September 15, 2022 Edition
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The death of QE2 has rather dominated the news for the last week or so and will probably pass after the funeral today.
Otherwise the war in Ukraine seems to be in a turning phase. I hope that continues into the eventual getting rid of the Russians from Ukrainian territory!
In OZ life goes on much as usual just awaiting the mourning period to pass,
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Major Issues.
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https://www.afr.com/policy/foreign-affairs/what-australia-should-do-about-taiwan-20220904-p5bf7i
What Australia should do about Taiwan
Canberra cannot be silent if US policy on Taiwanese independence changes. Quiet diplomacy is called for to warn against policies that recklessly risk war with China.
James Curran Historian
Sep 4, 2022 – 12.49pm
A fortnight ago this column drew attention to private concerns among Australian officials about the instability of American politics and its uncertain effect on US foreign policy after 2024.
This drew a response from a former senior official: “Well, what does Australia do?”
First, the government needs to take seriously the remarks of John Bolton and Mike Pompeo, former senior officials in the Trump administration, advocating that Washington recognise an independent Taiwan.
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https://thenewdaily.com.au/opinion/2022/09/05/summits-exercise-in-humility/
6:00am, Sep 5, 2022 Updated: 7:20pm, Sep 4
Alan Kohler: Among its outcomes, the jobs summit underlined irrelevance of Opposition
Last week’s jobs summit, like all summits, was a gathering of vested interests, so it was a nice moment when Ross Garnaut told them over dinner that reform happens when vested interests are defeated.
“The reform era (of the 1980s and ’90s) defeated deeply entrenched business and trade union interests that stood against the national interest,” he told the deeply entrenched business and trade union interests.
As expected, the Jobs and Skills Summit was a public negotiation in which business was given more migrants and pensioners in return for unions getting back the ability to go on strike.
Most business summiteers didn’t agree to that, some did, but the government announced that multi-employer bargaining will be legislated anyway.
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Jim Chalmers’ rude awakening from his super dream
Behind closed doors, the big industry super funds have clearly told the Albanese government that they’ll only invest in ‘national priorities’ if the risk/return ratio improves.
Karen Maley Columnist
Sep 5, 2022 – 5.00am
For a moment, Treasurer Jim Chalmers allowed himself to believe that there might be an easy solution to his perennial problem: how to deliver on Labor’s ambitious promises on affordable housing, aged care and renewable energy.
“We see trillions of dollars in workers’ capital, we see government budgets heaving with debt, and there are obvious needs for investment, particularly in areas like housing and energy,” he rhapsodised at the annual Superannuation Lending Roundtable.
As Chalmers saw it, the country’s $3.3 trillion super industry had a role to play in “investing in our national priorities” and “addressing some of our most formidable economic challenges”.
But that was before he and Anthony Albanese had a series of what the Prime Minister subsequently described as “discussions” with the heads of the big industry super funds.
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An HECS system is the fair way to pay for paid parental leave
An extension to 26 weeks of the current 18-week paid parental leave does not have to break the budget, nor does it need to involve larger taxpayer contributions.
Bruce Chapman and Warwick McKibbin
Sep 4, 2022 – 1.48pm
The Jobs and Skills Summit has revealed several areas of furious agreement between the trade unions and business. Both parties endorse and promote the notion that government-financed paid parental leave (PPL) should be expanded from the current 18 weeks to 26 weeks. According to the Grattan Institute, this will cost taxpayers about $600 million a year.
It should be no surprise that unions and business concur with this suggestion since, after all, workers and employers will benefit, yet neither would contribute to the cost of families receiving income in return for caring for an infant.
In this context, it is pertinent to enquire whether the suggested PPL extension is economically sound and to ask if there is a fairer way to pay for it.
As highlighted as long ago as 2008/09 in the Productivity Commission inquiry, there are many benefits from PPL. Providing more financial options to parents who want to have time away from work raising infants clearly benefits families and, the data suggests, society as a whole.
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Bogus reasons are being used to keep controversial documents secret
By Geoffrey Watson and Max Douglass
September 5, 2022 — 5.00am
When Australia introduced its federal freedom of information (FOI) scheme in 1982 it was ahead of the world. The scheme was a bipartisan reform with lofty ideals: to provide for transparency in government decision-making and to increase public participation in government by better informing voters.
The FOI scheme ideally, in effect, makes all documents relating to government decision-making available to the public, subject only to well-defined and recognised exceptions. Under the scheme the onus is on the government to justify withholding access to documents, with full disclosure being the norm.
If that scheme were allowed to operate then all would be good. But the problem is that, over the past 15 years or so, and particularly in the last five, the FOI architecture has been left to decay while uninterested governments stood idly by.
The FOI scheme is now moribund. Claims of exemption are wantonly deployed to defeat transparency and accountability. The Morrison government has been the worst example of this – it was obsessed with secrecy, especially since they thought it appropriate to fob off inquiries with “on-water matters”. Australia’s FOI scheme is a husk of its ideal.
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Unions again play a central role in corridors of power
Economics Editor
September 4, 2022 — 11.00pm
Welcome back to a tripartite world, where Labor has returned to power and its union mates are back inside the tent – and at last week’s jobs summit could be seen moving in their furniture. For those who don’t remember the 1983 glory days of Bob Hawke, Paul Keating, consensus, the Accord, and former ACTU secretary Bill Kelty as an honorary member of the cabinet, it will take some getting used to.
For those who’ve been watching only since the John Howard era, it may even seem unnatural. One of Howard’s first acts upon succeeding Hawke and Keating in 1996 was to delegitimise the unions.
He allowed the tripartite committees to lapse, and didn’t reappoint the ACTU secretary to the board of the Reserve Bank. I doubt if many even informal links between ministers and union leaders continued.
The Libs didn’t know the union bosses, and didn’t want to know ’em. They were the enemy – always had been, always would be. Big business bosses, on the other hand, would be privately consulted and were always welcome to phone up for a quiet word with the minister.
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Redesign stage three tax cuts to better balance equity and efficiency
Economist
September 4, 2022 — 4.30pm
The stage three tax cuts have become enemy No.1 among Australia’s policy commentariat. Claims abound that they’ll turn Australia’s income tax into a flat tax (they won’t) and that scrapping them is the solution to our inflationary predicament (it isn’t).
Much of the discussion is ill-informed. Partly, that’s because tax policy experts haven’t done a good enough job explaining to the public how we ought to think about tax design.
The stage three tax cuts are, as the name suggests, the third in a series of tax cuts introduced by the former Coalition government. The first two stages offered targeted tax relief to low- and middle-income taxpayers and raised tax thresholds to offset bracket creep.
For the Coalition, it was high folly to hive off tax relief for high earners into a standalone package from 2024. While the three stages together might seem reasonable, stage three on its own is difficult to defend.
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Newspoll: Coalition support plunges to record low
9:30PM September 4, 2022
Popular support for the Coalition has slumped to its equal lowest on record in the wake of the Morrison ministry controversy, as Anthony Albanese extends his lead over Peter Dutton as preferred prime minister.
An exclusive Newspoll conducted for The Australian shows the Liberal and Nationals primary vote falling for a second time since the election, plunging a further two points to land at a historic low of 31 per cent. This is almost five points down on the May election result and puts the Coalition at its equal lowest level of support since 2008, shortly after it went into opposition following the Rudd-slide of November 2007.
Underlying support for Labor remains unchanged at 37 per cent but, with the fall in support for the Liberal/Nations, Labor has widened its two party preferred lead by two points to 57/43.
This represents an almost 10-point gain for Labor since the election, as it continues to stamp its authority over the Liberal/Nationals parties.
Labor won the election with a primary vote of just 32.6 per cent but a two-party preferred split of 52.1/47.9 per cent.
