October 27, 2022 Edition
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In the UK we have a political farce running with only a day or so to run when you read this, with a new PM (Rishi Sunak) in place..
In the US the mid-term elections are coming in a week or so, thus some concern as to where the US is going!
In China Xi has his third 5 year term so we all wonder how that will turn out!
In OZ we have
has a Budget with floods, inflation, data leaks, the threat of recession,
Medicare concerns and other issues just rolling on! At least the Budget does not seem to have broken anything!
Overall an ‘omnishambles’ as they say!
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Major Issues.
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Pensions drama sparks call for rethink of $2.9trn market
The turmoil created by UK pension funds has prompted a call to look at their regulation.
William Shaw and Greg Ritchie
Oct 16, 2022 – 2.34pm
Pressure is growing for a sweeping rethink of Britain’s pension fund regulation after the sector’s near-implosion wreaked havoc across financial markets and helped bring about a humiliating government retreat.
Pensions were caught on the hop by rapidly rising gilt rates after the government’s mini-budget last month, forcing them into a wave of asset sales. The Bank of England stepped in to contain what it saw as “fire sale dynamics” – an emergency measure that is already prompting questions about why a huge but hitherto sleepy corner of the financial sector could spiral in this way.
At the heart of the turmoil were funds using liability-driven investments (LDIs), a form of financial engineering to match pensioners’ guaranteed income, known as defined benefit (DB), with long-term returns. In attempting to solve the funding gaps that have felled UK pension plans in the past, the web of investments and hedging tactics created a short-term liquidity crunch and mark-to-market losses of as much as £150 billion ($270 billion).
Kwasi Kwarteng, the chancellor whose spending plans marked the start of the sell-off, was sacked on Friday after just five weeks in the job. New oversight, accounting reforms or a closer look at the role of trustees could all be in play as the sector picks up the pieces from the past few weeks of chaos.
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‘Nowhere to hide’: super funds prepare for pending cash crunch
Jonathan Shapiro and Emma Rapaport
Oct 17, 2022 – 5.00am
Australia’s largest superannuation funds say they are stockpiling cash and stress testing their solvency amid an escalating offshore pension fund crisis and a global shift toward owning safer assets.
Local superannuation funds have been watching United Kingdom’s pension funds desperately scramble to sell assets, including bonds, Australian mortgage backed securities and global equities to meet margin calls. This has been triggered by margin calls relating to the hedging strategies UK funds put in place to protect them from falling interest rates.
Australian super funds do not have the same liability risk as UK funds, which are mostly based around “defined benefits”, meaning UK funds have to be matched to the expected payouts to members in retirement.
But Australia’s “defined contribution” funds have also engaged in hedging strategies, mostly to protect themselves from a rising Australian dollar reducing the value of their US dollar holdings, which can require them to stump up cash on short notice.
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Investors brace for more market mayhem
Shareholders are left clutching at straws as they try to decipher some form of coherent pattern in last week’s gyrations on Wall Street.
Karen Maley Columnist
Oct 16, 2022 – 5.56pm
Were last week’s wild market swings the advance tremors from a looming market shock? Or were they merely the violent moves that often occur at a market bottom?
A sense of unease has settled on markets as investors struggle to decipher reasons for the seemingly irrational moves.
US share and bond markets initially plunged in response to the disappointing US inflation reading for September. Investors were particularly unnerved by the “core” index – which excludes volatile food and energy costs – which climbed 6.6 per cent in the year to September, the fastest pace in four decades.
Investors quickly concluded that the painful inflation reading meant there was little prospect the US Federal Reserve would relax its planned rate rises.
Indeed, there was now a distinct likelihood the Fed would now hike interest rates by 75 basis points at both its November and December meetings.
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Super funds face more stress testing as markets stir
6:58PM October 16, 2022
The financial regulator plans to shortly release its final version of a new set of rules requiring super funds to lift their game on how they value their unlisted holdings while developing more thorough and regular stress tests for their massive investment portfolios.
The finishing touches to the swath of rules being developed by the Australian Prudential Regulation Authority come as extreme pressure is being placed on major UK pension funds given bond market turmoil there. Following the collapse in UK bond values sparked by the release of the Conservative government’s mini budget last month, funds there have been forced to dump assets to find cash to pay out their “liability-driven investing” strategies.
Thankfully Australian super funds have been able to sidestep the worst of the bond market turmoil. Unlike the UK, there are rules already in place here that restrict the use of leverage at the fund level to power investment strategies. But the stresses in recent weeks are expected to shine a light on how super funds have been working with private equity in recent years to launch buyouts.
The new super standards will be released in coming weeks and after more than a year in development APRA hopes to have them in place by the start of January. Among measures they will force super funds to more frequently value their holdings in unlisted assets such as tech start-ups to infrastructure.
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Veteran investor and former chair of ANZ, Woodside Charles Goode warns of the threat of stagflation to global economy
October 18, 2022
Investment veteran and former ANZ and Woodside chairman Charles Goode has warned the global economy now appeared to be stuck in a period of stagflation and that demands for higher wages, fuelled partly by full employment, will kickstart a protracted cycle of rising prices.
Mr Goode said he found it difficult to be optimistic for the year ahead and has characterised his investment approach in this environment as a “Rip Van Winkle” theme, referring to the 19th century short story of an American who falls asleep for 20 years and wakes up to a very changed world.
Addressing shareholders of listed investment company Australian United Investment Company in Melbourne on Tuesday, Mr Goode said at last year’s AGM he warned shareholders about the dangers of stagflation, runaway asset prices and the investor frenzy around tech stocks.
“Unfortunately, each of these broad risks has grown in importance during the year,” the Australian United Investment chairman said on Tuesday morning.
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Give overseas students more roads to permanent residency: think tank
Julie Hare Education editor
Oct 18, 2022 – 6.18pm
International students who stay in full-time work for four years following graduation should have a clear pathway to permanent residency which would both boost Australia’s desirability as a destination and go a long way to addressing chronic skill shortages.
Skilled occupation lists should be abandoned and replaced with a salary threshold, according to a key lobby group.
And all students who complete a bachelors degree or above should automatically have the right to four years of work following graduation, not just those who have a degree in an occupation deemed to be in areas of skills shortage, says the Committee for Sydney.
“There is a public perception that sometimes that international students are just there to make universities economically viable, and I guess there are merits to some of that thinking,” said Ehssan Veiszadeh, deputy CEO and head of strategy for the Committee for Sydney.
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Where to invest when the Aussie dollar is falling
Alex Gluyas Markets reporter
Oct 19, 2022 – 5.00am
The swift decline of the Australian dollar is causing investors to reconsider how they position their portfolios as the surging greenback wreaks havoc across financial markets.
The local currency hit a fresh 2½-year low of US61.69¢ last week, with BetaShares warning on Monday that it could fall to US58¢ in the next three to six months. Meanwhile, the US Dollar Index sits around 112.11, just shy of the 20-year high of 114.78 it touched late last month.
Like most major currencies, the Aussie has suffered at the hands of the US dollar’s rally, with fears that a hawkish Federal Reserve will tip the economy into recession, enhancing the greenbank’s appeal as a safe haven asset.
With the US central bank firmly on track to deliver another 0.75 percentage point rate rise in November following a hotter-than-expected inflation print last week, strategists are warning investors that there could be further pain to come for the local currency.
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Australia, Japan to boost military ties in Joint Declaration on Security Co-operation
October 19, 2022
Australia and Japan will announce an “epoch making” agreement to strengthen intelligence sharing and enhance the interoperability of military capabilities in response to a more aggressive Beijing and an increasingly dangerous strategic outlook in the Asia Pacific.
Japanese Prime Minister Fumio Kishida will sign the new agreement when he meets Anthony Albanese in Perth on Saturday, officially updating the Joint Declaration on Security Co-operation finalised in 2007 between then prime ministers John Howard and Shinzo Abe.
Japanese ambassador to Australia Shingo Yamagami told The Australian on Wednesday the upgrade was “epoch making” and would help shape relations between the two nations for the next decade, with negotiations on the new agreement having taken place over the past two years.
“Of course there have been tremendous changes in our security environment facing our two countries (since 2007), not to mention China’s rapid military build-up and their repeated attempts to change the status quo by force,” Mr Yamagami said. “So we have to come up with an updated version of this joint declaration.”
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Australia’s unemployment rate steady at 3.5pc in September
October 20, 2022
The unemployment rate held steady last month at 3.5 per cent, according to figures from the Australian Bureau of Statistics released on Thursday.
ABS head of labour statistics Bjorn Jarvis said: “With employment increasing slightly, by around 1,000 people, and the number of unemployed increasing by 9,000, the unemployment rate rose by less than 0.1 percentage point but remained at 3.5 per cent in rounded terms.”
The seasonally adjusted unemployment rate rose to 3.6 per cent for women (up 0.1 percentage point) and remained steady for men at 3.5 per cent.
The participation rate remained steady at 66.6 per cent, in seasonally adjusted terms, consistent with the relatively small changes in employment and unemployment.
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Cost of stage 3 tax cuts blows out to more than $250bn
NCA NewsWire
October 20, 2022
Jim Chalmers has revealed the cost of the stage 3 tax cuts has blown out by $11bn.
The Treasurer said on Thursday the latest Treasury costing of the policy had jumped from $243bn over a decade to $254bn.
Dr Chalmers made the revelation on ABC Radio National, five days before he hands down his first federal budget.
The revelation is likely to reignite debate over the equity of the tax cuts for workers on higher incomes at a time when the budget is facing considerable strain.
The cuts, which are due to come into effect in July 2024, would mean no one earning up to $200,000 a year will pay more than 30 cents of the dollar in tax.
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Wong says timing of West Jerusalem announcement ‘deeply regrettable’
October 20, 2022 — 7.10pm
Foreign Minister Penny Wong has apologised to the Jewish community for the way the federal government revealed its decision to no longer recognise West Jerusalem as Israel’s capital, saying the timing of the announcement was “deeply regrettable”.
The opposition urged Prime Minister Anthony Albanese to call his Israeli counterpart Yair Lapid to apologise for the way the decision was handled.
In an opinion article for The Australian Jewish News, Wong said she understood there were “few issues more central for many Jewish people than the status of Jerusalem”.
“It is more than a political issue,” she wrote. “It is definitional. It is about history, faith, identity.”
As Albanese did a day earlier, Wong defended the substance of the government’s decision but said it could have been handled better.
“I regret that the shift away from Australia’s longstanding position, and the shift back this week, have been distressing for communities that have a deep-rooted and keenly felt stake in the cessation of conflict, particularly the Australian Jewish community,” she said in the piece, published on Thursday.
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Medibank shares to stay in halt as EnergyAustralia reveals breach
Ayesha de Kretser and Paul Smith
Oct 21, 2022 – 2.46pm
Medibank has asked for its shares to stay halted while it determines the extent of the damage from a breach that compromised customers’ sensitive health data, as EnergyAustralia revealed it was hit by a data breach nearly a month ago.
Federal Environment Minister Tanya Plibersek said the Medibank attack was clearly concerning and distressing for customers, but showed it was incumbent on companies to step up their cyber defences.
“I think it’s a very strong message to businesses that they have a responsibility to protect the data of their customers,” she told ABC News on Friday.
EnergyAustralia said a breach that occurred on September 30 had resulted in “unauthorised access” to 323 customers’ information, including household and small business names, addresses, email addresses, electricity and gas bills, phone numbers and the first six and last three digits of credit cards.
