August 04, 2022 Edition
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The war seems to grind on sadly and Pres. Biden is having a second round with COVID as unprecedented weather happens all over the US. It all feels rather like ‘the end of days’!
In the UK we see an increasing chance of a third female PM being elected as the country seems to be struggling. We do need to remember however the UK remains a significant power with nuclear weapons and home-grown nuclear submarines!
In OZ we have had last week working out how to progress the First Nations ‘Voice’ as we wrap up the 1st session of Parliament for the new Government. Comments welcome on how you think it is all going!
The world seems also to be having bad economic news pretty much everywhere!
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Major Issues.
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https://thenewdaily.com.au/finance/2022/07/25/small-government-free-market-kohler/
6:00am, Jul 25, 2022 Updated: 8:59pm, Jul 24
Alan Kohler: Small government and free markets – ideology or greed?
At a small event at the Productivity Commission last week, visiting Nobel Prize-winning American economist Joseph Stiglitz was talking about revolution.
He said the free market and small government ideology that has had America and much of the world in its grip for 40 years is over.
“This is a revolution. We are at a juncture in history where the tide has turned. Forty years of ideology of markets and experiments in many countries has failed. The last straw was COVID-19.”
By which he meant, among other things, that America’s market-based economy was unable to supply its citizens with masks and they had to get them from China. And the mRNA vaccine breakthrough was the result of government money, not private enterprise.
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Curbing use of market power can help fight against inflation
By Rod Sims
July 25, 2022 — 5.00am
Increasing interest rates often seems to be our only weapon against rising inflation. But understanding the role of market power and curbing its use can also play a role, as can taking some sector-specific action.
Economists often assess inflation assuming that markets are competitive and that all sectors of the economy are behaving in the same way. These assumptions can lead to damaging policy choices, particularly in relation to interest rate rises in response to inflation.
Markets in Australia are generally far from strongly competitive and, instead, are often characterised by considerable concentration and market power. Also, today’s inflation owes much to shocks in key sectors, such as gas and electricity. Both these points raise issues for how we should now best respond to Australia’s rising inflation.
Many sectors of our economy are dominated by just a few companies; think beer, groceries, energy and telecommunications retailing, resources, elements of the digital economy, banking and many others. This means the dominant firms have some degree of market power; that is, they can set prices at higher levels knowing competitors are unlikely to undercut them and take market share from them.
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Australia needs insurance against future inflation
Reporter
July 24, 2022 — 10.00pm
The humble iceberg lettuce has had a lot of attention this year. Thanks to soaring prices, icebergs became the poster child for rising inflation in this country.
But inflation is more than just pricier salad ingredients. It affects just about everything we consume, and the causes of inflation are a complicated mix of short and long-term, local and global factors.
While the government and the Reserve Bank can do little when it comes to current inflation caused by Putin’s invasion of Ukraine, or the immediate effect on fresh vegetable prices from flooding events in northern NSW, there are things our institutions can do to better protect us from rising inflation in the future.
So what is driving inflation, and what can be done about it?
The Russian war in Ukraine and China’s strict COVID lockdowns have caused havoc for global supplies of essentials, including computer chips, wheat, oil and gas. We’ve also had flooding, which has affected the supply and distribution of fresh food, including that iceberg lettuce.
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In from the wilderness, Labor faces big economic beasts
Anthony Albanese won’t have the cushion of a benign economic climate, let alone a budget surplus.
Jennifer Hewett Columnist
Jul 24, 2022 – 6.33pm
After nine long years, Labor returns to parliament this week to sit on the right side of the Speaker and of political power.
But Anthony Albanese won’t have the cushion of a benign economic climate, let alone a budget surplus. Spiking inflation, interest rates and energy prices are already breaking through the comfort of the leather seating. Despite dreading the dark days of opposition, some Liberals even try to console themselves this was a good election to lose.
Pick your crisis – sorry, “challenge”. These are coming on a much broader range of fronts than the new government’s “special envoy for disaster recovery” can tackle.
But it’s the size and nature of the economic tests that are most constraining Labor’s choices, as Jim Chalmers keeps emphasising ahead of the October budget. Real wage increases? Not any time soon, after all.
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https://www.afr.com/policy/economy/gloomy-global-backdrop-for-chalmers-statement-20220725-p5b4fg
Gloomy global backdrop for Chalmers’ statement
The rapidly changing outlook means the new government must confront the growth agenda that both sides of politics have sought to ignore.
Jul 27, 2022 – 5.00am
The International Monetary Fund’s gloomy downgrade of its forecasts for the global economy rams home how quickly war, pandemic and inflation have upended things in the four months.
The risks that are already swirling in Ukraine, in COVID-hit China, and in the struggles of central banks to master inflation could quite plausibly mean a US recession by 2023 and among the world’s worst economic growth performances since 1970, says the IMF.
It means Treasurer Jim Chalmers will give his first big formal economic statement for the new government tomorrow, a day after today’s likely confirmation of an inflation rate headed to 7 per cent or more, amid the most sombre global backdrop most Australians will be able to remember.
The rapidly changing outlook means Dr Chalmers cannot dwell on the tough hand he was dealt at the May federal election. Alongside the deteriorating indicators, the government also has inherited an unprecedented jobs boom and the lowest unemployment rate for nearly half a century. It’s a combination like no other in modern times.
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Why you need to prepare for the day nobody wants to talk about
Most people agree an end-of-life plan would help their families manage financial and legal affairs if they died unexpectedly. Here’s how to get started.
Bina Brown Contributor
Jul 27, 2022 – 5.00am
Dying without the support of friends or family shouldn’t happen – unless it’s by choice. But older Australians are dying in aged care and hospitals under the comfort of nurses and care workers rather than loved ones because they never got around to organising their last days or hours differently.
In ward 11B of a major hospital, a 96-year-old former federal court judge, with no living family, is spending his final hours alone as the ravages of age, cancer and more recently COVID-19 determine his fate. Those who know him would have happily reminisced with him about his illustrious career and earlier life, perhaps played him some music they knew he liked and generally been a presence to ensure his comfort. He would have liked to know his biography that he was rushing to complete would be published.
But hospital rules won’t allow anyone who is not the enduring power of attorney, enduring or other guardian or named on an advanced care plan to visit at this time, even if to enhance what may well be his last days. Despite his intention to have at least one valid end-of-life planning document in place before his health declined further, there wasn’t one.
Residential aged care has become far less brutal, possibly because it is generally a requirement on entry that every resident has end-of-life documents on file. It’s also a place you expect to die and to die well; facilities should be well-used to it.
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Rates have to climb but recession risks are growing: IMF
By Shane Wright
July 26, 2022 — 11.00pm
Key points
· In its latest outlook, the IMF forecasts global economic growth to slow sharply.
· While the global economy is slowing, it believes inflation is getting worse.
· IMF economic counsellor Pierre-Olivier Gourinchas says central banks should make the control of inflation their top priority.
· But he also warns there’s a risk central banks could create a global recession next year.
Central banks will have to keep lifting interest rates and governments will need to cut spending if inflation is to be brought to heel, the International Monetary Fund (IMF) says while conceding the risks of a global recession next year are growing.
Ahead of Wednesday’s June-quarter consumer price index release, which is expected to show inflation in Australia climbing at a 32-year high of 6.2 per cent, the fund warned the fight against inflation would probably worsen the “hardship” facing many people.
