December 22, 2022 Edition
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As we move towards Christmas it seems little has improved. Ukraine is still suffering, Europe and the US are moving towards recession and the UK seems to be just in a worsening funk.
In OZ we are waiting to see whether the Gas Intervention works and if gas prices can be brought under control. Otherwise we seem to be having a European Christmas not a hot Aussie one!
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Major Issues.
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Franking credits drive the best capital allocation
Paul Taylor
Dec 11, 2022 – 5.00am
I’m continually surprised by the debate around franking credits and Australia’s dividend imputation system.
Franking credits not only stop the double taxation of profits, but they also create the environment in which the best projects and investments get funded. While the double taxation argument is well understood, I think the capital allocation argument is less well-known, and probably even more important for an efficient market and economy.
The Australian dividend imputation system was introduced in the 1980s by the Hawke-Keating government. Prior to this system, companies would pay corporate tax on company profits and then shareholders would also pay tax on any profits distributed through dividends by those companies.
With the introduction of the imputation system, shareholders receive franking credits for the corporate profit already paid and then only pay the difference between the corporate tax rate and their marginal tax rate.
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Does ‘getting Australia off the fence’ mean dragged into war in Asia?
The Albanese government appears to have not desire to stop and think about what the deepening moral commitment to the US alliance means for the nation’s sovereign decision-making.
James Curran Historian
Dec 11, 2022 – 1.44pm
With each passing year the consultations between Australian and US foreign and defence policy principals acquire greater gravitas.
Indeed, the meetings tend to grace history’s page even before the actual discussions occur.
It is now routine for each AUSMIN to be labelled the most “critical” or “ground-breaking” in the relationship’s history.
This year’s event, in Washington last week, was no different. It was also instantly memorialised for the future.
The Australian Strategic Policy Institute determined that AUSMIN should “yield a joint commitment to making 2023 a decisive year for strengthening the alliance’s collective defence and security”. Yet, that has been the treaty’s very purpose since its inauguration in 1951.
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Jason Clare’s mission possible: ambitious reform of our schools
Jordana Hunter School expert
Dec 11, 2022 – 3.05pm
After three years of unprecedented disruption to schooling and growing alarm about persistent pressures on teachers, the pre-Christmas meeting of education ministers provides the opportunity for political leaders to show they understand the challenges facing the national school system.
On the agenda is Education Minister Jason Clare’s draft National Teacher Workforce Action Plan, released last month. It sets out 28 items across six priority areas to tackle teacher shortages by making the profession more attractive.
But while Mr Clare deserves kudos for producing the plan quickly, the danger is that it becomes little more than a checklist of loosely connected commitments,, many of which refer to work already completed or in train.
This would be a terrible result because what Australia urgently needs is greater ambition and co-ordination among governments and school-sector leaders across the board.
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https://thenewdaily.com.au/finance/2022/12/12/alan-kohler-chatgpt-world-changed/
6:00am, Dec 12, 2022 Updated: 7:07pm, Dec 11
Alan Kohler: Yes, ChatGPT has changed the world
I’ve been playing around with ChatGPT for a few days.
It’s the new artificial intelligence product, released 10 days ago by OpenAI, that answers questions and has taken the tech world by storm (you can find it here and it’s free to use, at least for now).
My interest was piqued by this tweet from a senior research engineer at Microsoft, Shital Shah: “ChatGPT was dropped on us a bit over 24 hours. It’s like you wake up to the news of first nuclear explosion and you don’t know what to think about it but you know the world will never be the same again.”
Someone tweeted “Google is dead #ChatGPT”, and someone else wrote: “ChatGPT writes and thinks much better than the average college student IMO — it def undermines the purpose of the assignment.”
On Monday, Sam Altman, the CEO and co-founder (with Elon Musk) of OpenAI tweeted: “ChatGPT launched on Wednesday. Today it crossed one million users!”
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Lehrmann trial outcome shows criminal justice system is working
No matter the level of sympathy or community support for Brittany Higgins, the basic rights of an accused person such as presumption of innocence and the right to silence must be protected.
Anthony Whealy Contributor
Dec 12, 2022 – 5.00am
The unexpected outcome of the Lehrmann trial has raised hackles in all quarters. The criminal justice system has been impugned; the unfair treatment of complainants in sexual assault cases has been proselytised; the role of the media routinely condemned. In addition, the position of the prosecution faced with a vulnerable complainant has evoked considerable sympathy.
In all of this, the situation of a person accused of a major sexual crime has been largely neglected. Of course, rape and related offences are terrible crimes and their impact on victims is likewise, terrible. Special attention has been given to reform in this area to make the experience of complainants less burdensome. It has not always been successful. However, many of these reforms have been rightly praised. Equally, the search for further reform remains a work in progress.
However, consider the plight of a person, usually a male, charged with major sexual assault. This person rightly has the presumption of innocence before and for the duration of a criminal trial. Such a person has a right to silence and cannot be compelled to give evidence at the trial. These are the bulwarks of our criminal justice system, no matter the seriousness of the crime alleged. We should ask ourselves: why are these protections so fundamental?
Persons charged with a serious criminal offence have arrayed against them the might and power of the state. It is the state in the name of the Crown that brings the charge against an individual. The principal protections for an accused person lie in the historic tenets of the criminal justice system: the right to procedural fairness and the right to a fair trial; the right to a trial by jury; the right to demand proof beyond reasonable doubt; the right to silence and the presumption of innocence.
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Why the 60-40 balanced fund is an endangered species
Vesna Poljak Markets editor
Dec 12, 2022 – 5.00am
The typical 60-40 balanced fund is simply “naive diversification” and insufficient to defend an epic bond sell-off, such as that witnessed this year at the hands of aggressive central bank tightening.
A balanced fund is industry shorthand for an asset allocation that is 60 per cent shares and 40 per cent bonds. It is founded on the belief that when equities are in trouble, bond prices will rally in an instinctive flight to the safety of fixed income returns.
But that did not happen this year, Atrium chief investment officer Tony Edwards observes, and nor was it the first time bonds and shares were punished in a similarly painful fashion.
“What we’ve seen this year with 60-40 portfolios and really conservative portfolios having deep negative losses, is the interest rate risk – which is the primary risk that’s played out in markets this year – hasn’t been confined to fixed income portfolios,” the CIO says.
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Buy 12 stealth bombers at $28b to counter China: ASPI
Andrew Tillett Political correspondent
Dec 12, 2022 – 5.00am
Australia should consider buying a fleet of 12 advanced stealth bombers despite a price tag of up to $28 billion because China’s development of weapons capable to hitting Australian targets from 3000 kilometres away has left the defence force “outmatched”.
An Australian Strategic Policy Institute report, to be released on Monday, urges the Albanese government to speak to the US about buying the B-21 Raider bomber, saying the first aircraft could be delivered by 2030 to 2032, before the navy receives its first nuclear-powered submarine, and avoiding a capability gap.
“The ‘worst case’ scenario for Australia’s military strategy has always been the prospect of an adversary establishing a presence in our near region from which it can target Australia or isolate us from our partners and allies,” the report says.
“[China’s People’s Liberation Army] strike capabilities in the archipelago to our north or the Southwest Pacific, whether on ships and submarines or land-based missiles and aircraft, would be that worst case.
“Unfortunately, the ADF’s strike cupboard is rather bare. Defence is acquiring more modern maritime strike and land-attack missiles for its existing platforms.
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Into the world of bonds for investors seeking safe haven
6:00AM December 11, 2022
Financial experts agree that defensive investment strategies can help to weather difficult economic times such as the one we are currently experiencing.
With bond yields restored after the interest rate hikes of 2022, and as the market headwinds shift from soaring inflation to fear of recession in 2023, fixed income could become home for investors looking for a safe haven from risky assets.
Fixed rate bonds are simply a legal IOU where an investor loans money to a government or corporate group in exchange for a predetermined interest rate of return. During the life of the loan, the government or company promises to pay a fixed amount of interest at specified times and return the initial loan amount at maturity.
The government or company’s creditworthiness matters: the lower the credit rating, the riskier the investment. A lower-grade/higher-risk bond pays higher interest rates to attract buyers and to compensate for the higher chance of default. But this additional return is not without risk. Should that individual firm encounter financial stress, it may decide not to make good on its obligations. Highly rated governments, in contrast, are positioned to collect taxes from its citizens.
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https://www.afr.com/wealth/personal-finance/how-super-can-kick-in-as-you-get-older-20221211-p5c5fp
How super can kick in as you get older
Knowing how your SMSF assets can be strategically used as your needs change will give you more choices.
Louise Biti Contributor
Dec 13, 2022 – 5.00am
Investment plans should not be “set and forgot”. Your plans need to be monitored and adapted to suit your changing needs and circumstances, especially as you progress through retirement and face aged care decisions.