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Diversified portfolios best as world faces uncertain future
7:00PM September 4, 2022
Scenario analysis can help to prepare investors for uncertain times by providing the signals needed when considering a vast number of possible market outcomes after a given period. With the global outlook remaining clouded in uncertainty from geopolitics, energy shortages and sticky global inflation, the cards may fall in a number of sequential ways, which will have vast implications for skittish asset markets looking to extrapolate those developments, powered by algorithms and momentum-based funds.
Recently, I touched on the stages of grief for investors who have been forced to accept a world without multiple policy support, as governments and central bankers aim to kill the inflation monster that has fed from the pandemic.
I have also suggested that the US Federal Reserve would not pivot its policy easily or quickly as financial market participants return to work after a hot North American and European summer holiday.
The global outlook remains highly volatile with several possible pathways for asset markets all having reasonable probabilities. A few influential folk hold powerful cards and the sequence with which they may play those hands can have significant effects against an economic backdrop that is likely to continue to slow from increasingly restrictive policy into year-end.
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Our main trading partner is involved in systematic torture. What now?
Political and international editor
September 6, 2022 — 5.00am
So what does Australia do now? Now that the UN commissioner for human rights has published the formal finding – that our main trading partner is inflicting all manner of systematic torture on its Uyghur people.
Michelle Bachelet, former president of Chile, last week delivered her long-awaited UN report on China’s repression of its Uyghur minority, and some other predominantly Muslim groups.
After visiting China and interviewing a wide range of former detainees, she concluded that the Chinese government was committing mass violations of human rights. Still. After five years of shocking abuse. And five years of lying about it.
The good news is that she proved that Beijing has not yet altogether silenced the UN. But the pressure Beijing applied in trying to censor her was evident – Bachelet released her report just 11 minutes before her term as high commissioner expired. It was literally 11 minutes to midnight in Geneva.
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‘It’s no surprise we’re more financially stressed than ever’
Lucy Dean Wealth reporter
Sep 7, 2022 – 10.37am
Lettuce, salmon and coffee were all subjected to soaring inflation over recent months, and while prices are coming back to earth, for Australian workers, the financial pain and associated stress continues to bite.
The number of workers in severe financial stress has doubled since 2020 as rising inflation and interest rates put nearly 1 million people under severe pressure and another 2 million under moderate stress, according to new research by wealth manager AMP.
Financial stress has grown across all income levels, AMP’s 2022 Financial Wellness report has found, with women, single parents and part-time workers experiencing higher rates of stress. Pessimism about wage increases is also contributing.
More than one quarter, or 26 per cent, of part-time workers consider themselves in severe or moderate financial stress, up from 18 per cent in 2020. The number of women in similar situations has grown from 19 per cent to 27 per cent, while 25 per cent of single parents aged 30-44 admit to financial stress, up from 13 per cent.
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We’re now in the fourth and final act of the super bubble collapse
Jeremy Grantham highlights the eerie parallels between this year’s sharemarket gyrations and the bursting of previous sharemarket super bubbles.
Karen Maley Columnist
Sep 7, 2022 – 6.21pm
If legendary investor Jeremy Grantham is right, we’re now entering the vicious, and most brutal, phase in the collapse of the “super bubble” in share, bond and house prices.
His warning comes as a deepening sense of gloom is gripping the US sharemarket, which has now fallen 9.2 per cent since the bear market rally peaked in August. It is down 18.5 per cent so far this year.
European sharemarkets have suffered even heftier losses, falling by more than 25 per cent this year. Analysts are warning that the European shares have further to fall, as the region’s energy crisis intensifies.
And the local share market has dropped to the lowest level in seven weeks, as investors worry that synchronised tightening by the world’s major central banks will choke global growth and reduce demand for commodities.
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In death, Elizabeth shows how much Australia has changed
The Queen was a constant in the life of what is now a very different country. Her passing challenges us to think about how much more we want to change in the future.
Laura Tingle Columnist
Sep 9, 2022 – 4.05pm
Longevity plays tricks on us. Queen Elizabeth II was a public figure who has always been there in almost all of our lives – something widely noted on Friday as the news of her death spread.
Yet her very longevity meant that, inevitably, the picture of who she was and what she represented – both in the UK and Australia – was very different for different generations.
For her own generation, there was a sense of a parallel life, similar experiences shared: most notably of the trauma of World War II.
For generations since, they have observed her through different slices of time and, therefore, different prisms.
In Australia, perhaps one of the great generational divides is between those of us who remember standing to sing God Save the Queen at public events, concerts, even the movies, and those who don’t.
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https://www.afr.com/politics/federal/what-now-for-australia-and-the-monarchy-20211027-p593j5
What now for Australia and the monarchy
Queen Elizabeth was respected and adored. With her death comes questions about the British monarchy’s role as Australia’s head of state.
Andrew Clark Senior writer
Sep 9, 2022 – 7.53am
Queen Elizabeth commanded adulation, nowhere more so than in Australia. With her passing comes the long-anticipated question of the future of the British monarchy without her.
Much is at stake. The House of Windsor has a unique historical, constitutional, political, military, cultural, social and psychological footprint. Just by “being there” – in the words of the Peter Sellers film character, Chauncey Gardiner – Queen Elizabeth influenced the political mood and tone in other Commonwealth countries, including Australia.
For republicans, an Australia facing narrowing choices as China flexes its muscles in the region, plus issues such as reconciliation with Indigenous Australians, means having a head of state based in London and represented by Prince Charles, or his successor Prince William, just doesn’t fit the times.
Royalists argue, however, that current arrangements, including Australia’s status as a constitutional monarchy, emphasise our adherence to Westminster norms – elected parliaments, an independent judiciary and a robust press.
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Albanese shaping up to repeat a slice of Labor history that Dutton would be dreading
Columnist
September 10, 2022 — 5.00am
Anthony Albanese won’t want to get ahead of himself, but there is something in his extended political honeymoon that suggests Labor can write the history of this decade and possibly the next.
The clue isn’t in the published opinion polls which show the prime minister’s approval rating and Labor’s primary vote have been booming since the election on May 21. Those surveys of voting intentions are easily set aside when we remind ourselves that every federal government that took office from opposition since 1949 went backwards at the next election. Albanese and his colleagues are keenly aware that the loss of just two seats in net terms would see them going back to the future of minority government.
The clue is in how quickly Labor has switched the political debate. From climate change to wages policy, from child care and aged care to migration policy, Albanese and his ministers are pulling levers of intervention and being applauded by the representatives of business. Where Bob Hawke’s economic summit in 1983 established the platform for the deregulation of the economy, Albanese’s jobs summit a fortnight ago is preparing the ground for an enlarged government and, with it, the end of the John Howard model of running the country.
It should be noted that Albanese and his treasurer Jim Chalmers remain economically rational actors and will be cutting spending to make room for their election promises. And it is the way of these things that the cuts will hurt the government before the benefits for households, and the economy, can be quantified.
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Why Albanese won’t race to a republic following Queen’s death
Political and international editor
September 10, 2022 — 5.00am
The death of the Queen presents Australian republicans with the opportunity for which they’ve long planned. Is Anthony Albanese about to pounce and launch a campaign for constitutional change? We know he has strong republican views. Two years ago, he spoke of “the need for us to have an Australian head of state … the need for us to stand on our own two feet”.
A year earlier he said, “as a mature state, we’re entitled to have one of our own as our head of state. It is as simple as that.”
And the moment he took office as prime minister he upset monarchists by taking the unprecedented step of creating a post of assistant minister for the republic, which he gave to Matt Thistlethwaite.
But, despite his personal convictions, and despite the fears and suspicions of the monarchists, it’s an opportunity that Anthony Albanese will not be taking. He won’t be taking it this month, this year or this term of parliament.
Why not? Three good reasons. He’s not ready. His government’s not ready. Australia’s not ready.
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Mind the gap: how Australia is exposed to nuclear attack
As the chances of a US-Russia conflict increase, it’s foolish to think our geographic distance will safeguard us. Our ‘American spy base’ remains the priority target.