Inflation pressures around the globe have increased this year, in part due to the war in Ukraine, increases in government spending, strong consumer demand and supply chain issues tied to COVID-related problems in countries such as China.
In its latest outlook, the fund forecasts global economic growth to slow sharply to 3.2 per cent in 2022 and 2.9 per cent in 2023, from 6.1 per cent last year. In April, the IMF was expecting growth of 3.6 per cent this year and next.
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Inflation is not a big problem, so don’t hit it with a sledgehammer
Economics Editor
July 27, 2022 — 5.00am
It’s an old expression, but a good one: out of the frying pan, into the fire. Less than two years ago we were told that, after having escaped recession for almost 30 years, the pandemic and our efforts to stop the virus spreading had plunged us into the deepest recession in almost a century.
Only a few months later we were told that, thanks to the massive sums that governments had spent protecting the incomes of workers and businesses during the lockdowns, the economy had “bounced back” from the recession and was growing more strongly than it had been before the pandemic arrived.
No sooner had the rate of unemployment leapt to 7.5 per cent than it began falling rapidly and is now, we learnt a fortnight ago, down to 3.5 per cent – its lowest since 1974.
You little beauty. At last, the economy’s going fine and we can get on with our lives without a care.
But, no. Suddenly, out of nowhere, a new and terrible problem has emerged. The rate of inflation is soaring. It’s sure to have done more soaring when we see the latest figures on Wednesday morning.
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Tidal wave of social disruption lies ahead, warns CSIRO
12:00AM July 27, 2022
Resource scarcity, drug-resistant superbugs, disrupted international trade, an ageing population and increasingly unstable climate feature in the “megatrends” identified by the CSIRO to dictate how Australians will live and work over the next two, uncertain decades.
In a 10-yearly update released on Wednesday, the research agency runs the ruler over the sobering threats to the health, security and prosperity of a nation still in the throes of pandemic – as well as the potential for science and technology to meet the emerging challenges.
“Australia is at a pivotal point,” said CSIRO chief executive Larry Marshall. “There is a tidal wave of disruption on the way and it’s critical we take steps now to get ahead of it.”
The outlook to 2042 is deeply mixed. The devastation caused by Covid-19 underlined the heightened risk of infectious diseases in line with global population growth, increasing air travel, urbanisation, livestock handling and wildlife harvesting, the Our Future World report warns.
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11.37AM
CPI rises 6.1c in Q2, below forecasts, $A slips
Cecile Lefort
Australia’s consumer price index has risen 6.1 per cent in the June quarter, compared with the previous year, below forecasts of 6.2 per cent and following a 5.1 per cent increase in the first quarter.
Consumer prices rose by 1.8 per cent on a quarterly basis against forecasts of a rise of 1.9 per cent, following a gain of 2.1 per cent in the March quarter.
Trimmed mean CPI, the Reserve Bank of Australia’s preferred inflation measure, rose 4.9 per cent compared with a year prior, again exceeding forecasts of a 4.7 per cent increase. On a quarterly basis, the trimmed mean accelerated 1.5 per cent against forecasts of 1.4 per cent.
The Australian dollar fell to US69.37¢ from US69.52¢ and government bond yields eased. The three-year yield slipped to 3.07 per cent from 3.13 per cent, and the 10-year retreated to 3.34 per cent from 3.38 per cent.
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https://thenewdaily.com.au/finance/finance-news/2022/07/28/reserve-bank-review-alan-kohler/
6:00am, Jul 28, 2022 Updated: 8:27pm, Jul 27
Alan Kohler: The Reserve Bank is a renovator’s delight
The pointy end of the work of the panel reviewing the Reserve Bank will be to decide whether Governor Philip Lowe committed a sackable offence by saying, over and over, that he expects the cash rate to stay at 0.1 per cent until 2024.
It won’t come to a pink slip and cardboard box because Dr Lowe won’t seek an extension when his term expires in September 2023, like his two predecessors did, but there should be something that feels like a sacking: An external appointment to replace him, and shake the place up.
The 2024 “promise” is complicated: Forward guidance has become an important monetary policy tool, and the governor always made it conditional – that the RBA expected rates wouldn’t change until then – but being so specific about the year was unnecessary, and beyond the requirement of “forward guidance”.
What’s more, the panel may come to see that as just one of many mistakes – monetary policy over the past decade has been a shambles.
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Australia’s one major failure exposed in damning new report
Australia’s one major failure has been revealed in a shocking new report that shines a disappointing light on the whole country.
July 28, 2022 - 2:13AM
NCA NewsWire
Efforts to improve the lives of Indigenous Australians are falling embarrassingly short, a shocking new report has revealed.
The Productivity Commission has released a damning assessment of the national “Closing the Gap” targets.
Five key areas are falling woefully short, just two years since revised targets were set.
The areas most in need of improvement are childhood development, out-of-home care, adult imprisonment, deaths by suicide and maritime rights and interests.
“There are some disappointing results in the latest figures – it’s clear that more work needs to be done,” Indigenous Australians Minister Linda Burney said.
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Middle income retirees on the ropes as inflation soars
July 28, 2022
Middle income retirees are set to become the meat in the sandwich between the very wealthy and those on inflation-protected government pensions.
Retirees with little or no pension entitlements – which would number around 1.5 million people – must find a way to beat 6 per cent inflation or face an effective income cut.
Full-time pensioners will face a struggle with higher prices, but the government pension is at least adjusted to include inflation increases every six months.
What’s more, the Labor government is now under pressure to accelerate the indexing arrangements. National Seniors CEO Ian Henschke called this week for “pension indexing” to be applied every three months.
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Inflation to peak at 7.75pc, jobless rate to edge higher
Ronald Mizen Economics correspondent
Updated Jul 28, 2022 – 12.33pm, first published at 12.30pm
Australia’s 48-year low unemployment rate will edge higher to 4 per cent as headline inflation at close to 8 per cent sparks higher interest rates and slower economic growth, Treasurer Jim Chalmers revealed on Thursday.
Dr Chalmers warned of a “confronting” update on the country’s economic and fiscal position, but his statement to the parliament painted a picture of a nation well-placed to transform challenges into opportunities.
And despite previously downplaying the prospect of improvements to the budget because of record high commodity prices, the Treasurer now expects “a dramatically better-than-expected outcome” in the 2021-22 books.
But the optimism came with a warning about structural challenges in the nation’s finances, which are expected to add $30 billion to payments in the next four years, and the perils of unchecked inflation.
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https://www.afr.com/politics/apra-delivers-house-price-warning-to-albanese-20220727-p5b54x
APRA delivers house price warning to Albanese
Michael Read Reporter
Jul 27, 2022 – 6.03pm
Looming rate rises could plunge some over-leveraged households into financial distress and cause property prices to fall, the banking regulator told the Albanese government in a frank assessment of the nation’s property market.
In the Australian Prudential Regulation Authority’s incoming government brief, written in May and released on Wednesday under freedom of information laws, the agency responsible for monitoring the health of the banking system warned of a rapid shift in the economic outlook.
“Inflationary pressures and increases in interest rates will increase the cost of finance for business and housing,” the briefing said.
“More broadly, frequent natural disasters, increasing geopolitical tensions and cyber threats, and the lingering impact of COVID-19 are creating volatility in financial markets, increasing cost pressures for all industries and heightening risks in the financial system.”