If you have a self-managed superannuation fund, the legislation requires you to review your investment strategy at least once a year. This review should consider more than just the risk levels you are taking and how well investments are performing – it should also include how you draw down on investments to meet your changing needs.
As you age, you may need to move homes to access care or pay for care in your home. Using (and managing) your financial resources may give you a wider range of choices and better control over how you live in those later years of retirement.
Aged care can be expensive, but the government may subsidise some costs. An assessment of your financial capacity (a means-test assessment) is undertaken by Services Australia when you access care (and ongoing) to determine the split between how much of the cost you pay and how much the government pays.
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Australia warned we’ve made the ‘same mistake’ as US on housing
December 12, 2022 — 11.53am
Key points
· Gabriel Metcalf is returning to his native US after four years spent running the Committee for Sydney think tank.
· He says the city’s housing crisis is caused in part by homeowners not wanting their values to decrease.
· And he believes government should stop asking people whether they approve of what is being built near them.
When Gabriel Metcalf first visited Sydney on a study tour from the US, he fell in love with the city and its harbour. So, when a headhunter approached him about a job here years later, “I knew that was a phone call I should answer”.
In January, Metcalf will return to San Francisco after four years at the helm of the Committee for Sydney, an urban policy think tank. Back in California, he will be confronted by an eerily similar political environment, where housing affordability is a wicked problem and property ownership is the great social divide.
Superlative though he generally is in his appraisal of Sydney, Metcalf says that’s the one aspect of life here that came as an unpleasant surprise.
“Australia has made essentially the same mistake as the US ... it has created a system where all the current homeowners are terrified of housing becoming more affordable because that means their primary asset is not increasing in value the way they want,” he says.
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'Horrible reading': DNA lab probe findings released
13-Dec-2022
Commissioner Walter Sofronoff, pictured above, has recommended sweeping structural changes to the way the Queensland Health and Forensic Scientific Services is run, including recruitment of new leadership, following an inquiry into the state's bungled DNA testing.
The lab's
failings were exposed by The Australian's podcast, Shandee's Story, and
investigated during a royal commission-style inquiry.
"The structural changes and the personnel changes that are are going to
happen to lay the foundation for what I hope will be a world-class
facility," he said.
"The government is going to have to find and recruit a scientist of the
highest calibre, and I know that they're working towards doing that imminently.
Once that's done, that person will take the reins and begin the changes that
will have to take place in the way that the laboratory is working."
Sofronoff acknowledged significant flaws in the lab's culture and procedures.
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Business outlook sours for the first time this year after Covid economic rebound: NAB survey
12:00PM December 13, 2022
The mood among Australian businesses has turned negative for the first time this year, as companies worry that the best of the post-Covid-19 economic rebound is now behind them.
NAB’s latest monthly survey showed businesses were still enjoying strong operating conditions in November, but that worries about an anticipated steep slowdown in 2023 drove the corporate sentiment index down 4 points to 4pts – the first subzero reading since December 2021.
NAB chief economist Alan Oster said “overall, the survey suggests the economy powered through November with consumers still spending in the run-up to Christmas”.
“However, firms have become increasingly pessimistic about the future as they look ahead to a slowing global economy and a period of weaker consumption as inflation and higher rates weigh on households,” he said.
Cost pressures had eased since the middle of the year, but remained high, the survey showed. Forward orders also softened in November.
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https://thenewdaily.com.au/finance/2022/12/15/broken-promises-2022-kohler/
6:00am, Dec 15, 2022 Updated: 2h ago
Alan Kohler: Three broken promises define 2022
This was the year of broken promises.
There were three of them, and they have haunted the whole of 2022, making it the horrible year it has been.
The big one, from which all else flows, was Vladimir Putin saying he would not invade Ukraine, several times.
A month before he broke that promise on February 24, the then opposition leader Anthony Albanese kicked off his election year on January 25 by promising at the National Press Club that Labor’s climate change policy would cut power bills by $275 a year.
It was based on modelling by Reputex that said renewable energy would bring electricity prices down by that much by 2025. Anyone who bases a promise on modelling is asking for trouble.
A week after that, on February 1, Reserve Bank Governor Philip Lowe said interest rates would not go up for “some time yet”. Having spent a year promising that they wouldn’t go up until 2024, he made that a bit more vague as 2022 began, but everybody only remembered the bit about 2024.
Neither man saw the trap the Russian President had set for them, by lying about his intentions in Ukraine.
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Labor’s true spots are now on show
The verbal battering of the gas companies means business now surely has the measure of the business-unfriendly way the Albanese government does politics.
Dec 14, 2022 – 7.25pm
While Anthony Albanese tried to present a pro-business face to the Australian people before the federal election, eight months after coming to office, Labor’s true spots are now on show.
First, there was the retro industry-wide pattern bargaining workplace shake-up the Albanese government sprang on business at its jobs summit stitch-up in September – which excluded most CEOs, who actually create jobs, from the guest list.
Dressed up as a way to get wages moving again but without doing anything meaningful to boost productivity, it showed Labor is still controlled by its union movement paymasters whose institutional interests were served by forcing the industrial relations bill through parliament before Christmas. That is despite union membership slumping to a new low of just 12.5 per cent of the workforce.
Then Labor floated the idea of breaking its election promise to retain the stage three personal income tax cuts that give back bracket creep, in order to help pay for Labor’s childcare and disability services spending monuments. That is Whitlamesque “nation-building” and not the kind of Hawke/Keating-style economic reform that Mr Albanese said he wanted his government to emulate.
Now comes Labor’s massive intervention into the energy market, which the government has the numbers to ram through both houses of parliament during Thursday’s emergency sitting.
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Regulators intensify their demands on the ASX
James Eyers Senior Reporter
Dec 15, 2022 – 9.21am
The Reserve Bank and corporate regulator have used special powers for the first time to intensify oversight of the ASX to ensure it invests in the system that settles $5 billion of equity trades every day and maintains the market’s confidence in plans to replace it.
The Australian Securities and Investments Commission has used a power under the Corporations Act to issue notices to ASX that will require it to produce a special report on the capacity and security of the existing CHESS system, which will be audited by Ernst & Young.
“ASIC’s immediate priority is to ensure current CHESS continues to provide the level of service, reliability and resilience that is required,” ASIC chairman Joe Longo said in a statement. “This is important not just for industry but also for the Australian economy and investors.”
In a coordinated action, the Reserve Bank, which co-regulates the clearing and settlement monopoly, has also taken additional action against ASX following the CHESS replacement debacle
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The number of Australians in work increased by a bumper 64,000
12:32PM December 15, 2022
The unemployment rate has held steady at a near 40-year low of 3.4 per cent in November, as the number of Australians in work jumped by 64,000.
The latest figures from the Australian Bureau of Statistics showed this year’s jobs boom showed no sign of waning, and suggested the Reserve Bank of Australia would likely have to continue to hikes rates in the New Year to slow demand and bring inflation under control.
Underemployment, which measures those with jobs but who are looking for more hours, fell from 6 per cent to 5.8 per cent – a further sign of an historically tight labour market. Full-time employment accounted for more than half the total monthly increase, lifting by 34,200.
Jim Chalmers in a statement welcomed the strong jobs report, but foreshadowed a more difficult 2023.
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https://www.afr.com/wealth/personal-finance/what-the-coming-recession-will-look-like-20221214-p5c64v
What the coming recession will look like
It will be longer than normal and unlikely to be followed by a big bounce in prices like past downturns.
Christopher Joye Columnist
Dec 16, 2022 – 10.11am
With US equities getting pounded overnight – down some 2.5 per cent – and the S&P 500 slipping below 4000 points again as a result of renewed fears of an interest rate-led recession, it is instructive to consider what high inflation recessions actually look like.
Since the start of 2022, Coolabah models, which leverage off both bond and equity market data, have been forecasting a US recession with high conviction. And now central banks around the world are increasingly acknowledging that the record rise in interest rates that they are imposing on unwitting borrowers in response to the biggest inflation crisis in 40 years will inevitably force the global economy into a serious downturn.
While all the macro data flows continue to deteriorate sharply, the central bankers have to date wanted to keep their foot on the throat of the inflation genie. Investors have, therefore, had to grapple with consistently hawkish rhetoric from the monetary policy mandarins while recognising the practical reality that we are rapidly approaching peak terminal cash rates.
In the case of the US Federal Reserve, this was bumped up during the week from the Fed’s prior estimate around 4.6 per cent to 5-5.25 per cent. It is remarkable to think that financial markets in December last year were only pricing in a maximum Fed policy rate of just 1 per cent.
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Slowdown ahead: Australia’s top CEOs on the economic outlook
Business leaders say the Australian economy starts from a period of resilience, but 2023 will be tough as rising rates and cost pressures bite.
Dec 17, 2022 – 5.00am
How do you expect the Australian economy to perform in 2023? What is the risk the economy slows below the federal budget forecast of 1.5 per cent next financial year in response to the RBA’s rate hikes?
