement we should be measuring performance,” he told The Australian Financial Review. “But the existing benchmarks have perverse consequences on investment decisions”, including decisions not to invest in infrastructure projects with long-term horizons.
-----
Home buyers warned by RBA to expect more interest rate pain
By Shane Wright
June 21, 2022 — 10.00am
Home buyers are being warned by the Reserve Bank to prepare for more interest rate rises, saying it has to get the cost of money back to a normal level to head off inflation pressures that would leave all Australians worse off.
RBA governor Philip Lowe, speaking to the American Chamber of Commerce in Australia in Sydney on Tuesday morning, said the bank was committed to doing what was required to bring inflation back to within its 2 to 3 per cent target band.
The bank has lifted interest rates at its past two previous meetings, taking the official cash rate to 0.85 per cent from 0.1 per cent. Financial markets expect the bank to take the cash rate to almost 3 per cent by year’s end.
The RBA board meets next on July 5 with expectations it will increase rates again, possibly by 0.65 percentage points.
-----
Investing your savings can sometimes be better than adding to super
Whether or not retirees should add more to their superannuation balance or invest under their personal name comes down to tax considerations.
Ben Smythe Contributor
Jun 21, 2022 – 3.29pm
The contribution rules are changing on 1 July for those retirees who have previously been locked out. However, before you start adding further contributions it is wise to assess whether it actually makes sense for you based on your personal circumstances.
Firstly, the new cohort from July 1 who can now contribute additional savings are those who are over age 67 and retired. There will no longer be a requirement to meet a work test for any after-tax contributions up to age 75.
Note, though, that work test requirements will still be in force if you wish to claim a tax deduction on your personal contribution.
While you
might now meet these relaxed rules, it is also important to remember that you
will continue to be locked out from making additional after-tax contributions
if your total superannuation balance is
greater than $1.7 million.
-----
Why interest rates are going up, and won’t be coming down
Economics Editor
June 22, 2022 — 5.00am
It’s time we had a serious talk about interest rates. And, while we’re at it, inflation. Someone in my job knows it’s time to talk turkey when the man in charge of rates, Reserve Bank governor Dr Philip Lowe, decides to go on the ABC’s 7.30 program to talk about both.
There’s much to talk about. Why are interest rates of such interest to so many (sorry)? Why do some people hate them going up and some love it? How do interest rates and the inflation rate fit together? Why do central banks such as our Reserve keep moving them up and down? When rates go up, they normally come back down – so why won’t they do so this time?
Starting with the basics, interest is the price or fee that someone who wants to borrow money for a period has to pay to someone who has money they’re prepared to lend – for a fee.
Legally, the “person” you’ve borrowed from is usually a bank, while the person with savings to lend deposits them with a bank. But economists see banks as just “intermediaries” that bring borrowers on one side together with ordinary savers on the other.
-----
Is the bond market punishing the RBA?
Australia’s bond rates are higher than the US and for no good reason, say bond traders. That leads to an awkward debate for Martin Place to consider.
Jonathan Shapiro Senior reporter
Jun 22, 2022 – 12.20pm
This week has been an uncomfortable one for governor Phil Lowe as the Reserve Bank of Australia released its self-reflective report into its yield curve control policy that came to a messy and undignified end last year.
While the RBA concluded it worked, it acknowledged there had been a hit to its reputation. That has been compounded by the governor’s steadfast, but completely wrong, insistence that the cash rate would not go up until 2024.
So, there’s no doubt the RBA has taken a credibility hit.
But how large and how quantifiable? There’s a bit of a debate brewing whether the widening gap between interest rates in Australia and the US is a measure of an apparent credibility gap.
-----
Chalmers optimistic, despite economic ‘s--- sandwich’
Phillip Coorey Political editor
Jun 23, 2022 – 2.06pm
Treasurer Jim Chalmers has acknowledged the economic situation inherited by Labor could be described as “a shit sandwich”, but said there was cause for optimism.
In a rev-up speech to Treasury staff including secretary Steven Kennedy, Dr Chalmers urged everybody at every level to take an active role in helping repair the budget and combat the significant economic challenges.
“Now, the commentators, and the cartoonists in particular, I’ve noticed, have taken to describing this economic situation that we’re dealing with now, if you’ll pardon the language, as a bit of a s--- sandwich,” Dr Chalmers said.
“I don’t really see it the same way that the commentators and the cartoonists see it. I think that there are good reasons to be optimistic about our economy, and also optimistic about our country, so long as we are good enough to navigate this tricky set of circumstances that we’ve inherited in the near-term.”
-----
https://www.afr.com/politics/federal/actu-concedes-on-5pc-wages-20220622-p5avnk
ACTU concedes on 5pc wage growth
Jun 23, 2022 – 7.13pm
ACTU secretary Sally McManus says low-paid workers should keep pushing for wage rises that match inflation, claiming that the rising cost of living is being driven by profits, not pay increases, and that warnings of a 1970s-style wage price spiral are “total Boomer fantasy”.
Dismissing the Reserve Bank of Australia’s view that wage increases should be kept to 3.5 per cent to help lower inflation, Ms McManus said wages were not a risk in the modern era devoid of centralised wage-fixing.
The wage price index was not even close to 3.5 per cent, “let alone 5 per cent, let alone 7 per cent”, the current and forecast headline inflation levels.
“And so to think somehow that the system is going to deliver across-the-board pay increases of 5 or 7 per cent is Boomer fantasy land,” she said.
“Not realising that whole system would be incapable of delivering that. We do not have centralised bargaining in this country. It would not be possible for that to happen.”
-----
Australia ranks fourth on global property risk list. Will we dodge it?
June 24, 2022 — 8.27am
Key points
· Australia ranked fourth on a global list of countries likely to have a property price correction.
· Property prices have boomed and are high compared to incomes and rents.
· Property prices do not necessarily fall because they have reached high levels - they need a trigger such as rising interest rates.
Property listings
Australia is one of the most likely countries in the world to clock property price falls, a new ranking shows, after prices boomed over the past two years.
Property prices are high compared to rents and incomes, the Bloomberg Economics research found, although local experts caution prices will not necessarily drop far enough to get back in line with fundamentals.
Australia ranked fourth in the OECD for the risk of a property price correction, behind New Zealand in first place and just ahead of Canada in fifth, two other countries where property markets have been hot for years.
Central banks around the world, including Australia, cut interest rates to support economies during the pandemic, allowing buyers to borrow more and pushing property prices higher.
As economies recover, interest rates are going up and property markets are starting to slow.
-----
Highly educated voters spurned ‘unpopular’ Coalition leaders
10:00PM June 23, 2022
Just over a quarter of Australians with university degrees voted for the Coalition at the May election, highlighting Peter Dutton’s challenge in needing to win more support among highly educated professionals.