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Chalmers sets out the ‘precarious and perilous’ economic path
The treasurer is setting the scene for economic pain to come – blaming the legacy of the Coalition government and promising that better times are ahead. But not just yet.
Jennifer Hewett Columnist
Jul 28, 2022 – 5.15pm
It’s telling that Jim Chalmers’ Big Day Out as treasurer was not his first budget but a major economic statement. His constant spruiking of the need to be “upfront with the Australian people” is political code for trying to ensure their pain is pinned on the legacy of the former government rather than the actions of the present one.
“They know their new government didn’t make this mess, but we take responsibility for cleaning it up,” he told parliament.
This is a standard political tactic for any new government, of course. But the economic stakes get higher given the extraordinary level of debt – for governments and households – and the huge new risks in a world that has spent the past decade worrying more about deflation than inflation and must abruptly re-adjust.
According to a sober but confident sounding Chalmers, this convergence of challenges is of a kind that comes along once in a generation but also represents a once-in-a-generation opportunity.
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The Liberals’ search for a future as a modern party
Monday’s pre-parliamentary powwow laid bare the threats that, while not quite existential, are arguably as bleak as any that the Liberal Party has grappled with since its inception.
Phillip Coorey Political editor
Jul 28, 2022 – 8.00pm
John Howard knows better than most how difficult the first term of a new government can be.
After his landslide victory against the Keating Labor government in 1996, Howard’s Coalition, wracked by ministerial sackings and initial policy drift, came close to becoming a oncer, but fell over the line in 1998 despite losing the popular vote. It took another three elections before Labor won back power.
Howard’s experience was far from unique. Every first term government since that of Gough Whitlam has gone backwards at the next election.
The Rudd-Gillard shambles was reduced to a minority government in its second term while the Abbott-Turnbull circus was left with a threadbare majority after the 2016 election.
When the remnants of the federal Liberal Party gathered in Parliament House on Monday for a day-long session of discussions and pep talks ahead of the start of the new parliament, Howard pointed out the travails that all new governments face.
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Why turning away from China is not a serious option
For many in the national security community in Canberra, the American alliance has become a way of life. But this is possibly the country’s greatest strategic gamble.
James Curran Historian
Jul 29, 2022 – 5.00am
When in early 1976 Australia’s first ambassador to China, Stephen FitzGerald, wrote a series of dispatches from Peking back to the new Fraser government in Canberra, he faced up to harsh realities and difficult questions.
FitzGerald wrote three opinion pieces covering the political, economic and cultural dimensions of the relationship. He would later write that they reflected his “distillation of where we’ve got to with China over the three years” since his arrival, “and what I think we’ve got to do over the next twenty to twenty five″.
In his analysis of China’s economic trajectory, FitzGerald foresaw that “by the year 2000 China would have a dominant role in the expansion of the Australian economy”, and he predicted China would maintain an annual growth rate in the vicinity of 10 per cent over the next quarter-century.
But in both the title and content of his opening cable, he threw down the gauntlet. Was the aim of a substantive political relationship with China just too hard?
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IMF downgrades growth in Australia and across Asia-Pacific
By Shane Wright
July 29, 2022 — 9.01am
The International Monetary Fund has downgraded its forecasts for the Australian economy for this year and next, warning nations across the Asia-Pacific region will have to lift interest rates to deal with growing inflation pressures.
In an update to its world economic outlook, the fund on Friday said it expects the Australian economy to expand by 3.8 per cent in 2022 before growth slows to 2.2 per cent next year.
It’s a substantial step down from its April outlook when the IMF believed Australia’s economy would grow by 4.2 per cent this year and by another 2.5 per cent in 2023.
Director of the IMF’s Asia and Pacific department, Krishna Srinivasan, said the events playing out in Europe and elsewhere would weigh on the region’s economies including Australia.
“The global economic outlook has darkened, and growth across Asia and the Pacific is poised to slow further amid the continuing impact of Russia’s invasion of Ukraine and other shocks,” he said.
“Several economies will need to raise rates rapidly as inflation is broadening to core prices, which exclude the more volatile food and energy categories, to prevent an upward spiral of inflation expectations and wages that would later require larger hikes to address if left unchecked.”
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Labor starts to cast off the shibboleths of the last decade
The new government started the week casting off some the shibboleths and modi operandi that have dominated our politics for at least the past decade relating to climate change and Indigenous recognition.
Laura Tingle Columnist
Jul 29, 2022 – 3.57pm
There’s nothing quite like the reality of walking into the House of Representatives – and heading to the other side of the chamber to the one you are used to – to bring home that there is a new government, and a whole new agenda at play in Canberra.
You can almost see the set of the shoulders of defeated ministers trying to look … well, casual? … as they head for the opposition benches, and the barely disguised elation of the victors heading – at last – to the other side of the chamber.
There are the formalities of being sworn in and the excitement of first speeches given.
Most significantly, there is the important task for the government of setting expectations. Sure, everyone has been through the white heat of an election campaign and heard ad nauseam what the government is promising to do
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‘I believe the country is ready for this reform’: Albanese
Tom McIlroy and Samantha Hutchinson
Jul 29, 2022 – 10.30pm
Anthony Albanese has vowed to finalise a referendum question on Indigenous recognition in the Constitution as soon as possible, to seize momentum and reduce the risk of a divisive “no” campaign.
Addressing the Garma Festival in north-east Arnhem Land on Saturday, the prime minister will call for broad political support for the Indigenous Voice to parliament, urging holdout conservatives to drop their opposition to “a simple but momentous change”.
Proposing a simple question – “Do you support an alteration to the Constitution that establishes an Aboriginal and Torres Strait Islander Voice?” – Mr Albanese said further consultation and dialogue was needed ahead of a vote as soon as next year.
Rejecting claims the Uluru Statement from the Heart represents a third chamber of parliament or a veto over government, he has proposed three sentences be added to the Constitution.
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Seven waves of disruption are bearing down on Australia
Each wave has the potential to smother us, or power us into the future. The question is whether we are brave enough to catch them.
Larry Marshall
Jul 27, 2022 – 5.00am
Today CSIRO launches a once-in-a-decade report from the national science agency about the seven global megatrends that will change the way we all live over the next two decades.
The megatrends are global disruptions driven by powerful geopolitical, economic, social, technological and environmental forces, and the impact they will have on Australia’s people, communities and industries will be significant.
Megatrends give a name to the uncomfortable truths and massive opportunities that will shape our future, but they also give us the power to invent a version of that future where we prosper. The key is seeing them clearly enough to inform the actions we take, and responding together to change our trajectory.
As a nation, we haven’t always done this well. We’ve spent 50 years understanding climate change, but we haven’t invested in the large-scale, transformative change we now so desperately need to limit its impact. This failure to act is an uncomfortable and costly truth, but uncomfortable truths also show us where the most powerful innovation can be found – if we act.
The megatrends forecast a future world where a changing climate leads to multiple concurrent climate hazards that overlap and compound. Where the global shift towards net zero becomes a massive opportunity for Australia to transform our economy.
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A broken Voice is no option: Australia’s moment to unite or fail
Political and international editor
July 30, 2022 — 5.00am
It should be a unifying act of nation-building. It risks being a divisive failure. With minimal work to prepare public opinion, Anthony Albanese is launching his campaign on Saturday to install an Indigenous Voice to parliament.