Ryan Stokes, Seven Group
I remain optimistic about the economic outlook for Australia. We have record low unemployment, resilient investment in productive infrastructure, strong terms of trade, and continued demand for energy and natural resources from trading partners in our region, and robust household and business balance sheets.
To enable growth, we need to accelerate skilled migration and address the gap created five years ago due to a change in the visa process, which has left us hundreds of thousands of workers short.
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Australia’s top CEOs on the energy crisis
Australia’s top chief executives have told the annual Chanticleer CEO Poll that price caps are not the right solution to rising energy prices.
Dec 16, 2022 – 4.53pm
Do you support the federal government’s moves to regulate the domestic gas price below the international price? What other energy policies do you think are urgent?
Meg O’Neill, Woodside Energy
More supply is the key to lowering price and ensuring adequate long-term energy security. Business needs the confidence to make large-scale and ongoing investments in energy production, capacity and transmission.
A price cap would make investing in Australia a riskier prospect than other jurisdictions, undermining confidence in fiscal stability and leading to under-investment in supply.
For example, we are considering future development opportunities in the Bass Strait as well as investment in gas capacity mechanisms that can alleviate pressure, such as floating storage and regasification units. These investments will be less attractive if pricing is limited.
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Australia was always bullied by vested interests, until now
Political and international editor
December 17, 2022 — 5.00am
The Albanese government has broken the curse. The curse that has held Australia in thrall to the resources sector ever since the Rudd government was destroyed in its efforts to impose a resource super-profits tax.
The gas industry worked itself into hysteria over the past week. It raged and blustered. It pulled out of its agreement to guarantee gas supply to the east coast of Australia. And it threatened Anthony Albanese with a $20 million ad campaign and an investment strike.
And who could blame it? It’s what we trained the resources sector to do. Australia’s political system has rewarded precisely this sort of bullying in the past by meekly surrendering.
Not only the resources sector but vested interests in general. Remember that soon after Rudd’s fall, Julia Gillard proposed some modest regulation of poker machines. When the clubs industry attacked, Gillard surrendered without a fight.
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Next year could be challenging for investors, but not all hope is lost
Columnist
December 14, 2022 — 5.10am
While Australia’s economic and financial outlook faces a number of challenges in the coming year, there might be some bright spots if you know where to look.
The good news is that inflation should moderate next year. The COVID-driven demand for goods is unwinding, and we may once again see falling prices for cars, clothes, furniture, and consumer electronics.
In Australia at least, wage growth also remains fairly low, suggesting inflation in a range of services should also not get a lot worse. Annual underlying inflation could drop from just over 6 per cent to be back within the Reserve Bank of Australia’s 2 to 3 per cent target band by next Christmas.
Importantly, Australia likely does not need a recession to contain inflation. Were it up to the RBA, it would likely be content with a relatively soft landing for our economy in 2023 – containing the year-ahead rise in the unemployment rate to not much more than 4 per cent, from 3.4 per cent today.
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COVID-19 Information.
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Beijing swings from anger over zero-COVID to coping with infections
Ryan Woo and Albee Zhang
Dec 11, 2022 – 3.39pm
Beijing | Beijing’s COVID-19 gloom deepened on Sunday with many shops and other businesses closed, and an expert warned of many thousands of new coronavirus cases as anger over China’s previous COVID-19 policies gave way to worry about coping with infection.
China dropped most of its strict COVID-19 curbs on Wednesday after unprecedented protests against them last month, but cities that were already battling with their most severe outbreaks, like Beijing, saw a sharp decrease in economic activity after rules such as regular testing were scrapped.
Anecdotal evidence suggests that many businesses have been forced to close as infected workers quarantine at home while many other people are deciding not to go out because of the higher risk of infection.
Zhong Nanshan, a prominent Chinese epidemiologist, told state media that the omicron strain of the virus prevalent in China was highly transmissible, and one infected person could spread it to as many as 18 others.
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COVID is running rampant in China and its hospitals are overwhelmed
By Eryk Bagshaw
December 13, 2022 — 3.58pm
Singapore: Coronavirus hotlines are overwhelmed in Beijing, hospitals are running out of beds in Guangzhou and medical facilities in Hebei province are relying on one-third of their staff to keep them running. COVID-19 is running rampant throughout China.
The deluge of mostly mild cases has strained health resources and triggered a shortage of antigen tests and widespread confusion about protocols after three years of zero-COVID were abruptly abandoned last week.
The Beijing Health Commission said 22,000 people visited the city’s fever clinics on Sunday – 16 times the number of visits the previous Sunday. The same day the city’s emergency centre received six times the normal volume of calls.
“The call volume is too large, the queue is too long, and calls that really need it may find the line is occupied,” said Wang Yong, deputy director of Beijing’s Emergency Centre. “The number of ambulances is limited and the efficiency is reduced.”
The panic is being partly driven by the government’s own messaging. The Chinese Communist Party spent the best part of 36 months telling its citizens to be terrified of the virus – a year longer than most other governments – as it ruthlessly pursued its zero-COVID strategy.
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How to take the politics out of national security
Australia should overhaul the way it makes national security decisions to ensure bipartisan support for long-term undertakings like AUKUS.
Ben Scott Contributor
Dec 16, 2022 – 5.00am
Australia’s more complex and competitive national security environment will present Canberra with tougher choices and more of them. To improve its decisions, the government should invite relevant shadow ministers into a bipartisan Advisory National Security Council (ANSC).
Both sides of politics often call for national security bipartisanship. It makes sense for Australia to present a united front on big international and security issues where much is at stake and domestic disagreements are minimal.
A good example is the bipartisan delegation Foreign Minister Penny Wong led to the Pacific.
Wong had earlier pledged not to “weaponise national security for political purposes” but, somewhat ironically, did so while berating the opposition for doing just that while in government.
It’s true that the assumed virtue of national security bipartisanship has been unhelpfully weaponised. Governments have used it to forestall debate.
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Climate Change.
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https://www.afr.com/companies/energy/messy-end-to-gas-market-intervention-20221210-p5c5a9
Messy end to gas market intervention?
The government had no choice but to intervene, and none of the possible interventions was without big consequences. But does setting a “reasonable price” snatch defeat from the jaws of victory
Tony Wood Contributor
Dec 11, 2022 – 4.12pm
Market interventions are inherently bad, yet we have seen a big one in the past week. Energy continues to be a geopolitical battleground, and Australia’s energy market never ceases to provide intriguing policy conundrums.
The Albanese government walked into a nasty energy price bombshell that blew up when the Treasurer revealed advice that electricity and gas prices would rise by more than 40 per cent over two years. This is not a market failure. The energy market works with merciless efficiency, and Australia’s abundant resources are in high demand overseas, mostly courtesy of the Ukraine war. The domestic consequence looked to be horrible, and Treasury agreed.
The government had no choice but to intervene, and none of the possible interventions was without big consequences. Energy consumers have been pleading for relief, while energy producers threatened the direst of outcomes if their windfall profits were affected. Just to be helpful, the Queensland Premier was outraged that her government-owned generators might also lose windfall gains, and joined with the NSW Premier to suggest they may deserve compensation for the loss of associated royalties.
Over the past few weeks, it became clear that both gas and coal needed to be considered, and some form of price caps would be the least bad solution. The caps should apply only to domestic supply and preferably without affecting current contracts.
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https://www.afr.com/companies/energy/the-risks-in-albanese-s-energy-deal-20221210-p5c59u
The risks in Albanese’s energy deal
The federal government’s deal with the states wraps up its energy package with a neat Christmas bow. How long will it take to unravel?
Jennifer Hewett Columnist
Dec 11, 2022 – 6.33pm
The Albanese government is confident that its deal with the states provides it with a crucial political breather to cope with spiralling energy prices. But the cost of this comes in the form of opening a highly volatile, high-risk battle with gas producers, backed by most of the resources industry.
Last Friday, Prime Minister Anthony Albanese expressed confidence that his government had delivered on the end-of-year deadline to come up with a “constructive” solution to soaring energy bills after protracted negotiations with the Liberal and Labor state governments.
It’s a neat-sounding package wrapped up in a Christmas bow. But it’s not just the Christmas Grinch suggesting that it all sounds a little too good to be true.
The more detail the gas producers have learnt about the package, the more agitated they have become.
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‘Reasonable’ gas price a disaster for the energy grid
If this policy is implemented for short-term political mileage, it will do irreparable long-term damage to both the East Coast power grid and Australia’s standing in the global investment community.
Mark Samter Contributor
Dec 12, 2022 – 11.57am
We should be under no illusions that for all the short-term political mileage of lowering energy bills, the government’s proposed gas market legislation risks the very foundations of the east coast energy grid and all who use it.
As the latest piece of evidence shows, short-election cycle democracies are particularly ill-equipped to deal with energy policy through the transition. Labor’s legislation, if passed, will see capital and therefore supply evaporate from the sector, at the same time as artificially lifting demand as gas-fired generators will run harder, particularly if coal plant performance remains poor.