But it said the breach did not include documents that can be used to commit identity fraud like passports and driver’s licences, or bank details.
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From Westminster to Canberra, zombie ideas are out
The Truss horror show happened because conservatives stick with ideas that are not working for voters, even when ideology says they should be.
Laura Tingle Columnist
Oct 21, 2022 – 4.33pm
The most dangerous condemnations of a politician, and the most dangerous jokes, usually come out of their own mouths.
So while the shortest lived prime ministership in British history may have come to an end on Thursday among lots of hilarity about how a lettuce had lasted longer than Liz Truss, it was her nomination earlier this month of “Blank Space” as her favourite Taylor Swift song that gave the UK’s Channel 4 the backdrop to the montage with which it ended the news – and farewelled a British prime minister that night.
Why any politician would want to be associated with the notion of a “blank space” is hard to fathom. But there was much about Truss’ premiership that was hard to fathom.
But watching it from here, it was probably just the latest episode in the long horror show that has become Conservative politics in Britain which may have come as something of a relief, in that it means our politics of recent years doesn’t look quite so terrible.
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https://www.afr.com/politics/federal/inflation-to-stay-higher-for-longer-chalmers-20221021-p5brol
Inflation to stay higher for longer: Chalmers
Oct 21, 2022 – 10.30pm
High inflation will stay above the Reserve Bank of Australia’s target band for a year longer than expected, but Treasurer Jim Chalmers has warned not to expect additional help with the cost of living when he hands down his first budget on Tuesday.
This is despite revenue being more than $100 billion higher over four years than thought.
The treasurer said pouring more money into the economy beyond that already promised before the election would only further exacerbate inflation, and it made more sense to dedicate the revenue surge to reducing the deficit.
“The definition of responsible is what happens to these revenue upgrades,” he told AFR Weekend.
“And our overwhelming priority when it comes to these revenue upgrades has been to ensure that they improve the budget position at a time when inflation is at its most threatening.”
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Jim Chalmers goes after the wealthy and corporates in tax crackdown
The Albanese government will crack down harder on tax abuse by companies and the rich in an effort to raise at least $3 billion extra for the federal budget.
John Kehoe Economics editor
Oct 21, 2022 – 10.30pm
The Albanese government will crack down harder on tax abuse by companies and the rich in an effort to raise at least $3 billion extra for the federal budget.
Treasurer Jim Chalmers said the budget on Tuesday would include tougher tax compliance measures to be imposed by the Australian Taxation Office.
“There will also be in the budget some additional tax compliance measures in the field on programs began by our predecessors,” Dr Chalmers said in a pre-budget interview.
The tax crackdown implements Labor’s election policy to collect a forecast $3.1 billion over four years by ramping up the ATO’s tax avoidance taskforce on multinationals, large corporates and wealthy individuals.
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https://www.smh.com.au/national/honeymoon-nears-the-end-for-kumbaya-pm-20221019-p5br47.html
Honeymoon nears the end for kumbaya PM
Political and international editor
October 22, 2022 — 5.00am
Anthony Albanese promised again and again to “unite the nation, not divide it”. And for a magical moment – a moment lasting for weeks and then months – it seemed true.
Of course, the opposition started carping about the new government immediately. But even the leader of the junior opposition party, David Littleproud of the Nationals, joined the Albanese Jobs and Skills Summit last month. Albanese was compared widely to Bob Hawke as a unifying leader.
Traditional Labor foes lined up to praise the government – employer groups, Liberal premiers, some economists. Bouquets arrived from major foreign powers, and kept arriving.
This week, the kumbaya moment came to its inevitable end. Decisively. The singing stopped, hands unjoined, angry words rang out.
Just a few weeks ago the Business Council’s chief executive, Jennifer Westacott, applauded the government for lifting the Morrison government’s “taboo” on talking about reform: “It’s taken out the accusatory, personal discussion and moved the conversation to the systemic issues that we need to fix and fix quickly.”
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Australia has escaped global recessions before. What are our chances this time?
Columnist
October 22, 2022 — 5.00am
Australia’s economy faces the risk of an old-style US-led global recession with an older China twist. Knowing these two things is not the same as being forewarned, because Jim Chalmers can’t yet tell when one deadly cycle ends and a new – even more dangerous – one begins.
This is a wicked dilemma for Chalmers as he prepares to deliver his first budget as treasurer on Tuesday: his best forecasts cannot account for misjudgments and brain snaps in the world’s two largest economies.
Chalmers understands that a global recession is likely next year, perhaps even inevitable. But he doesn’t know when, or even if, he and Reserve Bank governor Philip Lowe will be forced to execute a collective U-turn and switch from fighting inflation to saving jobs.
They won’t have the perverse luxury of a singular defining event, such as the collapse of Lehman Brothers in September 2008 or the global lockdown against COVID-19 in March 2020, to tell them when to change policy. They will have to wait, like the rest of their peers in the developed world, until the US Federal Reserve is satisfied that inflation has been killed off. But that may only happen in the rearview mirror of economic statistics, reporting on the world as it was a few months earlier – by which time it may be too late to prevent a crash.
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COVID-19 Information.
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The web of surveillance operations tracking COVID in NSW
October 19, 2022 — 11.49am
NSW’s COVID hunters have deployed a network of surveillance systems to track the spread of the virus through the community and to predict the inevitable next wave.
The state government’s decision to scrap mandatory reporting of positive rapid antigen tests left some epidemiologists concerned health authorities would be flying blind, unable to foresee future waves of COVID-19.
But NSW Chief Health Officer Dr Kerry Chant said the state’s sewerage, absenteeism rates, hospitalisations, deaths, genomic sequencing and surprisingly high PCR testing rates, as well as data from overseas, were all part of the web of data that inform NSW’s COVID defences.
“They’re all pieces of the puzzle,” Chant said.
“We need to use multiple indicators and look at them all through multiple lenses [to] see whether we are approaching a new wave or if we’re seeing an uptick in infections,” she said.
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‘Fractured’ pandemic response failed the most vulnerable, independent report finds
October 20, 2022 — 12.01am
Key points
· A major independent review urges federal and state governments to learn from the mistakes of this pandemic and overhaul their planning for the next one.
· It identifies four substantive failings in Australia’s response to the COVID crisis, including inequitable government support measures that exacerbated social disadvantages.
· The review finds lockdowns were a sensible measure at the start of the pandemic but were subsequently “driven by policy failures”.
An independent review of Australia’s response to the COVID-19 pandemic has found ill-conceived policies, politically driven health orders and excessive use of lockdowns failed to protect the old, disregarded the young and abandoned some of the nation’s most disadvantaged communities.
The review, led by former top public servant Peter Shergold, urges federal and state governments to learn from mistakes and overhaul planning, to broaden the advice provided to national cabinet and restore trust in how decisions are made.
The final report of the Shergold panel, which was funded by three private philanthropic trusts and is entitled Fault Lines, identifies four substantive failings in Australia’s response to the COVID crisis: inequitable government support measures that exacerbated existing social disadvantages; the unjustified closure of schools; inadequate protection of aged care residents; and the overuse of “brutal” lockdowns and border closures.
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Healthcare workers must be treated with care in wake of COVID burnout
By Sue Dean and Deb Massey
October 22, 2022 — 12.00am
The toll of COVID-19 on our healthcare workers has been brutal, with many saying they want to quit their jobs.
The World Health Organisation says burnout, coupled with an ageing workforce, is a “ticking time bomb” that could lead to “poor health outcomes across the board, long waiting times for treatment, many preventable deaths, and potentially even health system collapse”.
The Royal Australian College of General Practitioners’ just published an annual survey that reported some three-quarters of GPs say they feel burnt out.
With burnout characterised in part by a “depersonalisation” or a sense of detachment, it can be tough to care for others. “Compassion fatigue” can set in. So, how can we help health workers to continue helping others?
A worldwide workforce shortage
Workforce projections predict health workforce shortages worldwide. Retention is a major factor and burnout the major contributor. During the pandemic, studies from the United States and Singapore reported unprecedented turnover in the healthcare sector, and again burnout was the biggest factor.
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Pandemic overreach finally exposed as a national scandal
11:00PM October 21, 2022
For those of us who have railed against pandemic overreach for more than two and a half years – struggling to comprehend the paranoia of politicians, bureaucrats and media, in defiance of the facts – there has been some solace this week. Australia’s great Covid-19 shame has been confirmed by a reputable study.
We have seen police drones spy on backyards, pregnant women arrested in their homes for dissent, Australians barred from returning to their own country, and families and loved ones barred from funerals, weddings and medical help across state borders. We all had our bizarre or traumatic experiences (I was reduced to smuggling a child illegally across a state border) but those of us who retain our sanity are convinced it must never happen again.
Our damaging, cruel and costly pandemic response has been exposed in the first major independent review of the nation’s Covid-19 performance. Those who were complicit in this public policy scandal are trying to brush off the findings as the wisdom of hindsight.
This is disingenuous. They must not be allowed to get away with it because most of the relevant information was available early in the pandemic and experts and commentators were calling out the missteps in real time since early in 2020.
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Climate Change.
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No entries in this category.
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Royal Commissions And The Like.
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https://www.afr.com/politics/federal/ndis-review-ordered-amid-8-8b-blowout-20221018-p5bqlj
NDIS under review as it blows out to $50b
Phillip Coorey and Michael Read
Oct 18, 2022 – 6.41pm
The Albanese government admits it needs to rein in the National Disability Insurance Scheme after revealing its cost will blow out by almost $9 billion over the next four years, putting further pressure on the already-ravaged federal budget.
With the policy now among the top five demands on spending, despite being less than a decade old, next week’s budget will forecast its annual cost to surpass $50 billion by 2025-26. This is about $20 billion more than the Productivity Commission estimated in 2017 when the scheme became fully fledged.
It is also well above the $44.6 billion estimate contained in the last budget, released only in March, and a more than 50 per cent increase on the current annual cost of $29.3 billion.
Disability Minister Bill Shorten, who co-designed the NDIS when Labor was last in government, announced on Tuesday that a review into the scheme would be brought forward from next year and would report to the government by October next year.
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$8.8bn blowout in NDIS budget
11:12PM October 18, 2022
Australia’s “disability safety net” has blown out by $8.8bn and needs a reset to remain sustainable for future generations of people with disability, NDIS Minister Bill Shorten says.
Mr Shorten has brought forward by a year a planned review of the National Disability Insurance Scheme, saying the scheme, now forecast to cost taxpayers $50bn a year by 2025-26, needs “to be better than it is”.
“For too many people the scheme has developed into a source of stress and anxiety,” he said.
“We want it to do what it’s meant to do – to provide choice and control for people with disability. (We) want to make sure that our national disability safety net is strong and responsive, generous and reasonable.”
Mr Shorten said next week’s federal budget would reveal “an increase in projected costs over the next four years of $8.8bn” compared to the Coalition’s budget handed down just seven months ago, blaming poor management by the previous government.
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National Budget Issues.
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https://thenewdaily.com.au/finance/2022/10/17/alan-kohler-labor-policies/
6:00am, Oct 17, 2022 Updated: 9:31pm, Oct 16
Alan Kohler: Labor’s immigration and housing policies are an explosive combination
The Immigration Minister Andrew Giles has just revealed that he’s processed more than two million visas since the election.
