February 15, 2018 Edition.
The big news globally has been the wobbles that have assailed global equity markets. Losses have been between 5 and 10% with Asian markets suffering a lot, developed a little less and ours holding up fairly well as it had not gone up all that far.
In related news the US has just added $350B or so to the national debt and must be at some risk of simply going broke in the next decade or two.
Trump has not skited about how high the Dow Jones is for a week now! – mostly since it has been falling!
In Oz there has been handwringing about Barnaby’s pregnant girlfriend and the inability of the Government to pass its Company Tax Cuts. In case you are wondering I reckon Scott Morrison is a very poor Treasurer who is largely an economic illiterate. He is all political spin and point scoring and has no real evidence, as best I can tell, for most of what he wants to do.
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Here are a few other things I have noticed.
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Major Issues.
- Feb 4 2018 at 1:01 PM
Markets are at a treacherous junction as bond yields rise
by John Authers
Markets have swerved away from some deep-seated patterns this week: the 10-year Treasury yield, which sets the cost of money for the world has risen its most since election week; stocks have had their worst week in two years; and in the alternate universe where cryptocurrencies trade, bitcoin has fallen 60 per cent from its pre-Christmas peak.
None of these developments can yet be called a car crash or a train wreck. (Not even bitcoin, which has logged 90 per cent falls and rebounded in the past.) But there is something to the driving analogy. We are at a treacherous junction. If any of a number of different actors misjudges, or tries to do things too fast, then there certainly is a risk of a crash. To navigate it, we need to understand where we started.
The world has had very low interest rates ever since the 2008 financial crisis. Financial conditions remain historically loose. But those rates look ever harder to justify. After all, the stock market has been rallying in response to impressive numbers suggesting that economic growth is back; both retail and institutional investors have their animal spirits back, as money flowed into stock funds last month in a way not yet seen this century; and corporate earnings are good.
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Bitcoin whipsaws investors as 'mother of all bubbles' shows signs of bursting
Eric Lam, Dani Burger and Joanna Ossinger
Published: February 3 2018 - 5:57PM
Bitcoin whipsawed investors, falling below $US8,000 for the first time since November before recovering most of Friday's losses, as a miserable 2018 continued for cryptocurrencies, with investors confronting a mounting list of concerns about the future of the industry.
Since reaching a record high of $US19,511 on December 18 shortly after the introduction of regulated futures contracts in the US, Bitcoin has wiped out more than half its value amid waves of negative news.
Setbacks included escalating regulatory threats from authorities around the world including India, South Korea, China and the US, a record $US500 million heist at Japanese exchange Coincheck, fears of price manipulation and Facebook's ban on cryptocurrency ads.
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The ten things to watch in 2018
Saul Eslake, Advisory Board Member, Jamieson Coote Bonds - JCB
19th January 2018.
Here are ten things that I think will shape the global and Australian economies in 2018, and that expect I’ll be talking about at conferences and events over the course of the coming year.
1: Central banks
The era of ultra-cheap money, which began during the global financial crisis, is drawing to a close. Already, the US Federal Reserve has raised its key policy interest rate target four times since the end of 2015, and has begun to wind back its bloated balance sheet (something which will take a very long time to complete).
The Bank of Canada has raised its policy rate three times, and the Bank of England once, since the middle of last year. The European Central Bank and the Bank of Japan are maintaining their negative overnight interest rates for the time being, but both of them have recently foreshadowed an eventual end to their bond-buying programs.
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What if bond prices take a dive?
by Dr Shane Oliver, AMP Capital Head of Investment Strategy and Chief Economist
on 02 Feb 2018 in Fixed Income
on 02 Feb 2018 in Fixed Income
There are a lot of reasons why investors could, or perhaps should, be worried we’re headed for a bond market correction. Chief Economist Dr Shane Oliver shares his predictions for bonds and the implications for investors across other asset classes.
There are a lot of reasons why investors could, or perhaps should, be worried we’re headed for a bond market crash, or even a mini bond-market correction, a-la 1994.
I’ll outline the reasons why it’s easy to imagine a perfect storm brewing which could lead to an abrupt sell off in the global bond market in the near term.
But first, I’m going to cut to the chase and point out that I think a dramatic crash in bond prices is most likely going to be avoided. The main reason I say this is because high debt levels mean interest rate rises are more potent than they may otherwise have been, meaning it’s unlikely Central Banks will need to raise interest rates quickly to curb rising inflation. Add to that, Central Banks in Europe, Japan, and Australia remain a fair way off tightening rates, so global monetary policy will remain easy for a while yet. And ongoing technological innovation should constrain how far inflation will go up when it does.
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- Updated Feb 4 2018 at 11:00 PM
Care needed as markets take on pre-GFC look
by Karen Maley
Are we in the midst of a healthy market correction or experiencing the first tremors of a seismic shift in global financial markets?
That's the question investors are grappling with after Friday's slump in shares and bond markets, an abrupt wake-up call after the placidity that has characterised most of the nearly nine-year bull market run.
Some fear that we could be on the precipice of a major market realignment amid signs that the tightening US jobs market is finally starting to produce faster wage growth – a prelude to rising US inflation.
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Corruption will never die, but we can do more to stamp it out: here's how
Jessica Irvine
Published: February 4 2018 - 11:30PM
Corruption is not always an easy thing to pin down.
Sure, brown paper bags stuffed with wads of cash are easy enough to figure out.
But outright bribery is only one of the myriad ways individuals or businesses may seek to pervert government decisions to their advantage.
The problem stems from the fundamental nature of our economy.
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Why the market cracked
- The Australian
- 6:48AM February 5, 2018
Alan Kohler
US interest rates have been rising for two years now. The Fed funds rate (their equivalent of our RBA cash rate) has been raised five times since December 2015 and the 10-year bond yield — the key interest rate that’s set by the market — bottomed in July 2016 at 1.36 per cent and has been rising ever since.
After that first Fed rate hike, the S&P 500 corrected 10 per cent, but since then the sharemarket has been completely unconcerned about interest rates. The S&P 500 has put on 55 per cent since January 2016, with only a brief pause when the bond rate got up off the floor 18 months ago.
So, why the worry among share traders on Friday when the bond rate popped up from 2.72 per cent to 2.84 per cent in response to a better than expected employment report for January?