The essential concept is straightforward. In 2017, the Uluru Statement from the Heart presented the request from 250 Indigenous leaders: “In 1967 we were counted,” referring to the referendum that included Aboriginal people in the census for the first time. “In 2017, we seek to be heard.”
The prime minister, in his speech on Saturday at the Garma Festival in Arnhem Land, describes the Uluru Statement as “a hand outstretched, a moving show of faith in Australian decency and Australian fairness from people who have been given every reason to forsake their hope in both”.
Who would the Voice speak to? And about what? In Albanese’s proposal, the Voice “may make representations to parliament and the executive government on matters relating to Aboriginal and Torres Strait Islander Peoples”. This is a minimalist position, ceding no actual power, designed to attract maximum support.
Consulting Indigenous Australians on the decisions that affect them “is simple courtesy, it is common decency,” he posits. “I believe the country is ready for this reform. I believe there is room in Australian hearts, for the Statement from the Heart.”
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Exciting, but there’s a lot to fix’: Labor gets to work
The new government is taking the reins, placing climate and the economy firmly on the agenda in the first week of parliament. Meanwhile, the Coalition is adjusting to life out of power.
Tom McIlroy P olitical reporter
Jul 29, 2022 – 12.55pm
Aaron Violi pulls up a chair in his sparsely furnished Parliament House office. The sun is setting at the end of his first sitting week and the federal politician and Victorian Liberal is in a reflective mood.
Having withstood the electoral swing against Scott Morrison’s Coalition to win the seat of Casey in outer suburban Melbourne, the father of two finds himself in the middle of Canberra’s post-election flux. Labor has taken hold of the reins of government and the opposition is quickly adjusting to life out of power.
“I had a moment of sitting in the chamber on the first day on Tuesday, and looking up to see the school kids up above,” Violi tells AFR Weekend.
“I couldn’t help but reflect on when I was up there in grade six,” he says. “I definitely never predicted that I’d be on the other side of the glass some day.”
He watched the pomp and ceremony as the 47th federal parliament was brought into session this week, delivering his first speech the night before Anthony Albanese and Peter Dutton faced off in their first question time battle.
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COVID-19 Information.
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Hospitalisations climb but no more mask mandates, premiers say
Patrick Durkin BOSS Deputy editor
Jul 24, 2022 – 5.18pm
The premiers of the country’s two most populous states are holding the line on a “common sense” response to the current COVID-19 wave that does not involve mask mandates, even though hospital admissions are due to surge past the January peak of 5390.
Hospitalisations due to COVID-19 reached 5362 on Sunday, with over 500 deaths nationally over the past week alone.
Victorian Premier Daniel Andrews, who previously imposed the world’s longest pandemic lockdown, again resisted calls for mandatory mask wearing and ordering people to work and learn from home, saying “common sense” was the most important defence.
“The most important thing people can do is use that common sense. I’m not telling people what to do, I’m just asking,” Mr Andrews said on Sunday.
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As Omicron strains spread, is this the forever plague?
By Liam Mannix
July 24, 2022 — 8.27am
Almost a year ago today, in the middle of a freezing Melbourne winter, a young woman fell sick. The bug soon spread to her housemates. The three, who had already had COVID-19 a year before, probably thought they were sharing a nasty cold.
The young woman diligently lined up for a PCR test – this was in July 2021, when we still did that – and, to her surprise, discovered she had COVID. Again. Some 368 days after her first diagnosis.
She and her housemates were Australia’s first documented cases of reinfection. Natural antibody levels generated in response to their first infections in 2020 had waned over 12 months to such a point they were vulnerable to the newly emerged Delta variant. It was such a novel thing at the time that their case made it into the scientific literature.
A year later, what was once novel is about to become de rigueur. The arrival of Omicron and its subvariants has seen vaccine effectiveness wane from the giddy mid-90s percentages of the first doses to around 40 per cent by some estimates. With that sharp drop will come increasing numbers of reinfections.
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Climate Change.
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California fire rages as US bakes in record-setting heat wave
AFP
6:59AM July 25, 2022
A Californian bushfire ripped through thousands of hectares on Saturday after being sparked a day earlier, as millions of Americans sweltered through scorching heat with already record-setting temperatures due to climb.
The heatwave encompassing multiple regions has increased the risk of blazes, such as the major Oak Fire, which broke out on Friday in California near Yosemite National Park, where giant sequoias have been threatened by flames in recent days.
The fire – described as “explosive” by officials – grew from about 240ha to about 4800ha within 24 hours. Concentrated in Mariposa County, it has already destroyed 10 properties and damaged five others, with thousands more threatened. More than 6000 people had been evacuated, said Hector Vasquez of the California Department of Forestry and Fire Protection, as the fire remained uncontained on Saturday night (Sunday AEST).
The department said the fire’s activity was “extreme”.
Californian Governor Gavin Newsom declared a state of emergency in Mariposa County on Saturday, citing “conditions of extreme peril to the safety of persons and property”.
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Energy prices smash records as coal generation slumps
12:00AM July 29, 2022
The scale of Australia’s energy crisis has been laid bare with wholesale power and gas prices surging to new highs after coal generation plummeted to its lowest level of supply on record.
Wholesale electricity prices more than tripled in the second quarter of 2022 to average $264 per megawatt hour compared with $87MWh in the first three months of this year, the Australian Energy Market Operator said, with Queensland and NSW posting the highest prices.
Gas prices across the east coast markets also soared to more than $28 per gigajoule on average from less than $10/GJ in the first quarter, and peaked at more than $41/GJ on June 30, exceeding international LNG netback prices in both May and June as Russia’s restrictions on supply roiled global markets.
The collapse of black coal-fired generation contributed to the price hit with a string of plant breakdowns and supply shortages resulting in the fossil fuel recording its lowest second quarter output since the national electricity market began in 1998. Coal, which normally accounts for 60 per cent of supply, fell to 43 per cent in the three months to June 30.
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Royal Commissions And The Like.
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No entries in this category.
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National Budget Issues.
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Consumer spending starts to dry up as interest rates rise
By Rachel Clun
July 25, 2022 — 4.56am
Fewer movie tickets or nights out are in the budgets of Australian households as higher interest rates start taking bigger chunks out of their pay cheques and inflation adds to the cost of essential goods including groceries and petrol.
Data from some of Australia’s largest financial institutions shows spending on discretionary items including household products, entertainment and dining out has begun to fall as both inflation and interest rates continue to rise.
On Wednesday, Australian Bureau of Statistics data will show just how high inflation has become, and Treasurer Jim Chalmers will on Thursday address the ongoing cost of living pressures being faced by households around the country when he delivers his economic statement to parliament.
Commonwealth Bank senior economist Belinda Allen said people had spent up big after the pandemic’s Delta lockdowns of 2021 and through the Omicron outbreak earlier this year, but that looked to have peaked around mid-May, just after the Reserve Bank started lifting interest rates for the first time in more than a decade.
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Wayne Byres to step down as APRA chairman
Ayesha de Kretser Senior Reporter
Jul 26, 2022 – 10.04am
Australian Prudential Regulatory Authority chairman Wayne Byres has advised Treasurer Jim Chalmers that he will step down, with a search now underway for his replacement.
Mr Byres will step down on October 30 after a more than eight-year stint, during which he has led the banking, insurance and superannuation systems through the global pandemic, as well as major international changes.
Dr Chalmers thanked Mr Byres for his “dedicated service” to Australia and “significant contribution to the Australian financial system and the global framework for prudential regulation.”