The Coalition’s support was lowest among people with degrees, attracting just 26.2 per cent of those voters, according to a survey during the campaign from the Australian National University.
The number was barely above that achieved by the Greens, with 24.6 per cent of people who completed university voting for the minor party and 36.5 per cent voting for Labor.
Labor has a similar challenge in needing to win over less educated Australians, with just 27.6 per cent of people who did not complete high school voting for Anthony Albanese.
-----
Adam Bandt unfurls banner of a radical culture war
10:59PM June 23, 2022
Adam Bandt’s refusal to stand next to the national flag has provoked a wide and heated reaction, unsurprisingly.
The flag carries a lot of symbolic freight. It has waved overhead since Federation in 1901, watching over the nation’s history in its entirety. It has hung there throughout the ups and downs of the 20th century, and beyond, as a sentinel of national unity. Soldiers have died under it. Olympic medallists have stood proudly, often with tears in their eyes, as it has slowly been raised aloft to acknowledge their triumphs. It overlooks the national anthem to open football grand finals – in effect, giving official recognition to the event. It has been waved during royal visits. It emblazons Parliament House in Canberra.
In effect, the flag raises the hand of secular benediction over the nation, blessing it. It stands with the Constitution and the vast assembly of public institutions as the bedrock of society.
Protests such as those made by Bandt are to be expected of radical undergraduates in a surge of ill-thought revolutionary enthusiasm. During the Vietnam war years, American students burnt flags in deliberate acts of desecration, a crime in some countries. But a member of a significant and established political party, and indeed its leader, should be more circumspect.
-----
Anthony Albanese’s Paris trip a final act of contrition to the French
Twenty-five years after France was the most hated country in the region, Australia is now happy to have another nuclear-armed ally in the Pacific.
Phillip Coorey Political editor
Jun 23, 2022 – 8.00pm
On January 27, 1996, just weeks before the election at which Anthony Albanese entered parliament, the French conducted their last nuclear test in the Pacific.
Despite fierce protests from all Pacific nations, including the Keating Labor government, France capped off an appalling period as a Pacific power with what was estimated to be its 193rd atomic test – 41 of which were atmospheric – since 1966.
Not to mention what the New Zealand government at the time called an act of state-sponsored terrorism when French agents blew up the Greenpeace ship Rainbow Warrior in Auckland Harbour in 1985. France at first tried to cover it up, and then threatened crippling economic sanctions against the Kiwis when they jailed two of the perpetrators.
The January 1996 nuclear test at Fangataufa came a month after the equally controversial explosion at its sister atoll Mururoa, something Paul Keating aptly described as “an act of stupidity” and “a mindless decision”.
-----
https://www.afr.com/politics/federal/albanese-faces-teal-revolt-over-staff-cuts-20220624-p5awfn
Albanese faces teal revolt over staff cuts
Phillip Coorey Political editor
Updated Jun 24, 2022 – 4.39pm, first published at 4.09pm
Prime Minister Anthony Albanese has angered much of the 16-member crossbench, including the newly elected teal independents, by slashing staff allocations to just one adviser each.
In a letter to the MPs sent on Friday, Mr Albanese said that in addition to the four staff members for their electorate offices, “I propose to allocate you one additional full-time staff member at the ‘adviser’ classification”.
This is a decrease from the four advisers that Scott Morrison allocated the crossbenchers when he was prime minister.
Independent MP Zali Steggall, who holds the Sydney seat of Warringah, said Mr Albanese’s words about being respectful of the crossbench, even though he did not need their votes, had been rendered meaningless.
-----
China thaw? It’s from the freezer to the fridge for Albanese government
By Richard McGregor
June 25, 2022 — 5.00am
Since arriving in Australia a few months back, the new Chinese ambassador has met two former prime ministers, past, present and future foreign ministers, multiple captains of industry and university chiefs and academics.
In Canberra this week, Xiao Qian called on the national secretary of the Labor Party, Paul Erickson, whom he presumably didn’t seek out for advice on marginal-seat campaigning, before heading to Sydney for a speech on Friday.
The hall at the University of Technology Sydney was full for the pre-lunch speech, though a little less so by the end, as at least six people were ejected during its delivery after noisily condemning Chinese human rights actions. Over cries of “free Tibet”, Xiao smoothly stuck to his script — that the new Australian government’s election has opened the way for a “possible improvement” in ties and that both sides should make a “concerted effort” in that direction.
In Beijing, Graham Fletcher, the Australian ambassador, leads a quieter life. Senior leaders have maintained a ban on meeting Australians. Officials and scholars have largely shunned invitations to talk. Even big state companies with large investments in Australia are reluctant to meet.
-----
First misstep? Albanese infuriates the new crossbench he will need to pass laws
June 26, 2022 — 5.00am
What was Anthony Albanese thinking?
At the May 21 election, hundreds of thousands of Australians voted for a new federal representative. Yes, Labor won 11 new seats in the lower house (and lost a couple too) and reached a majority of 77 seats.
But that wasn’t the only story. Seven new independents – Allegra Spender, Kylea Tink, Sophie Scamps, Zoe Daniel, Monique Ryan, Kate Chaney and Dai Le – were also elected, as were three new Greens MPs in the form of Stephen Bates, Max Chandler-Mather and Elizabeth Watson-Brown.
In the Senate, Jacqui Lambie has been joined by her former staffer Tammy Tyrell; in the ACT, former Wallabies champion David Pocock was elected; and in Victoria, Ralph Babet snuck in for the United Australia Party.
Australians voted for change and it wasn’t limited to Labor.
-----
We need to talk about China — and then actually do something about our own security
12:00AM June 25, 2022
The collapse of Australia’s relations with China is one of the most extraordinary and consequential events in the history of Australian foreign policy. Just a few years ago, China was hailed as our great friend and the key to our economic future. Now political leaders talk openly of going to war with China – the most powerful country in Asia, our largest trading partner and one of our biggest sources of immigrants, with immense armed forces and nuclear weapons.
Not since we faced Imperial Japan in the 1940s have things been so bad between us and a major Asian power. And this is potentially worse, because China today is more formidable and more important to Australia’s future than Japan ever was, since it is swiftly becoming the richest and most powerful country on earth.
This is the simple fact we must learn to live with. Recent figures from the Treasury in Canberra spell it out starkly. Today, China’s economy is 19 per cent of global GDP and America’s is 16 per cent. By 2035, China will be at 24 per cent and America just 14 per cent.
So what should we do about it? This is one of the most important questions we face as a nation today, and perhaps one of the most important we have ever faced. It is hardly an exaggeration to say that our entire future as a country – our security, our prosperity and, indeed, our identity – depends on how we answer it. And yet the question is hardly discussed.