He urgently needs to start talking to the Minister for Housing, Julie Collins, or else most of those people will be living in tents.
If the Labor government doesn’t start co-ordinating immigration and housing, the mixture will be explosive, because Australia’s housing crisis is going to be horrific next year.
The visa
backlog has only come down from one million to 872,000 despite two million
being approved, because the applications are now pouring in – 2.22 million have
come in since June 1 says Andrew Giles, more than four times as many as the
same period last year.
According to ABS data, approvals for student and working holiday visas are back
to pre-pandemic levels, about 55,000 a month in total.
And at the jobs and skills summit, Giles announced an increase in the permanent migration intake from 160,000 to 195,000, or 16,000 a month.
In other words, the Labor government has heard businesses complaining about staff shortages, and perhaps also the Reserve Bank muttering about needing to keep wages in check, and has flung open Australia’s doors.
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https://www.afr.com/companies/retail/food-inflation-rising-faster-than-expected-20221014-p5bpxh
Supermarket inflation has already hit 8pc: UBS
Carrie LaFrenz Senior reporter
Updated Oct 17, 2022 – 9.06am, first published at 5.00am
Food inflation is rising at a faster rate than expected across fresh and dry grocery foods, with multiple price rises by suppliers this year being passed on to shoppers, supporting sales growth at supermarket giants Coles Group and Woolworths throughout 2023.
A key finding in the UBS consumer team’s latest supermarkets research is that the rate of food price rises has stepped up markedly again in the September quarter, with fresh food up 9 per cent, and dry goods up 7.7 per cent. Woolworths’ food inflation rate is slightly higher than Coles.
“This is a reminder that food inflation is an ongoing point of pressure on the entire value chain, suppliers and retailers, that is being passed to consumers,” UBS head of consumer research Shaun Cousins said.
Coles’ overall inflation was sitting at 8 per cent at the end of September quarter, up from 5.5 per cent in the last quarter of 2022, according to UBS. Woolworths’ overall inflation was 8.3 per cent year-on-year, and up from 5.6 per cent in the June quarter of 2022.
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AMP launches income-boosting product to shake up retirement market
11:00PM October 17, 2022
AMP is looking to shake up the retirement income market with a new product that combines elements of an account-based pension and an annuity, in a move the wealth manager says will give retirees more flexibility on their savings alongside the certainty of a higher income for life.
The wealth manager’s new MyNorth Lifetime product, available through the North Wrap platform, stripped away the limitations of annuities and traditional pension accounts, AMP’s general manager for retirement solutions Ben Hillier said.
“An account-based pension has a lot of flexibility for retirees and advisers to invest how they like, there’s a lot of flexibility. But people don’t know how much to draw down without fear of running out,” Mr Hillier told The Australian.
“On the other hand, you have an annuity, which provides a guaranteed income for life, but there’s no flexibility. You can’t adjust to the changing circumstances and the rates of income have traditionally been quite light.”
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https://www.afr.com/policy/economy/more-to-this-budget-than-it-appears-20221018-p5bqm8
More to this budget than it appears
The Treasurer has been playing down this budget. But it will give important clues on what the government is prepared to deliver in future – and what it is not.
Danielle Wood Economist
Oct 19, 2022 – 1.14pm
Treasurer Jim Chalmers is doing everything he can to portray next week’s budget as an unexciting affair. It will be “bread and butter” or “solid”, he regularly tells us. After a brief flirtation with tinkering with the stage three tax cuts that would have made for some serious frisson, the budget will primarily be a vehicle for delivering on election commitments.
But that doesn’t necessarily mean it will be boring. Indeed, the budget will give us an important sense of where fiscal and economic policy will be going for next three years.
First, we will get to see the government’s most up-to-date take on the macroeconomic environment and the consequences for the bottom line. Frankly, it’s a highly unusual period. In the short-term, things are surprisingly rosy on the fiscal front. High commodity prices (especially relative to Treasury’s deliberately conservative assumptions) and low unemployment wiped almost $50 billion off the forecast deficit for 2021-22 and should substantially reduce it for this financial year.
But the “dark storm clouds” the Treasurer is fond of referring to are real. The latest IMF World Economic Outlook downgraded the growth outlook for the US and China and forecast that parts of Europe will dip into recession in 2023. These challenging global conditions will inevitability drag on Australia’s economic performance.
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https://www.afr.com/policy/economy/the-three-big-budget-tests-jim-chalmers-must-pass-20221004-p5bn35
The three big budget tests Jim Chalmers must pass
The federal budget next Tuesday is the first big opportunity for Jim Chalmers to show the nation what sort of treasurer he is.
John Kehoe Economics editor
Oct 19, 2022 – 12.56pm
Jim Chalmers’ first federal budget next Tuesday is a big opportunity to show the nation what sort of treasurer he can become.
Will he be a once-in-a-generation treasurer like Paul Keating and Peter Costello, or will he be unexceptional?
Chalmers is more experienced than most new treasurers. Over the past 15 years, he has been an adviser to former treasurer Wayne Swan, a shadow treasurer and a Labor finance spokesman.
He is the government’s best economic communicator. Yet, Australia needs more than words to navigate the economic challenges.
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https://thenewdaily.com.au/finance/2022/10/20/flood-investment-super-funds/
6:00am, Oct 20, 2022 Updated: 7:36pm, Oct 19
Alan Kohler: Make flood levees investment assets for super funds
About a million Australian homes have been built on flood plains, and the families living in them are up to their knees in water right now, cleaning up, or worrying about the next flood.
With climate change increasing the frequency and ubiquity of floods, most, if not all, of those houses will either have to be protected or moved.
Leaving the residents of Maribyrnong, Shepparton, Lismore and the other towns and suburbs that are built next to rivers to their own devices is not going to be acceptable.
These people and their children are faced with long-term poverty because their houses are worth less, if not worthless, their furniture and belongings will be destroyed every few years and insurance will be massively expensive, if they can get it.
Some families can be moved to higher ground, for example in Lismore, as long as governments buy the land and help pay for the new houses, but most will need new, higher levees between them and the river.
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Chalmers’ biggest budget challenge is the ‘saviour state’
Australians have been taught that in times of crisis governments will always step into the breach.
Jacob Greber Senior correspondent
Oct 22, 2022 – 5.00am
Back in mid-2014, a few months after former prime minister Tony Abbott and his treasurer Joe Hockey delivered their first, politically doomed, budget, Jim Chalmers found himself embroiled in a battle of words with then Treasury secretary Martin Parkinson.
The experienced bureaucrat who had worked closely with Chalmers when the rising Labor player was former treasurer Wayne Swan’s chief of staff, called out the opposition’s attacks on the Coalition’s budget. Labor was wrong, Parkinson said, to “exhort vague notions of fairness to oppose any form of reform”.
“If you do that, if you use such an argument to defend what is an unsustainable status quo, what you are doing is consigning Australia to a deteriorating future,” Parkinson said.
Chalmers hit back, accusing the well-paid Parkinson of having no understanding or empathy for the people affected by the Coalition’s planned cuts.
And in the end Chalmers and Labor prevailed. By the autumn of 2015, as the Coalition’s fortunes soured in the polls, Abbott forced Hockey to dismantle much of the previous year’s cost-cutting strategy. Later that year, both men were turfed from office.
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Health Issues.
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‘Medicare is haemorrhaging’: The rorts and waste costing taxpayers billions of dollars a year
By Adele Ferguson and Chris Gillett
October 17, 2022 — 5.00am
Billions of dollars are being rorted from Medicare each year by medical practitioners making mistakes or charging for services that aren’t necessary or didn’t even happen – including billing dead people and falsifying patient records to boost profits.
The revelations come as GPs lobby the federal Labor government to boost Medicare funding and increase rebates, claiming the system is in crisis as patients struggle to find a bulk-billing doctor.
A joint investigation by The Sydney Morning Herald, The Age and the ABC’s 7.30 program has uncovered flaws in Medicare’s systems that make it easy to rort and almost impossible to detect fraud, incorrect payments and errors.
The leakage is estimated by some to represent nearly 30 per cent of Medicare’s annual budget, or about $8 billion a year.
The rorting, which continues largely unpunished, includes a doctor caught in February charging for dead people in aged care homes, a doctor prescribing drug addicts with oxycodone without due care and radiologists over-servicing terminally ill cancer patients.
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Doctors taught how to ‘pack and stack’ Medicare billings to boost revenues
By Adele Ferguson and Chris Gillett
October 17, 2022 — 5.00am
Rorting Medicare has become so lucrative that courses teach doctors and health professionals how to milk the $28 billion taxpayer-funded billing system and cover their tracks.
Offering carefully worded courses and conferences, some operators market themselves as experts in educating health professionals on how to get the most out of the 5800 services eligible for a Medicare rebate.
A joint investigation by The Sydney Morning Herald, The Age and ABC’s 7.30 has uncovered flaws in Medicare’s systems that make it easy to rort and almost impossible to detect fraud, incorrect payments and errors.
The investigation has also obtained access to teaching materials from an online course that offers doctors step-by-step guides on how to maximise returns and promotes the practices as legal and ethical.
The lecturer explains to doctors how to “pack and stack” Medicare by loading a combination of Medicare billings onto each patient while they are in front of the practitioner. In addition, they encourage repeated returns of the patients for more services.
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Medicare rorting is a national scandal needing urgent fix
October 17, 2022 — 5.00am
In a 1984 television advertisement spruiking the imminent implementation of Medicare, Bob Hawke summarised the simple principle behind the scheme.
“Every Australian – from newborn babies to the prime minister – can share in the cheapest, simplest and fairest health insurance scheme Australia has ever had,” Hawke said.
Nearly four decades later, the concept of universal healthcare in Australia is at serious risk. The truth is that Medicare – the bedrock of Australia’s health system and a core element of this country’s social fabric – is sick and could soon be placed on life support.
A major investigation by The Sydney Morning Herald and the ABC’s 7.30 program has found that billions of dollars are being rorted from Medicare each year by medical practitioners making mistakes or charging for services that aren’t necessary or didn’t happen.
The scale of fraud, incorrect payments and errors is so severe that up to 30 per cent of Medicare’s annual budget, or about $8 billion a year, is being wasted each year.
This is a national scandal and demands urgent action.
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https://www.ama.com.au/media/ama-statement-medicare-allegations
AMA Statement on Medicare allegations
Published 17 October 2022
The AMA is extraordinarily disappointed at the allegations today in the media suggesting that up to $8b is being defrauded each year from Medicare by health professionals including doctors.
These claims are an unjustified slur on the medical profession, with the vast majority of doctors doing the right thing by their patients and by Medicare rules.
Our health system is built around universal access to health care that Medicare supports, and the AMA supports effective stewardship of this Medicare funding.
The AMA has worked with the Government to ensure that Medicare requirements are clearer for doctors and supported initiatives to ensure that the Department of Health has effective tools to police and detect fraud.
The AMA meets regularly with the Department of Health, which has sophisticated analytical tools, and understands that there is no evidence of the widespread fraud suggested in today’s media.
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CSL outlines strategy to catapult growth through Vifor
Yolanda Redrup Reporter
Oct 17, 2022 – 12.02pm
CSL Vifor’s iron deficiency business is the “jewel in the crown” of the newly acquired company, according to CSL chief executive Paul Perreault, who dismissed market concerns about what would happen when patents protecting its flagship product expire in 2023 and 2028.