The $12 per gigajoule price cap for 2023 is bad enough, albeit with most gas already contracted, it actually makes little real difference. On top of that, the fact that spot markets in the southern states – and the retailers (who in many cases are the ones selling at $20-$30/GJ – are somehow not included in it at all is puzzling to say the last.
However, the real policy disaster is what the legislation creates for future years, with the mandatory code of conduct that will enshrine a “reasonable price provision”.
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https://www.afr.com/companies/energy/wrong-approach-gas-plan-threatens-supply-20221211-p5c5fi
Gas plan threatens billions in investments
Angela Macdonald-Smith Senior resources writer
Updated Dec 12, 2022 – 10.48am, first published at 8.51am
Billions of dollars of investments in gas projects and takeover deals are hanging in the balance as a result of the federal government’s intervention in the gas market, say industry heavyweights.
RBC Capital Markets said the shock proposal could derail the $18.4 billion takeover bid for Origin Energy, representing a “material adverse change” for the business. Analysts pointed to increased doubts around domestic gas projects including Santos’ Narrabri venture in NSW and Senex Energy’s $1 billion expansion in Queensland.
In a rare public comment, the head in Australia of Japanese giant Mitsui, Masato Sugahara, added to criticism by ExxonMobil, Chevron and Shell, saying the intervention “may not align with international market standards for investor certainty, and could be counter-productive for domestic consumers in the long run.”
More than $1 billion was wiped off the market value of Origin on Monday as worries escalated that the proposed takeover bid from North American giants Brookfield and EIG could be scuppered, or the price cut, because of the Albanese government’s more aggressive-than-expected plan to rein in runaway energy prices.
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Government’s bait and switch has caught gas producers flatfooted
Business columnist
December 12, 2022 — 4.05pm
Whether by accident or design (the latter more likely), the Albanese government has executed a bait and switch on the gas industry. Having telegraphed for many weeks that a price cap would be imposed on gas and coal for a limited period, the government has thrown a grenade into the market.
It was a manoeuvre that has caught the gas industry off guard and sent some participants into crisis mode. While the industry players were always going to complain, the expanded intrusion by the federal government has been characterised by some as a declaration of war against the industry.
Rather than just the 12-month price cap on coal and gas – the second element to the government’s proposed legislation is to intervene in long-term gas pricing by inserting itself into negotiations between gas suppliers and the commercial customers.
Taking on the role as a price arbiter in a free market is a hazardous exercise and is a big swing for a government whose treasurer, Jim Chalmers, has repeatedly claimed to dislike being a market interventionist.
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Gas market grinds to halt as Woodside, Shell suspend sales talks
Angela Macdonald-Smith Senior resources writer
Updated Dec 13, 2022 – 6.01pm, first published at 9.19am
Woodside Energy has joined Shell and other east coast gas suppliers in calling off talks with customers for new supply contracts in the wake of the government’s plan to permanently control prices, increasing uncertainty over the level of gas available for manufacturing and power generation in the years ahead.
The stalling of the gas market came as Woodside CEO Meg O’Neill urged the federal government to rethink its proposed gas market intervention, warning the shock plan risks energy rationing and power shortages, and would cost investment and jobs.
“We need to unlock gas supply now... no-one wants to see energy shortages and gas rationing,” said Ms O’Neill, who has since last month also been chairman of the oil and gas industry group APPEA.
“We must develop a comprehensive, longer-term solution that addresses gas supply and reliability, the overall energy mix and infrastructure, without undermining the market-based economy.”
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Generators limited capacity during energy crisis, but no rules broken
Mark Ludlow Queensland bureau chief
Dec 15, 2022 – 5.00am
Big electricity generators did not act in good faith when they failed to bid into the National Electricity Market in June – forcing the market operator to intervene to avoid blackouts – but they did not break any rules, according to report by the Australian Energy Regulator.
Despite claims from AER chairwoman Clare Savage in July that the regulator could be looking at illegal conduct, the final report into the incident has found the generators did not have a case to answer.
While the AER report found some generators engaged in behaviour that caused “poor market outcomes” – which ultimately led the Australian Energy Market Operator to intervene and suspend the market – they were mostly doing it for commercial reasons.
“The evidence we obtained appears to indicate that several generators had little to no regard about the effect of their actions on the broader system,” the report found.
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Price caps are only the start of a long fight, warns gas industry
Phillip Coorey and Jacob Greber
Dec 15, 2022 – 5.53pm
Energy suppliers are digging in for a protracted battle with the government over coming months, saying Thursday’s passage through parliament of laws to cap prices is just one of a series of planned policies with the potential to damage the industry,
But as parliament legislated a one-year, $12-per-gigajoule price cap on uncontracted gas, and a permanent code of conduct to enforce the sale of gas at a “reasonable price”, Prime Minister Anthony Albanese dismissed talk that the changes would dampen much-needed investment in gas and warned the industry risked “talking itself down”.
“If you go out there, and you say, ‘Oh, this will inhibit investment, this will create issues for us going forward’, then you’re essentially talking down your industry,” he told Sky News.
“And I see no reason, there’s nothing in this legislation that should require that sort of conversation.”
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‘Draconian, reckless, vandalism’: Gas fights for its future
The gas industry’s warnings about the government’s price intervention have been ignored. Now Labor will have to own the consequences if it hasn’t got it right.
Angela Macdonald-Smith and Mark Ludlow
Dec 16, 2022 – 3.42pm
Just over a week ago, the worst-case scenario for Australia’s world-scale gas industry was a temporary cap on prices, supposedly to provide relief for households and businesses slammed by spiking energy bills.
Now the out-of-favour sector is fighting for its future, with stark repercussions feared for the broader Australian economy.
Despite the hundreds of billions of dollars of investment, billions in taxes and royalties, and thousands of jobs the industry has provided over the past decades, its prospects could hardly be bleaker under the Albanese government’s radical package of gas measures rushed through Parliament this week.
At least that’s the viewpoint of global energy heavyweights such as ExxonMobil, Shell and Mitsui which have invested billions of dollars to create one of the world’s largest and most reliable sources of LNG – in demand the world over to keep the lights on through the transition to low-carbon energy – and which also supply gas to east coast domestic buyers.
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The price cap might have fit, minus the threat of future interventions
A relatively simple piece of legislation has turned into an unhappy episode because of the government’s proposed rules for controlling tomorrow’s gas market.
Laura Tingle Columnist
Dec 16, 2022 – 5.20pm
In Berlin on Thursday, the German parliament approved legislation to cap gas and electricity prices for consumers and companies. After months of wrangling, European Union leaders are expected to release a statement on Monday finalising a price cap, and other measures, to deal with high energy prices.
It would have to be said that the Germans have not done things by halves amid an energy crisis that has gripped the world’s fourth-largest economy after Russia’s invasion of Ukraine.
Russia supplied 55 per cent of Germany’s gas in 2021. Not only did the latter face the likelihood of losing that supply but it also brought it on by halting the commissioning of a major gas pipeline from Russia.
Germany has subsequently transformed its energy policies to fill the gaps, keeping some old technology in play (nuclear, coal and oil-fired power plants) but also vowing to accelerate its move into renewables.
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Royal Commissions And The Like.
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New aged care star ratings make difficult family choices easier
Aged care homes are being put under the spotlight in a system that compares staffing levels, residents’ experience and quality of care.
Bina Brown Contributor
Dec 15, 2022 – 5.00am
A new star ratings system for aged care is being rolled out this week, giving existing and potential residents and their families important insight into the quality and staffing levels of an aged care facility.
Providers have already received their first round of ratings from the Department of Health and Aged Care, with 31 per cent receiving four or five stars, 59 per cent receiving three stars and 10 per cent receiving one or two stars.
A one-star rating indicates significant improvement needed, two stars indicates improvement needed, three stars indicates an acceptable quality of care, four stars indicates a good quality of care and a five-star rating indicates an excellent quality of care.
The ratings will be made public on the My Aged Care website through the “find a provider tool”, allowing anyone researching aged care online to compare and monitor facilities.
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National Budget Issues.
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Who knew? The price of better government is higher taxes
Economics Editor
December 12, 2022 — 5.30am
Have you noticed? Since the change of government, the politicians have become a lot franker about the budgetary facts of life. And now the Parliamentary Budget Office has spelt it out: it’s likely that taxes will just keep rising over the next 10 years.
The great temptation for politicians of all colours is to make sure we don’t join the budgetary dots. On one hand, they’re going to improve childcare and health and education, do a better job on aged care and various other things. On the other, they’ll cut taxes.
In short, they’ve discovered a way to make two and two add to three.
The attraction of that relatively new institution, the Parliamentary Budget Office, is that it reports to the Parliament, meaning it’s independent of the elected government. Each year, sometime after the government has produced its budget, the office takes the decisions and figurings and examines whether they are sustainable over the “medium term” – an econocrats’ term for the next 10 years.