After all, jobs growth has been averaging around 200,000 a month — Friday’s number — for five years, so hardly a surprise.
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Next election will offer voters more genuine, wider choice
Ross Gittins
Published: February 5 2018 - 1:37AM
Even if we don't end up having a federal election this year, rest assured, it will feel like a year-long campaign. But whenever it occurs, it's likely to determine the fate of neo-liberalism, aka "bizonomics".
Though the two sides like to paint every election as a clear choice between good (us) and evil (them), many voters have concluded all politicians are the same – liars and cheats.
But that's truer of the way they behave than of the policies they espouse on some key issues.
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There’s a good reason why market valuations are high
- Doug Turek
- The Australian
- 12:00AM February 6, 2018
Bond experts PIMCO coined the phrase “the new normal” to refer to the likelihood of extended post-GFC low interest rates. Given their input into pricing shares, it follows that the current high sharemarket valuations might persist and we might need to get used to a higher “new normal’’ price/earnings ratio and higher share prices.
This may calm current anxieties about elevated share prices and suggest an inevitable correction could be short-lived, cushioned and a buying opportunity.
At the end of last year the Australian sharemarket was trading on a forward P/E ratio of 16.2 about 15 per cent above its 20-year average.
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Nation needs to take stock
- The Australian
- 12:00AM February 7, 2018
Adam Creighton
When interest rates are the rising tide, boats sink, especially those heavily laden with debt.
Indeed, few countries should be as worried about the prospect of sharply higher global interest rates as Australia, whose households and government have binged on debt since the financial crisis a decade ago. Not many nations have accumulated $990 billion in net foreign debt like we have, equivalent to about 56 per cent of GDP, up from 8 per cent in 1995.
While many other countries’ national debt levels are far higher, few have sourced so much of theirs from foreigners. The Japanese government, the world’s most indebted, is the classic case, having borrowed almost entirely from its own citizens. Unlike Japan, Australia’s governments can’t tax foreigners more if they refuse to roll over the loans.
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- Updated Feb 7 2018 at 12:15 AM
APRA delivers banks $1b windfall: Productivity Commission
The regulatory crackdown on investor lending that was designed to curb a housing bubble ended up delivering a $1 billion a year windfall to bank profits, the Productivity Commission has found in a withering assessment of the state of competition in financial services.
The draft report from the government's policy adviser, to be released Wednesday, found that regulators' focus on stability was killing competition, at the expense of customers and small businesses.
The Australian Prudential Regulation Authority's intervention to slow growth in interest-only home loans, which Treasurer Scott Morrison recently hailed as "malleable" and effective, had cost taxpayers up to $500 million a year in extra income tax deductions.
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Landmark inquiry finds Australia's banks are exploiting their most loyal customers
Eryk Bagshaw
Published: February 7 2018 - 12:15AM
Australia's banks are exploiting their most loyal customers and the Turnbull government's $6.2 billion bank levy will end in higher fees for consumers, according to the findings of a landmark Productivity Commission inquiry.
The highly-critical 600 page report to be released Wednesday will bring the behaviour of major financial services firms back into the spotlight just one week before the royal commission into the sector begins on Monday.
The inquiry, commissioned by Treasurer Scott Morrison amid a torrid political debate last year, also found the government's efforts to cool overheating housing markets in Sydney and Melbourne had inadvertently provided a half-a-billion dollar windfall to the banking sector.
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Rates to stay low for some time yet, says Reserve Bank
Peter Martin
Published: February 6 2018 - 6:53PM
The Reserve Bank has signalled that the next increase in interest rates is some time off, opening the year with an economic statement in which the key word is “gradual”.
“Further progress in reducing unemployment and having inflation return to target is expected,” the statement from Reserve Bank Governor Philip Lowe read, “Although this progress is likely to be gradual.”
The sentence was placed at the end of the announcement that the bank would keep interest rates on hold for another month, the spot that is usually used to sum up the bank’s feelings about the future of the economy and interest rates.
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Labor devising Queensland 'rescue' package ahead of likely decision to reject Adani
Nicole Hasham
Published: February 6 2018 - 7:30PM
An impending decision by Labor to formally oppose the controversial Adani coalmine would come with a jobs package for Queensland to head off claims the party is selling out struggling towns.
Labor has strongly signalled it will oppose the proposed Adani mega-mine in Queensland’s Galilee Basin as it defends the Melbourne seat of Batman from a stiff Greens challenge in an upcoming byelection.
The shifting rhetoric prompted government accusations that Labor was trading mining jobs in Queensland for inner-city votes.
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The smartest way to spend taxpayer dollars
Ross Gittins
Published: February 6 2018 - 7:06PM
Did I tell you that my grandson, fast approaching his second birthday and not many months away from losing his status as our one and only grandchild, is a budding genius? His educational development is supervised by his father, who, being a doctor, started with identifying parts of the body. My grandson's always being quizzed, and loves showing off how much he knows.
Already he can count – provided you don't test him too closely above two or three – and, courtesy of Play School, can sing the alphabet song, whether or not he's invited to. He misses no more than a few of the letters, and is always careful to sing zed rather than zee.
Do I worry about how he'll manage to scratch out a living in the looming, frightening world of robots and artificial intelligence? No I don't. Not with the parents he's got.
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A few future frigates or a real defence industry?
Nicholas Stuart
Published: February 7 2018 - 12:15AM
It's definitely more exciting to begin a column discussing "the rhythmic clang of halyards ringing out across Genoa harbour", or perhaps the stonework of the house, just outside the walls of the old city, where Christopher Columbus lived as a child, than it is to discuss shipbuilding industry policy. So let's do exactly that.
Even in winter, the temperature here in Genoa is balmy. The old city was built on the water where, by the early 1400s, it hosted the world's first banks and had become a thriving centre of medieval commerce. Craggy hills protected the port and it is still possible, today, for a single glance to encompass both the snow-capped hills and, a short drive away, the beaches of the Italian Riviera.
This is the money shot. It's also the giveaway, explaining why a small group of Australian journalists has been invited to tour the dockyards that still churn out everything from huge cruise ships (almost all the vessels servicing our industry were built here) through to the pleasure yachts of Russian tycoons and oil rigs for the sputtering industry of the North Sea, devastated by the collapsed fuel price.