Addressing investors and analysts in the company’s first major briefing on its strategy for the Vifor business since it announced the $US11.7 billion acquisition in December, Mr Perreault said he was always being asked about “IP cliffs”, but he was bullish about the future of the iron business because of the complexity in manufacturing these products.
“There is a lot more to this business than just viewing it as an earnings erosion story following loss of exclusivity,” he said.
“Operationally there is a lot of complexity to what Vifor Pharma actually does. Iron is actually harder [than plasma] and when I say harder, it’s hard as a rock. Many of you know iron ore in this country, and it does start with iron ore. It is a very difficult process... it’s not that other people can’t make it, but it is complicated.
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Accusations that doctors rort $8 billion a year from Medicare trigger Govt investigation
Federal Minister for Health Mark Butler has commissioned a review of Medicare compliance programs, including the PSR
17 October 2022
Doctors have been accused of rorting $8 billion annually from Medicare in a series of front-page news stories, leading the Federal Government to announce a review of its compliance programs.
The claim, published in Nine Newspapers and on the ABC but rubbished by doctors groups, is based on estimates by Dr Margaret Faux (PhD), the CEO of a medical billing administration company Synapse Medical.
The reporters say they have “uncovered flaws in Medicare’s systems that make it easy to rort and almost impossible to detect fraud, incorrect payments and errors”.
“The leakage is estimated to represent nearly 30 per cent of Medicare’s annual budget, or about $8 billion a year.”
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Government to investigate claims doctors scam billions from Medicare
Michael Read Reporter
Oct 18, 2022 – 9.54am
The federal government will review allegations medical professionals are scamming $8 billion from Medicare, even as Health Minister Mark Butler labelled the figure “way out of whack” with other estimates and doctors slammed it as a slur on the profession.
A joint investigation by The Sydney Morning Herald, The Age and the ABC’s 7.30 program on Monday said flaws in the Medicare systems meant doctors were rorting about $8 billion per year from Medicare, or 30 per cent of the program’s budget.
Speaking on Tuesday morning, Mr Butler said that figure seemed “extraordinarily high”.
“It’s way out of whack with any other figure that’s ever been provided to government including as I said by the national audit office, that only did a review of the program a few years ago,” Mr Butler told the ABC.
“But I’m taking it seriously, so I’ve asked the department for some formal analysis of the work.”
The $8 billion estimate is from Margaret Faux, an expert with a PhD in Medicare claiming and compliance.
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‘How can this report identify $8 billion?’ Health Dept statistician rubbishes Medicare rort claim
The federal Minister for Health also says the number is 'out of whack'
18 October 2022
Federal Minister for Health Mark Butler says media allegations that $8 billion in Medicare funding is rorted or wasted are “out of whack” with all previous evidence.
The figure was based on an estimate provided by Dr Margaret Faux (PhD), the CEO of a medical billing administration company called Synapse Medical Services, which sells practices computer software designed to improve billing accuracy.
Appearing on ABC’s 7.30 on Monday night, Dr Faux said it was not clear how much Medicare “leakage” was “deliberate abuse”.
But she claimed rorts and innocent mistakes were the reasons general practice was “in tatters”.
“Medicare doesn’t have a lot of life left in it, unfortunately. I’d give it a couple of years max,” she said.
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The bulk of GPs aren’t overbilling you for their priceless care
GP
October 18, 2022 — 3.30pm
Doctors across the country woke up on Monday to this masthead’s joint investigation with the ABC covering “Medicare rorts” claiming to cost taxpayers billions. It was a day of despair for the majority of us medicos. Not because of what you may expect – a fear of audit or diminished income. We despaired because of what it means for our reputation. For, at the crux of it all, most of us truly care about you, our patient, and our ability to heal. Not what we gain to profit from the healthcare system.
Public mistrust in our profession has been brewing since the start of the COVID-19 pandemic. Two years ago, we were applauded in our scrubs. Now, we get eyerolls when we ask you to keep wearing your mask in our clinics, for your protection (and ours). Comments about the influence of big pharma on our prescribing choices have become more widespread. It has not just been a pandemic of COVID-19 but of misinformation about what we stand for as a group.
Doctors often top high-income earner lists but know that most of us do not fall into this category. Most of us do not do this job for the money – GPs, in fact, make only slightly more than train drivers. There are far easier and faster ways to make a good living.
Our training is brutal, no matter the specialty. Whether we become GPs or interventional cardiologists, we make hard, tireless sacrifices to achieve fellowship. We sacrifice our youth. We sacrifice our social life. We sacrifice friends. We sacrifice our family time. We sacrifice our own health.
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Medicare losing $500m each year through public hospital ‘double dip’
By Sean Parnell
October 18, 2022 — 4.35pm
Medicare has been losing around $500 million each year to state-run public hospitals for health services the hospitals are already funded to deliver.
Hospitals receiving duplicate payments, colloquially referred to as “double-dipping”, has been a problem for years but only recently have authorities tried to resolve the issue.
The Australian National Audit Office previously estimated the scale of the problem at between $122 million and $332 million a year. However, it has not received the same policy attention as cost-shifting, and a more thorough data-matching project was required to ascertain the cost to the commonwealth.
The National Health Funding Body has used data-matching tolls to determine that $450-$500 million in potential duplicate payments were made to public hospitals in 2020-21. This masthead understands the 2021-22 analysis has yet to be completed but a similar amount is expected.
While this masthead understands state and territory governments were not required to refund Medicare for duplicate payments in 2020-21, the amended national health reform agreement now makes it possible.
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Health fund members brace as insurers end pandemic relief
9:10AM October 19, 2022
Health fund members are being urged to check their cover ahead of November 1 premium rises by insurers covering more than 70 per cent of Australians.
Many major health funds delayed their traditional April 1 premium increases because Covid-19 impacts but the relief disappears soon and some members may face two rises in five months.
Comparison website iSelect’s spokeswoman, Sophie Ryan, says the timing adds extra pressure to households already doing it tough, and there are several ways to save money on health cover.
“On November 1, temporary financial relief will be over for millions of Australians covered by private health insurance, with Medibank/ahm, Bupa, nib and HCF – which combined have over 70 per cent market share – increasing premiums by an average of between 2.66 per cent and 3.18 per cent,” she says.
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https://medicalrepublic.com.au/medicare-stoush-goes-live-on-stage/79451
19 October 2022
Medicare stoush goes live on stage
By Wendy John
The storm over Medicare billing reached a moment of calm yesterday as Dr Margaret Faux and Adjunct Professor Karen Price came virtually face-to-face at a digital health conference.
In the morning the lawyer blocked the RACGP president on Twitter; in the afternoon the two sat together on a panel about funding at the Wild Health Summit in Melbourne – although Dr Faux was on a screen.
Monday’s stories in Nine newspapers and on the ABC, about medical practitioners committing widespread Medicare overbilling and fraud, provoked indignation among doctors across the nation. The stories reported an $8 billion waste of funds through Medicare misuse, using as their key source Dr Faux, who runs a billing compliance company, has a PhD on medical claiming and compliance and has written regularly for TMR about Medicare complexity.
A Twitter storm of criticism quickly grew against Dr Faux and the media investigation. Professor Price hit back against the media investigation, asking for these “dreadful suggestions” to be substantiated. She tweeted on Monday night that “[Margaret Faux’s] own thesis contradicts her statements”.
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https://medicalrepublic.com.au/a-grotesque-media-beat-up-that-blackens-a-profession/79568
20 October 2022
A grotesque media beat-up that blackens a profession
That’s a long way from the headline that states definitively Medicare is losing $8bn a year to fraud, error and over-servicing. This is a beat-up of astronomical proportions.
Eight billion dollars leaking from Medicare each year!
You’ve got to be joking. Eight billion?!
I saw the headlines on the newspapers lying in driveways as I was walking my dog. To be honest my first thought was they’d discovered some glitch in the system. To the best of my knowledge there was no ongoing inquiry into Medicare, no major audit, no uptick in medicolegal fraud cases, no royal commission.
And of course there wasn’t.
While the headlines screamed phenomenal Medicare abuse by doctors, the great exposé relied on one PhD thesis.
According to the Nine newspapers report, Dr Margaret Faux* had “uncovered flaws in Medicare systems that make it easy to rort and impossible to detect fraud, incorrect payments and errors”.
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Since exposing Medicare rorts, I’m afraid to leave home. Doctors, read the evidence
By Margaret Faux
October 21, 2022 — 9.49am
For almost four decades I have witnessed Medicare being abused and it is crushing me. I have worked hard to build a business designed to do everything possible to help doctors understand Medicare and bill correctly, but I am fighting a losing battle.
When I embarked on my PhD a decade ago, I knew that without academic rigour, no one would believe what is really going on inside Medicare, and how bad it is. Recently, I decided that I could no longer sit by, in complicit silence, and watch Medicare crumble. But it was a risk.
Last week I discussed the likely impacts of the impending media coverage with my family, and had conversations at work about the potential fallout. Would our clients, most of whom are doctors, leave us in droves?
I expected some personal impact, but I never imagined I’d be called “Mediscare Faux” and be scared to leave my house. And worse, that this vitriol would come from people who call themselves health professionals. When I started my nursing career almost 40 years ago, we had codes of conduct that held us to the highest professional standards. The campaign against me this week has fallen well short of those standards.
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AMA president admits he hasn’t read the Medicare research he claims is wrong
October 20, 2022 — 9.07pm
The powerful doctor leading a public relations effort to discredit claims that up to $8 billion a year is being wasted in the Medicare system admits he hasn’t read the PhD which first sounded the alarm on the problem.
The president of the Australian Medical Association, Professor Steve Robson, has spent four days attacking a joint investigation by The Sydney Morning Herald, The Age and the ABC’s 7.30 program into Medicare, dismissing the work as an “unjustified slur on the medical profession”, “fantasy” and “staggering in its inaccuracies and its nastiness”.
He has also criticised Dr Margaret Faux, whose PhD on the Medicare claiming and compliance system concluded nearly 30 per cent of Medicare’s annual budget, or about $8 billion a year, is being lost through fraud, incorrect payments and errors.
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Former PSR director says $8 billion Medicare rort claims are fake news
Professor Julie Quinlivan
21 October 2022
The headlines that $8 billion in Medicare claims are fraudulent are classic cases of fake news.
The evidence for this dramatic accusation was from a ‘Medicare expert’ who, Google Scholar reveals, has published only five articles.
An analysis of the expert’s publications reveals one is a review of previous literature (presumably the introduction to her thesis), another is a survey of 27 practitioners (not a particularly large sample size given we have 160,000 medical practitioners in Australia) and another a survey of ‘stakeholders’ she feels are responsible for medical education.
Unfortunately, only three of the 18 medical schools were surveyed, and the Australian Medical Council — the largest ‘medical school’ in Australia — was also not surveyed.
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https://www1.racgp.org.au/newsgp/professional/implausible-healthcare-experts-doubt-scale-of-medi
‘Implausible’: Healthcare experts doubt scale of Medicare ‘rorting’
Scepticism is growing as to whether $8 billion is really leaking from Medicare each year, with the new reports’ timing now also being questioned.
20 Oct 2022
An increasing
number of healthcare experts, public servants, administrators and other
stakeholders are questioning a series
of reports from Nine Newspapers and the ABC that allege 30% of the $28
billion Medicare budget is being drained annually via incorrect billing,
low-value care, and fraud.