-----
COVID-19 Information.
-----
First Omicron wave was really twice the size of recorded cases, study says
By Mary Ward and Lucy Carroll
June 20, 2022 — 6.00am
The number of COVID-19 infections in Australia was likely at least twice what was reported among adults during the first major Omicron wave, with Queensland recording the highest rate of any state.
Data from the National Centre for Immunisation Research and Surveillance (NCIRS) and the Kirby Institute’s latest serology survey of blood donors found that by the end of February, at least 17 per cent – or almost 3.5 million – Australian adults had caught the virus.
The survey examined 5185 de-identified samples from Australian blood donors aged 18 to 89 to find evidence of COVID-19–related antibodies. Two types of antibody to SARS-CoV-2 were tested: the nucleocapsid protein, which is only present in someone who has been infected with COVID-19, and spike antibodies, which are produced by both natural infection and vaccination.
The highest proportion of adults with antibodies was in Queensland, where 26 per cent were shown to have had a COVID-19 infection by the end of February, despite only 10 per cent of Queenslanders having registered a test.
-----
Don’t pump brakes: our COVID strategy must change to reflect reality
By Brendan Crabb and Mike Toole
June 23, 2022 — 5.00am
Australia continues to release the pandemic brakes, such as the easing of mask mandates in airports and isolation rules for positive cases, sending a strong “mission accomplished” signal to the public. However, this narrative is in contradiction to what the numbers say about widespread infection, suffering and disruption.
The statement by national cabinet that the pandemic is still with us, and extending federal support to state and territory hospitals, was welcome, yet there was no action to reduce the amount of virus in our community.
So, what is going on? Is the current strategy of vaccinating strongly but tolerating widespread Omicron transmission still valid? Far from it. We now know a lot more about the various Omicron sub-variants, and it’s not good.
When the fast-spreading Omicron variant first hit an exhausted population late last year, the response was to continue following a national plan based on the less transmissible Delta variant. There was a sense among policymakers that Omicron would not only be benign, but even desirable because it would boost vaccine-based population immunity and help end the pandemic. Six months on from Omicron’s emergence, we can assess what has happened.
-----
Climate Change.
-----
Germany fires up coal plants to avert gas crisis
Melissa Eddy
Jun 20, 2022 – 9.35am
Berlin | Germany will restart coal-fired power plants in order to conserve natural gas, the country’s economy minister announced on Sunday (Monday AEST), amid concerns about a looming supply shortage after Russia cut gas deliveries to Europe last week.
The move was part of a series of measures, including new incentives for companies to burn less natural gas, announced by Germany as Europe takes steps to deal with reduced energy supplies from Russia.
Since European countries imposed sanctions to punish Moscow after Russia’s invasion of Ukraine in February, Russia has responded by cutting off gas supplies to several European countries. Last week, Russian energy giant Gazprom also reduced flows through the Nord Stream pipeline, an important undersea link that carries gas directly to Germany.
Gazprom blamed maintenance issues for the reductions, but European leaders have called the move a political tactic by President Vladimir Putin of Russia.
-----
This energy revolution is hard - really hard - but it’s doable
By Alan Finkel
June 20, 2022 — 5.00am
Australia’s east coast electricity grid was under unprecedented pressure last week, laying bare the challenges of achieving a zero-emissions electrical system. It’s hard, really hard. And it’s only the beginning. The next step is to expand our zero-emissions electricity generation, and hydrogen produced from it, to replace oil and gas in transport, building heating and industry.
It has been easier for countries such as Norway and France because they have drawn on hydroelectricity and nuclear electricity to massively reduce their emissions. Tasmania, too, has achieved virtually 100 per cent emissions-free electricity through its combination of hydro and wind electricity.
From an engineering perspective, hydroelectricity and nuclear are dream players, producing electricity on demand and contributing to the secure and reliable operation of the grid. Solar and wind generation are less co-operative, but realistically that’s all that mainland Australia has at hand. To deploy them, they must be supported by transmission lines, storage and arguably a modest amount of natural gas generation.
Australia has made good progress. There has been record investment in the past three years that has seen our solar and wind generation in the east coast grid almost double from 12 per cent in 2018 to 23.5 per cent in 2021. On a per capita basis, our solar and wind generation is comparable with California. Looking just at solar electricity, on a per capita basis Australia is No. 1 in the world.
-----
Capacity mechanism must be pragmatic and cleaner solution
There are cost risks in centralised buying of reserve generation power. But they are likely to be worth taking.
Tony Wood Contributor
Jun 20, 2022 – 5.36pm
The Energy Security Board has released a design for the first major overhaul of the National Electricity Market since it was launched in the late-1990s.
The high-level design for a capacity mechanism may be complex and controversial in some areas, but it is also pragmatic and timely, given that the NEM is off the road after a major pile-up.
Concerns that the NEM might not be fit for the purpose required of the electricity market in a transition to a zero-emissions future have been around for the best part of a decade.
They gained most voice after the Finkel review of the security of the market and were expressed in the form of the National Energy Guarantee proposed by then-prime minister Malcolm Turnbull.
-----
Royal Commissions And The Like.
-----
No entries in this category
-----
National Budget Issues.
-----
https://www.afr.com/policy/economy/the-reserve-bank-s-plunge-into-negative-equity-20220619-p5auvi
Reserve Bank’s plunge into negative equity
Grant Wilson Contributor
Jun 19, 2022 – 3.03pm
The epic moves in bond yields this fiscal year have plunged the balance sheet of the Reserve Bank deep into negative equity. This is historically unprecedented territory for Martin Place, and for Canberra as well.
It will need to be reckoned with, ahead of the RBA’s annual report, due in September.
Not everyone agrees with this précis. It is often pointed out the central banks are different from companies and can operate from a position of negative equity.
We agree with that, as far as it goes. And it is certainly the view of the RBA. In last year’s annual report it highlighted that negative equity “would not affect the Reserve Bank’s ability to operate effectively or perform any of its policy functions”.
So, the RBA can continue to raise rates unimpeded by its balance sheet travails.
-----
Economic times are tricky, but they’re far from ‘dire’
Ross Gittins
Economics Editor
June 19, 2022 — 10.00pm
It’s a funny thing. The easily impressionable are packing down for imminent recession, while the economic cognoscenti are fretting that the economy is “overheating”. Unfortunately, the two aren’t as poles apart as you may think. Even so, both groups need to calm down and think sensibly.
There was much talk of recession last week as the sharemarket dropped sharply. We dropped because Wall Street dropped. It dropped because the thought finally occurred that if the US Federal Reserve whacks up interest rates as far and as fast as the financial markets are demanding, high inflation might be cured by putting the US into recession.