By TOM GILLING
September 10, 2022
The risk of nuclear war is now “higher than at any time since the Cold War”, according to the former director of Australia’s Joint Intelligence Organisation, emeritus professor Paul Dibb. In his paper The Geopolitical Implications of Russia’s Invasion of Ukraine, published this week by the Australian Strategic Policy Institute, Dibb warns Australians not to believe that our geographic distance from a European war will safeguard us from nuclear attack.
The priority target is what the Russians still call the “American spy base” at Pine Gap in the Northern Territory. “We need to plan on the basis that Pine Gap continues to be a nuclear target,” Dibb writes, “and not only for Russia. If China attacks Taiwan, Pine Gap is likely to be heavily involved. We need to remember that Pine Gap is a fundamentally important element in US war-fighting and deterrence of conflict.”
Dibb goes on to say that Australians “need to understand what the implications would be for Alice Springs, which is a town of 32,000 people only 18km from the base”. What he does not say is that those “implications” have already been examined in a highly classified government study that was covered up for more than 30 years.
The study, by the Office of National Assessments, was ordered by prime minister Malcolm Fraser. Eleven copies were delivered to the undersecretary of the Department of the Prime Minister and Cabinet on March 30, 1981. Entitled “A preliminary appraisal of the effects on Australia of a nuclear war” and classified “TOP SECRET AUSTEO” (Australian eyes only), it argued that “US facilities in Australia might be targeted relatively early in a strategic nuclear war”.
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COVID-19 Information.
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New parliamentary inquiry to investigate long Covid
September 5, 2022
A new parliamentary inquiry will investigate the impact of long Covid on Australians and the broader health system, the federal government has revealed.
Labor MP Dr Mike Freelander will chair the House Health Committee, which will launch the inquiry.
Dr Freelander said very little was known about long Covid and the inquiry would “build a picture” of the impact it was having on the broader community.
“The committee recognises that both long Covid and repeated Covid infections are emerging as significant health challenges for Australia,” he said.
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Climate Change.
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https://thenewdaily.com.au/opinion/2022/09/08/to-save-humanity-print-money-alan-kohler/
6:00am, Sep 8, 2022 Updated: 6:48pm, Sep 7
Alan Kohler: Reserve Bank the best bet to save humanity from climate crisis
Here’s a crazy idea: Give the job of dealing with climate change to the Reserve Bank.
It’s crazy because the Reserve Bank is up to its neck in the one job it has, which is fiddling with interest rates to incite us to borrow and then once we’ve done that, and we’re out on the debt limb, saw it off. Right now, it’s in sawing-off mode.
But here’s why it’s not so crazy: First, it’s the only government body that’s entirely independent of politics and the need to be popular, and it’s clear that political democracy is failing to deal with climate change, and second, the Reserve Bank can create money.
Terrifying political failure
The abject failure of politics around the world to even seriously reduce the burning of fossil fuels, let alone stop it, is terrifying.
A third of Pakistan is under water and Europe is drought-stricken with just 1.1 degrees of global warming from the pre-industrial age. Scientists tell us that current policies will lead to 2 to 3 degrees of warming, which would make large parts of the planet uninhabitable and cause mass extinctions, possibly of human beings.
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Insurance lobby group warns of uninsurable danger zones
Liam Walsh Reporter
Sep 8, 2022 – 5.30am
Some regions may increasingly struggle to obtain cover as “extreme weather risks grow”, the insurer industry group has warned.
The warning comes amid spiralling insurance costs for zones struck by disasters, including cyclone magnet North Queensland and flood-prone spots on Australia’s east coast.
In a new series of reports into damage from natural calamities, the Insurance Council of Australia has pushed its case for greater government spending on mitigation, reduction of taxes and zoning reform.
It highlighted that flooding this year had cost almost $5.28 billion from 233,000 claims, making it the second-biggest insurance disaster after a 1999 hailstorm in Sydney.
That inundation bill marked the first time major flooding in a widespread area including capital cities had struck, since insurers widely adopted automatic flood cover after 2011.
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Royal Commissions And The Like.
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No entries in the category.
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National Budget Issues.
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RBA tipped to lift cash rate 0.5pc, traders split on terminal rate
Cecile Lefort Markets reporter
Sep 5, 2022 – 1.08pm
Bond markets have modestly pared back expectations on how high the Reserve Bank will increase the cash rate and the Australian dollar has been knocked lower as Europe’s energy crisis encourages investors to stick with safer currencies.
The RBA holds its policy meeting on Tuesday and bond futures indicate an 89 per cent chance that the central bank will increase its benchmark cash rate by 0.5 percentage point for the fourth consecutive time, taking the cash rate to 2.35 per cent.
Economists expect a similar outcome, but opinions vary on the peak rate and whether the central bank will start easing next year.
Bond investors imply a terminal rate of 3.8 per cent by mid-next year, which is widely disputed by economists who say it is too high. Bond markets had expected a peak above 4.2 per cent in June, but have since swung between 3.2 per cent and 4 per cent.
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It’s time to give the RBA permission to be unpopular
Chief economist, EY Oceania
September 6, 2022 — 5.00am
To the non-economist, the gold lettering displayed in the foyer of the Reserve Bank’s Martin Place headquarters rings hollow. Taken from 63-year-old legislation, it states that the RBA has a duty to contribute to the stability of the currency, full employment and the economic prosperity and welfare of the Australian people. It implies the RBA won’t do anything to make anyone worse off. It also suggests the bank can be all things to all people.
But for those people who recently heard the RBA governor Philip Lowe say rates would not be rising until 2024 – and made big borrowing decisions based on that – it might well feel like the RBA isn’t really contributing to the “economic prosperity and welfare of the Australian people”, as its 1959 act states it has a duty to do.
It seems likely we will see another half a percentage point increase in interest rates from the RBA today. Adding to the 1.75 percentage points of rate hikes they have already put in place since May, it’ll be a tough pill to swallow in the face of the escalating cost of our essentials.
But the RBA is, in fact, lifting rates for a very good reason. It needs to slow down inflation because rapidly rising prices are bitter, especially for vulnerable people. They eat into household budgets, stymie business activity, threaten jobs and strangle the economy.
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https://www.rba.gov.au/media-releases/2022/mr-22-28.html
Media Release Statement by Philip Lowe, Governor: Monetary Policy Decision
Number 2022-28
Date 6 September 2022
At its meeting today, the Board decided to increase the cash rate target by 50 basis points to 2.35 per cent. It also increased the interest rate on Exchange Settlement balances by 50 basis points to 2.25 per cent.
The Board is committed to returning inflation to the 2–3 per cent range over time. It is seeking to do this while keeping the economy on an even keel. The path to achieving this balance is a narrow one and clouded in uncertainty, not least because of global developments. The outlook for global economic growth has deteriorated due to pressures on real incomes from high inflation, the tightening of monetary policy in most countries, Russia's invasion of Ukraine, and the COVID containment measures and other policy challenges in China.
Inflation in Australia is the highest it has been since the early 1990s and is expected to increase further over the months ahead. Global factors explain much of the increase in inflation, but domestic factors are also playing a role. There are widespread upward pressures on prices from strong demand, a tight labour market and capacity constraints in some sectors of the economy.
Inflation is expected to peak later this year and then decline back towards the 2–3 per cent range. The expected moderation in inflation reflects the ongoing resolution of global supply-side problems, recent declines in some commodity prices and the impact of rising interest rates. Medium-term inflation expectations remain well anchored, and it is important that this remains the case. The Bank's central forecast is for CPI inflation to be around 7¾ per cent over 2022, a little above 4 per cent over 2023 and around 3 per cent over 2024.