The reports initially drew a sharp response from doctors and medical
organisations, including the AMA,
RACGP
and Royal
Australian and New Zealand College of Radiologists, but now experts not
accused of any wrongdoing are also responding.
Prominent healthcare economist and former health department secretary Dr
Stephen Duckett is one who has come forward to cast doubt on the estimate. He
told newsGP at no point in his near 50-year career working in health
administration has he seen any sign of malfeasance or carelessness occurring at
such a scale.
‘It seems implausible to me. It’s just such a high proportion of Medicare
billing that it seems speculative,’ he said.
‘I’ve seen no evidence that the fraud is at that $8 billion level … it would
have to be endemic to get to those levels and I just don’t think it is.’
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https://medicalrepublic.com.au/rorts-smear-could-see-gps-quit-in-droves/79669
21 October 2022
Rorts smear could see GPs quit in droves
By Holly Payne
But support is rolling in from some surprising quarters, such as former PSR director Professor Julie Quinlinvan.
Cairns generalist Dr Minh Le Cong says he has received messages from well over 100 colleagues considering abandoning general practice amid the “Medicare rorts” media spray.
The messages have come from doctors at all stages of their career – older GPs who are entering the latter part of their career through to junior doctors and even medical students.
“[There were] students saying, ‘well, I wasn’t sure about a career in general practice anyway, but this has kind of sealed the deal for me that I won’t be considering one’, which is, to me … a bit of a concern, because in my private practice up in Cairns it’s just harder and harder to find new doctors,” he told The Medical Republic.
Dr Le Cong said he had been somewhat surprised by the number of messages he had received, which were largely prompted by a series of articles published by The Sydney Morning Herald, The Age and on ABC’s 7.30 program.
The reporting centred on Dr Margaret Faux’s* PhD thesis and the associated claim that $8 billion was leaking from Medicare each year through illegal or inappropriate health practitioner billing, low-value care and fraud.
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Sleeping patients billed by doctors in latest case of Medicare rorts
By Adele Ferguson and Chris Gillett
October 22, 2022 — 5.00am
This story is part of a series examining how billions of dollars are being rorted from Medicare each year. See all 17 stories.
Doctors billing Medicare for consultations at a NSW aged care facility while residents were asleep; radiologists claiming for a single CT brain scan as two separate procedures; and a specialist surgeon calling a patient to cancel an operation so he could take his dog to the vet but then claiming the call as a specialist consultation.
These are just three of the hundreds of cases that have flooded in after a joint investigation into Medicare rorting by The Sydney Morning Herald, The Age and ABC’s 7.30, as the calls grow louder for federal Health Minister Mark Butler to launch an independent inquiry into Medicare.
One patient, Trevor, who had his surgery cancelled on December 17 last year said the surgeon spent less than a minute talking to him on the phone.
“I was booked in to have a small lump removed from my mouth on a Saturday morning and the surgeon rang me the day before to say he had to take the dog to the vet and had to cancel my toe surgery. I told him it was my mouth,” he said.
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Andrews must remove the gag on health workers, for all our sakes
Radio presenter
October 23, 2022 — 5.00am
This is part of our Victorian election series “Talkback”, featuring legendary broadcasters Neil Mitchell and Jon Faine’s takes on the campaign every Sunday. Read Faine’s piece here.
Victoria’s health system is a shambles. The people who rely on it and work in it must demand better. Now.
Both the government and the opposition carry blame. There have been decades of under-investment and negligent willingness to put it off for another day.
A senior doctor at Melbourne's Alfred Hospital is calling on the premier to provide further funding to the top trauma facility.
The system has stayed afloat on the back of dedicated staff who work ridiculous hours and do extraordinary things because they care about their patients.
But real fixes can’t be delayed any further. It is simply unacceptable that neither side in this campaign has given any serious attention to short-term answers.
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International Issues.
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https://www.afr.com/world/europe/buffeted-by-sequence-of-shocks-bailey-defends-boe-20221016-p5bq2w
Buffeted by ‘sequence of shocks’, Bailey defends BoE
Hans van Leeuwen Europe correspondent
Oct 16, 2022 – 9.51am
London | Bank of England governor Andrew Bailey has hit back at his government critics, including Prime Minister Liz Truss, who have accused the bank of failing to start raising interest rates early enough to choke off inflation.
He also launched a front-foot defence of the bank’s £68 billion ($122 billion) rescue mission in the long-dated government bond market.
He said the gilt-market intervention, which ended on Friday, would not muddy the waters of monetary policy because the BoE was not using bond purchases or sales (quantitative easing or tightening) as a tool to fight inflation.
Dr Bailey said central banks did not start raising interest rates sooner because they could not have fully foreseen how a series of price shocks would compound each other, rather than just having a transient impact.
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Party congress assembles in Beijing for Xi’s opening speech
Associated Press
Oct 16, 2022 – 8.24am
Beijing | China on Sunday opens a twice-a-decade party conference at which leader Xi Jinping is expected to receive a third five-year term that breaks with recent precedent and establishes him as arguably the most powerful Chinese politician since Mao Zedong.
Mr Xi is expected to issue a lengthy address at the opening session, but little change is foreseen in his formula of strict one-party rule, intolerance of criticism and a hardline approach towards COVID-19, including quarantines and travel bans even as other countries have opened up.
As with most Chinese political events, little information has been released beforehand and the congress’ outcome will only be announced after several days of closed-door sessions. How much has been decided in advance and how much is still to be hashed out in face-to-face meetings also remains unknown.
At a two-hour news conference on Saturday, congress spokesperson Sun Yeli reaffirmed the government’s commitment to its zero-COVID policy despite the economic costs, and repeated its threat to use force to annex self-governing Taiwan.
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https://www.afr.com/world/asia/why-we-are-getting-china-so-wrong-20221011-p5bowb
Why we are getting China so wrong
Linda Jaivin
Oct 14, 2022 – 5.00am
The Communist Party of China has a very particular relationship with public discourse, including discussion of its own and the country’s history, across Chinese official and social media. Let’s call it one of coercive control.
Reading the official press in the People’s Republic of China (PRC), you’d be excused for thinking that, apart from a handful of “bad elements”, its citizens were a community united, pumped with patriotic pride and bursting with excitement in anticipation of Xi Jinping’s imminent ascension to a norm-defying third term as the head of the party.
A volunteer (but not wholly unrewarded) army flies the party’s banner in every corner of the internet, helping the multi-armed organs of censorship to police, drown out and smear even mildly dissenting or cautionary voices: in official jargon, “harmonising” the Chinese-language online world with “positive energy”.
Much recent Western, including Australian, commentary on China, meanwhile, is in danger of unintentionally propagating a similarly reductionist portrait of this vast, complex and diverse nation. Substitute dissidents and rights activists for “bad elements”, some version of oppressed or brainwashed masses for “a community united” and “aggressive nationalism” for “patriotic pride”. Then retune the excitement as a threatening clamour.
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Joe Biden calls Truss tax cuts a ‘mistake’ as Bank of England warns of rate rises
By Rob Harris
Updated October 16, 2022 — 2.13pmfirst published at 9.44am
London: US President Joe Biden has called embattled British Prime Minister Liz Truss’ abandoned tax cut plan a “mistake” as the governor of the Bank of England warned that interest rates may need to rise in the short term following the financial turmoil caused by the British government’s mini-budget.
The White House had declined to comments on the failed tax cuts for weeks, but Biden on Saturday (US time) said he is worried other nations’ fiscal policies may hurt the US amid “worldwide inflation”.
Biden said it was “predictable” that the new prime minister was forced to walk back plans to aggressively cut taxes without identifying cost savings, after Truss’ proposal caused turmoil in global financial markets. It marked an unusual criticism by a US president of the domestic policy decisions of one of its closest allies.
“I wasn’t the only one that thought it was a mistake,” Biden said. “I disagree with the policy, but that’s up to Great Britain.”
Bank of England governor Andrew Bailey told an audience in Washington on Saturday (US time) that “inflationary pressures” meant a “stronger response” could be needed from the central bank than thought in August.
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Xi warns on Taiwan action, acclaims ‘all-out war’ on COVID-19
Michael Smith North Asia correspondent
Updated Oct 16, 2022 – 3.42pm, first published at 2.13pm
Tokyo | Xi Jinping has issued a fresh warning that Beijing may use force to reunify China with Taiwan, in an opening speech to the five-yearly meeting of the Communist Party’s National Congress in which he also praised the country’s growing military strength and its “all-out war” against COVID-19.
In a speech which highlighted Beijing’s emphasis on national security over the economy, Mr Xi also signalled he would pursue his campaign of “common prosperity”, build a stronger military and prepare it for combat scenarios.
The week-long party congress is expected to culminate next Sunday, with the reappointment of Mr Xi as leader for an historic third term
Mr Xi used his opening speech to reiterate that Beijing reserved the right to use force to take control of Taiwan while underlining the importance of the self-governed island’s reunification with mainland China.
“Resolving the Taiwan question is a matter for the Chinese, a matter that must be resolved by the Chinese. We will continue to strive for peaceful reunification ... but never promise to renounce the use of force. We reserve the option of taking all measures necessary,” Mr Xi said in a speech that ran for almost two hours.
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https://www.afr.com/world/europe/lack-of-a-better-option-the-only-thing-saving-truss-20221016-p5bq4y
Lack of a better option the only thing saving Truss
The UK prime minister is facing political ruin after the collapse of her economic agenda, but Conservative MPs do not have an obvious successor to rally around.
George Parker
Oct 16, 2022 – 12.41pm
“I am not going anywhere,” Kwasi Kwarteng declared on Thursday (Friday AEDT), shortly before he rushed out of a reception at the UK ambassador’s residence in Washington on a rainy night to catch the last plane back to London.
By Friday lunchtime London time, the chancellor had been sacked after his debt-fuelled “mini” budget sent panic through markets and created political carnage. His 38 days in office was the second-shortest tenure in almost two centuries, pipped only by a politician who died of a heart attack.
By cutting her ties with Kwarteng, Prime Minister Liz Truss insisted she was acting decisively to restore economic stability as she reversed a decision to block a previously planned increase in corporation tax.
“The way we are delivering our mission right now has to change,” she said in a short address on Friday that acknowledged little direct responsibility for the financial turmoil of recent weeks. “We need to act now to reassure the markets of our fiscal discipline.”
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Xi’s sabre-rattling underscores Australia’s China challenge
Australia’s overarching strategic goal should be to encourage Beijing to pull back behind the rules of the global system and prevent strategic competition with the US from escalating into a potentially disastrous war over Taiwan.
Oct 16, 2022 – 5.04pm
Xi Jinping’s sabre-rattling opening speech at the 20th Communist Party Congress warning that China reserves the right to use military force to achieve reunification with Taiwan underscores the unprecedented strategic challenge Australia faces.
Never in Australia’s history has the nation had to deal with its major trade partner also being its major security challenge. Mr Xi’s great power ambition to make China not only rich but geopolitically powerful will continue to destabilise the Pax Americana that has kept the peace in the Asia Pacific region since the end of World War II.
For the past 70 years, America’s unchallenged regional supremacy has been the strategic foundation of Australia’s modern prosperity. By guaranteeing Australia’s security in Asia, the 1951 ANZUS treaty with the United States made it possible for this European outpost at the foot of Asia to engage and integrate with its Asian neighbours.
The 1957 commerce agreement with once-bitter wartime enemy Japan was the start of Australia’s mineral exports of coal, gas, and iron ore fuelling the industrialisation of East Asia’s “miracle” tiger economies.