“His leadership and expertise has positioned the Commonwealth to respond well to some of the greatest challenges in Australia’s history - most recently in ensuring the stability of the financial system during the COVID-19 pandemic,” Dr Chalmers said.
APRA deputy chairman John Lonsdale, a former Treasury executive is well-known to Dr Chalmers and is considered the frontrunner to replace Mr Byres.
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Headline inflation jumps to 6.1pc
Ronald Mizen Economics correspondent
Jul 27, 2022 – 11.43am
Australia’s annual inflation rate jumped to 6.1 per cent, its highest level in more than two decades, in a surge fuelled by record petrol prices and increased home-building costs.
Wednesday’s result came in slightly below the market consensus of 6.3 per cent through the year. The rise in the consumer price index in the three months ended June 30 was the highest since June 2001 and the introduction of the GST, according to the Australian Bureau of Statistics.
Underlying inflation, the Reserve Bank of Australia’s preferred measure, rose 1.5 per cent in April-June, and gained 4.9 per cent over the year, the highest rate since June 1991.
Non-discretionary inflation, which includes expenses such as food, petrol, housing and health costs, increased a significant 7.8 per cent in the year.
New dwelling prices rose 20.3 per cent as government support was withdrawn, while petrol prices soared 32 per cent.
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Economic ‘bad cop’ time coming to an end for Chalmers
By Shane Wright
July 28, 2022 — 6.41pm
The softening-up complete, the onus is now on Treasurer Jim Chalmers to start delivering.
Chalmers’ economic update, outlining just how much has changed since his predecessor, Josh Frydenberg, delivered a rose-hued budget back in March, contained some harsh truths.
Frydenberg’s speech could be from another time. The official cash rate was 0.1 per cent, wages were expected to outpace inflation and a decent-looking iceberg lettuce didn’t require a small personal loan and a battle in the local Coles shopping aisles.
Chalmers’ update contained sizeable reductions in expected GDP, a ramp-up in inflation to a 32-year high and the revelation that wages won’t be doing better than inflation until at least 2024.
Extrapolating the wage forecasts, most Australians won’t see their real pay back to its pre-COVID level until the second half of this decade.
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Perfect storm: This could be the recession we have to have
Senior business columnist
July 28, 2022 — 11.59am
Are central banks fighting the last war and could and would they do anything different even if they are?
The US Federal Reserve Board raised US interest rates by 75 basis points on Wednesday, its fourth rate rise this year in the most aggressive cycle of a tightening of US monetary policy in four decades.
Next Tuesday the Reserve Bank is also expected to raise its cash rate by another 50 basis points, its fourth increase this year.
Other central banks, from Canada and New Zealand to the European Central Bank, are following similar paths in the face of the worst outbreaks of inflation since the 1970s. The US inflation rate is 9.1 per cent, the eurozone’s 8.6 per cent and Australia’s 6.1 per cent (and on its way towards 7 per cent).
That’s despite clear slowing of global and domestic economic growth in all the major economies.
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Message from offshore: an economic storm is coming
July 29, 2022
As US growth slides, Australia’s most internationally focused businesses are more advanced in preparations for the storm that is coming in a world where interest rates are still rising and inflation is some way from peaking.
US GDP contracted 0.9 per cent overnight, adding fuel to fears of a recession that could spread around the world.
And the outward-looking players from Macquarie Group and Rio Tinto are leading the pack ahead of more domestic-focused companies in conditioning investors for lower returns and potentially some modest hits. As Treasurer Jim Chalmers also on Thursday painted a picture of the world economy treading a “precarious and perilous” path, these businesses are rethinking their outlook.
Macquarie’s Shemara Wikramanayake noted the investment bank had a robust June quarter, but conditions started softening in the final weeks. This slowing momentum has continued into July and coincided with super-sized central bank rate hikes and a slowing northern hemisphere.
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Tax landowners to repay COVID-19 debt, ANU study says
John Kehoe Economics editor
Jul 29, 2022 – 6.00pm
A federal land tax of 0.1 per cent imposed annually on mainly wealthier and older property owners would be the best way to repay about $500 billion of government debt accumulated during the COVID-19 pandemic, a new study says.
Other viable options are to reduce concessions for capital gains tax (CGT), introduce an inheritance tax, or a tighter means test for the age pension by assessing the value of a retiree’s principal place of residence, says an Australian National University research paper released to The Australian Financial Review.
The ANU paper sets an objective of over 33 years reducing federal government debt back to sustainable levels of about 30 per cent of GDP, after it blew out to more than 40 per cent, or $1 trillion, in the pandemic.
The least economically damaging way to raise more revenue to reduce debt would be via a flat federal tax on the unimproved value of land, said Robert Breunig, chairman of tax policy at the ANU’s Tax and Transfer Policy Institute.
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Health Issues.
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In Indonesia, a foot and mouth battle of epic proportions
Emma Connors South-East Asia correspondent
Jul 24, 2022 – 3.22pm
Singapore/Jakarta | Inadequate compensation, vaccine hesitancy and the difficulty involved in reaching millions of farmers are hampering Indonesia’s efforts to stop the spread of foot and mouth disease (FMD).
Indonesia’s central government is rushing to slaughter animals that have the disease or have been in contact with it, and to vaccinate others.
It is offering up to 10 million Indonesian rupiah ($963) compensation for cows that have to be killed and 1.5 million for goats, sheep and pigs. But this is less than half the market value and represents what will be a loss of livelihood and savings for many farmers.
In Bogor, West Java, dairy farmer and breeder Ferry Kusmawan is a worried man. Foot and mouth disease has cut his herd by one third and he is unsure about the value of vaccination.
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https://www.fnarena.com/index.php/2022/07/27/health-is-wealth/
Health Is Wealth
Australia | 2:13 PM 27 July, 2022
In times of great uncertainty the Australian healthcare sector can offer investors plenty of choice, with varying degrees of risk and opportunities.
-Australia’s healthcare sector has seen record government investment
-Global pandemic has accelerated changes for healthcare services -ASX-listed healthcare sector is dominated by international operators.
-Next generation of success stories are announcing themselves
By Nikhil Gangaram
With the nasty words of recession, volatility and inflation dominating global headlines, it would be all too easy for investors to miss the fact that a healthcare revolution is bubbling along right beneath our eyes.
In addition to being the nation’s largest employer, the Australian healthcare sector has served as a reliable crux for money managers for an extended period of time.
Companies in the sector benefit from a unique combination of attributes well suited to the current environment.
Healthcare companies in general are not overly impacted by slowing economic activity or higher interest rates.
Additionally, post the general de-rating of higher-multiple Quality companies since the start of 2022, healthcare stocks are now trading at lower valuations, while boasting strong balance sheets accompanied with long-term pipelines of well-funded research and development.
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Chief medical officer Paul Kelly’s big Monkeypox declaration
NCA NewsWire
July 28, 2022
Australia’s top doctor has declared that Monkeypox is now a communicable disease incident of national significance.
Chief medical officer Paul Kelly made the major announcement on Thursday morning.
In Australia, there have been 44 cases – the majority of which have been within returned international travellers.
Professor Kelly’s announcement means the federal government can enact an emergency response to the outbreak.
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Strengthening Medicare Taskforce appointed
The Australian Government is making it easier for Australians to see a doctor by strengthening Medicare, the critical foundation of our health system.