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https://www.afr.com/policy/economy/rates-hit-households-hard-with-worse-to-come-20220906-p5bft1
Rates hit households hard with worse to come
The RBA’s latest rate rise is just a downpayment on the pain coming for households and businesses and will be made worse by the fallout from Europe’s energy crisis.
Jennifer Hewett Columnist
Sep 6, 2022 – 6.09pm
It will be cold comfort for Australians paying off a mortgage but Europeans face an even more expensive Christmas – and probably a near-freezing one given soaring energy prices and shortages.
Philip Lowe’s announcement of a further 0.5 per cent rise in the cash rate this month will certainly compound the cost of living pressure in Australia even if consumer panic is yet to set in as people keep spending. This ensures this week’s move is certain not to be the last rate rise this year, although the squeals of pain are loud and getting louder.
Even the expiry of the halving of the fuel excise at the end of this month won’t cause as much noise.
But according to Commonwealth Bank chief executive Matt Comyn, the full impact of the Reserve Bank’s higher interest rates still won’t really hit most households until closer to Christmas. The RBA governor concurs, saying in his statement that “the full effects are yet to be felt in mortgage payments”.
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The concept of normal has been lost in the post-pandemic world
By Shane Wright
September 6, 2022 — 6.25pm
Normal is within spitting distance.
That might not exactly be the way Reserve Bank governor Philip Lowe put it in his statement explaining why the official cash rate was being pushed up another 0.5 percentage points on Tuesday, but it was the general vibe.
The trouble is the concept of what is normal in terms of monetary policy has been lost over the past decade or so.
Ever since central banks slashed interest rates to deal with the global financial crisis, what is considered a normal interest rate has been trashed. The COVID-19 pandemic made it worse as some central banks used negative interest rates while most, including the RBA, engaged in quantitative easing.
So what’s normal? Tuesday’s move took the official cash rate to 2.35 per cent. The last time it was higher than that was back in January 2015.
In that month, the jobless rate was 6.3 per cent and underemployment was 8.5 per cent.
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Economy grows by 3.6pc in the year to June
September 7, 2022
The Australian economy expanded by a robust 0.9 per cent over the three months to June, and 3.6 per cent over the year, as easing Covid restrictions triggered a surge in household spending on travel and eating out and record commodity prices underpinned a record trade surplus.
The new national accounts figures from the Australian Bureau of Statistics revealed an economy still in rude health in the June quarter, even as the spectre of climbing interest rates and an increasingly precarious global background suggest an imminent slowing in activity.
ABS head of national accounts Sean Crick said “rises in household spending and exports drove growth in the June quarter”.
“This is the third consecutive quarter of economic growth, following a contraction in the September quarter 2021, which was impacted by the Delta outbreak,” Mr Crick said.
Household spending jumped 2.2 per cent in the quarter as expenditure on travelling at home and abroad surged 37 per cent in the three months thanks to easing Covid restrictions. There was also a 9 per cent increase in spending in cafes and restaurants.
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Economy grows by 3.6pc in the year to June
10:51PM September 7, 2022
Jim Chalmers has told households to brace for a “very tough period” of surging grocery, power and mortgage bills, as he warned that providing families with more handouts in the October budget would force the RBA to more aggressively raise rates.
A day after the central bank hiked rates for the fifth straight month and flagged further pain to come for mortgage holders, the Treasurer said “there will be cost-of-living relief for Australians in the budget, but it will be delivered in a way that doesn’t make the task of the independent Reserve Bank harder”.
Dr Chalmers’ comments came after Australian Bureau of Statistics figures revealed an economy still in rude health heading into the middle of the year, even as the spectre of climbing interest rates and an increasingly precarious global outlook suggested an imminent slowing in activity.
Real GDP expanded by a robust 0.9 per cent in the three months to June, and 3.6 per cent over the year, as easing Covid restrictions triggered a surge in household spending on travel and eating out, and as sky-high commodity prices underpinned a record trade surplus.
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https://www.afr.com/policy/economy/why-central-banks-got-inflation-so-wrong-20220907-p5bg4w
Why central banks got inflation so wrong
A former Bank of Japan governor says central banks took the wrong lessons from Japan’s long-term experiment with ultra-loose monetary policy – causing them to underestimate inflation, in a huge policy mistake for the global economy.
Jennifer Hewett Columnist
Sep 7, 2022 – 5.03pm
The new world of rising inflation and rising interest rates makes Japan’s determination to stick to its aggressively loose monetary policy stand out even more as an oddity.
True, Japan’s inflation is still well below other developed economies, but it is rising and is now slightly above the bank’s 2 per cent target. Yet the central bank is maintaining its policy of negative short-term interest rates and capping the yield on Japanese 10-year bonds at 0.25 per cent.
Bank of Japan governor Haruhiko Kuroda has not been deterred by either savage depreciation of the yen or growing scepticism of global markets. He insists inflationary forces in Japan are still transitory – just as other central banks used to argue before being bowled over by the stubbornness of rising prices.
But what if those other central banks and economists took the wrong lessons from Japan’s long-term experiment with ultra-loose monetary policy to try – unsuccessfully – to combat deflation? What if it meant other countries became so overly concerned with deflation in their own economies that they kept interest rates too low for too long to try to get back to at least 2 per cent inflation?
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Fired-up Phil Lowe points to the unemployment scoreboard
By Shane Wright
Updated September 8, 2022 — 4.50pmfirst published at 4.49pm
Like a footballer who has dropped an easy mark but whose team is 10 goals up, Reserve Bank governor Philip Lowe has told his critics to look at the scoreboard.
Those critics, including people with super-sized mortgages, bond traders who punted on low interest rates forever and some members of the political class, have increasingly demanded Lowe’s head on a spike outside the RBA’s Martin Place headquarters.
His crime has been to lift interest rates, this week reaching 2.35 per cent, after saying late last year that it was likely the cash rate would remain at 0.1 per cent until 2024.
For weeks, Lowe has remained quiet on the calls for retribution. That ended on Thursday with what, for central bank types, was a full-throated rebuttal.
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NAB, ANZ, CBA lift rates as RBA struggles to make big impact
Ayesha de Kretser Senior Reporter
Updated Sep 9, 2022 – 7.13pm, first published at 3.55pm
Aggressive discounting to lure new customers, the sheer volume of fixed-rate mortgages written in recent years and the usual delays in banks passing on higher rates to customers are blunting the impact the Reserve Bank of Australia’s rapid-fire interest rate increases are having on spending, analysts say.
RBA governor Philip Lowe said on Thursday that the pace and size of future official rate increases could be reduced, even as uncertainty remains over when and how hard the increases already baked in will hit consumers.
Bankers also fear a hard interest rate “cliff” next year when cheap fixed rate mortgage deals roll off and are refinanced at much higher rates.
By Friday afternoon, National Australia Bank, ANZ Banking Group, Commonwealth Bank and Macquarie Bank, as well as Bendigo and Adelaide Bank, had passed on Tuesday’s 0.5 percentage point increase, with others expected to follow suit. Both NAB and ANZ were quiet on rates for savers, while CBA rewarded certain customers with 0.6 percentage points and Macquarie lifted selected savings rates by between 0.5 percentage points and 0.65 percentage points.
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Health Issues.
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An Australian heart transplant method saved Ross’ life. Now it’s boasting success worldwide
By Mary Ward
September 6, 2022 — 11.30am
An Australian method of preserving donated hearts has boosted the number of successful transplants and new data shows recipients of these “dead” tickers have similar survival rates to traditional transplants.
There have been 78 heart transplants conducted through Sydney’s St Vincent’s Hospital and the Victor Chang Cardiac Research Institute’s world-first DCD (donation after circulatory death) process, a technique that has since been adopted by several hospitals abroad.
While donated hearts once had to come from brain-dead people whose hearts were still beating, the DCD method, pioneered in Sydney, means donations can take place after the heart has stopped. Within half an hour of life support being switched off, the heart is extracted and flushed with an oxygenated blood preservation solution before being transported in a special machine to its recipient.