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https://www.afr.com/policy/economy/uk-s-new-treasurer-vows-to-win-back-market-trust-20221017-p5bq99
Truss battles for survival as Tories plot mutiny
William James and William Schomberg
Oct 17, 2022 – 7.55am
London | New treasurer Jeremy Hunt promised to win back Britain’s economic credibility by fully accounting for the government’s tax and spending plans, while insisting his boss Liz Truss remained in charge of the country.
Prime Minister Truss appointed Mr Hunt on Friday in an attempt to rescue her leadership as confidence in her ability to run the country drained away within both her own Conservative Party and international financial markets.
Sunday’s newspapers were rife with stories of plans to replace her.
Investors have sold British government bonds heavily since September 23 when Mr Hunt’s predecessor, Kwasi Kwarteng, announced a string of unfunded tax cuts without publishing a set of independent economic forecasts.
The knock-on effects forced the Bank of England into an emergency intervention to protect pension funds and drove up mortgage costs – adding to the squeeze on Britons’ finances.
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Xi’s coronation can’t overshadow growing property crisis
New IMF figures show just how bad China’s real estate woes are. Iron ore miners will hope Xi Jinping uses the Communist Party Congress to take fresh action.
Oct 17, 2022 – 5.00am
There will be no shortage of pomp and pageantry accompanying Xi Jinping’s coronation at the Chinese Communist Party’s congress this week. But there’s something deeply ironic about celebrating the latest milestone in China’s economic miracle while the most important chunk of the economy is in crisis.
China’s property sector, which accounts for between 20 per cent and 25 per cent of Chinese GDP and about 40 per cent of household assets, is in the second year of a slump that has so far proved impervious to a series of increasingly desperate government stimulus measures, including lower rates, tax breaks and directives for banks to support property developers.
Confidence in these latter efforts, worth an estimated 600 billion yuan ($130 billion), took a hit late last week when private developer CIFI Holdings Group became the latest to default on a bond coupon payment.
While some $US50 billion ($79 billion) of Chinese property bonds have now defaulted since Evergrande infamously sparked a crisis by missing a debt payment in December last year, CIFI was seen as something of a test case for the latest bank support for developers because it received funds from a state-owned bank. That this support still wasn’t enough to avoid default is a serious concern.
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Biden’s strategy traces the Cold War’s mental map
Despite looking to resist a world of “rigid blocs”, the US national security blueprint remains a manifesto for a binary world divided between democracies and autocracies.
James Curran Historian
Oct 16, 2022 – 1.11pm
Within days of each other, revealing portraits of the United States and China have been unveiled.
In Washington last week, the Biden administration released its national security strategy. It says much about American psychology at a critical juncture.
And Beijing yesterday witnessed the opening of the 20th Party Congress that will see Xi Jinping confirmed as president for a record third term.
It comes as the White House launches arguably its biggest move to compete with, and restrain, China in its technology war, curbing the ability of world and US chip makers to sell semiconductors and chip-making equipment to Chinese customers. As Bloomberg notes, it strikes at the foundation of China’s efforts to build its own chip industry.
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Tories hold secret talks on crowning new leader
By Henry Zeffman
The Times
October 17, 2022
Liz Truss will appeal to moderate Tory MPs to save her premiership on Monday after it emerged that powerbrokers had held secret discussions about ousting her and arranging a “coronation”.
The prime minister will address the One Nation group of centrist Conservatives after a weekend in which three of her MPs called on her to quit and her new chancellor tore up the agenda on which she was elected only last month.
Senior members of the 1922 Committee of Conservative backbenchers held talks late on Friday evening about Truss’s future, The Times can reveal.
The discussion focused on the circumstances in which Sir Graham Brady, chairman of the committee, would have to tell Truss to stand aside, even though under present rules she cannot be challenged for 11 months.
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Liz Truss the latest victim of a never-ending Tory death cult
Caroline Wheeler and Harry Yorke
The Times
11:43AM October 16, 2022
When Kwasi Kwarteng was made the new UK prime minister’s chancellor, he believed he had entered into a pact of mutually assured destruction with her. Even two weeks ago, after Liz Truss committed her first major U-turn on the chancellor’s mini-budget by reinstating the top rate of income tax, Kwarteng was still confident that their political destinies were inextricably intertwined.
In his suite in the Hyatt Regency hotel at the Conservative Party conference in Birmingham, he told allies: “The idea that a prime minister is going to bullet her chancellor and survive, I just don’t think is feasible.”
Unknown to Kwarteng, his long-term friend had already been sounding out at least one former cabinet minister about the prospect of replacing him.
Intermediaries had begun reaching out to allies of Sajid Javid, the former chancellor, to gauge his appetite for a return to the Treasury in case Kwarteng was forced to fall on his sword. The prime minister’s emissaries asked Javid to name his price but had not bargained on his conditions being too much for Truss to accept.
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Xi’s hard line on reuniting Taiwan with ‘motherland’
Editorial
11:00PM October 16, 2022
If Western nations were seeking signs that Chinese ruler Xi Jinping wanted steadier, more mature relationships with them, his speech to the Chinese Communist Party Congress on Sunday put paid to such ideas. “Wolf warrior” foreign policy and China’s military build-up are here to stay. Amid a sea of red, under a giant hammer-and-sickle emblem, the general secretary’s speech was about further strengthening Chinese power in the world and tightening control by the Communist Party domestically. On Taiwan, the likeliest flashpoint for war with the US and its allies, Mr Xi insisted “the complete reunification of the motherland must be achieved’’. Those remarks drew the loudest applause from 2300 comrades in Beijing’s Great Hall of the People. While claiming to want “peaceful reunification’’, an option the Taiwanese have made clear they will not countenance, Mr Xi said he would “never promise to give up the use of force and reserve the option to take all necessary measures”. The wheels of history were rolling towards China’s reunification and rejuvenation, he said. Mr Xi’s lauding of China achieving “comprehensive control’’ over Hong Kong, putting it in the hands of “patriots’’ and turning it from “chaos to governance’’, underlined his disdain for his predecessors’ promises and how worthless any pledge of “one nation, two systems’’ would be for the Taiwanese.
Control, domination and authoritarianism were significant themes of the speech. Chinese people, Mr Xi said, “must strengthen our sense of hardship, adhere to the bottom-line thinking, be prepared for danger in times of peace, prepare for a rainy day, and be ready to withstand major tests of high winds and high waves’’. While not mentioning the US by name, he said China needed to be “mindful of potential dangers, be prepared to deal with worst-case scenarios … and even dangerous storms on our journey ahead’’.
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https://www.afr.com/world/asia/china-trapped-in-economic-doldrums-under-xi-plan-20221017-p5bqdt
China trapped in economic doldrums under Xi plan
The President outlined his broad vision for China’s economy over the next five years and beyond, but offered no solution to the country’s immediate problems.
Michael Smith North Asia correspondent
Updated Oct 17, 2022 – 3.01pm, first published at 2.45pm
Tokyo | Xi Jinping has a grand economic vision for China.
He wants to increase low-income wages and boost the size of China’s middle-classes, continue growing GDP, improve social security, make the country a powerhouse in technology and science, and reduce its reliance on other countries.
The problem is, there was nothing new in his two-hour speech at the opening of the Party Congress on Sunday, or in the official 72-page transcript of his remarks, that offered China a clear pathway out of the economic doldrums.
Property crisis
Economists say the challenge for Xi, as he prepares to rule China for an unprecedented third term, is that his five-year vision seeks to increase the income of poorer people without a strategy to boost the overall size of the economic pie.
“He has really got no good answers to moribund productivity growth and high youth unemployment, including among college graduates,” says Mary Lovely, a Washington-based economist at the Peterson Institute for International Economics.
“So, he has an economy that is not doing well. It is producing GDP, but real GDP is at a much slower rate than he wants.
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Restoring Britain’s credibility will be hard for Hunt
Another round of austerity is both impossible and undesirable. If the government is unwilling to reinstate all the tax cuts it has made, it needs to find other taxes to take their place.
Martin Wolf Columnist
Updated Oct 17, 2022 – 1.59pm, first published at 1.45pm
One down and one to go.
Talking to policymakers attending the annual meetings of the IMF and World Bank made clear the blend of amusement, anxiety and anger with which many view the UK. Kwasi Kwarteng’s mini-budget was the wrong policy (unfunded tax cuts) at the wrong time (a global crisis).
Liz Truss more than shared his folly. She might survive as a figurehead. But she lacks the judgment required of a prime minister. She should go, too. Members of parliament, not party members, should then choose the new leader and prime minister. A general election should follow.
Confidence in the rationality and self-discipline of British policymaking has been damaged, just as trust in the country’s willingness to keep its word was damaged by the desire to break the agreement over Northern Ireland reached so triumphantly three years ago. To regain that confidence, a return to the status quo ante will be insufficient.
Jeremy Hunt, the new Chancellor, knows he cannot be sacked. He must now do whatever it takes.
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Xi Jinping’s worrying message for investors
Shareholders and company bosses will be deeply worried by the Chinese president’s signals that he intends to tighten his party’s grip on the nation’s economy.
Karen Maley Columnist
Oct 17, 2022 – 6.33pm
As they listened to Xi Jinping’s opening speech to the Chinese Communist Party’s 20th national congress in Beijing on Sunday, the chiefs of the mining giants that count China as their most important customer, as well as the heads of multinational companies that invested billions of dollars setting up production facilities and supply chains in the country, will have felt a sinking feeling.
There was little sign that Beijing intends to launch a major stimulus policy, even though the world’s second largest economy – which for decades has been the engine of global growth – is sputtering, and the country is grappling with a looming demographic crisis.
Slower Chinese growth threatens the short-term profits not only of Australian miners, such as BHP, Rio Tinto and Fortescue Metals Group, but also of US businesses – such as Apple, Caterpillar, Nike and Tesla – which are heavily dependent on Chinese sales.
Indeed, corporate bosses around the world will have been struck that in a speech that lasted for almost two hours, Xi failed to refer either to China’s deepening economic problems, or to the high unemployment rate faced by Chinese youth, which is now close to 20 per cent.
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https://www.afr.com/world/europe/jeremy-hunt-not-liz-truss-is-now-in-charge-20221018-p5bqkw
Jeremy Hunt, not Liz Truss, is now in charge
Some Tory MPs may conclude it is better to pretend that the chancellor is really PM and see how far it takes them.
Robert Shrimsley
Oct 18, 2022 – 7.50am
Conservatives have two choices now, neither of them good. They can continue to intrigue against Liz Truss until they find a way to winkle her out of office, or they can attempt to pretend she is no longer really there and that her new chancellor Jeremy Hunt is really in charge.
Neither option is attractive either to the party or to the country, but the second choice has the appeal to some of her MPs of not requiring them to do anything yet. Truss is beyond a lame duck leader. With Hunt’s latest statement he has wiped out almost all of her growth strategy and policy platform.
Her budget has ended up costing voters money and everyone knows it. She has no credibility with the electorate, colleagues or the markets. The upshot is that, quite brilliantly, the Conservatives have somehow contrived to have Rishi Sunak’s policies and Liz Truss’ presentation skills.
The Tories will not allow her to lead them into the next election, so the only question for them is when and how to remove her. The plotting has been ferocious but so far without clarity. There is no consensus on her replacement, on how to remove her and how to replace her without allowing party members another say.