Date published: 28 July 2022
Media type: Media release
Audience: General public
The Albanese Government is making it easier for Australians to see a doctor by strengthening Medicare, the critical foundation of our health system.
After a decade of Liberal cuts and attacks on Medicare, primary health care is in crisis in Australia.
The Albanese Government is delivering on a key election commitment, the Strengthening Medicare Taskforce.
The Strengthening Medicare Taskforce is bringing together Australia’s health policy leaders. The diverse membership has been drawn from across the health professions, and includes consumer, rural and regional and Aboriginal and Torres Strait Islander representatives.
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Wither the AMA: Is the powerful doctors’ union losing its clout?
By Dana Daniel and Michael Koziol
July 29, 2022 — 8.36am
As president of the Australian Medical Association for much of the pandemic, Dr Omar Khorshid enjoyed a higher profile than many of his predecessors. A strong advocate for greater healthcare funding and strict measures to constrain COVID-19, he was a prominent and arguably powerful voice shaping Australia’s response to the virus.
As Khorshid vacates the chair this weekend after two years in the top job, he does so against a long-term backdrop of declining membership, infighting and consternation over the AMA’s purpose, policies and relevance after the pandemic.
28,000, representing less than 30 per cent of the country’s 104,000 doctors, compared with 50 per cent in 1987 and 95 per cent in the 1960s.
Meanwhile, the Royal Australian College of General Practitioners has 45,840 members, the vast majority of GPs. (A small percentage of rural GPs are members of the Rural Doctors Association only.)
“Some people use [those numbers] to attack us and say we don’t represent many doctors,” says Khorshid. “We don’t accept that at all. We represent all doctors.”
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Health Minister to focus on ‘terrifying trend’ of GP shortfall
July 30, 2022 — 5.02pm
The new federal health minister has identified the looming shortage of general practitioners as the most pressing medium to long-term challenge in the health system.
Health Minister Mark Butler, speaking at the Australian Medical Association’s national conference on Saturday, said the low number of medical graduates applying to specialise in general practice was “the most terrifying statistic” in health care.
“It’s hard enough to get a GP right now and we know that the current generation of older GPs are pretty exhausted, particularly over the last 2½ years, and we just do not have the pipeline coming through,” Butler said. “It is probably the most terrifying trend that I see in primary care.”
Royal Australian College of General Practitioners president Dr Karen Price told The Sun-Herald and The Sunday Age that 16 per cent of medical graduates had applied to specialise in general practice in 2022, up slightly from the 15.2 per cent reported last year but “not enough”.
The Herald and The Age have previously reported on the falling enrolments in general practice training and the looming shortfall of nearly 10,000 doctors by 2030. Doctor shortages are most acute in rural and regional areas.
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International Issues.
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Murdoch’s US newspapers turn against Trump
Mark Mulligan World editor
Jul 24, 2022 – 2.40pm
Fox, Donald Trump’s favourite news network, may have dismissed as a partisan witch hunt the Congressional hearings into the January 6 Capitol riots, but two other outlets from Rupert Murdoch’s media empire are taking it seriously.
Both the tabloid New York Post and business masthead the Wall Street Journal at the weekend condemned the former president’s behaviour on the day in question, with the former saying Mr Trump was “unworthy to be this country’s chief executive again”.
According to CNN, the editorial amounts to “the tabloid’s strongest critique of Mr Trump yet”.
It was published online on Friday evening (Saturday AEST), around the same time the Wall Street Journal also published an editorial harshly criticising the former president.
The Journal called him “the president who stood still on January 6” and praised vice-president Mike Pence, who Mr Trump famously suggested in a tweet deserved the full wrath of the Capitol rioters.
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https://www.afr.com/policy/economy/i-was-wrong-about-inflation-20220724-p5b42z
I was wrong about inflation
I was relaxed about warnings that Joe Biden’s $US1.9 trillion stimulus package would be dangerously inflationary. As it turned out, of course, that was a bad call.
Paul Krugman
Jul 24, 2022 – 11.53am
In early 2021, there was an intense debate among economists about the likely consequences of the American Rescue Plan, the $US1.9 trillion package enacted by a new Democratic president and a (barely) Democratic Congress.
Some warned that the package would be dangerously inflationary; others were fairly relaxed. I was Team Relaxed. As it turned out, of course, that was a very bad call.
But what, exactly, did I get wrong? Both the initial debate and the way things have played out were more complicated than I suspect most people realise.
You see, this wasn’t a debate between opposing economic ideologies. Just about all the prominent players, from Larry Summers to Dean Baker, were Keynesian economists, with more or less centre-left political leanings. And we all had similar views, at least in a qualitative sense, about how economic policy works.
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Here comes the phony recession, but the real one is close behind
July 25, 2022
The US economy will probably be in “recession” by the end of this week, according to the conventional rule of thumb – two consecutive negative three month periods.
If the world’s biggest economy, as measured by GDP, shrinks 1.6 per cent over the three months to the end of June, which is the current best forecast from the Federal Reserve Bank of Atlanta, that definition will be met, after a 1.6 per cent fall in the first quarter.
But it would be a phony recession, another sign that GDP, an arcane statistic designed in the 1930s, had decoupled from economic reality.
“You don’t see any of the signs. Now, a recession is a broadbased contraction that affects many sectors of the economy. We just don’t have that,” said Janet Yellen, US Treasury secretary, on Monday (Australian time), speaking on US television.
For a start, the US jobless rate as in Australia remains at half century lows, 3.6 per cent in June, and retail spending, the engine of modern economies advanced a healthy 1 per cent in June, up 8.4 per cent from a year earlier. Yes, blue chip US stocks have dropped about 17 per cent this year, but measured against earnings, share prices are still expensive.
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https://www.afr.com/world/europe/the-vibes-theory-of-uk-politics-20220725-p5b4d8
Why the UK conservative leadership race is all about ‘vibes’
Policies matter, of course. But so do tribal signifiers. That’s why Rishi Sunak has to try much harder to seem the same level of rightwing as rival Liz Truss.
Janan Ganesh Contributor
Jul 25, 2022 – 2.01pm
Former UK Treasurer Rishi Sunak, who wanted to leave the European Union before that cause was popular, is trailing with the Conservative grassroots as the field of candidates for the Conservative Party leadership narrows to two. Rival Liz Truss, who campaigned with some vigour to remain in the EU, polls better among them.
This oddity takes explaining. One theory cites his not being white. Another is his reluctance to promise tax cuts. Yet a third is his mutiny at the outgoing leader. But all three things are true of Kemi Badenoch, a now-eliminated hopeful in the leadership race, and she is liked on the right.
Allow me some speculation. Sunak’s views are right-wing but what you might call his effect is liberal. Truss, an actual Liberal Democrat for a while, is the opposite. He presents as: know-it-all, at ease abroad, richer than God. She presents as no-nonsense and what the British call “regional”.
So, on the basis of accent and a few biographic facts, one Oxonian of public-sector middle-class stock appeals to the metro-snobs and the other to the bumpkin-cranks: two tribes into which our unsubtle age triages so many of us. Policies matter, of course. But so do tribal signifiers. He has to try much harder to seem the same level of right-wing as Truss.
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Looks like Milton Friedman was right about global inflation
We are in uncharted waters and care needs to be taken to avoid further policy mistakes in Western central bank policies. Friedman’s main insights with a global tweak might be helpful in that rethink.