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Share dump is opportunity to make money, say investment gurus
John Collett
Published: February 6 2018 - 5:30PM
Australia's benchmark share index has fallen by about 5 per cent this week, wiping about $84 billion from the market's value, but fund managers insist shareholders should remain calm.
At the market close on Tuesday, the local S&P/ASX 200 index sat at 5833 points, having fallen from more than 6100 points on Friday.
Blue chips were amongst the stocks belted on Tuesday as Australia joined markets around the world in echoing sharp declines on Wall Street. The Dow Jones Industrial Average fell 4.6 per cent on Monday night Australian time, posting the biggest point slump in its history.
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Elon Musk’s SpaceX launches world’s biggest rocket
SpaceX Successfully Tests Powerful Falcon Heavy Rocket
The SpaceX Falcon Heavy takes off from Pad 39A at the Kennedy Space Centre. Picture: AFP.- Andy Pasztor
- The Wall Street Journal
- 9:05AM February 7, 2018
Space Exploration Technologies Corp. successfully launched the Falcon Heavy rocket today (AEDT) on its initial test flight, marking another coup for founder Elon Musk.
The blast-off from Florida’s Kennedy Space Center attracted throngs of spectators and was closely followed by the global aerospace industry. It capped multiple design changes, years of delays and a roughly $1 billion investment by SpaceX, as the company is commonly called.
The closely held Southern California company defied industry critics by flying the world’s most powerful rocket since US astronauts landed on the moon almost five decades ago.
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Feb 7 2018 at 9:54 AM
The role of volatility shorts in this week's market sell-off
by Robin Wigglesworth
When excitable beliefs in new paradigms in markets are shattered it can be spectacular. The conviction that stock markets had entered a new era of tranquility has become the latest example.
After a record breaking stretch of more than 400 days for US equities without a drop of more than 5 per cent, volatility has returned.
The S&P 500's two-day drop of more than 6 per cent was initially triggered by rising bond yields, but analysts and investors say the unravelling of popular volatility-linked trading strategies that have proved lucrative in recent years played a key role.
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Financial stress on the rise
John Collett
Published: February 6 2018 - 4:30PM
Slow wage growth and big hikes in the costs of some essential services are putting families under ever more financial strain.
Throw into the mix a new baby and reversion to a single wage and the finances are stretched even more.
That's the situation facing Dean and Bridie, who have just become parents for the first time. The couple rent in Melbourne's St Kilda and they do not have credit cards.
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Stoking a fire with gasoline: why the US share market shuddered
Peter Martin
Published: February 7 2018 - 11:45PM
Why did the US sharemarket suddenly tank?
For the same reason that ours might, one day, although there are no signs of it yet.
The US jobs market is on fire. In the past year the United States has hired an extra 2.1 million workers, and not just because of Trump. In the previous year, under Obama, it hired an extra 2.5 million. All up, since the low point in 2009 the US has taken on an extraordinary 18 million additional workers, an extra 14 per cent.
It has pushed the US unemployment rate down from 10 per cent to 4.1 per cent, where it has stayed for four consecutive months. So low is 4.1 per cent that, with the exception of a few months under President Clinton at the height of tech stock mania at the start of this century, you need to go back to 1969, when astronauts first walked on the moon, to find it bettered.
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http://www.news.com.au/finance/economy/australian-economy/ten-signs-were-heading-for-economic-armageddon/news-tory/1b307a7dd620376d0bd8628e015cbf56
Ten signs we’re heading for ‘economic armageddon’
THE $4 trillion bloodbath was the opening act of “economic armageddon” — and Aussies under the age of 44 should be worried
THIS week’s global share market bloodbath was “a small tremor before the big earthquake” as Australia moves “ever closer to economic armageddon”, a former government economist has warned.
John Adams, a former Coalition policy adviser who last year identified seven signs that the global economy was heading for a crash — later warning the window for action had closed — believes the $4 trillion wipe-out was just the opening act of his apocalyptic prophecy playing out.
“When the economic earthquake hits, don’t be surprised to see soaring interest rates, massive falls in asset prices [like] shares, real estate and bonds, higher unemployment and widespread bankruptcies,” he said.
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'Softens hardness': TGA under fire for health claim list that critics say endorses pseudoscience
Esther Han
Published: February 9 2018 - 12:15AM
Hundreds of bizarre health claims such as "tonifies kidney essence" and "opens body orifices" will be approved by the Therapeutic Goods Administration and appear on complementary medicine labels under new laws being pushed by the federal government, horrifying doctors.
In July last year, the TGA began developing a list of "permitted indications" that would restrict vitamin and herbal medicine companies to make only government-approved health claims on their products once the Therapeutic Goods Amendment bill passes.
Health groups were expecting a list of about 100 clinical indications, each backed with scientific evidence. Instead, it has ballooned to more than 1000 claims, most of which they say are misleading, potentially harmful and based on pseudoscience.
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Scrap super guarantee increase to boost wages, save $2b: Grattan Institute
Jessica Irvine
Published: February 8 2018 - 9:00PM
Workers should not be forced to lock away a rising portion of their wage in superannuation, according to a new report.
Axing the planned increase to 12 per cent in the rate of compulsory super would save federal coffers almost $2 billion a year – money that would be better spent boosting rent assistance for vulnerable retirees, mainly single women, the Grattan Institute report says.
Amid persistent low wages growth, the report argues the current 9.5 per cent rate is adequate to fund a decent retirement income for the typical worker.
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I won't be pushed to push up rates, says RBA governor Philip Lowe
Peter Martin
Published: February 8 2018 - 8:20PM
Reserve Bank of Australia governor Philip Lowe has hit out at calls for a rise in interest rates, saying he won’t adjust the bank’s record low cash rate of 1.5 per cent any time soon and he won’t be swayed by increases overseas.
Opening the A50 forum of leading international fund managers in Sydney, Dr Lowe said he was often asked whether increases by other central banks meant he had to push up Australia’s rates.
His answer was that while there was a common element in worldwide interest rate moves, rates did not need to move in lock-step.
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- Updated Feb 8 2018 at 11:00 PM
Scott Morrison says data sharing regime will 'revolutionise' banking
by James Eyers
Treasurer Scott Morrison said new rules to give bank customers control over their data will disrupt the major banks' "stronghold" on information and encourage a new wave of fintech innovation.