“These are hearts that would not otherwise have been used,” said Professor Peter MacDonald, a senior cardiologist at St Vincent’s Hospital and leader of the DCD heart transplant team.
When Sydneysider Ross Tripodi woke up from his DCD heart transplant in April 2020, he assumed it must not have happened: he didn’t feel like he had just had a big surgery, he felt better than before.
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International Issues.
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Nord Stream 1 closure threatens Sweden, Finland energy market with ‘Lehman Brothers’ crisis
By Supantha Mukherjee and Essi Lehto
September 5, 2022 — 5.53am
Stockholm: Finland and Sweden have announced plans to offer billions of dollars in liquidity guarantees to power companies in their countries after Russia’s Gazprom shut the Nord Stream 1 gas pipeline, deepening Europe’s energy crisis.
Finland is aiming to offer €10 billion ($14.6 billion) and Sweden plans to offer 250 billion Swedish crowns ($34 billion) in liquidity guarantees.
“This has had the ingredients for a kind of a Lehman Brothers of energy industry,” Finnish Economic Affairs Minister Mika Lintila said on Sunday, local time.
When Lehman Brothers, the fourth-largest US investment bank at the time, filed for bankruptcy in September 2008 with more than $US600 billion in debt, it triggered the worst parts of the US financial crisis.
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https://www.afr.com/world/europe/uk-energy-crisis-is-a-burden-of-war-20220905-p5bfjj
UK energy crisis is a burden of war
It would be a crime and a folly to let the domestic costs of the war fall disproportionately on the least well-off. Solidarity in sharing these burdens is obligatory. In wartime, markets are not sacrosanct.
Martin Wolf Columnist
Sep 5, 2022 – 3.26pm
Desperate times call for desperate measures. The UK has rightly supported Ukraine’s cause in its war with Vladimir Putin’s Russia. Today’s soaring gas prices are as much a weapon in Putin’s fight as missiles directed at Ukraine and, like them, they will kill.
It would be a crime and a folly to let the domestic costs of the war fall disproportionately on the least well-off. Solidarity in sharing these burdens is obligatory. So, too, is willingness to shed shibboleths. In wartime, markets are not sacrosanct.
Price controls, even rationing, must be on the table.
The price of natural gas is nearly five times what it was a year ago. The result is a distributional shock, a terms of trade shock (since the UK is a big net importer of gas), an overall price shock (with inflation likely to hit 20 per cent), and a contractionary shock to gross domestic product.
The distributional shock is the most important. According to ING, even with the measures already taken by the government, the cost of energy could rise from 12 per cent of household disposable income for the lowest decile in 2021, to 41 per cent between October 2022 and September 2023.
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Chip warfare: US-China tensions being ramped up in battle to be No.1
Senior business columnist
September 5, 2022 — 12.35pm
The world’s largest maker of artificial intelligence chips has found itself in the front line of a fresh push by the US to frustrate China’s ambition of overtaking the US to become the world’s technology superpower.
Last week, Nvidia disclosed (in a Securities and Exchange Commission filing) that the US government had imposed export restrictions on two of its most advanced chips, barring the company from exporting them to China or Hong Kong. Advanced Micro Devices (AMD) also revealed it had received a similar order.
While AMD said the impact of the ban was unlikely to be material, for Nvidia it seems it will be highly material, affecting about $US400 million ($590 million) of sales in the current quarter. It said it had been told the new licensing requirement was to reduce the risk the products might be used by China’s military.
The restrictions on the sales of advanced semiconductors – it appears Nvidia and others in the US will be able to continue to sell less sophisticated chips to China – follows the recent passage through Congress of the CHIPS Act, which provides more than $US52 billion of funding to boost domestic manufacturing of semiconductors in the US. Taiwanese and Korean chipmakers are now constructing manufacturing facilities in the US.
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https://www.afr.com/world/europe/how-and-when-the-ukraine-war-ends-20220904-p5bf79
How and when the Ukraine war ends
Democracies have given Ukraine just enough weapons not to lose. If free societies are serious about victory, it’s time to arm Ukraine to the teeth with planes, tanks and artillery. We must brace for a long struggle.
Misha Zelinsky Special correspondent
Updated Sep 5, 2022 – 7.04pm, first published at 5.01pm
The question most asked about the Ukraine war is when and how it ends.
The answer to “when” may be found in Ukraine’s new counteroffensive and the raging battle for Kherson.
Kherson, a strategic Black Sea port, was the first major city to fall to Russia. With bridges across the nearby Dnipro river destroyed, the estimated 25,000 Russians defending Kherson are effectively trapped in south-central Ukraine without supplies.
Ukraine hopes to gradually wear down these troops, forcing a surrender or panicked retreat. This would boost morale and show allies Ukraine can fight beyond dogged defence. Victory would also clear Ukraine’s Black Sea trade routes.
A Russian retreat would make defending occupied Crimea harder. Low Russian morale would completely sink.
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https://www.afr.com/world/europe/truss-vows-fast-action-on-cost-of-living-crisis-20220905-p5bfkf
New British PM Liz Truss vows to ‘govern as a Conservative’
Hans van Leeuwen Europe correspondent
Updated Sep 5, 2022 – 10.40pm, first published at 5.09pm
London | Liz Truss will become Britain’s new prime minister on Tuesday after winning the Conservative Party leadership election, vowing to cut taxes and follow conservative principles in tackling the country’s cost-of-living crisis.
On Monday the Conservatives announced Ms Truss had secured the votes of about 57 per cent of the party members who voted in the six-week membership ballot, against 43 per cent for former chancellor Rishi Sunak.
Having won what she called “one of the longest job interviews in history” to become party leader, she will on Tuesday become the 15th British prime minister of the Queen’s 70-year reign when she meets the monarch in Scotland to get her commission.
She vowed to “govern as a Conservative”, promising “a bold plan to cut taxes and grow our economy”.
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Putin has declared an all-out energy war on Europe
By Ben Marlow
September 6, 2022 — 8.23am
Russia’s disinformation machine has repeatedly struggled to put an alternative spin on the realities of its devastating war in Ukraine. But it was almost like the Kremlin couldn’t be bothered to come up with a credible explanation for a permanent halt to the flow of gas through the Nord Stream 1 pipeline to Europe on Friday night.
Even German industrial giant Siemens, which oversees maintenance of the pipeline, was quick to rubbish Russia’s claims that repair work couldn’t be carried out.
The whole world understands what’s happening - in closing one of the most important gas supply routes to Europe just hours after the G7 group of countries unveiled plans to impose a price cap on Moscow’s oil exports, Vladimir Putin has pre-empted the West and declared an all-out energy war.
The German economy ministry, along with its French counterparts, was quick to point out that the EU has been hastily preparing for life without Russian hydrocarbons ever since it became clear Putin was willing to weaponise Russian energy exports.
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New British prime minister Liz Truss inherits a poisoned chalice
By Rob Harris
September 5, 2022 — 12.41pm
London: Different jockey, same horse. It is hard to see what new tricks Liz Truss has up her sleeve.
The UK’s ruling Conservative Party, which came to power 12 years ago on a promise to fix a “broken Britain”, has eaten up and spat out three prime ministers and now presents the next an unenviable poisoned chalice.
While there have been Conservative achievements along the way and, of course, the polarising Brexit has undeniably restored a sense of sovereignty if not any economic dividend, it is hard to argue things are in a better place more than a decade on.
Britain’s new prime minister inherits a basket case of an economy and a looming energy crisis that will likely define their tenure, as short or as long as that might be.
She has a little more than two years to convince voters she has more ideas than that the cabinet she’s been a part of for more than eight. But any focus on winning an election in December 2024 would be a gross disserve to a nation which is, right now, sleepwalking into chaos.