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Top economists urge government to rethink stage three tax cuts
By Shane Wright
December 14, 2022 — 12.01am
Some of the nation’s most respected economists have called on the federal government to reconsider the size, shape and timing of the $254 billion stage three tax cuts, saying they pose a risk to the budget and will push up inflation.
In full-page advertisements in The Sydney Morning Herald and The Age on Wednesday, 100 financial experts – including former competition watchdog chair Allan Fels, the architect of HECS Bruce Chapman and tax expert Miranda Stewart – signed an open letter to Prime Minister Anthony Albanese arguing the cuts in their current form were unaffordable.
The tax cuts, legislated by the previous government with Labor support in 2019, have come under increased scrutiny since Treasurer Jim Chalmers revealed in October that their expected cost over the decade to 2032-33 had climbed $11 billion in less than six months.
Parts of Labor want the cuts, which are due to start in mid-2024, to be ditched. Chalmers has said they will impose a growing cost on a budget already struggling under the weight of increasingly expensive programs but Albanese has made clear the government is sticking with its election promise to deliver them, saying there was “no change” in its position.
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‘Are you even listening?’ The ex-PM is schooled at the robo-debt royal commission
By Tony Wright
Updated December 14, 2022 — 6.13pmfirst published at 5.28pm
He was a senior minister for all nine years of the last Coalition government and rose to the heights of prime minister, all the while perfecting the art of not answering a straight question when it suited him.
But Scott Morrison, who was bundled out of power in May, was handed a lesson about his much reduced status on Wednesday when he appeared as a witness in the royal commission into the infamous robo-debt scheme.
As he launched into long and convoluted responses to questions, the commissioner, Catherine Holmes SC, grew increasingly impatient.
“Can I just get you to stick to answering the question a bit more?” Holmes ordered the former prime minister.
“I do understand that you come from a background where rhetoric is important but it is necessary to listen to the question and just answer it without extra detail; unnecessary detail.”
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Markets could be about to enter a golden period, says UniSuper chief
By John Collett
December 14, 2022 — 5.16am
Though impossible to know for sure, it’s a reasonable bet that we are now in the most pessimistic part of the investment cycle. Share prices, despite the end-of-year ‘Santa rally’, are down from where they started this year, along with bond and property prices.
But for John Pearce, the chief investment officer at $115 billion superannuation fund UniSuper, these grim times are rapidly receding in 2022’s rear-vision mirror, with the experienced asset manager seeing better times ahead.
He believes excesses in markets are being eliminated, whether it is the “bubble” in the Australian house prices or losing much of the froth from share prices.
“What we are going through now is a cleansing period and key to that cleansing period is ridding ourselves of the notion that zero or negative [real interest] rates are a good idea,” Pearce says, referring to the central banks driving rates low at the onset of the pandemic.
Pearce said high inflation is the financial cost of the government cash splash to households and businesses during the worst of COVID-19, a move that created more demand for goods at a time fraught with supply chain bottlenecks.
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Health Issues.
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Medical centre chain rorted Medicare as authorities ignored tip-offs
By Adele Ferguson and Ben Cubby
December 12, 2022 — 5.00am
Key points
· New documents show collapsed bulk billing medical centre chain Tristar systematically rorted Medicare over a number of years.
· This came despite authorities being tipped off to the problem on numerous occasions.
· Whistleblowers say the Tristar business model was based on hiring GPs on visas and taking 30 to 50 per cent of the billing income.
This story is part of a series examining how billions of dollars are being rorted from Medicare each year. See all 25 stories.
One of the country’s biggest bulk billing medical centre chains and mental health providers systematically rorted Medicare over a number of years while authorities failed to act on a series of tip-offs and red flags, leaked documents show.
The company, Tristar Medical Group, collapsed in May this year, leaving hundreds of patients without access to medical services and owing creditors $23 million.
A month after the Medicare rorts stories broke, Dr Margaret Faux address misinformation and offers her assistance to the independent Medicare inquiry.
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‘Sex absolutely matters’: How gender affects your chance of survival in ICU
December 14, 2022 — 7.47pm
Women are more likely to die in intensive care from male-dominated conditions, including cardiac issues, than men.
The findings of the world-first study involving almost 1.5 million Australian and New Zealand ICU patients shocked the researchers, who set out to examine how sex and gender may influence a person’s chance of survival.
The most striking difference was following heart surgery, where women were roughly 1.5 times more likely to die in ICU than men. Women are also more likely to die in ICU following a cardiac arrest compared to men.
“The big question we set out to answer was, ‘Does sex or gender matter when you’re critically ill?’ And what we found is that sex absolutely matters,” Austin Health intensivist and lead researcher Dr Lucy Modra said.
“It has an impact on whether you live or die and your illness severity.”
As part of the study, published in the American Journal of Respiratory and Critical Care Medicine, researchers examined more than 10 years’ worth of data from 200 hospitals in Australia and New Zealand.
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Backbench angst over Labor’s decision to cut Medicare psychologist sessions
December 18, 2022 — 5.00am
The federal government is facing growing calls from mental health experts, the Greens, the Coalition and its own backbench to reverse its decision to slash the number of Medicare-funded psychologist appointments, with Health Minister Mark Butler accused of displaying a bias against the program for more than a decade.
More than 10 Labor MPs attended a meeting with Mental Health Minister Emma McBride on Thursday where they expressed concern about the decision to cut the number of psychologist sessions annually under Medicare from 20 to 10.
A Change.org petition calling on the government to reinstate the additional sessions had received more than 32,000 signatures as of Saturday night.
In a letter sent to Butler on Friday, Greens leader Adam Bandt and the party’s health spokesperson, Senator Jordon Steele-John, called on the health minister to “immediately reverse” the decision to cut the number of psychologist sessions a year under Medicare from 20 to 10.
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International Issues.
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Global correction in commercial property ‘headed Australia’s way’
Nick Lenaghan Property editor
Dec 11, 2022 – 1.46pm
A price correction in commercial real estate that is gaining steam in the American and European markets will soon make its way into Australia, according to the research head at Heitman, a real investment platform with more than $78 billion ($US53 billion) under management globally.
As Heitman’s head of global investment research, Mary Ludgin is in a good position to gauge how rising rates and inflation are playing out through the property sector and how big institutions are shifting their investment strategies in response.
The first sign of prices shifting has been an expansion in yields or capitalisation rates, commonly known as cap rates in the sector.
“Definitely there has been upward pressure on yields around Europe and the US. I would imagine that would translate here as well,” Dr Ludgin told The Australian Financial Review during her recent visit to Australia.
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We haven’t reduced financial risk, just transformed it
There is growing evidence that post-crisis reforms, while aimed at shoring up financial stability may have, in important areas, simply traded counterparty risk for liquidity risk.
Brooke Masters
Updated Dec 11, 2022 – 3.07pm, first published at 3.06pm
When Citigroup chief executive Jane Fraser was asked last week what risks she was most concerned about, market liquidity topped her list.
The Bank for International Settlements is worried about “fragility” in the market for mortgage-backed securities. And volatility has soared in US Treasury markets this autumn due to poor liquidity.
With the world poised to plunge into recession, stresses are to be expected. But there is growing evidence that the post-crisis reforms, while aimed at shoring up financial stability may have, in important areas, simply traded counterparty risk for liquidity risk.
Back in the 2008 crisis, much of the contagion stemmed from trades between failing institutions and stronger ones. When insurer AIG sold more credit default swaps than it could make good on, its failure threatened to topple a whole slew of banks that were on the other side of those trades.
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Ukraine hits hotel housing Putin’s Wagner mercenaries
Mark Landler, Matt Stevens and Matthew Mpoke Bigg
Dec 12, 2022 – 9.56am
Kyiv | Russian drone strikes on the southern Ukrainian port city of Odessa plunged more than 1.5 million people in the region into darkness over the weekend, while several hundred kilometres to the east, the Ukrainians struck the Russian-occupied city of Melitopol, an attack that opened another front in the fiercely contested battle for territory.
Ukraine’s President Volodymyr Zelensky said the country’s forces had shot down 10 of 15 drones that Russia deployed over Odessa, a tally not immediately possible to verify. But he said the strikes by Russia, part of a nationwide assault on Ukraine’s energy grid, had left the region in a “very difficult” situation, warning that it would take “days,” not “hours,” to restore power to civilians.
Some 300,000 residents of the Odessa region remained without electricity late on Sunday afternoon (Monday AEDT), the head of the regional military administration, Maxim Marchenko, said on the messaging app Telegram.
The drone strikes came as a senior official in eastern Ukraine said Ukrainian forces had attacked a hotel where members of Russia’s private Wagner military group were based, killing many of them.