Adrian Blundell-Wignall Economist
Jul 25, 2022 – 4.48pm
Milton Friedman always asserted that inflation was everywhere and forever a monetary phenomenon. Central banks and post-Keynesian economists were very happy to ditch this thinking at the first sign of instability in the relationship. Monetarism was “cancelled”. Inflation targeting based on forecasting became the dominant way of thinking about inflation and the running of policy.
And look where we have ended up.
A shopper in Berlin as inflation pushed the European Central Bank to its first rate rises in a decade. AP
For many years, central banks wrongly took credit for observed low inflation; that their policy targets gave rise to “credibility” and tamed expectations, so that ultra-easy policy after the global financial crisis wouldn’t cause inflation.
It was never thus.
Globalisation and the China supply shock were ramping up at the same time. Import competition, the Amazon/Walmart effect and job fears as businesses restructured to take advantage of structural change resulted in less secure jobs and low wage outcomes for ordinary workers.
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Russia seeks regime change in Ukraine, says Kremlin’s top diplomat
By Susie Blann
July 26, 2022 — 6.28am
Kyiv: Russia’s top diplomat said Moscow’s overarching goal in Ukraine is to free its people from its “unacceptable regime,” expressing the Kremlin’s war aims in some of the bluntest terms yet as its forces pummel the country with artillery barrages and airstrikes.
The remark from Russian Foreign Minister Sergei Lavrov comes amid Ukraine’s efforts to resume grain exports from its Black Sea ports —something that would help ease global food shortages — under a new deal tested by a Russian strike on Odesa over the weekend.
“We are determined to help the people of eastern Ukraine to liberate themselves from the burden of this absolutely unacceptable regime,” Lavrov said at an Arab League summit in Cairo late Sunday, referring to Ukrainian President Volodymr Zelensky’s government.
Apparently suggesting that Moscow’s war aims extend beyond Ukraine’s industrial Donbas region in the east, Lavrov said: “We will certainly help the Ukrainian people to get rid of the regime, which is absolutely anti-people and anti-historical.”
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Trump 2.0 poses a grave risk to the US, and Australia
Political and international editor
July 26, 2022 — 5.00am
Absorbing as they may be, the US Congressional hearings into the January 6 insurrection have told us a great deal more about something that we already knew: that Donald Trump tried to overthrow democracy in the US by fomenting a violent attack on the Congress.
While most of us have been preoccupied with his past, he’s busy working on his future. And on coming back with a vengeance.
In spite of everything, he remains the frontrunner for the Republican nomination to the presidency; the overwhelming majority of Republicans in Congress either support him or fear him; and he is the most formidable fundraiser in American politics.
And his public approval rating of minus 11 per cent is no worse than Joe Biden’s minus 12 per cent, according to the rolling poll average maintained by realclearpolitics.com.
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Walmart issues profit warning as soaring inflation hits customers
Andrew Edgecliffe-Johnson
Jul 26, 2022 – 8.15am
New York | Walmart has issued its second profit warning in 10 weeks, signalling a further deterioration in the US retail environment as inflation bites the price-sensitive consumers on which the world’s largest retailer depends.
“The increasing levels of food and fuel inflation are affecting how customers spend,” said Doug McMillon, Walmart’s chief executive. He said the company had made “good progress” clearing inventory in “hardline” or consumer durable categories — such as appliances and furniture — but was having to increase markdowns on clothing in its US stores.
In a statement made after the close of New York trading — just three weeks before the company is due to report earnings for the three months to June — Walmart warned its operating income would fall by 13-14 per cent in the quarter and by 11-13 per cent over the full year as it discounts merchandise to clear excess inventory.
In May, at its last earnings announcement, it had flagged that operating income would be “flat to up slightly” in the second quarter and down by only 1 per cent for the full year. It had given similar guidance for earnings per share, which it now expects to fall by 8-9 per cent in the second quarter and by 11-13 per cent in the full year on an adjusted basis.
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Alarm bells are ringing as China’s property cancer spreads
Senior business columnist
July 26, 2022 — 12.00pm
The mortgagors’ revolt that has swept through China in recent weeks shouldn’t by itself trigger a banking crisis but it is another symptom of the cancer that is eroding one of the pillars of China’s economy.
What started as a boycott of loan repayments by a handful of homeowners frustrated at having paid for apartments that haven’t been completed has spread rapidly over the past week to the buyers of more than 300 property developments across China.
China’s authorities are clearly concerned that the boycott movement will continue to expand. They’ve censored references to the boycotts online, floated the possibility of awarding grace periods for borrowers with uncompleted properties, told banks to provide more funding for developers and are themselves setting up a ¥300 billion ($64 billion) fund to help the developers complete unfinished projects.
The reason for the angst and anger of the homeowners is obvious. The property industry in China operates on a pre-sales model – the buyers pay for their properties, putting down a deposit and borrowing the rest, before construction starts.
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https://www.afr.com/policy/economy/imf-downgrades-global-growth-outlook-20220726-p5b4sg
IMF downgrades global growth outlook
Ronald Mizen Economics correspondent
Jul 26, 2022 – 11.00pm
The International Monetary Fund has significantly downgraded its outlook for the global economy for the second time in just three months as inflation and rapidly rising interest rates stymie activity.
The IMF forecasts growth of just 3.2 per cent this year and 2.9 per cent next year, 0.4 and 0.7 percentage points lower from April. This largely reflected slowdowns in the United States, China and in the Eurozone.
Rising food and energy prices also prompted an upward revision to the global inflation outlook, with price growth expected to reach 6.6 per cent in advanced economies, up almost a full percentage point.
Treasurer Jim Chalmers used the IMF World Economic Outlook update to warn that the international economy was entering a difficult phase.
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Russian officers 30 years ago presaged rise of Putin, Ukraine conflict
By Deborah Snow
July 27, 2022 — 12.15am
In May 1992 I went searching for answers to a question that had been nagging at me ever since I’d arrived in Moscow as the ABC TV Russia correspondent.
I’d landed, spellbound, in the wintry Russian capital in early January that year, just days after the formal dissolution of the Soviet Union in the dying days of December.
By May the winds of change I was witnessing had become a hurricane. A re-energised Russian president, Boris Yeltsin, was forging ahead with a program of economic shock therapy designed to forcibly break the entrenched habits of a people heavily conditioned by decades of communism.
Among those with an entrepreneurial disposition (including elements of the criminal class) a super-heated form of primitive capitalism was already taking hold. Many other Russians just felt left behind and overwhelmed; there were the first signs of an encroaching impoverishment of a sizeable portion of the professional class.
The dismemberment of the USSR, once one of the most powerful states in the world, was proceeding apace.
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Russia doing better than expected despite sanctions: IMF
AFP
July 27, 2022
Despite damaging Western sanctions imposed on Moscow in the wake of the invasion of Ukraine, Russia's economy appears to be weathering the storm better than expected as it benefits from high energy prices, the IMF said Tuesday.
The sanctions were meant to sever Russia from the global financial system and choke off funds available to Moscow to finance the war.
"That's still a fairly sizable recession in Russia in 2022," IMF chief economist Pierre-Olivier Gourinchas told AFP in an interview.
Meanwhile, rising energy prices are "providing an enormous amount of revenues to the Russian economy."
While major economies including the United States and China are slowing, the report said, "Russia's economy is estimated to have contracted during the second quarter by less than previously projected, with crude oil and non-energy exports holding up better than expected."