It’s true that when central banks try to cool an overheating economy by jamming on the interest-rate brakes, they often overdo it and precipitate a recession.
But a few other things are also true. One is Paul Samuelson’s famous quip that the sharemarket has predicted nine of the past five recessions. As the pandemic has taught us to say, it has a high rate of “false positives”. Assume that a sharemarket correction equals a recession, and you’ll do a lot more worrying than you need to.
-----
https://www.afr.com/policy/economy/rba-puts-3-5pc-lid-on-wages-20220621-p5avg4
RBA puts 3.5pc lid on wages
Ronald Mizen Economics correspondent
Jun 21, 2022 – 7.09pm
Reserve Bank of Australia governor Philip Lowe has sought to put a lid on wages growth of about 3.5 per cent and warned regular pay rises of 4 to 5 per cent risked entrenching higher inflation.
Dr Lowe flagged the need of real wage cuts, saying annual rises in the mid-threes was a good “anchoring point” for employers and unions, even while inflation was forecast to reach about 7 per cent by year’s end.
His comments come after the Fair Work Commission last week delivered a rare split increase that lifted the minimum wage for 184,000 workers by 5.2 per cent, and 4.6 per cent for about 2.6 million workers on higher awards.
Following the decision, Industrial Relations Minister Tony Burke told The Australian Financial Review the advice to him was wage rises of headline inflation plus productivity growth would not be inflationary.
But Dr Lowe said inflation will remain above the target band for “years” and the RBA would do “what is necessary” to pull it down.
-----
https://www.afr.com/policy/economy/rba-not-on-a-pre-set-interest-rate-path-20220621-p5avcq
RBA not on a pre-set interest rate path
Philip Lowe Reserve Bank governor
Jun 21, 2022 – 12.50pm
It is a challenging time in the global economy. Most countries, including the United States and Australia, are experiencing the highest rates of inflation for many years.
The tragic events in Ukraine have led to sharp increases in the prices of food and energy. And interest rates are rising around the world from the record lows during the pandemic.
All this is happening at a time when unemployment rates are as low as they have been for many decades and household budgets are under pressure. So, it is a complex policy environment.
The rise in inflation is a global story – it is occurring everywhere. In the United States and Europe, inflation is above 8 per cent, and the peak has not yet been reached in some countries.
Australia is no exception to the general trend, although inflation here remains below that of most other advanced economies. In headline terms, inflation in Australia was 5.1 per cent over the year to the March quarter, which is the highest rate in many years.
-----
RBA boss in 'boomer fantasy' over wages: McManus
23 June, 2022
Australian Council of Trade Unions secretary Sally McManus says Reserve Bank governor Philip Lowe "isn't quite in touch with reality" following his warning of a potential price spiral following this year's 5.2 per cent minimum wage increase.
Ms McManus said inflation "has absolutely nothing to do whatsoever with wages," arguing that Mr Lowe's warning of a 1970s style price spiral is "a total boomer fantasy land."
The union boss said the Reserve Bank board has "very little idea how things work," because they don't participate in negotiations about pay increases.
"All of this is just a fantasy because they don't understand what actually happens at the bargaining table," she told ABC RN Breakfast today.
-----
Brakes on spending: Albanese warns of budget cuts
By David Crowe
June 23, 2022 — 8.55pm
Cabinet ministers have started work on spending cuts in the federal budget after identifying programs they want to scrap, sparking a warning to Australians to prepare for curbs on outlays to bring the nation’s finances under control.
Prime Minister Anthony Albanese said the Labor government’s first budget would “really put the brakes on” federal spending to address problems highlighted by the expenditure review committee (ERC) of federal cabinet.
“We’re going to have to really put the brakes on some of the spending which is there,” he told the ABC’s 7.30 program on Thursday night.
With budget deficits forecast to reach $261.4 billion over the four years to 2025, the incoming government is rejecting some spending options despite pressure from state leaders and community groups for long-term boosts to outlays on health and social services such as Newstart.
-----
Recession alarm bells are ringing as the war on inflation escalates
Senior business columnist
June 23, 2022 — 11.57am
This week produced clear warnings from the Reserve Bank and the US Federal Reserve Board that they will do whatever it takes to bring out-of-control inflation rates under control, even if that means provoking recessions.
On Tuesday, the RBA’s Philip Lowe said the bank was committed to “doing what is necessary” to ensure that Australian inflation – which is running at around 5.2 per cent and which he thinks will top out around 7 per cent in the December quarter – returns to the RBA’s target range of two to three per cent.
On Wednesday in the US, the Fed’s chair, Jerome Powell, said a recession in the US, where the inflation rate is 8.6 per cent, was possible and orchestrating a soft landing for the US economy was “very challenging”.
-----
Inflationary mindset could upset ‘narrow path’ to target: RBA chief
Hans van Leeuwen Europe correspondent
Jun 25, 2022 – 7.10am
Berlin | The Reserve Bank has only a “narrow path” to curb runaway inflation without triggering an economic downturn, governor Philip Lowe has warned, as the bank pushes back against a change in Australians’ “inflation psychology” that he fears could inflict more damage.
If workers and businesses did not believe that the RBA could chart a “credible path” back to its inflation target, he said, they may get stuck in an inflationary mindset that would keep fuelling wages and prices growth.
This would then force the central bank to impose much higher interest rates and squeeze the economy.
“There is a path there to have inflation come down without the economy having too much pain, but it’s a narrow path,” Mr Lowe repeatedly said during a UBS panel discussion in Zurich late on Friday (AEST).
Mr Lowe suggested the bank’s path would not include any 0.75 percentage point interest-rate increase, which the RBA had “not put on the table”.
-----
Why the inflation problem may not be as big as we think
John Kehoe Economics editor
Jun 24, 2022 – 5.00pm
While everyone is now obsessed about surging inflation, most people have missed that the big global forces underpinning price spikes are reversing.
Inflation caused by pandemic-induced supply chain disruptions, the war in Ukraine and ultra-loose monetary policy is turning around. The international forces driving the inflation of goods, food, energy and housing appear to be unwinding.
In the past few days, money market traders have started to notice, paring back bets on ultra-aggressive interest rate rises by central banks and pushing down bond yields, partly on concerns about a possible US recession.
Money markets are now pricing in a 3.1 per cent Reserve Bank of Australia cash rate by year-end, down from 4 per cent projected last week.
-----
Rising interest rates, inflation give Lowe a challenging high wire act
By Shane Wright
June 25, 2022
Like a tightrope walker about to take their first steps across a chasm, Reserve Bank governor Philip Lowe can see his goal – and the danger beneath his feet.