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Pentagon sounds alarm on Beijing’s rising nuclear threat
12:00AM December 12, 2022
The just released Pentagon report that assesses China’s military power predicts Beijing will have about 1500 strategic nuclear warheads by 2035, or roughly triple the number of today. By comparison, the US currently deploys 1744 warheads and Russia 1588. So, China may soon achieve strategic nuclear parity with America.
Senior officials in US Strategic Command are talking about the need for more strategic nuclear weapons given the rapid increase in China’s inventory. The key threat for America now is that, for the first time, it faces the prospect of war simultaneously with two well-armed nuclear powers, Russia and China.
At the height of the Cold War, the Pentagon’s calculations were that to threaten unacceptable damage to the Soviet Union as a modern functioning society, the US would have to destroy a quarter of that country’s population – about 70 million people – including its political and military leadership. It is unclear if a similar calculation applies for China.
This does not mean to say that Washington needs to match China’s rapid increase of its strategic nuclear weapons from a low base of scarcely 200 warheads a few years ago. But it may well mean we are on the threshold of a renewed nuclear arms race.
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US makes breakthrough on clean energy ‘holy grail’
Tom Wilson
Dec 12, 2022 – 3.44pm
London | US government scientists have made a breakthrough in the pursuit of limitless, zero-carbon power by achieving a net energy gain in a fusion reaction for the first time, according to three people with knowledge of preliminary results from a recent experiment.
Physicists have since the 1950s sought to harness the fusion reaction that powers the sun, but no group had been able to produce more energy from the reaction than it consumes – a milestone known as net energy gain or target gain, which would help prove the process could provide a reliable, abundant alternative to fossil fuels and conventional nuclear energy.
The federal Lawrence Livermore National Laboratory in California, which uses a process called inertial confinement fusion that involves bombarding a tiny pellet of hydrogen plasma with the world’s biggest laser, had achieved net energy gain in a fusion experiment in the past two weeks, the people said.
Although many scientists believe fusion power stations are still decades away, the technology’s potential is hard to ignore. Fusion reactions emit no carbon, produce no long-lived radioactive waste and a small cup of the hydrogen fuel could theoretically power a house for hundreds of years.
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https://www.computerworld.com/article/3682143/chatgpt-finally-an-ai-chatbot-worth-talking-to.html
ChatGPT: Finally, an AI chatbot worth talking to
The newest research project from OpenAI is actually interesting — and already useful. Before long, AI like this will transform business communications.
By Mike Elgan
Contributing Columnist, Computerworld | 8 December 2022 22:00 AEDT
AI chatbot experts are all talking about — and talking to — a newish research project from artificial intelligence research organization OpenAI. It’s called ChatGPT.
(OpenAI, a San Francisco-based non-profit AI research lab founded in December 2015, is the same organization behind the DALL-E image generation technology.)
Conceptually, ChatGPT can be used like the AI art tools in the sense that minimal text input by the user produces credible synthetic media — paragraphs instead of images. In fact, it can write convincing, often compelling essays, stories and even poems. And, like the AI image creators, you can direct ChatGPT to write prose in specific styles.
I told ChatGPT to tell me about Twitter in three separate queries: one in the style of Ernest Hemingway, another in the style of Mark Twain and the third in the form of a limerick. The results were radically different, and moderately good attempts, though not quite right in any of the results.
FTX a paperless bankruptcy caused by grossly inexperienced management
Matthew Cranston United States correspondent
Dec 14, 2022 – 4.40am
Washington | A small group of “grossly inexperienced and unsophisticated individuals” within cryptocurrency exchange FTX gambled away other peoples’ money, leaving a paperless bankruptcy that will take months to determine what assets are left, a US Congressional committee has heard.
On Tuesday (Wednesday AEDT) the US Justice Department, Securities and Exchange Commission and Commodity Futures Trading Commission filed three separate court filings seeking to prosecute FTX founder Sam Bankman-Fried for his role in the collapse of FTX.
Among them are eight criminal counts, including conspiracy and wire fraud, for allegedly misusing billions of dollars in customers’ funds.
Mr Bankman-Fried was due to give testimony to the Financial Services Committee. Instead, he made his first appearance in a Nassau, Bahamas court since his arrest on Monday; Bankman-Fried could end up being extradited to the US.
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US says FTX fraud ‘one of the biggest’ in its history
Chris Prentice and Megan Davies
Updated Dec 14, 2022 – 7.50am, first published at 1.42am
Nassau, Bahamas/New York | US prosecutors accused Sam Bankman-Fried, the founder and former CEO of FTX, of fraud and violating campaign finance laws by misappropriating his customers’ funds, saying the investigation is ongoing and “moving very quickly”.
US Attorney Damian Williams in New York said Mr Bankman-Fried made illegal campaign contributions to Democrats and Republicans with “stolen customer money”, and said it was part of one of the “biggest financial frauds in American history”.
“While this is our first public announcement, it will not be our last,” he said on Tuesday (Wednesday AEDT), adding Mr Bankman-Fried “made tens of millions of dollars in campaign contributions”.
Mr Williams declined to say whether prosecutors would bring any charges against other FTX executives, emphasising that the investigation was continuing. He also declined to say whether any FTX insiders were co-operating with the investigation.
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https://www.afr.com/policy/economy/fed-must-confront-unpleasant-choices-next-year-20221213-p5c5ze
Fed must confront unpleasant choices next year
The US central bank might stick officially to its 2 per cent inflation target but, in practice, pursue a higher one.
Mohamed El-Erian Global financial commentator
Dec 13, 2022 – 3.07pm
Signalling the pursuit of an objective while quietly heading in a different direction is a tactic in politics that is as old as it gets.
Now the US Federal Reserve may be forced to consider such a tricky manoeuvre as 2023 unfolds. This is not because it is an optimal approach. Far from it.
Rather, the Fed may end up seeing it as better than the other main options, now that it has fallen well behind an inflation process that is likely to prove stickier than many currently expect, including the central bank.
Since 2012, the Fed has been publicly and explicitly committed to a 2 per cent inflation target. The 2 per cent objective originated in New Zealand in 1990 and gradually spread to several other advanced countries.
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‘Game changer’: US says scientists have made breakthrough in nuclear fusion energy
By Ari Natter and Will Wade
December 13, 2022 — 5.57am
After more than 50 years of false starts, nuclear fusion is finally taking a resolute step closer to becoming the world’s newest energy source.
The US Department of Energy on Tuesday (US time) announced that scientists at a laboratory in California managed for the first time to generate more electricity from a fusion reactor than they needed to trigger it.
The historic breakthrough raises the prospect that someday — perhaps decades from now — the global economy will be run on carbon-free electricity generated by the very process that powers the sun and stars.
“The fusion breakthrough will go down in history,” US Secretary of Energy Jennifer Granholm said. “This is what it looks like for America to lead.”
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https://www.afr.com/technology/nuclear-fusion-has-come-of-age-20221214-p5c661
Mankind can now replicate the sun’s process. That is astounding
Replicating the process of the sun in a laboratory is the first step towards clean, cheap and safe energy for all.
Ambrose Evans-Pritchard
Dec 14, 2022 – 11.00am
Nuclear fusion has long been a graveyard littered with unfulfilled promises. A spectacular breakthrough over recent days at the Lawrence Livermore National Laboratory in California does not yet guarantee the world bountiful clean, cheap and safe energy.
It does not get us off the hook on climate change or allow us to dodge the upheaval of net zero by 2050; nor does it alone put the old fossil-based order out of business. But mankind can now replicate the process of the sun and the stars in a laboratory. That is astounding.
We can plausibly look forward to commercial fusion plants producing the first baseload power for electricity grids by the early to mid-2030s, and possibly slightly sooner.
The question is no longer whether it can be done, but how soon the first commercial start-up can crack the engineering and metallurgy challenges of fusion, and whether innovation can slash costs to the $US50 ($73) per MWh benchmark level needed to transform the international energy landscape.
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Reasons to be cheerful this Christmas (but realistic too)
We cannot wait for another period of catastrophe before we attempt renewal.
Martin Wolf Columnist
Dec 14, 2022 – 2.13pm
Is our world getting better and likely to continue to do so or is it sitting on the edge of catastrophe?
People who think about these questions tend to divide sharply into the cheerful optimists, who believe the former, and the gloomy pessimists, who insist on the latter.
I am in the former camp. But I would also make an important caveat. Continuing progress depends on managing the dangers we ourselves have created. Among these are destruction of the planetary environment and thermonuclear war.
To succeed we must overcome forces of division, within and among countries, that threaten social stability, global co-operation and peace. In sum, the world can be a better place. But we cannot take for granted that it will be.
An optimistic view of the past is contained in the Human Development Report 2021/2002 from the UN Development Programme and Poverty and Shared Prosperity 2022 from the World Bank.
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https://www.afr.com/technology/the-parents-in-the-middle-of-the-ftx-collapse-20221213-p5c62t
The parents in the middle of the FTX collapse
Longtime Stanford academics Joseph Bankman and Barbara Fried saw their lives transformed after Sam Bankman-Fried started FTX in 2019.