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https://www.afr.com/policy/economy/six-inflation-mistakes-that-central-banks-make-20220726-p5b4tl
Six inflation mistakes that central banks make
The world’s central bankers have to act tough now because they succumbed to complacency, over-confidence in models, distraction and even politicisation.
Bryce Wilkinson
Jul 27, 2022 – 12.19pm
Since 2019, central banks have presided over perhaps the largest monetary stimulus the world has ever seen. Despite this, the surge in inflation surprised them.
They did not forecast current inflation. When it started emerging, they said it was temporary.
Now they have their backs to the wall. To reduce inflation, they must raise interest rates, a lot. But doing so will increase unemployment, losses on asset prices and bankruptcies.
What will they do? What should they do?
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From a synchronised boom to a synchronised bust?
Central banks are now moving in lockstep to hike rates to tame inflation, but their synchronised tightening risks plunging the global economy into a deep recession.
Karen Maley Columnist
Jul 27, 2022 – 4.05pm
Central bankers face a dilemma.
There’s no doubt they’re under enormous pressure to lift interest rates aggressively to tackle rampant inflation and to convince businesses and households that these rapid price rises won’t continue.
As a result, we’re witnessing a synchronised rate-raising cycle by central banks in developed countries, which are pushing official interest rates up aggressively to clamp down on excessively strong demand, and reduce the upward pressure on prices.
The US Federal Reserve, which is wrestling with an inflation rate that soared to 9.1 per cent in the year to June, a clip not seen in more than four decades, is now poised to announce a further 75 basis point rate rise.
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Fed raises rates 0.75pc, Powell says US not in recession
Mark Mulligan World editor
Updated Jul 28, 2022 – 7.09am, first published at 4.11am
A strong labour market suggests the United States is probably not in recession, says Federal Reserve chairman Jerome Powell, although weakening activity in some sectors point to a much-needed cooling of jobs growth.
Speaking after the Fed lifted interest rates by 0.75 percentage point for the second month in a row, Mr Powell said he doubted that the world’s biggest economy had contracted in the three months to the end of June, after shrinking slightly in the first quarter.
President Joe Biden and his administration have recently been playing down fears that the economy had entered technical recession - two negative quarters in a row - and Mr Powell’s comments on Wednesday (Thursday AEST) chimed with this view. GDP data is due out late tonight AEST.
Mr Powell said although sectors such as housing had already cooled in response to higher interest rates,steady demand for labour suggested strength in other areas.
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https://www.afr.com/politics/us-and-china-are-entering-a-trap-of-their-own-making-20220728-p5b581
US and China are entering a trap of their own making
The costs of miscalculation by either side would be lethal, and the risks are only growing.
Edward Luce Columnist
Jul 28, 2022 – 8.12am
When two trains are heading for collision, the switch operator puts them on different tracks. Alas, in geopolitics it is up to the drivers to take evasive action.
In the case of the US and China, each questions the other’s ability to drive trains. History offers us little hope that looming train wrecks will organically resolve themselves.
When it comes to Joe Biden and Xi Jinping – the two world leaders who most need to meet face to face but have not done so since Biden took office – evasive action is notable by its absence, particularly on Taiwan.
Biden has suggested the two countries resume some kind of strategic dialogue. Any routine exchange of views, even shouting matches, would be better than today’s escalation.
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Are interest rates at neutral? Markets certainly hope so
Count me among those hoping that Powell is entirely correct that rates are already at neutral. This would improve the chances of the Fed being able to soft-land the economy.
Mohamed El-Erian Contributor
Jul 28, 2022 – 11.20am
One of Federal Reserve Chair Jerome Powell’s unscripted remarks at his press conference on Wednesday (Thursday AEST) – that interest rates have reached a “neutral level” after the just-announced 75-basis-point interest-rate increase – is sure to prompt much discussion among economists in the weeks and months ahead.
Judging from how markets reacted the minute he made this remark, it is clear what conclusions the vast majority of investors want these economists to reach.
Neutral is shorthand for the crucially important notion that the level of interest rates is consistent with monetary policy being neither contractionary nor expansionary. When combined with the Fed’s dual mandate, it signals a monetary policy that is close to being set to deliver maximum employment and price stability.
In today’s world, this is translated by markets into the view that the Fed now believes that it has already done the bulk of what is needed to tighten monetary policy to deal with what Powell himself described as inflation that remains “much too high” and is inflicting “considerable hardship” on Americans.
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https://www.afr.com/world/europe/have-putin-s-ukraine-goals-shrunk-or-expanded-20220728-p5b5fr
Have Putin’s Ukraine goals shrunk or expanded?
Russia’s stated invasion goals and outsiders’ perceptions of them appear to be shifting shape on a monthly basis.
Leonid Bershidsky
Jul 29, 2022 – 3.14pm
The war in Ukraine is, let’s admit it, weird. Russian citizens can, at least theoretically, travel to Ukraine for business or pleasure, though now – only since June – they need visas. The belligerents are parties to a recent deal ensuring safe grain exports.
Russian gas keeps flowing to Europe through Ukraine’s pipeline system, albeit in reduced volumes. Countries that supply weapons to Ukraine are also paying Russia for energy and fertiliser imports, thus also funding its war effort. It’s not easy to imagine any of this going on during, say, World War II.
If that tangle of relationships is not confusing enough, both Russia’s stated invasion goals and outsiders’ perceptions of them appear to be shifting shape on a monthly basis.
In one sense, Russia appears to have scaled back its goals. To achieve his stated objectives, the “demilitarisation” and “denazification” of Ukraine, Vladimir Putin attacked on a much broader front than Russia maintains today.
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Is Russia headed for an embarrassing collapse?
Mike Martin
Jul 30, 2022 – 10.44am
Some weeks ago the Russians announced an “operational pause” in the Donbas.
Breaks in fighting like these are pretty normal in this type of high-intensity warfare, because of the vast supplies required and damages inflicted.
Armies sometimes just have to take time-outs to regroup and build up their supplies again, although normally you don’t broadcast to everyone that you’re doing it.
That’s a bit odd, and makes it seem like there must be another reason that Russian military activity has decreased.
And decreased it has.
Russian artillery fire has significantly dropped, and there are fewer offensives.
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https://www.afr.com/world/europe/russia-loses-half-of-its-troops-in-deadly-war-20220729-p5b5pn
Russia loses half of its troops in ‘deadly war’ in Ukraine
Nataliya Vasilyeva, David Millward and Marcus Parekh
Jul 29, 2022 – 1.48pm
London | More than 75,000 Russian soldiers have been killed or injured in the war in Ukraine, according to new classified US intelligence, a loss equivalent to almost the entire British army.
If accurate, the figure would equate to half the 150,000 Russian troops reported to have been committed to the Ukrainian invasion, a staggering figure that points to an “exceptionally deadly war”, according to analysts.
“We were briefed that over 75,000 Russians have either been killed or wounded, which is huge,” Michigan Democratic congresswoman Elissa Slotkin, who serves on the House Armed Services Committee and recently visited Ukraine, told CNN.
“You’ve got incredible amounts of investment in their land forces, over 80 per cent of their land forces are bogged down, and they’re tired. But they’re still the Russian military.”
The classified briefing, first reported by CNN, was given by the State Department, the Department of Defence, the Joint Chiefs of Staff and the Office of the Director of National Intelligence to the House of Representatives on Wednesday.
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I look forward to comments on all this!
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David.
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