He, like central bankers around the world, are all heading out onto a very thin wire balancing the need for strong economic growth on one hand with the battle to bring inflation under control on the other.
Speaking this week about the situation facing the Reserve Bank, and through it, the Australian economy, Lowe conceded the way ahead was not for the faint-hearted, especially for those who may have a job.
“It’s a fairly narrow path we’re on. We’re trying to get demand and supply to increase at the same rate and achieving that’s difficult,” he said.
-----
https://www.afr.com/policy/economy/budget-deficit-slashed-by-half-to-33b-20220624-p5awff
Budget deficit slashed by half to $33b
John Kehoe Economics editor
Jun 24, 2022 – 5.37pm
The federal budget deficit bequeathed by the Morrison government has been slashed in half to $33 billion in the first 11 months of the financial year, new Department of Finance figures reveal.
Soaring commodity prices fuelled by the war in Ukraine and the low 3.9 per cent unemployment rate underpinned bumper corporate tax revenue and lower welfare expenses.
For the 31 days of May, the budget recorded a surplus of $12.5 billion due to large and seasonal corporate tax payments.
But an independent budget expert warned the windfalls to the budget were unlikely to last, as iron ore prices fall and longer-term spending pressures build from the national disability insurance scheme, aged care, defence and interest repayments.
----
Health Issues.
-----
‘We are in for a tough winter’: Sharon Lewin, the clear-eyed optimist
June 25, 2022 — 5.55am
I have spoken to Professor Sharon Lewin many times in the past two years. Yet until I sat down to lunch with her, we had never properly met.
As a health reporter at The Age, my interactions with her were limited to politically charged press conferences or interviews over the phone ahead of a deadline, with the director of the Peter Doherty Institute for Infection and Immunity typically answering questions in a clear, gentle and calm manner. Some might say that The Age and Sydney Morning Herald owe her (and countless other scientists and frontline healthcare workers) a free lunch for the hours they have spent being interviewed during the pandemic.
Lewin walks into Bistro Gitan, a bustling contemporary French and Spanish-inspired restaurant in South Yarra, and gives me a big hug, as if she were greeting an old friend.
The bistro is a favourite haunt of Lewin’s. She suggests we share an entree of Kingfish tartare with nori rice crisps, Yarra Valley salmon caviar and finger lime dressing. She orders the salade de chevre chaud with fig, walnut and port wine dressing for her main course, while I opt for the pumpkin Parisian gnocchi.
-----
International Issues.
-----
https://www.afr.com/policy/economy/the-wildcard-factors-influencing-us-inflation-20220620-p5av0g
The wildcard factors influencing US inflation
A long reliance on easy money may give rise to new difficulties as the Fed raises interest rates.
Rana Foroohar Contributor
Jun 20, 2022 – 10.03am
Inflation is all investors can think about right now. How high will it go? How long will it last? Can it be curbed in the US without a major recession?
There are useful comparisons to be made with the era of high inflation in the 1970s and early 1980s. But there are also many factors today that are unique to our moment, and they make it unusually difficult to predict exactly how quantitative tightening will play out. Below are three inflation “wild cards” that are worth considering.
The first is the way in which the financialisation of the economy could have an impact on the Federal Reserve’s efforts to tamp down inflation. Decades of low-interest rates, coupled with several major bouts of quantitative easing following the 2008 financial crisis, raised both asset prices and debt levels.
Retail investors are more exposed to stocks than they were a decade ago thanks to the growth of target-date funds that invest more in equities on the front end of their time horizon, as well as the gamification of trading. We have all grown used to an economy in which paper wealth grows. So, what happens when asset prices inevitably fall as interest rates rise?
-----
The Fed hasn’t fixed its worst blunder since the 1970s
For younger viewers, it’s going to come as a shock to see That ’70s Show for the first time. Spoiler alert: Not much about that decade was transitory.
Niall Ferguson
Updated Jun 20, 2022 – 2.08pm, first published at 1.06pm
I knew Paul Volcker. Jay Powell is no Paul Volcker. I didn’t perhaps know “Big Paul” as well as Lloyd Bentsen knew John F. Kennedy, but I knew him well enough to talk trout fishing in a cloud of a cigar smoke, getting a crick in my neck as well as smoke in my eyes because he was so darn tall.
I never met Arthur Burns – Volcker’s predecessor, but one, as Federal Reserve chairman – who preferred puffing on a pipe to cigars. But I think I’ve read enough about Burns to suggest plausibly that the current Fed chairman, Jay Powell, has more in common with him than with Volcker. This is unfortunate, and potentially disastrous for the US economy.
Last Wednesday, Powell sought to re-establish his and the Federal Reserve’s credibility with an increase of 75 basis points in the federal funds rate – the biggest rate increase since 1994. The initial media and market reactions were quite positive. I was, and am not, convinced.
It’s not just that the Powell Fed has a track record for blinking under political pressure – he already had that in common with Burns, long before anyone had heard the word “COVID”. Think back four years, to 2018, the year of Powell’s appointment by president Donald Trump.
-----
https://www.afr.com/world/north-america/us-democracy-survives-the-madness-of-trump-20220619-p5autv
US democracy survives the madness of Trump
The Financial Review’s take on the principles at stake in major domestic and global stories.
Jun 20, 2022 – 6.19pm
The Congressional hearings into the January 6, 2021, storming of the US Capitol will go down in history as testimony to Donald Trump’s Caligula-like political madness. The hearings have learned that Mr Trump was repeatedly told by advisors that the unconstitutional plan for then vice president Mike Pence to refuse to certify Joe Biden’s election victory was “nuts” and “crazy”.
But deluded by his narcissistic “stolen election” lies, Mr Trump had “detached from reality” according to former attorney general William Barr. The infamous January 6 Washington rally, where Mr Trump’s demanded the vice president do the “right thing”, incited the raging mob that came within metres of where Mr Pence was sheltering in the Capitol building.
Congress has also heard that lawyers advising Mr Trump warned him that overturning the majority of voters cast for Mr Biden risked major civil disorder and “riots in the street”.
For all this, January 6 was still essentially a riot by ragtag camp followers of the court of Mr Trump, rather than an attempted “coup” or “insurrection”. That is underlined by the way White House insiders showed that their first loyalty was to the US Constitution, and by the fact that America’s political system had the institutional strength to stare down the challenge to democratic norms.
-----
Great unknown: Markets brace for turmoil as the Fed unwinds its 14-year experiment
Senior business columnist
June 20, 2022 — 11.59am
While the focus of financial markets and economists last week was on the US Federal Reserve Board’s big hike to US interest rates, something else of equal - if not greater - significance for markets and economies also occurred last week.