David Yaffe-Bellany, Lora Kelley and Kenneth P. Vogel
Updated Dec 14, 2022 – 12.55pm, first published at 10.10am
At the height of its corporate power, cryptocurrency exchange FTX convened a group of athletes and celebrities for a charity event in March at FTX Arena, the home of the NBA’s Miami Heat.
Local high school students competed for more than $US1 million ($1.46 million) in prizes, pitching Shark Tank-style business ideas to a panel of judges that included David Ortiz, a former Boston Red Sox slugger, and Kevin O’Leary, an actual Shark Tank host.
But the event’s organiser was a figure better known in academic circles – Joseph Bankman, a long-time tax professor at Stanford Law School and father of Sam Bankman-Fried, the now-disgraced founder of FTX.
Wearing a baseball cap with FTX’s logo, Bankman walked onstage to help announce the winners of two $US500,000 cheques. Behind the scenes, he played the role of FTX diplomat, introducing his son to the head of a Florida non-profit organisation that was helping adults in the area set up bank accounts linked to the crypto exchange’s platform.
Two months later, Bankman-Fried promoted the partnership in testimony to Congress, where he was pushing crypto-friendly legislation.
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https://www.afr.com/policy/economy/fed-lifts-key-rate-by-0-5pc-20221215-p5c6h2
Fed bets on a soft landing as it raises rates by 0.5pc
Matthew Cranston United States correspondent
Updated Dec 15, 2022 – 7.53am, first published at 6.02am
Washington | The Federal Reserve expects the US economy to slow but still avoid a recession next year after slashing its economic growth forecast and lifting the Fed funds rate by 0.5 percentage points to a 4.25 per cent to 4.5 per cent target range.
While the Fed has eased has size of its rate rises from 0.75 percentage point, it has projected rates will end up next year at 5.1 per cent, higher than the 4.6 per cent previously forecast by the bank in September.
With higher rates, the Fed has also cut its 2023 economic growth forecast to 0.5 per cent, down from the 1.2 per cent it forecast in September projections.
Fed chairman Jerome Powell said the US economy could still avoid a recession and that a soft landing was still achievable, especially if inflation continued to fall.
“I don’t think it would qualify as a recession because you have positive growth. It’s slow growth, it’s below trend, it’s not going to feel like a boom,” Mr Powell said, “I don’t think anyone knows whether we are going to have a recession or not.”
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A tough lesson for Australia as Ukraine runs short of munitions
Military leader and strategist
December 14, 2022 — 3.30pm
In 1914-1915, a scandal erupted in England about the shortage of high-explosive shells for the Western Front. While there was a lag in industry expanding to satisfy the enormous consumption of munitions in the war, it was also a symptom of a military institution that had failed to anticipate the challenges of modern war.
We aren’t quite in this predicament yet. But in 2023, the Ukrainian army may run out of munitions before it runs out of fight. Based on current usage of ammunition in the war, production of munitions is increasingly lagging battlefield needs. Most of Ukraine’s use of NATO 155mm artillery ammunition has been drawn from war stocks, not production lines. These stocks are finite.
Ukraine fires up to 5000 artillery rounds each day (the Russians fire many more). With the US producing just 14,000 shells per month (European figures are not available, but they are probably similar), there is a drastic shortfall in this vital ammunition type.
Despite a ramping up of US production, quantities won’t increase until 2024. And, as a NATO official quoted in The New York Times describes it, 20 of NATO’s 30 members are “tapped out” in regards to supplying ammunition to Ukraine. The situation for air defence missiles and precision weapons is also trending towards shortages in 2023 if the fighting continues and production doesn’t increase.
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Ron DeSantis leads Donald Trump among Republicans: poll
By John McCormick
Dow Jones
12:13PM December 15, 2022
Republican primary voters have high interest in Florida Gov. Ron DeSantis as a potential 2024 presidential nominee and view him more favourably than they do former President Donald Trump, a new Wall Street Journal poll shows.
In a hypothetical contest between the two, Mr DeSantis beats Mr Trump, 52 per cent to 38 per cent, among likely GOP primary voters contemplating a race in which the first nomination votes will be cast in just over a year.
The poll found that Mr DeSantis is both well-known and well-liked among Republicans who say they are likely to vote in a party primary or nominating contest, with 86 per cent viewing the Florida governor favourably, compared with 74 per cent who hold a favourable view of Mr Trump. Only one in 10 likely GOP primary voters said they didn’t know enough about Mr DeSantis to venture an opinion of him.
Among all registered voters, Mr DeSantis is viewed favourably by 43 per cent, compared with 36 per cent for the former president. Favourable views of Mr Trump were the lowest recorded in Journal polling dating to November 2021 and have been pulled down by a decline in positive feelings among Republicans. Since March, his favourable rating among GOP voters has fallen to 74 per cent from 85 per cent, while the share who view him unfavourably has risen to 23 per cent from 13 per cent.
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https://www.afr.com/world/asia/global-factories-brace-for-china-s-covid-tsunami-20221216-p5c6uy
Global factories brace for China’s COVID tsunami
Angus Whitley and Sarah Chen
Dec 16, 2022 – 9.53am
Beijing | From locking in workers to hoarding medicines, beds and disinfectant, China’s factories are going to great lengths to keep the machines running — and the global supply chain intact — as an onslaught of COVID-19 cases looms.
The world’s second-biggest economy is rapidly dismantling restrictions that largely kept the virus at bay for almost three years. The resulting eruption in infections is set to be a key test for a vast network of factories that account for almost one-third of the world’s manufacturing output. Those plants are now taking extraordinary steps to ward off infections.
Sinopec, for example, likens the task ahead to fighting a war. The Chinese oil refining giant has gone over plans to hold output steady with some staff more than 30 times, isolating certain employees from the rest of the workforce and scrapping leave. Electric vehicle maker Nio has secured several truckloads of medical supplies and equipment for staff as part of a plan to keep its lines humming.
Outbreaks have the potential to cripple production or tear through employee rosters, threatening the global supply of everything from cars and golf carts to kitchen appliances and, of course, iPhones.
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https://www.afr.com/world/north-america/the-american-left-s-chronic-nimby-problem-20221215-p5c6pg
The American left’s chronic nimby problem
Progressives like to embrace worthy causes but not often at the cost of having their lives disrupted.
Edward Luce Columnist
Dec 15, 2022 – 3.58pm
Joe Biden’s clean energy bill rightly hit the headlines when it was passed in August. It was America’s biggest move by far to tackle global warming.
Alas, there were few headlines last week to mark the torpedoing of that bill’s substantive hopes. An unholy alliance of left-wing Democrats and Republicans sank an accompanying bill that would have cut through red tape to ensure the clean energy projects can go ahead.
The Republican motive was obvious: kill anything with Joe Biden’s name on it. The Democratic left’s motive was self-defeatingly familiar: “If it’s not perfect, we’re against it.”
This trait is a feature not a bug of America’s progressive left. In this case, the 72 opposing Democratic lawmakers, including Vermont’s Bernie Sanders, objected that the bill would also have enabled a West Virginia natural gas pipeline, which means fossil fuels.
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Moscow warns of ‘consequences’ if US Patriot missiles go to Ukraine
By Jamey Keaten
December 16, 2022 — 5.53am
Key points
· Russia’s Foreign Ministry warned that if US sends sophisticated air defence missiles to Ukraine, it could prompt a response from Moscow.
· US officials said on Tuesday that Washington was poised to approve sending a Patriot missile battery to Ukraine.
· Patriot missiles can better shoot down incoming Russian missiles that have crippled much of Ukraine’s vital infrastructure.
· For months the US has been reluctant to provide the system because it didn’t want to send in American forces into Ukraine to operate the systems.
· Even if US troops aren’t in Ukraine, concerns remain that deployment of the missiles could further escalate the conflict.
Kyiv: Russia’s Foreign Ministry warned that if the United States confirms reports that it plans to deliver sophisticated air defence missiles to Ukraine, it would be “another provocative move by the US” that could prompt a response from Moscow.
Ministry spokesperson Maria Zakharova said in a weekly briefing on Thursday that the US had “effectively become a party” to the war in Ukraine, following reports that it will provide Kyiv with Patriot surface-to-air missiles, the most advanced the West has yet offered to help repel Russian aerial attacks.
Growing amounts of US military assistance, including the transfer of such sophisticated weapons, “would mean even broader involvement of military personnel in the hostilities and could entail possible consequences,” Zakharova added.
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Beware toxic extremism lurking on the fringes
12:00AM December 16, 2022
In 2014, US law enforcement officers ranked the sovereign citizen movement as the highest domestic terror threat, above Islamists, the Ku Klux Klan, neo-Nazis, skinheads, and environmental and animal rights extremists.
While the movement has no defining text, centralised leadership or accepted creed, sovereign citizens are united by a belief that the state and its laws are illegitimate. During routine traffic stops involving adherents of the ideology, several US law enforcement officers have been murdered.