He said stringent security and governance rules along with safeguards to protect customer privacy would be be at the core of the federal government's regime, due to start on July 1, 2019.
Mr Morrison will release a report by King & Wood Mallesons partner Scott Farrell on Friday that will guide the Turnbull government's approach "to giving consumers greater access to, and control over, their data".
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http://www.smh.com.au/comment/no-one-is-buying-the-minerals-councils-coal-slime-20180208-h0vrgc.html
No one is buying the Minerals Council's coal 'slime'
Simon Holmes à Court
Published: February 9 2018 - 12:15AM
Thursday marked the first anniversary of Scott Morrison's extraordinary coal stunt. The Treasurer held up a lump of lacquered coal in Federal Parliament in a testosterone-fuelled frenzy and berated us all: "This is coal. Don't be afraid, don't be scared."
Morrison later capitulated, admitting that adding new coal power would cost too much and take too long to build.
Not so the Minerals Council of Australia. Only weeks after BHP Billiton, the council's largest funder, directed it to pull its head in, the mining industry's peak body appears emboldened in its hardline coal advocacy.
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Veteran investor Jim Rogers says next bear market will be 'the worst in our lifetime'
Heejin Kim
Published: February 9 2018 - 3:24PM
Jim Rogers, 75, says the next bear market in stocks will be more catastrophic than any other market downturn that he's lived through.
The veteran investor says that's because even more debt has accumulated in the global economy since the financial crisis, especially in the US.
While Rogers isn't saying that stocks are poised to enter bear territory now - or making any claim to know when they will - he says he's not surprised that US equities resumed their sell-off on Thursday and he expects the rout to continue.
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10 things to know about the market sell-off: Mohamed A. El-Erian
Mohamed A. El-Erian
Published: February 10 2018 - 10:19AM
US stock markets have concluded one of the wildest and worst weeks since the global financial crisis.
Here are 10 things to know about the sell-off:
It is driven by technicals, not fundamentals. The ongoing market correction doesn't reflect a worsening of economic and corporate fundamentals. Rather, it is being driven by technical factors, including the unwinding of "short-volatility" trades (more on these below), the testing of relatively new products and a shift in investor conditioning away from the "buy-the-dip" paradigm.
It is inherently unsettling. One of the reasons why this sell-off is so unsettling is the difficulty of pointing to familiar culprits, be they economic, geopolitical or corporate-related. This makes investors and traders more jittery, more suspicious and less confident about what will happen next.
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- Updated Feb 9 2018 at 3:42 PM
'This year feels different': Gerard Minack on market mayhem
What do you do when a mini-meltdown hits the markets and threatens to end a multi-year bull market? You call a famed bear, of course.
Gerard Minack is a former global head of strategy for Morgan Stanley. Well-known for calling the global financial crisis (GFC), he now plies his insights on an independent basis to a bevy of hedge funds and asset managers around the world.
Before we hear from Minack, a quick recap. This week, and after a unusually lengthy period of calm, markets went a bit haywire. On Monday night the S&P 500 fell by more than 4 per cent – its worst decline since August 2011 – on its way to a 10 per cent fall in under two weeks.
The ASX on Tuesday had its biggest drop in two and a half years. Bourses around the world have followed a similar trajectory. Volatility looks to be back, and in a big way. Some large Wall Street funds that bet on low volatility blew up in a single night, erasing $US3 billion of capital along the way.
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It may not feel like it, but markets have had a great escape
Tracey McNaughton
Published: February 9 2018 - 4:10PM
It has certainly been a stomach-churning ride in financial markets recently.
Equity prices down, bond yields up. Volatility has returned with a bang. Welcome to “The Great Escape”.
For much of the past decade, financial markets have been hostage to unconventional monetary policy - a situation where market liquidity has been supported by the bond-buying behaviour of the biggest central banks in the world.
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Chief scientist Alan Finkel hits back at electric car doubters
Nicole Hasham
Published: February 9 2018 - 9:25PM
Affordable electric vehicles that can drive up to 600 kilometres on a single charge will help bring a motoring revolution to Australia, predicts Chief Scientist Alan Finkel, in an intervention that defies naysayers of the technology.
In an interview with Fairfax Media, Dr Finkel said the onus was on the federal government to cut greenhouse gas emissions from the transport sector, but predicted electric cars “will be a significant element” of policies considered.
Dr Finkel – who owns two electric cars – would not comment on government policy. But he pointed to his review of the national electricity market that called for the development of a whole-of-economy emissions reduction strategy by 2020.
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That sinking feeling: trust in politicians lower in Australia than in most other countries
Peter Hartcher
Published: February 10 2018 - 7:34AM
Australia's political class has excelled itself. Truly. The people aren't very impressed with institutions of any type. Indeed, Australians are feeling more let down than most around the world, even though our objective conditions are much better.
Of the 28 countries surveyed for the annual Edelman "trust barometer" published this week, Australia ranks 21st for the people's overall level of trust in institutions of all kinds, including government, business, the media and NGOs.
And Australia has the distinction of being only one of two countries where trust across all categories of institution fell for a second consecutive year. Singapore was the other.
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Finally, an Indigenous middle class emerges
Ross Gittins
Published: February 10 2018 - 12:15AM
It's easy for prime ministers to make big promises at some emotion-charge moment of national attention, but a lot harder to keep those promises when the media spotlight (and that prime minister) are long gone.
I could be alluding to the promise Kevin Rudd made that the federal government would never forget the needs of the victims of Victoria's Black Saturday bushfires in 2009, but I'm referring to the promise he made a year earlier, at the time of his apology to the stolen generations, to Close the Gap between Indigenous and non-Indigenous Australians.
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Housing investor loans slumped by 10 per cent in 2017
Clancy Yeates
Published: February 9 2018 - 4:43PM
New lending to property investors slumped by a tenth last year as tougher bank credit standards started to bite, but the prudential regulator is "not declaring victory just yet."
Figures on Friday showed the mortgage market finished last year with a whimper, with new loan approvals for both owner-occupiers and property investors falling, as the nation's biggest property markets also slowed.
The Australian Bureau of Statistics said the number of loans to people buying a home to live in fell by 2.3 per cent in the month, while the value of approvals to would-be landlords dipped by 2.6 per cent.
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'Some time' before inflation, jobs reach their targets: RBA
Published: February 9 2018 - 1:03PM
The Reserve Bank of Australia said the economy was some way off full employment and inflation returning to the midpoint of its target, signalling policy will stay on hold.