The Fed started its process of “quantitative tightening”, or QT, last week. That involves allowing the massive hoard of bonds and mortgages that the US central bank has accumulated through its waves of quantitative easing (QE) – its purchases of bonds and mortgages – to run off by not reinvesting the proceeds from maturing securities.
Last week $US15 billion ($21.6 billion) of Treasury securities held by the Fed matured without the proceeds being reinvested. By the end of the month $US47.5 billion of Treasury and mortgage-backed securities will be allowed to mature without reinvestment. The same will occur in July and August before the amounts double to $US95 billion a month from September.
Just as QE – first rolled out in response to the 2008 financial crisis and then doubled down on in response to the pandemic – was unprecedented, so is QT.
-----
https://www.afr.com/world/europe/farewell-to-russia-and-to-the-sinatra-doctrine-20220621-p5avcd
Farewell to Russia and to the Sinatra doctrine
Russian officials used to joke that liberated states ‘were doing it their way’. Thirty years later, Vladimir Putin has taken his country back to the imperialism, autocracy and isolation of the Soviet period.
Gideon Rachman Columnist
Updated Jun 21, 2022 – 12.35pm, first published at 12.06pm
“Congratulations/commiserations on being on the Russians sanctions list,” read the text message from a colleague. That was how I found out that I am now on the Kremlin’s enemies list – banned from entering Russia.
The realisation that I might have made my last visit to the country made me think back to my first trip in 1987. It feels like Russia has come full circle – back to the autocracy, aggression and isolation that defined the Soviet era.
In 1987, the Soviet Union was in its dying days – although we didn’t know it at the time. I was in Moscow to cover the arms talks between the US and the USSR. The big story for the local correspondents was the opening of the first private restaurants in the country.
Things were changing and that was reflected in the almost playful manner of Gennadi Gerasimov, the Soviet spokesman at the time.
-----
Stagflation will be the cost of reducing inflation: Dalio
Timothy Moore Before the Bell editor
Jun 22, 2022 – 4.42am
Bridgewater Associates co-founder Ray Dalio said it’s both “both naïve and inconsistent” to think that all the US central bank to check rising prices is to lift rates and “everything will be good”.
The hedge fund billionaire said “supposed experts” assessing moves in financial markets “is like listening to nails scratch against a chalkboard because they are typically saying incorrect things in an erudite rather than commonsense way.
“Markets and economic movements are driven by much simpler and more commonsense linkages than most people articulate.”
In a LinkedIn post, Dalio also said it was a “misunderstanding” of how the economy works to focus on inflation alone.
-----
https://www.afr.com/world/north-america/panic-about-the-us-is-premature-20220620-p5av7b
Panic about the US is premature
Yield curves are signalling a US recession. But strong households, corporates and employment all say that the country should just shrug off a downturn.
Richard Yetsenga Contributor
Jun 21, 2022 – 4.14pm
It seems a good news story just won’t do it. If the pandemic didn’t ruin the global economy, it’s going to be the war in Europe or China’s struggles. Now the Fed might be the one to finally drive the world into a deep recession.
Why can’t the central expectation be for some reasonable outcomes? It should be.
It’s clear the safest part of the cycle is behind us. The best time for asset markets is when policy is easing but the data have started to improve. This is also when businesses should be taking advantage of cheap funding and valuations to buy assets and expand. That period began in 2020 for many economies and extended to the early months of this year.
All cycles end at some point, with a recession that’s deep enough, and business bankruptcies jump, unemployment increases sharply, and many people remain unemployed. In addition, non-performing loans rise such that banks become more hesitant to lend.
-----
Ukraine braces for Russian ‘storm’ ahead of EU summit
Natalia Zinets and Oleksandr Kozhukhar
Jun 21, 2022 – 5.51pm
Kyiv | Ukraine acknowledged on Tuesday difficulties in fighting in its east as Russian forces stepped up pressure and made advances on two cities ahead of an EU summit this week, which is expected to welcome Kyiv’s bid to join the bloc.
The governor of the Luhansk region, scene of the heaviest Russian onslaughts in recent weeks, said Russian forces had launched a massive attack and gained some territory on Monday (Tuesday AEST), although it was relatively quiet overnight.
“It’s a calm before the storm,” governor Serhiy Gaidai said.
Ukrainian President Volodymyr Zelensky had predicted Russia would step up attacks ahead of the EU summit on Thursday and Friday. However, he was defiant in an address to the nation, referring to “difficult” fighting in Luhansk for Sievierodonetsk and its sister city Lysychansk.
“We are defending Lysychansk, Sievierodonetsk, this whole area, the most difficult one. We have the most difficult fighting there,” he said. “But we have our strong guys and girls there.”
-----
Pockets of resistance: Why the southern Ukraine front matters
Military leader and strategist
June 21, 2022 — 7.30pm
Over the past two months, attention on the Ukraine War has generally focussed on the Russian eastern offensive. The Russians, having learnt some of the lessons of their failed Kyiv and Kharkiv offensives, have concentrated much of their combat power in eastern Ukraine, where they have slowly, painfully and brutally seized most of the Luhansk region.
But there is another front in this war that is also important: the campaign in the south. Because of its long-term economic implications for the state of Ukraine, the war in the south may prove even more decisive than the military operations in the Donbas.
Over the past month, Russia has increased its missile and artillery attacks across the south. While these attacks have some military utility, the Russians have a more strategic goal in mind. As retired American general Jim Dubik has written, “the territory that Russia controls in the south, less Odessa, puts Putin in a position to slowly choke Ukraine’s economy while continuing to pummel Ukraine’s cities, civilians, industry, cultural sites and infrastructure.”
Putin may have emphasised operations in the Donbas in his May 9 “victory” speech. But this deliberate and systemic destruction of Ukraine’s capacity to generate revenue may now be the Russian theory of victory.
-----
https://www.afr.com/property/residential/global-housing-bubbles-are-bursting-20220622-p5avp3
Housing bubbles are bursting around the world
As central banks raise interest rates around the world, once-hot residential real estate markets in many nations are suddenly turning cold.
Enda Curran
Jun 22, 2022 – 12.56pm
A world economy already contending with raging inflation, stock-market turmoil and a gruelling war is facing yet another threat: the unravelling of a massive housing boom.
As central banks around the globe rapidly increase interest rates, soaring borrowing costs mean people who were already stretching to buy property are finally reaching their limits. The effects are being seen in countries such as Canada, the US and New Zealand, where once-hot residential real estate markets have suddenly turned cold.
It’s a sharp reversal from years of surging prices fuelled by rock-bottom mortgage rates and government stimulus, along with a pandemic that popularised remote work and sent homebuyers on the hunt for bigger spaces.