Last week in Germany, special forces arrested 25 people involved in a plot to storm the Bundestag, overthrow the country’s government and attack the power grid. Members of the Reichsburger movement believe the 1871 borders of the German Empire are the country’s true borders and that the Federal Republic should not exist. The Reichsburger group previously had plans to attack state representatives, including the carrying out of killings.
On January 6, 2020, the US Capitol was stormed by a mob who wished to prevent the counting of electoral college votes that would confirm the victory of president-elect Joe Biden. While the mob consisted of a motley crew of Donald Trump supporters, militia men and QAnon devotees, they were united in their belief that the results of the 2020 election were false. More than 2000 rioters entered the building, leaving faeces in hallways, while outside they erected a gallows chanting “Hang Mike Pence”.
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Vladimir Putin’s absence fuels rumours of ‘Noah’s Ark’ escape plot
By Marc Bennetts
The Times
11:00AM December 16, 2022
With his war in Ukraine turning into a disaster for Russia, President Putin is doing his best to keep out of the public eye, fuelling rumours about his health and state of mind and reports that he could be planning to flee to South America.
Yesterday the Kremlin announced that Putin would not take to the ice in Red Square for his traditional ice-hockey match with a select group of allies and bodyguards.
Over the past few days, Putin’s annual press conference has been cancelled, as has his yearly “conversation with the people” – a Q&A session that can last for more than four hours. Both events, which are broadcast live by state television, are vital elements of the Kremlin’s portrayal of Putin as an all-powerful, father-of-the-nation figure.
More significantly, Putin appears to be planning to skip his annual state of the nation address to the lower and upper houses of parliament. The president is obliged to report in person to parliament once a year, according to the constitution, which was rewritten two years ago by the Kremlin to allow Putin to stay in power until 2036, when he will be 83.
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In Britain, dysfunction now rules the day
Even normally optimistic AFR correspondent Hans van Leeuwen has succumbed to pessimism as the country remains bogged down in post-Brexit political paralysis.
Hans van Leeuwen Europe correspondent
Dec 16, 2022 – 10.17am
I recently found myself in Groningen, a Dutch provincial town, on family business. I happened to go to its hospital, which was immaculate, well provisioned and well organised. If you arrived laid out on a stretcher, you’d feel reassured and relieved.
I also went to the town’s new civic building. The architecture, scale and finish had the quality of a luxury mall. It housed a brilliantly quirky library, a range of user-friendly community spaces full of interesting activities, and a clutch of cafes and restaurants. On a Sunday afternoon, it was full of people.
I couldn’t help comparing it to my local equivalents back in England: a dingy, dilapidated hospital – one of Britain’s best – and an austere, functional, underfunded library. London is only 500 kilometres from Groningen as the crow flies, but feels a world away.
I don’t like to make these comparisons, or to talk Britain down. In fact, I have often gently chastised my English friends and acquaintances for their relentless self-deprecation, declinism and post-Brexit doomsaying.
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https://www.afr.com/world/pacific/the-gloss-comes-off-jacinda-ardern-s-government-20221215-p5c6mc
The gloss comes off Jacinda Ardern’s government
It is the real-world economic issues that have washed up on New Zealand’s shores that have hit the government the hardest.
Luke Malpass Stuff political editor
Dec 17, 2022 – 5.00am
In August last year, the delta strain of COVID-19 entered New Zealand, prompting a sharp lockdown for the whole country that continued in various forms in Auckland until December. But that October, Prime Minister Jacinda Ardern announced that New Zealand would abandon its much-vaunted elimination strategy for the virus.
From that point, her Labour government has met one challenge after another. So much so, that this year has ended with a series of polls showing her popularity is at its lowest level since being elected in 2017.
Ardern received international plaudits for her government’s initial handling of COVID-19, but the political day after the pandemic night before has proven to be her biggest challenge.
The latest Taxpayers’ Union Curia Research Poll shows that the centre-right National and ACT parties could form government if an election were held today. It is one of several such polls.
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Zelensky and his generals on why the war hangs in the balance
The three men at the crux of Ukraine’s war effort are convinced that Russia is readying another big offensive, to begin as soon as January.
The Economist
Dec 16, 2022 – 2.07pm
Two books stand out in the stacks resting on the desk of Volodymyr Zelensky, Ukraine’s President. One is a collection of essays on Ukrainian history by Mykhailo Hrushevsky, a 19th-century thinker who helped forge the country’s national identity.
The second is Hitler and Stalin: the Tyrants and the Second World War, by Laurence Rees, an English historian. The books hint not only at the President’s outlook, but also his changed circumstances.
When The Economist last spoke to Zelensky in March, the conversation took place in a situation room. He was living in a secret bunker full of instant noodles and a sense of existential peril. Now, he is back in his old wood-panelled office in central Kyiv. An Oscar statuette, lent for good luck by actor Sean Penn, stands on a shelf.
Though sandbags and tank traps remain, gone is the adrenalin of those early weeks. Zelensky’s routine typifies the change. At 6am each morning he dons his reading glasses and flicks through 20 or so pages of each book.
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https://www.afr.com/world/europe/kremlin-warns-us-could-be-targeted-in-ukraine-20221216-p5c6z4
Kremlin warns US could be targeted in Ukraine
Jamey Keaten
Dec 16, 2022 – 1.40pm
Kyiv | Russia’s foreign ministry warned on Thursday (Friday AEDT) that if the US delivered sophisticated air defence systems to Ukraine, those systems and any crews that accompany them would be a “legitimate target” for the Russian military, a blunt threat that was quickly rejected by Washington.
The exchange of statements reflected soaring Russia-US tensions amid the fighting in Ukraine, which is now in its 10th month.
Russian Foreign Ministry spokeswoman Maria Zakharova said the US had “effectively become a party” to the war by providing Ukraine with weapons and training its troops.
She said that if reports about US intentions to provide Kyiv with Patriot surface-to-air missile system proved true, it would become “another provocative move by the US” and broaden its involvement in the hostilities, “entailing possible consequences”.
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Japan to double defence spending in overhaul fuelled by China threat
By Kyoko Hasegawa and Sara Hussein
AFP
7:40PM December 16, 2022
Japan’s government approved a major defence policy overhaul on Friday, including a significant spending hike, as it warned China poses the “greatest strategic challenge ever” to the country’s security.
In its largest defence shake-up in decades, Japan vowed to up security spending to 2 per cent of GDP by 2027, reshape its military command and acquire new missiles that can strike far-flung enemy launch sites.
“Fundamentally strengthening our defence capabilities is the most urgent challenge in this severe security environment,” Prime Minister Fumio Kishida said last week.
Polls suggest Japan’s public largely backs the shift, worried by growing Chinese military power and geopolitical developments such as the war in Ukraine.
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Behind the disturbing rise of the West’s conspiracy mindset
In the driveway killing zone out in Wieambilla, four constables encountered the face of human evil. But they also met minds and lives wretchedly warped by conspiracy theories. Experts say there are three reasons people succumb.
From Inquirer
December 17, 2022
Four young police constables drove out on Monday afternoon to the most straightforward of jobs. A welfare check, a missing person’s inquiry. No special danger. No bulletproof vests (though vests wouldn’t have helped against high-powered ammunition). No back-up needed. Just another job.
Out in Wieambilla, roughly 300km west of Brisbane. Rural Queensland. The sweetest spot on earth. The salt of the earth, rural Queensland. Waltzing Matilda country. Older Australians might remember the rural Queensland of the Dad and Dave stories, a kind of bush Garden of Eden in which our sense of ourselves once took shape.
A welfare check in a tiny hamlet in the big state’s hinterland, it should be an Australian version of the village bobby in a Miss Marple story.
The four young police officers were all impossibly good-looking. They could have stepped into A Country Practice or Doctor Doctor or any TV wonderland you like.
But those police didn’t inhabit that sylvan glen of our common imagining. The Australian bush isn’t usually US-style Deliverance country. But when they walked up the driveway, two good, decent, fine young people, constables Rachel McCrow and Matthew Arnold, were savagely shot to death. The other two police escaped, not least through heroic actions of their own.
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Putin pressures generals after Russia bombards Ukraine again
President Vladimir Putin has held extensive meetings with the military top brass overseeing Russia’s campaign in Ukraine, where Moscow has stepped up bombardments, according to the Kremlin on Saturday.
“On Friday, the president spent the whole day at the army staff involved in the special military operation in Ukraine,” a statement said.
He held a meeting with Defence Minister Sergei Shoigu and Chief of General Staff Valery Gerasimov and held “separate discussions with commanders” from different defence branches, it said.
“I would like to hear your proposals on our actions in the short- and medium-term,” Mr Putin was shown as saying in the meeting by Russia’s state television.
The Kremlin said Mr Putin spent the whole of Friday at the headquarters of Russia's military operation, the BBC reported.
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David.
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