Main takeaways
- Reserve Bank of Australia leaves inflation and economic growth forecasts unchanged from three months earlier in quarterly Statement on Monetary Policy released on Friday
- Forecast unemployment cut to 5.25 per cent for year ending June 2018 through to year ending June 2019, from 5.5 per cent seen three months earlier
- Near-term growth outlook for major trading partners "is a little stronger" than seen in November; growth in China expected to "moderate a little" over coming year
- Most of decline in mining investment has now passed, meaning resource sector should make positive contribution to GDP over next few years
- Large pipeline of public infrastructure work to be done is supporting GDP growth as well as conditions in some parts of the private sector
- Australian dollar bought 77.72 US cents at 11.40am in Sydney, from 77.85 US cents before the report's release.
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Politicians deaf to the silence of no one listening
Harold Mitchell
Published: February 9 2018 - 12:45AM
I really miss my dear old dad. Regular readers will recall we lost him about a year ago on the morning of his 96th birthday. It was a good innings.
But he did tell me he would live to 100 so his passing took me by surprise because he’d never let me down before. And what I have missed most over the last 12 months is the great wisdom that comes with great age. He was born two years after the end of World War I and battled on with a single mum through the recession. He married very young, worked hard all his life in saw mills and brought up a family mostly as a single parent.
Ninety years of living counts for a lot and creates insights that can really cut through.
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Franken-products create a nightmare on Wall Street
- The Australian
- 12:00AM February 10, 2018
Andrew White
David Rogers
Had any XIV in your portfolio? Perhaps some SVXY?
No? Lucky you. You’ve probably rested a little easier this week, not being exposed to these so-called Franken-products that, like the monster in the Mary Shelley sci-fi classic, rose to wreak havoc.
Jolted by a shock of inflation fear, the VelocityShares Daily Inverse VIX Short-Term ETN,(XIV) and the ProShares Short VIX Short-Term Futures ETF (SVXY) were part of an estimated $2 trillion of investments in the US stockmarket banking on a one-way bet: that the historically low volatility that has ruled for much of the past decade would continue forever.
The benign conditions allowed for ever steepening rises in the US sharemarket, which started going parabolic in the December quarter and had its best January since 1987 as improving economic data was supercharged by big cuts to US tax rates.
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The evils of indexes we could do without
- The Australian
- 12:00AM February 10, 2018
Alan Kohler
Charles Dow and Edward Jones have a lot to answer for. Without them we might not have share indexes and that would be a very good thing indeed: indexes have been, and still are, a blight on humanity.
I’m only half-joking, not even half really, and anyway it’s way too late, of course. That genie is well and truly out of the bottle and has been causing havoc for more than a century.
What happened this week, and seems to be still happening, was an overdue and oversized (already) adjustment to share prices, in the expectation of a faster lift in interest rates than was previously expected. Forecasts of economic growth and profits haven’t changed; if anything they have grown, but the discount rate for figuring out the present value of future cash flows has had to be tuned.
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National Budget Issues.
Gas giant bills threat: price hikes of up to $430 predicted
Adam Gartrell
Published: February 5 2018 - 12:09AM
Australian households could be paying as much as $430 more for electricity by the end of next year unless wholesale gas prices are brought under control, according to a new report that warns the Turnbull government's energy policies are falling short.
Policy analysts at the McKell Institute have for the first time modelled the impact of wholesale gas prices on household power bills in New South Wales, Victoria and Queensland - finding consumers are already paying between $100 and $200 more than what the Australian Competition and Consumer Commission considers reasonable.
Using the ACCC's figures - and taking into account the government's current gas policy settings - McKell's modelling finds households in NSW could be paying $434.08 more for electricity on average by the end of 2019. Households in Queensland are heading for a $312.92 price rise and Victorians could be paying $254.09 more.
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Treasurer upbeat on outlook after US trip
Treasurer Scott Morrison has returned from a trip to the US optimistic about the outlook for both the global and Australian economies.
New figures have backed Treasurer Scott Morrison's optimistic economic outlook for the year, with a jump in job advertising pointing to further strong employment gains.
Mr Morrison, who has just returned from a trip to the US, says the Trump administration's tax cuts are already having a psychological impact on US businesses and points to a year of "great economic opportunity" around the world.
The treasurer met with key US business leaders and tax reform was high on the agenda.
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Malcolm Turnbull commits to keeping company tax cuts in the budget until next election
Eryk Bagshaw, James Massola, Peter Martin
Published: February 9 2018 - 6:00PM
Reserve Bank governor Philip Lowe says a cut to the company tax rate could be seen by some as "regrettable" but would not threaten Australia's return to surplus, as the Turnbull government moves to recast debate about the policy through a direct pitch to workers who deserve a pay rise.
In a shift in language, Treasurer Scott Morrison on Friday made a case for workers to back the package by arguing an uncompetitive global tax rate "holds back the pay rise that Australians have been looking for".
Prime Minister Malcolm Turnbull also hosed down speculation the government might shelve the policy, committing to keep its $35.6 billion cost in the budget all the way to the next election even if, as expected, it is blocked by the Senate.
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Health Budget Issues.
Health insurers savage Bill Shorten's 'disastrous' premium price plan
Adam Gartrell
Published: February 4 2018 - 11:33AM
Health insurers have reacted furiously to Opposition Leader Bill Shorten's plan to cap premium price rises, warning of "disastrous" consequences for the entire heath industry and massive cost increases once the freeze ends.
Mr Shorten has announced a Labor government will cap price rises at two per cent for two years, saving an average family $340.
The promise comes after the Turnbull government confirmed last month that premiums would rise another 3.95 per cent this year - the lowest price rise in 17 years but still almost double the general inflation rate. The constant price rises have many people ditching their cover, threatening the industry's viability.
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Labor promises to cap health insurance premium rises at 2% for two years
Opposition says it would ask Productivity Commission to review private healthcare value, quality and affordability
Sun 4 Feb 2018 09.10 AEDT Last modified on Sun 4 Feb 2018 11.53 AEDT
Labor plans to cap private health insurance rate increases to 2% for two years, which could save a families an average of $340.
In a statement on Sunday Bill Shorten and the shadow health minister, Catherine King, said Australians were being “ripped off” by premium rises that had averaged 5.5% over the past 10 years.