Truss has been handed an economy that is forecast to go into a long recession later this year with inflation at a 40-year high and limits on the options for getting growth going again.
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https://www.afr.com/policy/economy/challenges-for-truss-would-test-the-best-20220905-p5bfmh
Challenges for Truss would test the best
New British Prime Minister Liz Truss will need to show her own courage in fiscal management of debt and the budget if she is to keep the confidence of the financial and currency markets.
Sep 6, 2022 – 7.34pm
Liz Truss is the new leader of Britain’s Conservatives and the country’s prime minister after winning a majority of the 140,000 party members in a contest so underwhelming that the disgraced Boris Johnson would have easily won, had he been standing.
The task among Britain’s real voters is even harder. The Conservatives trail Labour by the biggest polling margin in a decade, putting at risk the 80-seat majority won less than three years ago, with an election due in 2024.
Britain is suffering an economic double-whammy, with the worst inflation outlook of its G7 peers as it is hit by both a similar post-pandemic hollowing of the labour force to the US, and the energy shock shared with the rest of Europe – with the latter the most immediate danger.
Ms Truss is considering a freeze on the next round of price rises planned for October, with public funding from borrowed money to compensate the energy suppliers at a cost greater than the pandemic furlough.
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Truss vows to turn Britain into an ‘aspiration nation’
Hans van Leeuwen Europe correspondent
Sep 7, 2022 – 3.47am
London | New British Prime Minister Liz Truss has vowed to unveil an energy-price freeze this week and turn the country into an “aspiration nation” through tax cuts, economic reform and infrastructure spending.
After receiving her commission from the Queen on Tuesday, she gave a soberly delivered speech on the steps of Downing Street - a marked contrast to the earlier valedictory rhetoric of her voluble and hyperbolic predecessor, Boris Johnson.
Before going indoors to start naming her cabinet, she said she would this week announce measures to stave off huge increases in household energy bills. Media reports have suggested this could include a two-year price freeze costing more than £100 billion ($170 billion).
Her first appointment was to elevate Kwasi Kwarteng, the business and energy secretary under Mr Johnson, to the post of chancellor - the equivalent of Australia’s treasurer, who lives and works next door to the PM at No. 11 Downing Street.
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https://www.afr.com/world/europe/new-uk-pm-drafts-222b-plan-to-freeze-energy-bills-20220906-p5bfwn
New UK PM drafts $222b plan to freeze energy bills
Alex Wickham
Sep 6, 2022 – 5.31pm
London | Incoming Prime Minister Liz Truss has drafted plans to fix annual electricity and gas bills for a typical UK household at or below the current level of £1971 ($3300).
In discussions with her team and government officials, Ms Truss has settled on a mechanism that will avert the massive increase in energy bills that is due to kick in at the start of next month under the existing pricing system, according to officials and advisers to Ms Truss who were briefed on the plan.
The policy could cost as much as £130 billion ($222 billion) over the next 18 months.
Energy bills in the UK were due to jump 80 per cent from October to £3548 a year for the average household, forcing many poorer families to choose between heating their homes and other basics.
Under the plans drawn up by Ms Truss’ team, that pricing regime will effectively be abolished, and the energy regulator Ofgem will be sidelined. Instead, ministers will set a new unit price that households will pay for electricity and gas, the people said.
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Ukraine’s southern offensive signals new stage of brutal combat
Military leader and strategist
September 6, 2022 — 7.30pm
A new phase of the Ukrainian campaign to take back its territory in the south has commenced. There have been inklings of the Ukrainians’ intent to step up their activities in that area for several months. Statements from government officials, small-scale attacks across the front line in Kherson, partisan activities and deeper strikes on Russian supply, transport and command hubs have provided signals that Ukraine would eventually undertake wider operations to take back this decisive region.
However, a week into this new stage of fighting, the situation remains unclear. The Ukrainians claim to have liberated several settlements, but a blanket of operational security has obscured clarity on exactly which of the belligerents is making progress where.
What we do know is that fighting is taking place on multiple axes across a 240-kilometre-long front line. This is equivalent to a line from Tweed Heads to Noosa Heads. And the battlefield stretches beyond the Kherson region and well into Russian-occupied Crimea. No single commander or organisation has complete visibility of what is occurring over such a large part with many tens of thousands of soldiers engaged.
We can surmise that the Ukrainian objective for this operation is to push the Russians back across the Dnipro River into eastern Kherson. The Ukrainians need to take back their territory. At the same time, they need to hurt the Russians, break their forces and send a message to Putin and the Russian people about the futility of their invasion.
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Nowhere to hide: A 40-year bull market has ended in a sea of red ink
Senior business columnist
After a 40-year bull market, investors in government bonds and other fixed interest securities are now experiencing their first bear market and the biggest losses in the bond market since the 1970s.
The Bloomberg Global Aggregate Total Return Index of government and blue-chip corporate bonds has slumped 20.75 per cent from its peak at the start of January last year, meeting the commonly accepted definition – a fall of 20 per cent or more – of a bear market in shares or bonds. It is the first fall of that magnitude in the more than 30-year history of the index, which was first published in 1990.
Bond prices have fallen as interest rates around the world have risen – there is an inverse relationship between the value of bonds and their yields, with prices falling as yields rise – generating both paper and real losses for traders and investors.
In 2018 it appeared that the bond market - the marketplace for government and corporate debt - was on the cusp of a bear market before the US Federal Reserve, which had started lifting US interest rates for the first time since the global financial crisis, blinked in the face of market tantrums and reversed course.
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Can Britain’s Conservatives find their way again under Liz Truss?
The Wall Street Journal
7:45PM September 6, 2022
Inflation may not be transitory but being leader of the UK surely is. For the third time in six years Britain has a new prime minister. A pace of turnover that superior Brits once sneered at as reflecting Balkan-level instability is now routine for Her Majesty’s government.
Margaret Thatcher lasted more than 11 years in 10 Downing Street; Tony Blair managed a decade. Neither was ever rejected by the British people in that quaint exercise in popular democracy known as a general election.
Both won thumping majorities three times and then succumbed to the impatience and ambition of parliamentary colleagues who, in their wisdom, ousted them mid-term and replaced them with nonentities who were — sooner or later — rejected at the polls.
Will the latest gamble pay off any better? Having removed Boris Johnson in the early northern summer amid angst about his disorderly behaviour, Conservative Members of Parliament hope a change at the top will see them through one of the most challenging periods any British leader has faced.
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Liz Truss must keep an open mind if she wants to stay in Number 10
The UK’s new prime minister is famously a political shape-shifter. The best thing she could do now is dump the rigid Thatcherite program she propagated to win Conservative Party approval.
Jim O'Neill Columnist
Sep 7, 2022 – 1.37pm
With Conservative Party members having chosen foreign secretary Liz Truss to succeed Boris Johnson as their leader, Britain will have its third prime minister since voters decided in June 2016 to leave the European Union.
Truss has just two years and a few months to go before another general election must be held. To survive, she will need to tackle a long list of policy challenges, unify her deeply divided party, and win over more of the public.
Given that her predecessor was ousted 2½ years after winning an 80-seat majority, her task will not be easy.
In courting the Conservative Party’s 180,000-odd members, Truss presented herself as a modern-day Margaret Thatcher, advocating lower individual and business taxes and less regulation – the classic centre-right recipe for boosting economic growth. But since there are many more immediate issues facing the UK population, it remains to be seen whether she will, can, or even should follow through on these promises.
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https://www.afr.com/world/europe/europe-can-and-must-win-the-energy-war-20220907-p5bg16
Europe can – and must – win the energy war
How Europe responds to this crisis will shape its immediate and longer-term future. It must resist Vladimir Putin’s blackmail. It must adjust, co-operate and endure. That is the heart of the matter.