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Ruthless Jeremy Hunt axes Liz Truss’s tax cut reform
9:31PM October 17, 2022
British Chancellor Jeremy Hunt has reversed nearly every aspect of Prime Minister Liz Truss’s economic plan, in an extraordinary economic statement on Monday that was brought forward to calm the markets.
The tax-cutting, low government approach by Ms Truss – supported by most Tory MPs when they elected her leader – has been abandoned as Mr Hunt dumped the recently announced tax cuts.
Everything has been axed, except a stamp duty saving and a National Insurance contribution reduction because the measures are part-way through parliament.
On a dramatic move that was not foreseen, Mr Hunt also put a limit on the government’s energy support to households, which had meant the average two-bed house would have an annual gas and electricity bill of £2500 a year. He said this energy package would apply only until next April.
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So how is the US economy going, really?
The bosses of the two largest US banks have delivered very different verdicts on the US economic outlook.
Karen Maley Columnist
Oct 18, 2022 – 4.43pm
Depending on which US big bank boss you believe, the world’s largest economy is either heading into a hurricane, or holding up surprisingly well in the face of stubbornly high inflation and soaring interest rates.
Bank of America’s Brian Moynihan decided to break with the prevailing pessimism on Monday, and instead delivered a surprisingly upbeat prognosis of the health of US consumers, whose spending accounts for around 70 per cent of the world’s largest economy.
“The customers’ resilience and health remains strong,” Moynihan told analysts, after America’s second-largest bank announced a better-than-expected profit result for the third quarter.
The bank’s figures showed that spending by US consumers, particularly on travel and entertainment, remains robust, even though spending growth slowed to 10 per cent in September from 12 per cent earlier in the year.
Moynihan has previously said he expects a shallow US recession, with a moderate rise in the US unemployment from the present level of 3.5 per cent.
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Central bankers need to come clean on how monetary policy works
People need to feel – or worry that they’re about to feel – economic pain so that they change their behaviour.
Karen Maley Columnist
Oct 18, 2022 – 5.30pm
It’s about time that central bankers stopped being so coy when it comes to discussing the dirty details of monetary policy.
Now, most punters understand that there’s some sort of link between inflation and interest rates, so that when inflation is high – as it is at present – central bankers feel obliged to respond by pushing interest rates, and borrowing costs, higher.
But what most people fail to comprehend is that the whole point of higher interest rates is demand destruction.
In essence, higher interest rates only work to curb inflation because they inflict enough pain to cause people – both consumers and businesses – to change their spending and investing behaviour.
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https://www.afr.com/policy/economy/truss-gave-wrong-answers-to-the-right-questions-20221017-p5bqav
Truss gave wrong answers to the right questions
The likely fall of Britain’s PM should not be a smokescreen for governments of the world to maintain reckless spending.
Oct 18, 2022 – 8.30pm
Incredibly, British Prime Minister Liz Truss may now last only until the Conservative Party unites on a single candidate it can anoint into Number 10 without another destructive leadership contest. The new centrist Chancellor of the Exchequer Jeremy Hunt, Britain’s fourth in four months, has axed two-thirds of Ms Truss’ controversial tax cuts four weeks after they were announced.
His real job now is to settle financial markets and wind back the risk premium on UK government debt, and British mortgage belt voters, that Ms Truss’ tax cutting has become tarred with.
Yet the questions Britain’s drowning prime minister has raised about the need for driving growth first and foremost should not be thrown out with her inept answers, but should concern every economically rational political party in the world – including the Australian Labor Party.
The extraordinary collapse of Ms Truss’ tax-cutting plan reveals lessons for those who supported the lower-government, lower-taxing and more-deregulated pro-growth agendas of Margaret Thatcher and Ronald Reagan, Hawke-Keating and Howard-Costello, and even Tony Blair and Bill Clinton.
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Labour’s progressive dream has died along with the Tories’ libertarian one
If he is elected UK premier, Keir Starmer won’t have the money to do very much.
Janan Ganesh Contributor
Oct 19, 2022 – 10.01am
Don’t assume, even now, even after everything, that Britain will elect a Labour government next time. Sir Keir Starmer would make a fine prime minister. From afar, in the US, he always struck me as Joe Biden-like in his low standing among pundits who over-index charisma.
But the exorbitant privilege of having Liz Truss as an opponent will soon end. And his party has liabilities of its own that time will expose. Vestiges of the hard left survive in its grassroots, its backbenches, its bureaucracy. Little in recent UK history suggests the soft left is much more electable. Midterm polls, like sterling, are only worth so much.
Even if Labour wins, there is no social democratic Shangri-La at hand. What has died in Britain over recent weeks is the progressive dream, not just the libertarian one.
With little money to spend, the point of the next Labour government is — what, exactly? A more equitable kind of fiscal restraint? A bit more stress on tax rises and a tad less on spending cuts? That is something. But it is also much less than the party and its keenest supporters are prone to expect.
Tony Blair tripled NHS spending in cash terms and still ended up persona non grata with the left. Starmer should brace for a similar fate as a disappointer of millions.
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https://www.afr.com/politics/how-did-it-all-go-so-wrong-so-fast-for-liz-truss-20221019-p5bqzs
How did it all go so wrong, so fast, for Liz Truss?
Truss is squarely in the libertarian box. Her policies thrust her into the political wilderness, into a barren quadrant where few voters may be found.
Paul Krugman
Oct 19, 2022 – 11.50am
Liz Truss, Britain’s newish prime minister, has fallen from grace faster than any leader I can think of.
According to a poll released on Monday, she has only 9 per cent approval among British voters - a performance that would probably be impossible in the United States, where extreme political polarisation guarantees that even a leader who, say, instigated a violent insurrection will retain a large base of support.
The Star, a British tabloid, has a livestream of a head of lettuce next to a picture of Truss, asking which will last longer. But how did it go so wrong, so fast?
The immediate answer is that financial markets hated Truss’ fiscal plan, unveiled on September 23, which called for unfunded tax cuts for the affluent. Interest rates soared and the pound plunged; the government was soon forced into reversing more or less the whole thing.
But what provoked this market reaction? When the tax cuts were announced, many conservatives compared Truss’ policies - favourably - to those of Ronald Reagan and Margaret Thatcher. When Reagan pushed through unfunded tax cuts, they also raised interest rates - but they drove the dollar up, not down. Thatcher similarly presided over a strong pound. Why was this time different?
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The one key lesson from the UK government’s humiliation
Senior business columnist
October 19, 2022 — 11.50am
Within the humiliating policy backflip forced on the Truss government in the UK this week lies an important lesson for economic policymakers. In a contest between a central bank and politicians in today’s economic environment, the central bank will prevail.
On Monday, the new UK Chancellor of the Exchequer, Jeremy Hunt, abandoned almost all the unfunded tax cuts and scaled back the cap on energy prices that forced his predecessor, Kwasi Kwarteng, from his post after a furious backlash from financial markets that almost blew up the UK pension fund sector and triggered a financial crisis in the UK that could have spread elsewhere.
The markets’ response – the pound plummeted while UK bond yields soared – forced the Bank of England to intervene as UK defined benefit pensions funds pursuing a derivatives strategy designed to hedge their interest rate risks while allowing them to pursue higher and higher-risk investment returns were hit with what were essentially giant margin calls.
The bank, which has been raising UK interest rates to combat an inflation rate of almost 10 per cent and was, within days of its intervention, planning to start selling down its holdings of the bonds it bought in response to the pandemic, announced that, for a fortnight, it would act as the buyer of last resort for the bonds the funds were selling. It calmed the panic and gave Liz Truss time to dump Kwarteng and replace him with Hunt.
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https://www.afr.com/policy/economy/uk-inflation-returns-to-40-year-high-of-10-1pc-20221019-p5br70
UK inflation returns to 40-year high of 10.1pc
Liza Tetley and David Goodman
Oct 19, 2022 – 5.48pm
London | Soaring food prices drove UK inflation back into double digits in September, adding to pressure on the government and central bank to act.
The Consumer Prices Index rose 10.1 per cent last month from 9.9 per cent the month before, the Office for National Statistics said on Wednesday. That matched a 40-year high reached in July and exceeded economists’ expectations for 10 per cent.
The figures leave inflation well above the Bank of England’s 2 per cent target, adding to pressure on policymakers to lift the key rate significantly next month. The danger is that prices accelerate again early next year after the government loosens its support for household energy bills.
Soaring prices have delivered the sharpest squeeze on consumer spending power in decades, leading to a plunge in poll ratings for Prime Minister Liz Truss’s government. While she introduced generous aid for households’ energy bills and tax cuts to jump-start growth, a market rout forced her to backtrack on many of those measures, leaving open the question of how ministers will respond.
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https://www.afr.com/world/asia/containing-china-is-biden-s-explicit-goal-20221020-p5brbf
Containing China is Biden’s explicit goal
US efforts to isolate Beijing’s high-tech sector may accelerate Xi Jinping’s bid to take control of Taiwan.
Edward Luce Columnist
Oct 20, 2022 – 10.31am
Imagine that a superpower declared war on a great power and nobody noticed. Joe Biden this month launched a full-blown economic war on China — all but committing the US to stopping its rise — and for the most part, Americans did not react.
To be sure, there is Russia’s war on Ukraine and inflation at home to preoccupy attention. But history is likely to record Biden’s move as the moment when US-China rivalry came out of the closet. America is now pledged to do everything short of fighting an actual war to stop China’s rise.
It is not clear that corporate America, or its foreign counterparts, have fully digested what is about to hit them. For decades, serious businesses have based their growth models on having a China strategy — whether it be by exporting to China, or producing there, or both.
Unless a company’s product is, say, luxury goods or agricultural commodities, Biden’s technological decoupling will hit their bottom line. His escalation also marks a final break with decades of US foreign policy that assumed China’s global integration would tame its rise as a great power.
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Home secretary quits as Truss government enters new crisis
By Rob Harris
Updated October 20, 2022 — 8.29amfirst published at 4.31am
London: British Prime Minister Liz Truss’ floundering leadership has been plunged into a fresh crisis after the resignation of a senior minister and accusations of bullying in chaotic scenes on the floor of parliament.
Just hours after Home Secretary Suella Braverman quit in dramatic circumstances - criticising Truss’ leadership and broken promises - several media outlets, including The Telegraph, The Times and Financial Times and the BBC reported that chief whip Wendy Morton and her deputy, Craig Whittaker, had also resigned.
There was speculation that Truss had sacked Morton - a close ally - outside the House of Commons chamber and marched her out, with Whittaker resigning in protest.
Downing Street then later confirmed Morton was still Chief Whip as of Wednesday night (London time) after a murky few hours in which speculation abounded they were no longer in their jobs.
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The U.S. Military’s Growing Weakness
7:09AM October 19, 2022
Americans like to think their military is unbeatable if politicians wouldn’t get in the way. The truth is that U.S. hard power isn’t what it used to be. That’s the message of the Heritage Foundation’s 2023 Index of U.S. Military Strength, which is reported here for the first time and describes a worrisome trend.
Heritage rates the U.S. military as “weak” and “at growing risk of not being able to meet the demands of defending America’s vital national interests.”
The weak rating, down from “marginal” a year earlier, is the first in the index’s nine-year history.