In addition to the two-year cap Labor, if elected, will ask the Productivity Commission to review private healthcare focusing on its value, quality and affordability.
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- Updated Feb 4 2018 at 11:00 PM
Private hospitals told to release data on mistakes to help cut costs: Grattan Institute
by Geoff Winestock
Private hospitals and health funds should be forced to lift a veil of secrecy that hangs over which hospitals and clinicians are responsible for the 900,000 complications that affect patients in hospitals each year.
A new report by Stephen Duckett, health program director of the Grattan Institute, says that one in four overnight patients suffer a complication while in hospital and the figure is one in nine if day-patients are included.
The rate of complications, about 12 percent of all hospital patients, has been stuck at the same level for some time, partly because hospitals and doctors don't publish the data needed to help develop prevention strategies.
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Hospital complication rates 'veiled in secrecy' and marred by flawed definition of 'preventable': Grattan report
Kate Aubusson
Published: February 4 2018 - 11:56PM
There's a hospital in Australia where one in every six patients suffers a complication, but we don't know what hospital it is. Neither do its patients or the doctors who work there.
"A veil of secrecy" hangs over the hospitals and clinicians that have the highest complication rates and which hospitals are the safest, according to a new report by the Grattan Institute.
Published on Sunday night, the report also argues that the federal government's narrow definition of 'preventable' adverse events ignores the vast majority of complication rates, distorts the data and lulls some hospitals into a damaging sense of complacency.
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Shorten health premium cap a thought bubble: insurers
- The Australian
- 12:00AM February 5, 2018
Sarah-Jane Tasker
Australia’s health insurers have labelled Bill Shorten’s pitch to cap premium increases a political thought bubble that lacks economic sense amid calls for his policy on “real” reform to tackle rising healthcare costs.
Mr Shorten yesterday proposed fixing annual health insurance premiums at 2 per cent for the first two years of a Labor government, potentially saving a family $344. This year’s premium increase was an average of 3.9 per cent, the lowest in 17 years.
Medibank chief executive Craig Drummond said placing a cap on premiums would not change the issues that exist in the health system.
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Health insurance inquiry far from being a new idea
- The Australian
- 12:00AM February 6, 2018
Sean Parnell
Labor’s bid for a Productivity Commission inquiry into the health insurance sector comes less than three years after the commission suggested the Health Minister initiate such a review, which led the Coalition government to embark on a reform process it would continue next term if re-elected.
The opposition policy announcement also stops short of the broad review of the health system the commission has long called for, instead seeing the Coalition’s insurance work revisited during Labor’s first term and any other health initiatives dealt with separately.
At the weekend, Labor leader Bill Shorten and health spokeswoman Catherine King promised an insurance inquiry and premium rises to be capped at 2 per cent for two years. It came only days after Mr Shorten struggled to articulate Labor’s position on the insurance rebate and respond to long-time low premium increases announced by Mr Hunt.
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Knee and hip replacements ‘not needed by thousands of Aussies’
- The Australian
- 12:00AM February 7, 2018
Sarah-Jane Tasker
Thousands of Australians are undergoing unnecessary knee and hip replacements, a report warns, with medical professionals calling for a new model of care for osteoarthritis.
The report, published by Move — the national consumer-based organisation for muscle, bone and joint health — has estimated that as many as one in four knee or hip replacements are not required for people with osteoarthritis.
In 2016, almost 100,000 Australians received joint replacements to treat osteoarthritis of the hip or knee at an estimated cost of more than $2 billion.
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Labor ignores real reasons for rising health costs
- Dwayne Crombie
- The Australian
- 12:00AM February 7, 2018
A new Labor policy for health funds proposes a 2 per cent cap for the first two years on annual price rises and a Productivity Commission review of private health insurance. Everyone acknowledges and accepts affordability is a big concern for consumers of health insurance. If private healthcare is going to be sustainable and an effective choice for Australians, then collectively we need to solve the complex challenges that surround it.
Australia faces a challenge almost all countries in similar circumstances struggle with, and very few manage health system cost growth below 5 per cent (public or private). Total federal health spending has historically tracked between 5 and 7 per cent a year.
In the past few days Labor has chosen to demonise the industry and pretend health funds are somehow separated from the broader healthcare demand.
If adopted, health funds may be forced to increasingly exclude more expensive procedures regardless of their value and leave in less expensive procedures to survive. Typically this will affect those who are older or sicker and may push more people back into the public system.
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H
ealth insurance regulators raise alarm over rising costs
The Australian
12:00AM February 8, 2018
Sean Parnell
Health insurance regulators have sounded the alarm over rising medical costs and declared the current reform process must continue, only days after Labor leader Bill Shorten accused insurers of “a con” and vowed to cap premium increases at roughly half the current rate.
In a rare commentary on the state of the industry, Australian Prudential Regulation Authority official Geoff Summerhayes warned insurance companies were “under duress” as costs forced up premiums, leading members to drop their cover.
“The underlying cost of Australia’s health system is the ailment; rising insurance premiums are just a symptom,” Mr Summerhayes said. “Specifically, the fundamental forces pushing premiums up are higher claims costs experienced by insurers, through such factors as a greater uptake of medical services among policyholders and the rising cost of treatments and procedures.
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Greg Hunt flags $30 billion in new hospital cash but fight still looms
James Massola
Published: February 8 2018 - 6:08PM
Health Minister Greg Hunt will promise an extra $30 billion for hospitals from 2020 but the offer may not be enough to stave off a messy health funding fight.
The Labor-held states of Victoria, Queensland and South Australia are expected to argue the money will leave them short-changed, and the NSW Liberal government has also signalled it could demand more from the federal government.
The offer will be put on the table by Canberra during a Council of Australian Governments meeting on Friday.
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'Dudded' Victorian hospitals to lose $2 billion, says Labor
Noel Towell, James Massola
Published: February 8 2018 - 12:01AM
The Turnbull government wants to ''dud" Victorian hospitals and patients by more than $2 billion, according to Victorian Labor.
The state will miss out on enough money to hire 7000 doctors, 14,000 nurses or to pay for more than 330,000 surgical procedures, if the Commonwealth gets its way on a new funding package for the nation's hospitals, Labor's Health Minister Jill Hennessy says.