Martin Wolf Columnist
Sep 7, 2022 – 10.03am
“Europe will be forged in crisis and will be the sum of the solutions adopted for those crises.” These words from the memoirs of Jean Monnet, one of the architects of European integration, echo today, as Russia closes its main gas pipeline. This is surely now a crisis.
Whether Monnet’s optimistic perspective prevails, we do not know. But Vladimir Putin has assaulted the principles on which postwar Europe was built. He simply has to be resisted.
Energy is a vital front in his war. It will be costly to win this battle. Yet Europe can and must free itself from Russia’s chokehold. This is not to underestimate the challenge. Capital Economics argues that at today’s prices, the worsening of the terms of trade would amount to as much as 5.3 per cent of Italy’s gross domestic product over a year and 3.3 per cent of Germany’s.
These losses are bigger than either of the two oil shocks of the 1970s. Moreover, this ignores the disruption to industrial activity and the impact of soaring energy prices on poorer households.
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‘We will not supply anything’: Putin, in defiant speech, threatens Western gas and grain supplies
By Mary Ilyushina
September 8, 2022 — 5.34am
Russian President Vladimir Putin on Wednesday called Western sanctions “stupid” and threatened to halt all energy sales to Russia’s critics if they move forward with a cap on oil prices proposed by the Group of Seven industrialised economic powers.
“We will not supply gas, oil, coal, heating oil - we will not supply anything,” Putin said, in a defiant speech at the plenary session of the Eastern Economic Forum, which was being held in the city of Vladivostok in Russia’s Far East. Putin added that Moscow will let “the wolf’s tail freeze” in reference to a famous Russian fairy tale.
But in the West’s own defiant rejoinder, European Commission President Ursula von der Leyen on Wednesday reiterated that the European Union intends to break Russia’s grip on global energy markets and would press ahead with not only the cap on oil prices but on gas prices as well.
“Not only because Russia is an unreliable supplier, as we have witnessed in the last days, weeks, months, but also because Russia is actively manipulating the gas market,” von der Leyen told reporters in Brussels. “I am deeply convinced that with our unity, our determination, our solidarity, we will prevail.”
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Best way to avoid war is to arm Taiwan
12:00AM September 8, 2022
Our Taiwan debate has been marred by two misperceptions and one fallacy.
The first misperception is that war over Taiwan is improbable. This proposition is harder to sustain as Beijing continues to ratchet up pressure on Taipei.
Flying drones over small islands controlled by Taiwan is the latest in a long line of Chinese provocations and another step on the ladder of escalation that significantly increases the risk of military conflict.
Taipei has been remarkably restrained until now. But the administration of Tsai Ing-wen couldn’t allow the drones to fly uncontested over its territory without challenge. Its four-step response protocols have been measured: fire warning flares, report the incursion, expel the drone and shoot it down only as a last resort.
Last week, Taiwan’s patience finally ran out. Its armed forces shot down an infringing Chinese drone over Kinmen island.
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Elizabethan era comes to an end, as Queen dies aged 96
Hans van Leeuwen Europe correspondent
Sep 9, 2022 – 3.57am
London | Queen Elizabeth II has died aged 96, ending the longest monarchical reign in British history and removing the political bedrock that has buttressed Britain’s postwar era.
The Queen passed away at Balmoral Castle in Scotland on Thursday afternoon (Friday AEST), where she had been spending the summer, with her heirs and close family present at the castle.
Her death, after 70 years on the throne, has triggered a period of official mourning, before a state funeral expected in just over a week’s time.
All flags on public buildings will move to half-mast, government business is suspended, and official websites and social media accounts are wreathed in black.
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Charles III takes the throne immediately, leads public mourning
Hans van Leeuwen Europe correspondent
Sep 9, 2022 – 4.02am
London | Charles has become king, and Australia’s head of state, immediately upon the Queen’s death, and will be known as King Charles III.
The 73-year-old will be formally proclaimed as the new British sovereign on Saturday, in a ceremony attended by black-clad ministers and other dignitaries.
After that a proclamation confirming him as King Charles III will be read at St James’s Palace, his current official residence, and at the Royal Exchange in the City of London. His heir, Prince William, will kiss his hand.
The formal coronation at Westminster Abbey, with all its pageantry, pomp and ceremony, will take place in a few months.
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Truss unfurls $255b plan to freeze energy bills, ramp up fossil fuels
Hans van Leeuwen Europe correspondent
Sep 8, 2022 – 11.32pm
London | British Prime Minister Liz Truss has unveiled a £150 billion ($255 billion) plan to freeze household energy prices for two years and ramp up fossil fuel production, as she tackles a crisis that has threatened to spin out of control.
Ms Truss has gambled that markets will accept the debt-fuelled public spending splurge, with its potential effects on inflation and interest rates, as the price of buying some political and economic stability.
She also launched a review of Britain’s target to reach net zero carbon emissions by 2050, saying the government’s climate goals needed to take account of “the altered economic landscape”.
The government will rapidly expand drilling for oil and gas in the North Sea, and will scrap former prime minister Boris Johnson’s moratorium on fracking for onshore shale gas.
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https://www.afr.com/world/north-america/why-the-cult-of-trumpism-will-endure-20220905-p5bfk4
Why the cult of Trumpism will endure
The former US president took control of a party that was already in turmoil but he has set precedents that could long outlast his lifetime, including an unwillingness to accept election results.
Michael Hirsh
Sep 9, 2022 – 5.00am
Let the world beware: Trumpism was a long time coming, and it will be a long time going. It threatens to haunt us so far into the future that, by the time it’s gone, what US President Joe Biden calls “the American experiment” may no longer be recognisable – or even salvageable.
That’s the most reliable conclusion we can draw from the malign spectacle of the last 20 months since former president Donald Trump was dragged kicking and screaming out of the White House, after he sought to destroy what was left of the US constitutional order by fomenting a mob eager to hang his vice president (with Trump’s endorsement).
And nothing Trump’s successor, Biden, has done seems to have vanquished the Trump spectre; on the contrary, Biden has co-opted much of Trump’s populist “America First” agenda even as he recently condemned Trump’s movement as “semi-fascism”.
Similarly, very little that has come out of the congressional hearings around the January 6, 2021, insurrection, scheduled to resume in September, appears to be changing the minds of Trump’s millions of supporters.
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Britain’s new leader ‘revels in controversy and provoking people’
Awkward Liz Truss has little of Boris Johnson’s charisma. Rather, she scaled the party’s ranks with what colleagues describe as nerve, drive and an appetite for disruptive politics.
Mark Landler
Sep 6, 2022 – 12.39pm
In 1994, a passionate 19-year-old Oxford student, Elizabeth Truss, called for a referendum to abolish the British monarchy, telling an audience of fellow Liberal Democrats, “We do not believe that people should be born to rule.”
On Tuesday, Truss will travel to a Scottish castle to be anointed by Queen Elizabeth II as Britain’s new prime minister, completing a political odyssey from rabble-rousing republican to tradition-cloaked leader of the Conservative Party.
Truss, now 47 and known as Liz, long ago pivoted to embrace the monarchy as being good for British democracy, just as she long ago abandoned the Liberal Democrats for the Conservatives. More recently, she switched sides on Brexit, opposing the drive for Britain to leave the European Union before the 2016 referendum, then reversing course to become one of its most ardent evangelists.
Her ideological dexterity – critics would call it opportunism – has helped propel Truss to the pinnacle of British politics. How well it will prepare her for the rigours of the job is another question, given the dire economic trends enveloping the country, and a Tory party that seems torn between desire for a fresh start and regret about tossing out her flamboyant, larger-than-life predecessor, Boris Johnson.
By her own admission, Truss has little of Johnson’s charisma. Awkward where he is easygoing, staccato where he is smooth, she nevertheless scaled the party’s ranks with what colleagues describe as nerve, drive and an appetite for disruptive politics. When Johnson fell into trouble last year, she positioned herself adroitly, never publicly breaking with him while burnishing her leadership credentials as a hawkish foreign secretary.