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The index measures the military’s ability to prevail in two major regional conflicts at once — say, a conflict in the Middle East and a fight on the Korean peninsula. Americans might wish “that the world be a simpler, less threatening place,” as the report notes. But these commitments are part of U.S. national-security strategy.
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This is the beginning of Xi’s great unravelling
The Times
10:25AM October 19, 2022
Everything is in order in Beijing’s Great Hall of the People. Xi Jinping rolled out his pitch to remain China’s paramount leader and the 2300 hand-picked communist delegates applauded thunderously. A solitary dissident who strung two banners across the capital’s Sitong bridge exhorting the Chinese to be citizens not slaves was bundled away. Third-quarter GDP figures, deemed too dismal for public consumption, were withheld indefinitely lest they spoil the party’s mood.
The world’s first techno-autocrat, master of the data universe, is it seems on track with his long-term plans to revive growth and overtake the US, set global rules of trade in China’s favour and keep the Communist Party in power for ever and a day. By Friday, Xi should be elected for a third five-year term; by the weekend the new leadership line-up will be revealed, with only one known certainty: there will be no obvious crown prince. Xi will enter the pantheon alongside the likes of Mao Zedong and the reformer Deng Xiaoping.
Yet this next term for Xi is set to be a moment of hubris. It will be when his authority publicly unravels. When dissent within and outside the party leads to factionalist infighting and an open challenge. When Xi’s guiding credo – that China can never be allowed to fall apart as did Mikhail Gorbachev’s Soviet Union – ceases to persuade a younger, more alert generation. And when the army becomes more assertive, both in Chinese domestic politics and the near abroad.
There have been two distinctive Xi policies over the past decade. The first was to modernise the Communist Party’s drive against poverty. As a teenager, Xi’s communist bigwig father fell out of favour and Xi lived for seven years in a cave in desperately backward rural circumstances. So his commitment to a socialist levelling up wasn’t just ideological claptrap.
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British PM Truss quits, rivals jockey for lightning leadership spill
Hans van Leeuwen Europe correspondent
Oct 20, 2022 – 11.44pm
London | Liz Truss has quit as British prime minister, ending a 45-day premiership that collapsed into chaos and dysfunction at breathtaking speed.
The Conservative Party will now conduct a breakneck leadership election, which will conclude by October 28 at the latest. She will remain in Downing Street as caretaker PM until a new leader is chosen.
Recently installed chancellor Jeremy Hunt immediately ruled himself out. Bookmakers put their best odds on Rishi Sunak, the former chancellor and runner-up to Ms Truss in the recent leadership contest.
The party has set a high nomination threshold for the week-long ballot, to ensure no more than three candidates can compete. MPs will vote on Monday, followed by an online ballot of the party’s 172,000 members in the ensuing days.
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https://www.afr.com/world/europe/uk-snatches-the-coup-capital-crown-from-australia-20221021-p5brn5
UK snatches the coup capital crown from Australia
The BBC described Canberra as “the coup capital of the democratic world” in 2015. That title now belongs to the UK.
Andrew Clark Senior writer
Oct 21, 2022 – 9.27am
Back in 2015, after Malcolm Turnbull became the fifth Australian prime minister in as many years, the BBC described Canberra as “the coup capital of the democratic world”
By the end of this week, in the BBC’s own backyard, Britain was experiencing its fourth Chancellor of the Exchequer in 100 days, and UK Prime Minister Liz Truss announced she would be resigning after just 44 days in office.
Behind this role reversal is a UK still reeling seven years after the fateful - even arguably fatal - “Brexit” referendum decision to leave the EU. As events in the past few weeks have shown, a combination of Brexit, government incompetence and a sclerotic economy, make Britain crisis-prone.
After UK markets revolted against Truss’ proposal for 45 billion pounds ($80.1 billion) in unfunded tax cuts, and she paid the ultimate political price, a rickety UK political caravan rolls on.
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Bond market claims its first prime minister
Spendthrift politicians have been forced to bend the knee at the altar of their frugal financiers, with more capitulations likely.
Christopher Joye Columnist
Oct 21, 2022 – 12.43pm
In the old disinflationary world where central banks were buying most, if not all, of the debt issued by governments, there were no costs for profligate fiscal policy. But with the advent of high inflation, it is much more difficult, if not impossible, for central banks to bail out bad borrowers, compelling them to contend with the ruthless decision-making of bond market bandits. And the dicier the borrower, the tougher the market will become. This is bad news for any debt securities with elevated default risks.
The bond market’s iconic rolling of British prime minister Liz Truss is a breathtaking demonstration of the power creditors ultimately have over borrowers who are reliant on the goodwill of their financiers. We are likely to see many more examples of the disciplining influence of debt markets in the next year or two as radically higher interest rates precipitate defaults, “restructurings” (to avoid defaults) and far-reaching changes in underlying borrower behaviour.
Liquidity for all but the very strongest borrowers could disappear or become severely impaired as we have seen in past cycles in 2002, 2008, 2011, 2012, 2015, 2016, 2018 and 2020. Every single shock since the “tech wreck” in the early 2000s has involved central banks buying bonds to keep a lid on yields and maintain liquidity. The highest inflation rates in 40 years, which have been partly fuelled by excessive central bank stimulus, effectively take this quantitative easing (aka bond buying) option off the table.
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UK credit rating outlook cut to negative: Moody’s
Timothy Moore Before the Bell editor
Oct 22, 2022 – 8.20am
The political drama unfolding in London, which saw Liz Truss resign as prime minister days ago, has led Moody’s to cut its rating outlook on UK government debt to negative from stable.
“The evolution of policymaking, and the UK government’s ability to engender confidence in its commitment to fiscal prudence, will be a material consideration for Moody’s in resolving the negative outlook,” the firm said in a statement late on Friday (Saturday AEDT) London time.
“An outlook period typically lasts 12-18 months.”
Still, Moody’s said it affirmed the Aa3 rating it has on UK government debt which it said “reflects the UK’s economic resilience supported by its wealthy, competitive and diversified economy.
“Despite the weakening in fiscal policy predictability in recent years, the country’s long-standing institutional framework remains strong and will continue to support the UK’s ability to respond to shocks, as seen during the pandemic.
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Taiwan war more likely sooner rather than later
11:00PM October 21, 2022
When might war break out over the Taiwan Strait? We can piously hope the answer is “never”, but American national security professionals take a more pessimistic view. They know that if deterrence fails, then war is coming.
Last week, two new policy platforms – one from the Washington DC national security establishment and the second from the Chinese Communist Party – offered essential insights into the prospects for war or peace this decade.
President Joe Biden’s National Security Strategy puts the most optimistic case in what is an increasingly bleak strategic outlook.
The statement repeatedly describes the 2020s as the “decisive decade” within which a “competition is under way between the major powers to shape what comes next”.
Notwithstanding Russia’s war of aggression in Ukraine, Biden’s strategy sees the People’s Republic of China as the decisive strategic threat.
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Liz Truss quits as British Prime Minister
8:23AM October 21, 2022
Liz Truss has announced her resignation and will become Britain’s shortest-serving prime minister.
In a brief statement outside Downing Street shortly after 11.30pm on Thursday (AEDT), Ms Truss said: “I cannot deliver the mandate on which I was elected by the Conservative Party”.
Ms Truss said she had spoken to King Charles and had then discussed the way to replace her with the head of the Tory backbench committee, Sir Graham Brady.
“We’ve agreed that there will be a leadership election to be completed within the next week,” she said.
“This will ensure that we remain on a path to deliver our fiscal plan and maintain our country’s economic stability and national security.
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https://www.afr.com/world/europe/who-can-unite-britain-s-tories-now-20221020-p5brf0
Who can unite Britain’s Tories now?
The Conservatives have learned painfully that ideology does not work in a vacuum. But will the vindicated Rishi Sunak make it to the top?
Robert Shrimsley British political commentator
Oct 21, 2022 – 11.25am
Here endeth the lesson. Time has been called on the brief, disastrous premiership of Liz Truss after just 44 days and still roughly 20 days too late. She will be Britain’s shortest-serving prime minister, though it will make her an answer to a quiz question rather than earn her a place in history. Not even those who predicted that her premiership would go wrong imagined it would implode quite so rapidly or catastrophically.
Recent days have shown that she simply could not regain control of her government after the shambles of the preening ideological “mini” Budget which shook the markets and sent gilt yields soaring. The price of these errors will be paid by the British public, many of whom will end up worse off than they were before her tax-cutting budget. Political stability has also been wrecked. Britain will soon have had three prime ministers within two months.
What happens next? The only thing one can say with reasonable certainty is that there will not be a general election. While the moral case for one is substantial, fear of one now when the party stands at about 20 per cent in the polls, is perhaps the only unifying factor among MPs. Neutral observers might reasonably ask why the people who chose Truss can be trusted to choose her successor, but they are nonetheless going to do so. There will be a new Conservative prime minister by next Friday at the latest.
The real wild card, however, is Johnson.
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https://www.afr.com/markets/currencies/why-the-us-dollar-still-rules-the-world-20221017-p5bqhj
Why the US dollar still rules the world
America only makes up a little over 20 per cent of the world economy but through good times and crises the US dollar remains king of the currencies. Will it last?
Adam Tooze
Oct 21, 2022 – 5.00am
The dollar is king. This year the strength of the US currency has humbled the yen, the euro and the pound sterling. US interest rates are putting pressure on dollar debtors around the world.
This is not a surprise. It is often said that the dollar wins whatever the state of the world economy. It is a safe haven in crisis; in a boom, money surges into the dollar because US business is the prime generator of profits. But what is increasingly hard to ignore is how the dollar’s monetary pre-eminence is out of proportion to America’s actual economic standing in the world.
Thanks to the explosive growth of emerging markets such as China and India, the world economy is increasingly multipolar. As a result, the US accounts for little more than 20 per cent of global GDP and yet its share of currency reserves is closer to 60 per cent and the dollar is involved in 85 per cent of all foreign currency transactions.
If currency is conventionally thought of as an attribute of sovereignty, then this preponderance of the dollar would seem to confirm the continued existence of a US financial empire. And yet in 2022 this is at odds with America’s polarised and dysfunctional politics and the great power competition it faces abroad. It seems almost anachronistic that the Federal Reserve still functions as the de facto central bank of the world, like a hangover from the era of the Marshall Plan in the mid-20th century, or the moment of unipolarity in the 1990s.
How long can this anomaly continue? Are there alternatives to the dollar? In times of war the question becomes an urgent one.
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https://www.smh.com.au/world/asia/reshuffle-paves-way-for-xi-s-third-term-20221022-p5bs0c.html
‘Dare to struggle’: China’s premier dropped in reshuffle that paves way for Xi Jinping’s third term
By Eryk Bagshaw
October 22, 2022 — 5.36pm
China’s Premier Li Keqiang and his ally Wang Yang will retire from the Communist Party leadership committee, paving the way for Xi Jinping to take full control of his cabinet.
Li and Wang were left off the list of 205 members of the Central Committee, which supplies the 25-member Politburo and the seven-member Politburo Standing Committee.
The list was announced on Saturday - a day before Xi is expected to be appointed as China’s leader for a third term and be elevated to “people’s leader” or “Chairman”. Xi, 69, was named on the list, confirming he will continue to lead China despite being past the retirement age of 68.
“Dare to struggle, dare to win, bury your heads and work hard,” Xi told the thousands of delegates gathered in Beijing on Saturday. “Be determined to keep forging ahead.”
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I look forward to comments on all this!
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David.
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