An analysis by Bloomberg Economics shows that 19 OECD countries have combined price-to-rent and home price-to-income ratios that are higher today than they were ahead of the 2008 financial crisis – an indication that prices have moved out of line with fundamentals.
-----
Why retreating from global trade is a major mistake
From treating trade as optional to overstating the merits of self-sufficiency, these are errors to avoid as we head into a new world.
Martin Wolf Columnist
Updated Jun 22, 2022 – 11.35am, first published at 11.02am
Globalisation is not dead. It may not even be dying. But it is changing.
In the process, the institutions that shape it, notably the World Trade Organisation, are being forced to change, too. We are moving towards a different and far more difficult world. But in setting our new course, we need to avoid some mistakes.
Here are seven.
The first is to focus attention only on trade. As former IMF chief economist Maurice Obstfeld has noted, today’s fluid global capital markets have generated waves of financial crises, while bringing little evident benefit.
Insufficient attention is paid to this reality, largely because the interests in favour of free capital flows are so powerful, while their economic impact is so hard for most people to understand.
Self-sufficiency is ludicrous
The second is a belief that the era of globalisation was an economic catastrophe.
-----
https://www.afr.com/world/asia/xi-jinping-slams-western-sanctions-on-russia-20220622-p5avto
Xi Jinping slams Western sanctions on Russia
Michael Smith North Asia correspondent
Updated Jun 23, 2022 – 9.20am, first published at 9.08am
Tokyo | China’s President Xi Jinping has slammed Western sanctions against Russia, which he says are “weaponising” the global economy as he addressed leaders of emerging nations he hopes will support his alternative to the US-led world order.
In a speech ahead of Thursday’s BRICS summit, Mr Xi reinforced his support for Russian president Vladimir Putin and said sanctions were double-edged swords that would eventually harm those who imposed them.
“To politicise the global economy and turn it into one’s tool or weapon, and willfully impose sanctions by using one’s primary position in the international financial and monetary systems will only end up hurting one’s own interests as well as those of others, and inflict suffering on everyone,” Mr Xi said in a speech late on Wednesday.
Mr Xi did not name the United States or other countries that have imposed sanctions on Russia since Mr Putin invaded Ukraine in February. However, he made it clear he opposed the measures, in a speech which reinforced his tacit support for the Kremlin’s actions.
-----
The US is in recession as central banks fight last war
The US is either in recession already, or probably will be by the third quarter. This has sweeping consequences for the world’s dollarised financial system, for commodity demand and for global inflation.
Ambrose Evans-Pritchard
Jun 23, 2022 – 9.36am
The US is either in recession already, or probably will be by early autumn. This has sweeping consequences for the world’s dollarised financial system, for commodity demand and for global inflation.
The New York Federal Reserve’s internal model is flashing an 80 per cent risk that the US economy will enter a sustained contraction in the second half of this year, much sooner than presumed just weeks ago. The chances of a “soft landing” have dropped to 10 per cent. If so, you can stop worrying about an inflationary spiral.
The institution’s “dynamic stochastic general equilibrium” model (DSGE) points to an outright fall in GDP of 0.6 per cent this year and a further fall of 0.5 per cent next year. It likens the picture to the 1990 recession under George Bush snr, triggered by the first Gulf War.
Monetarists think the DSGE model understates the danger since it entirely ignores the role of money in the economy. It treats the abrupt switch from extreme quantitative easing to extreme quantitative tightening - a $US2.4 trillion ($3.5 trillion) switch annualised - as mostly background noise. This New Keynesian blind spot on how QE works (through the banking multiplier) has misled the Fed before, and may be misleading the Fed now.
-----
The time to put Trump on trial is drawing near
A botched prosecution would make Trump stronger and even help re-elect him. When you strike at a king — even a former one — you must kill him.
Edward Luce Columnist
Jun 23, 2022 – 10.02am
Pity Merrick Garland. Whichever path America’s attorney-general takes — to prosecute Donald Trump or not — entails great risk.
Putting the former president on trial would hasten the country’s drift towards political violence. Letting him walk away would make another coup attempt more likely. Garland is damned if he does and damned if he doesn’t. Either route could endanger US democracy.
The evidence amassed by the US House of Representatives’ January 6 committee is making it much harder to turn a blind eye. Garland’s quandary is acute. The standard of proof for a criminal conviction is considerably higher than lay observers of the January 6 protests might assume.
A botched prosecution would make Trump stronger and even help re-elect him. When you strike at a king — even a former one — you must kill him.
----
Sri Lanka’s economy ‘has completely collapsed’, says despairing PM
By Krishan Francis
Updated June 22, 2022 — 7.25pmfirst published at 7.22pm
Colombo: Sri Lanka’s prime minister says its debt-laden economy has collapsed after months of shortages of food, fuel and electricity, and the South Asian island nation cannot even purchase imported oil.
“We are now facing a far more serious situation beyond the mere shortages of fuel, gas, electricity and food. Our economy has completely collapsed. That is the most serious issue before us today,” Prime Minister Ranil Wickremesinghe told Parliament on Wednesday.
Wickremesinghe is also the finance minister tasked with stabilising the economy, which is foundering under the weight of heavy debts, lost tourism revenue and other impacts from the pandemic and surging costs for commodities.
“Currently, the Ceylon Petroleum Corporation is $700 million in debt,” he told MPs. “As a result, no country or organisation in the world is willing to provide fuel to us. They are even reluctant to provide fuel for cash,” he said.
-----
The message from the Capitol-riot hearing: Trump has peaked
The January 6 committee can help separate the former US president from elites, donors, and those who would support him simply because they don’t like the alternative.
Juliette Kayyem
Jun 24, 2022 – 5.00am
Many sophisticated observers of the January 6 committee will judge its success by two key metrics: whether the panel refers former President Donald Trump for criminal investigation and, if so, whether Attorney General Merrick Garland actually proceeds.
But committee members are doing another job at least as important as advising the Justice Department: they are giving an off-ramp to those who accepted Trump’s insistence that the 2020 election was stolen out from under him – and who might excuse or even support violence done in his name.
Democracies do not fail in a single moment; they gradually break down from within. The same can be said of violent movements. Since the Capitol riot, the United States has been waging what is essentially a counter-extremism effort against Trump and the forces that nearly toppled our democracy. Such movements grow by portraying themselves as successful and their leadership as exceptional.
The committee hearings have shown Trump to be not only an insurrectionist and an inciter of violence, but also a desperately sore loser.
-----
‘We are in crisis’: Germany braces for gas rationing
Melissa Eddy and Stanley Reed
Jun 24, 2022 – 9.20am
Berlin | Germany warned residents and businesses on Thursday (Friday AEST) that the country was in a natural gas crisis that could worsen in coming months.