“She has so much confidence in her instincts,” says Marc Stears, a political scientist who tutored Truss when she was at Oxford. “She is willing to take risks and say the kinds of things that other people aren’t willing to say. Sometimes, that works for her; other times, it hurts her.”
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https://www.smh.com.au/business/the-economy/the-world-is-getting-less-flat-20220907-p5bg0b.html
The world is getting less flat
By Paul Krugman
September 9, 2022 — 7.00am
Remember the Trump trade wars? Actually, many of the tariffs that Donald Trump imposed are still in place — less, I suspect, because Joe Biden thinks they were justified than because giving Republicans an excuse to accuse his administration of being soft on China doesn’t seem like a good idea. But in any case, trade issues are currently being overshadowed by everything from inflation to the war in Ukraine.
Under the radar, however, some of what Trump wanted but failed to achieve — a return of manufacturing to the United States, for instance — may actually be happening under his successor. A recent Bloomberg review of CEO business presentations finds a huge surge in buzzwords like onshoring, reshoring and nearshoring, all indicators of plans to produce in the United States (or possibly nearby countries) rather than in Asia.
There has also been a flurry of news reports, backed by some flaky data, suggesting that companies really are building new manufacturing facilities in the United States and other high-income countries.
So we may be seeing early indications of a partial retreat from globalisation. This isn’t necessarily a good thing, but that’s a topic for another day. For now, let’s talk about why this may be happening.
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A surging US dollar risks rattling the global economy
By Mohamed A. El-Erian
September 9, 2022 — 8.08am
As US markets were closed to mark the Labor Day holiday, the dollar index surged to a new three-decade high.
This is a reminder that the dollar is a relative, rather than an absolute, price — that is, it measures the value of the dollar relative to other currencies. But this also signals that while the US is likely to outperform other countries in most global macroeconomic scenarios for the year ahead, policy makers and market participants still need to keep a close eye on what’s going on elsewhere in the world, as global events will have a meaningful impact on the overall wellbeing of the US.
On Monday, the DXY dollar index appreciated to a level not seen since 2001. The move was driven by broad-based weakness in other currencies, with particularly notable moves against Sterling (which hit a new record low against the dollar) and the Euro (which traded below 0.99 to the dollar).
The major driver of dollar strength was yet another disruption to the European gas market as Russia announced an extension to the shutdown of the Nord Stream pipeline. Gas prices opened the European trading session 25 per cent higher than Friday’s before moderating somewhat. With Russia weaponising gas supplies in reaction to the West restricting its access to the international payments system and formulating energy price caps, a highly damaging total shutdown of supplies in the months ahead has become an alarmingly real, if not highly likely, possibility.
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https://www.journalofdemocracy.org/why-ukraine-will-win/
Why Ukraine Will Win
September 2022
The war in Ukraine, now in its seventh month, marks a critical juncture that will determine the course of global democracy. There are three important points to be made about its significance.
First is the question of why the war occurred in the first place. The argument was made, even before the Russian invasion, that Vladimir Putin was being driven by fear of NATO expansion and was seeking a neutral buffer to protect his country. While Putin doubtless disliked the idea that Ukraine could enter NATO, this was not his real motive. Ukrainian membership was never imminent. NATO expansion was not a plot hatched in Washington, London, or Paris to drive the alliance as far east as possible. It was driven by the former satellites of the former USSR, which had been dominated by that country since 1945 and were convinced that Russia would try to do so again once the balance of power turned to Russia’s favor. Putin, moreover, has explained very clearly what was at stake. In a long article written in 2021 and in a speech on the eve of the invasion, he castigated the breakup of the Soviet Union and asserted that Russians and Ukrainians were “one people” artificially separated. More broadly, Russian demands in the leadup to the war made it very clear that Moscow objected to the entire post-1991 European settlement that created a “Europe whole and free.” Russian war aims would not be satisfied by a neutral Ukraine; that neutrality would have to extend across Europe.
The real threat perceived by Putin was in the end not to the security of Russia, but to its political model. He has asserted that liberal democracy didn’t work generally, but was particularly inappropriate in the Slavic world. A free Ukraine belied that assertion, and for that reason had to be eliminated.
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The US-guided rockets helping Ukraine destroy Russian forces
John Ismay
Sep 10, 2022 – 10.33am
Of the billions of dollars in weapons the White House has shipped to Ukraine since the Russian invasion, perhaps none have attracted as much attention as the M142 HIMARS, an advanced rocket launcher that Ukrainian troops have used to devastating effect.
HIMARS, short for High Mobility Artillery Rocket System, is a 5-ton truck that can fire long-range guided rockets. The Pentagon announced it was sending the first of four launchers to Kyiv, Ukraine’s capital, at the beginning of June, about six weeks after it started providing 155 mm howitzers and ammunition.
Since then, the United States has sent Kyiv a total of 126 such howitzers and authorised shipments of up to 807,000 rounds of ammunition for them to fire.
Ukraine now has 26 advanced mobile launchers that can fire rockets even farther than those howitzers can — 16 HIMARS vehicles from the United States and 10 older American-made M270 launchers that Britain and Germany provided.
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Queen Elizabeth made monarchy palatable to the modern age
History will record that the Queen’s self-discipline and devotion to duty most probably saved the crown from the tidal forces of the 20th century.
David Von Drehle
Sep 9, 2022 – 3.52pm
The sun has finally set on the British Empire. Its last rays were embodied in the steadfast person of Queen Elizabeth II. Hers was the longest reign in British history, during which the country struggled to find its post-colonial identity.
Ten days of ceremonies will mark her passing – no one outdoes the English on ceremony – during which everything that can be said will be said of the Forever Queen. Here, while the news is still news, are a few brief observations on the person, the historical figure and the symbol that was Elizabeth Windsor.
We often think of duty in the context of a particular moment: the soldier in battle, the first responder in an emergency, the citizen in the jury box. The Queen’s entire life was a duty fulfilled. She first appeared on the cover of Time magazine in April 1929, a public figure at three years old. You might think the palaces and courtiers and jewels were ample compensation. But consider all the people around her who saw the royal life up close and wanted out. Her uncle abdicated the throne. Her children chafed under the scrutiny. A grandson decamped to Hollywood and bared his soul to Oprah.
Each wished in some way to have a life apart from royal duty. They wanted it to be a job, not an identity. They wanted to be individuals, with passions and quirks and the occasional bad day. Elizabeth understood her duty to efface herself in service to a highly abstract role: The Queen. The same tomorrow, the same next year, the same more than 70 years after she began.
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https://www.afr.com/world/europe/russia-confirms-retreat-of-thousands-of-troops-20220911-p5bh3l
Russia confirms retreat of thousands of troops
Bloomberg News
Sep 11, 2022 – 8.04am
Thousands of Russian troops retreated in the face of a lightning Ukrainian offensive in the Kharkiv region that threatens to derail the Kremlin’s bid to cement control of Ukraine’s east.
A local Moscow-backed official and pro-Russian military bloggers said Kremlin forces had pulled out of Izyum, a staging post for the campaign in Donbas, to avoid being encircled.
Russia’s defence ministry confirmed the pullout from Izyum and other areas in a statement from Moscow, describing the move as necessary to bolster forces in the eastern Donetsk region. Ukrainian President Volodymyr Zelensky said the Russian forces were making “a good decision” to leave the area, according to a video released by his office on Saturday.
The news came hours after Ukrainian officials announced the seizure of Kupyansk, a logistical and transit hub for Russian troops fighting in the east, and the recapture of other occupied territory in the northern Kharkiv region earlier this week.
Ukraine’s defence ministry also tweeted a photo it said was of the liberation of Balakliya, to the southwest of Kupyansk, with troops shown raising a Ukrainian flag in the town centre.
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I look forward to comments on all this!
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David.
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