A leaked document obtained by Fairfax Media reveals Prime Minister Malcolm Turnbull and Health Minister Greg Hunt want Canberra to continue to pay 45 per cent of the cost of hospital funding, with spending growth to be capped at an annual 6.5 per cent for the five years from 2020.
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Claims crackdown ‘offers $1bn in health savings’
- The Australian
- 12:00AM February 9, 2018
Sean Parnell
More than $1 billion a year would be saved if the federal government worked with health insurers to crack down on inappropriate claims by patients and medical practitioners, lobby group Private Healthcare Australia says.
Labor’s weekend pledge of a Productivity Commission inquiry into health insurance, and an unprecedented two-year, 2 per cent cap on premium increases, has again drawn attention to the underlying contributors to rising costs.
There are fears a Labor government would unnecessarily delay the reform process and any cap on premium increases might prompt insurers to reduce their coverage levels or increase gaps, putting patients at a disadvantage in the short term.
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Malcolm Turnbull heads off brawl with states over hospital funding
James Massola
Published: February 9 2018 - 5:02PM
Prime Minister Malcolm Turnbull has won over two states, NSW and Western Australia, and is close to securing Queensland's signature on a new five-year hospital funding agreement that includes $30 billion in new money.
Two more Labor state governments - Victoria and the ACT - also made encouraging signals about signing on following a health-focused Council of Australian Governments meeting that had threatened to descend into an all-out brawl over hospital funding.
South Australia and the NT, however, were sharply critical of the federal offer - which would see the Commonwealth continue to pay 45 per cent of hospital costs and cap spending growth at an annual 6.5 per cent for the five years from 2020.
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Labor premiers Andrews and Weatherill spurn Turnbull’s $30bn hospital fund boost
- The Australian
- 12:00AM February 10, 2018
Joe Kelly
Labor premiers Daniel Andrews and Jay Weatherill have rejected Malcolm Turnbull’s $30 billion hospitals funding boost, prompting federal Health Minister Greg Hunt to accuse them of “short-changing patients”.
The Council of Australian Governments meeting in Canberra yesterday was dominated by the Prime Minister’s proposed $30bn increase in public hospital funding over five years from 2020.
Mr Turnbull won support for the hospital funding deal from West Australian Labor Premier Mark McGowan and Liberal NSW Premier Gladys Berejiklian.
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‘Debatable’ surgery lifts health premiums
- The Australian
- 12:00AM February 10, 2018
Sarah-Jane Tasker
Sean Parnell
Private health insurers are spending almost $700 million a year on common hospital procedures and treatments that could be performed as day surgery, in doctors’ rooms or in the home at a fraction of the cost.
Analysis of data covering five routine hospital procedures — knee arthroscopy, spinal fusion, some types of hernia surgery, eye injections and overnight rehabilitation after joint replacements — reveals large savings could be made if the number of procedures performed was reduced in line with recommendations in clinical research.
Insurers have argued those savings could be passed back to customers through lower health insurance premiums, which has become a key political issue.
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International Issues.
An arrest in Moscow leads to a Norwegian espionage mystery
Anton Troianovski
Published: February 4 2018 - 7:42PM
Kirkenes, Norway: Frode Berg volunteered in a soup kitchen in rural Russia. He helped organise an annual cross-border festival and ski race. His congregation supported a new church in a Russian town just over the boundary line that divides East from West.
Then the Russians arrested him and accused him of being a spy.
That an espionage mystery is unfolding here on the Arctic frontier confounds residents who didn't expect to be swept up in the confrontation between Russia and the West. On the snowbound shore of an icy fjord, a three-decade experiment in building cross-border ties independent of geopolitics now hangs in the balance.
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Rising risk of conflict in northern Syria between US and Turkey
Selcan Hacaoglu
Published: February 5 2018 - 7:08AM
Ankara: Turkey says it's talking to the Americans. The US says it's talking to the Turks. Politicians and generals in the two countries are in almost constant communication, judging by their public comments.
There's no indication that any of this talk has resolved the fundamental argument that's threatening to bring NATO's two biggest armies into direct conflict in northern Syria.
When Turkish President Recep Tayyip Erdogan launched an offensive there last month against US-backed Kurdish fighters, he started in an area where American troops aren't embedded with their allies.
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Iranian women's veil protest wins support from the president
Thomas Erdbrink
Published: February 5 2018 - 1:06PM
Tehran: The office of Iran's president Sunday charged into the middle of one of the most contentious debates over the character of the Islamic Republic, suddenly releasing a three-year-old report showing that nearly half of Iranians wanted an end to the requirement that women cover their heads in public.
The report's release comes as dozens of women in recent weeks have protested in public against being forced to wear the veil, a symbol of Iran's revolution as much as it is deemed a religious requirement.
The decision to release the report — which found that 49.8 per cent of Iranians, both women and men, consider the Islamic veil a private matter and think the government should have no say in it — appears to pit President Hassan Rouhani directly against Iran's hard-line judiciary, which on Friday said that 29 people had been detained in connection with the protests. They have called the demonstrations "childish", insist that the large majority of Iranians support Islamic veiling and have called for harsher measures against those protesting the veil.
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Emmanuel Macron heads to Corsica to avert french repeat of Catalonia
Published: February 6 2018 - 7:03AM
Paris: Emmanuel Macron doesn't want Corsica to turn into France's Catalonia.
The French president on Tuesday begins a two-day visit to the Mediterranean island where a recently elected local administration is making demands for greater autonomy that the national government so far has indicated it can't accept.
French governments have long struggled in their dealings with Corsica, an island of 330,000 that lies closer to Italy's coast than France's with an independence movement that's resorted to violence in the past. While the island's current leaders have renounced pushing for statehood, they say they could change their minds if the national government doesn't meet demands for a special status for Corsican residents and an official role for the island's distinct language. Both moves could violate the French constitution.
"Macron is a serious man and a believer in the state, and I don't see how he can or will satisfy their demands," said Camille de Rocca Serra, a 63-year-old former president of Corsican assembly. "It's not possible and it wouldn't be beneficial. France is a unitary state, not a federation."
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As shares fall off cliff, Trump goes silent on his role in markets
Steve Holland and Trevor Hunnicutt
Published: February 6 2018 - 9:35AM
Washington/New York: As US stocks plunged on Monday, President Donald Trump was speaking at an event in Ohio but noticeably not taking credit for the market despite doing so repeatedly when stocks were rising.