“The situation is serious, and winter will come,” Robert Habeck, Germany’s economy minister, told reporters at a news conference in Berlin. He said the government had triggered the second stage of its three-step energy gas plan; the next stage would permit the government to begin gas rationing.
“Even if you don’t feel it yet: We are in a gas crisis,” he said. “Gas is a scarce commodity from now on. Prices are already high and we have to be prepared for further increases. This will affect industrial production and become a big burden for many consumers.”
Last week, Russia’s state energy giant, Gazprom, reduced the amount of natural gas it was delivering to Germany by 60 per cent, in what appeared to be the latest move to punish Europe for sanctions and military support for Ukraine.
Gazprom has pinned blame for the reductions on a turbine for a compressor station that was sent to Canada for repairs and has not been returned because of sanctions. But Mr Habeck called Gazprom’s cutbacks a deliberate economic attack by Russia’s president, Vladimir Putin.
-----
Why US growth, rather than inflation, will be transitory
Karen Maley Columnist
Jun 23, 2022 – 3.43pm
You have to give US Federal Reserve boss Jerome Powell credit. He really does try to break the bad news gently.
For almost all of 2021, Powell’s message was clear: the surge in prices was transitory, and inflation would soon return close to the 2 per cent target.
It wasn’t until the end of November 2021 that Powell decided to drop the “transitory”, telling US lawmakers it wasn’t the most accurate description for describing the country’s high inflation rate.
“It is probably a good time to retire that word,” he said.
But inflation is no longer the central preoccupation of financial markets: they’re now worried about a looming recession.
-----
DeSantis: The 43-year old putting Trump to the test
Matthew Cranston United States correspondent
Jun 24, 2022 – 12.23pm
Washington | Every US pollster and political pundit has a list of factors they think will determine Donald Trump’s decision to run for president in 2024, but there’s one that seems to come up again and again: Ron DeSantis.
The 43-year-old governor of Florida has things that Trump doesn’t: youth and a real head of hair, a Harvard law degree, military service in Iraq and Guantánamo Bay, and a cool, calm head in heated debates.
He’s had two other things going for him in the past few months that may have Trump a little bit worried: donations and popularity.
DeSantis has attracted at least 10 donors who spent $US24 million ($34.8 million) on Trump’s re-election bid in 2020, according to a detailed donor analysis by Politico. They have now given $US3.4 million to the Republican governor’s political committee, Friends of Ron DeSantis.
-----
In historic ruling, US Supreme Court overturns right to abortion
Matthew Cranston United States correspondent
Jun 25, 2022 – 3.17am
Washington| The US Supreme Court has overturned the 1973 Roe v. Wade decision on abortion rights that will lead to imminent restrictions across 26 states.
The court’s conservative majority, upheld a Republican-backed Mississippi law that bans abortion after 15 weeks in a 6- 3 vote. The court also voted 5-4 to overturn Roe v Wade.
The justices in the majority held that the Roe v. Wade decision - the 50-year-old legal precedent which stripped the US states of their powers to outlaw abortion - was wrongly decided because the US Constitution makes no specific mention of abortion rights.
The court also overruled the Planned Parenthood of Southeastern Pennsylvania v. Casey ruling that reaffirmed abortion rights and prohibited laws imposing an “undue burden” on abortion access.
“The Constitution does not confer a right to abortion; Roe and Casey are overruled; and the authority to regulate abortion is returned to the people and their elected representatives,“ the court’s ruling said on Friday (Saturday AEST).
Justice Samuel Alito said Roe “usurped the power to address a question of profound moral and social importance that the Constitution unequivocally leaves for the people.”
-----
https://www.afr.com/world/north-america/fed-s-bullard-says-us-recession-is-unlikely-20220625-p5awic
Fed’s Bullard says US recession is unlikely
Steve Matthews
Jun 25, 2022 – 4.13am
Federal Reserve Bank of St. Louis president James Bullard said fears of a US recession are overblown, as consumers are flush with cash built up during the COVID-19 pandemic and the expansion is in an early stage.
“I actually think we will be fine,” Bullard said in a speech in Zurich on Friday. “It is a little early to have this debate about recession probabilities in the US.”
Bullard repeated his call for further “front-loading” of rate hikes to contain inflation. The Federal Open Market Committee raised interest rates by 75 basis points last week and Fed chairman Jerome Powell indicated that either another move of that size, or of half a percentage point, will be on the table when policymakers meet again in late July.
While a growing number of economists have started to predict a US recession, Bullard said “this is in the early stages of the US recovery -- or US expansion, we are beyond recovery. It would be unusual to go back into recession at this stage”.
-----
Laos the latest economy to hit the skids
3:43PM June 24, 2022
Days-long queues for petrol, food and medicine shortages, a debt-laden government running out of foreign currency and citizens desperate to leave the country; no this is not Sri Lanka but Laos, the latest Asian nation reeling towards economic emergency.
Ratings agency Moody’s downgraded Laos’s credit rating to Caa3 – close to junk rating – last week as it warned the country of 7.5 million people was in danger of defaulting on its foreign loans with just $US1.3bn in foreign reserves, enough to cover two months of imports and roughly the equivalent of what it pays annually to service its debt.
“Default risk will remain high given very weak governance, a very high debt burden and insufficient coverage of external debt maturities by foreign exchange reserves,” Moody’s said in a gloomy assessment of the country’s prospects.
Laos, like Sri Lanka, has been battered by spiralling inflation and a weakened currency as a result of the back-to-back global crises of the Covid pandemic and Russia’s invasion of Ukraine in February. Inflation rates are among the highest in Southeast Asia – 12.8 per cent compared to less than 2 per cent in February last year – while the kip has lost more than 30 per cent of its value.
-----
The EU’s crumbling unity gives Putin an opportunity to win
Fraser Nelson
Jun 25, 2022 – 12.57pm
In the first days after Vladimir Putin’s invasion, Europe’s response was one of astonishing force and unity. Without prompts or any global leadership, crowds protested across the continent and governments offered to send arms and take in Ukrainian refugees.
It seemed as if Putin had made a catastrophic miscalculation, uniting the free world against him and inviting the most sweeping sanctions regime in living memory. But this picture is now changing - and fast.
The European Union summit this week looks like a classic of the genre: full of warm words for Volodymyr Zelensky and an offer of “accession candidate” status for his country. But behind the scenes, there’s huge discord.
To the fury of the newer EU members, it seems a clause will be inserted to the effect that Ukraine would not join before other countries were ready to assimilate its people.
The accession process takes a decade or more. As a Kremlin official recently pointed out, Ukraine might not exist within two years.
-----
I look forward to comments on all this!
-----
David.