The stark contrast was a sign that Trump may be absorbing a tough message, underscored by former White House advisers, that American presidents traditionally have avoided commenting directly on Wall Street's fickle trends.
Gene Sperling, a top economic adviser to Democratic former presidents Bill Clinton and Barack Obama, said Trump erred in recent months by focusing so heavily on the stock market.
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US Supreme Court allows revamp of gerrymandered Pennsylvania map
Joseph Ax
Published: February 6 2018 - 6:00AM
Washington: The US Supreme Court on Monday refused to block a lower court ruling requiring Republican-drawn congressional districts in Pennsylvania to be reworked immediately, boosting Democratic hopes of winning control this year of the US House of Representatives.
Justice Samuel Alito denied an emergency application filed by Republicans to stop the immediate reworking of the electoral district boundaries, preserving a ruling by the state's top court that they had unlawfully sought partisan advantage over the Democrats in drawing the maps.
The January 22 Pennsylvania Supreme Court ruling gives Republican legislators until this Friday to submit a revised map to Democratic Governor Tom Wolf, who would have until February 15 to sign off on the changes. If those deadlines pass without an agreement, the state court said it would rewrite the map itself.
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The Republican Party's scorched-earth policy
Nicole Hemmer
Published: February 6 2018 - 12:00AM
The Republican war against US intelligence agencies, which started when those agencies announced their consensus on Russian interference in the 2016 presidential election, hit an odd juncture last week with the release of a House intelligence committee memo that the GOP had trumpeted as revealing crimes "worse than Watergate".
But when the memo – actually a series of Republican talking points about the Russia investigation – was finally made public, there wasn't much there. If the four-page document was the extent of the committee's evidence of FBI misconduct, then it was a great day for the intelligence community.
Which makes the memo a baffling own-goal for a party that currently controls the presidency and both houses of Congress. Over the past several weeks, an army of Russian bots, conservative media personalities, GOP members of Congress, and earnest Trump supporters sent the hashtag #releasethememo trending, creating a crisis that could only be resolved with the memo's release. The members of the House intelligence committee who created the memo, however, knew that it contained no bombshells. The best they could hope for was to muddy the waters, to create an air of misconduct where no evidence of it existed.
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Wall Street plunge a 'big mistake', says Trump
Published: February 8 2018 - 8:01AM
President Donald Trump has broken his silence on the stock market.
Trump has commented frequently on market gains during his tenure, but stayed silent on Monday as the Dow Jones industrial average suffered its biggest one- day drop ever. He remained quiet as markets around the world swung wildly over ensuing days but elected to air his thoughts on Wednesday.
In a tweet, Trump said "In the 'old days,' when good news was reported, the Stock Market would go up. Today, when good news is reported, the Stock Market goes down. Big mistake, and we have so much good (great) news about the economy!"
The government reported last Friday that the economy created 200,000 jobs in January and that wages grew at the fastest pace in eight years.
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Russia already meddling in US midterm elections, Tillerson says
Published: February 8 2018 - 5:27AM
Washington: Secretary of State Rex Tillerson is warning that Russia is already beginning to interfere in the 2018 midterm elections and the US is ill-prepared to combat it.
Tillerson's warning comes as a top House Democratic described a pattern of Republican stalling on investigations into US President Donald Trump's alleged links to Russia.
Without elaborating, Tillerson raised the alarm about new Russian meddling in an interview with Fox News on Tuesday in Bogota. In an earlier stop in Mexico, he advised Mexican officials to be on guard for Russian interference in their elections scheduled for July.
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Russia meddled in US election, former president George W. Bush says
Stanley Carvalho
Published: February 9 2018 - 7:15AM
Abu Dhabi: George W. Bush has accused Russia of meddling in the 2016 US presidential election, calling Russian President Vladimir Putin a "brilliant tactician".
Bush, interviewed on stage at a business conference in the capital of the United Arab Emirates on Thursday, said there was clear evidence that the Russians had meddled but whether that affected the outcome of the election was another question.
"But they meddled and that is dangerous for democracy," he said, adding that Russia had done the same thing during the Cold War and was adept at trying to manipulate opinion in the United States and Europe.
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US Congress votes to end brief government shutdown
David Morgan
Published: February 9 2018 - 10:44PM
Washington: The US House of Representatives joined the Senate early on Friday morning in approving a bill to end an overnight federal shutdown, sparing Republicans further embarrassment and averting serious interruption of the government's business.
The stopgap funding and budget measure, approved by a 240-186 House vote, will go next to President Donald Trump. The White House said in a statement that he will sign it into law, which would extend government funding through March 23.
The shutdown, which started at midnight, was the second this year under the Republican-controlled Congress and Trump, who played little role in attempts by party leaders earlier this week to head it off and end months of fiscal squabbling.
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Tone deaf? Trump warns 'mere' abuse allegation can shatter lives
Doug Stanglin
Published: February 11 2018 - 4:56AM
Trump, in a pointed response to the uproar over charges of domestic violence by two top aides, cautioned on Saturday that lives can be shattered by a "mere allegation" and asked whatever happened to "due process?"
It was his first tweet on the topic since he lauded his ousted staff secretary, Rob Porter, in brief remarks to reporters in the Oval Office on Friday. He emphasised that Porter, who was forced to resign, had said "very strongly" that he was innocent.
Hour laters, White House speechwriter David Sorensen also resigned over domestic abuse allegations. Sorensen has denied his wife's claims.
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Israeli jet shot down in Syria after Iranian drone intercepted
Maayan Lubell & Lisa Barrington
Published: February 10 2018 - 7:42PM
Jerusalem: Israel launched its most intensive air strikes yet against Iranian forces in Syria on Saturday after intercepting what it said was an Iranian drone and the rare downing of an Israeli F-16 warplane.
The incidents marked the most serious confrontations in Syria between Israel and Iranian-backed forces that have established a major foothold in the country while fighting in support of President Bashar al-Assad in a nearly seven-year-old civil war.
Iran's expanding clout during the Syrian civil war, including deployments of Iran-backed forces near the Israeli-occupied Golan Heights, has raised alarm in Israel, which has said it would act against any threat from its regional arch-enemy Tehran.
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I look forward to comments on all this!
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David.
