March 14, 2019 Edition.
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In the US the big news is that the share-market had its worst week in a number of years and that has infuriated Trump more than somewhat. In related news Kim Jong Un appears to be preparing to start launching missiles again after the Summit failed. Things are going to hell in a handbasket it seems. The Boeing aircraft crashes are awful and people are now wondering about systemic issues with the aircraft...a real worry!
Brexit seems to have run out of runway and we are now seeing panic as to what to do! In the mean time the European economy is losing altitude at an alarming rate…As late a today the outcome is totally uncertain.
In Australia also the economy is softening quite markedly as the May election looms. The political spin is increasing by the minute!
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Major Issues.
Shares do well in the long run but risks abound
Updated Mar 2, 2019 — 5.49pm, first published at Mar 1, 2019 — 11.45pm
Being unlucky with share investments can be very costly, even if you take a long-term view.
This is one of the key lessons from the Credit Suisse Global Investment Returns Year Book 2019, which was published this week.
The book, written by Elroy Dimson, Paul Marsh and Mike Staunton from London Business School, measures equity returns since 1900 in 23 countries.
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Rice Warner proposes alternatives to Labor's franking plan
Mar 3, 2019 — 11.00pm
Shareholders have urged Bill Shorten to consider alternatives to his franking credit policy, including a $3.2 million limit on how much money can be stashed in the tax-advantaged superannuation environment.
Should it win the next election, Labor will make franking credits non-refundable, leaving an estimated 900,000 self-funded retirees worse off. Labor wants to target the rich but opponents argue it will hit middle Australia hardest.
Financial services consultancy firm Rice Warner has suggested three alternative mechanisms for collecting tax from those with large imputation credit refunds.
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How Morrison's Snowy scheme will accelerate coal's demise
By business editor Ian Verrender
Everyone, it seems, is a critic these days.
With an election looming and energy and climate policies that at best appear confused, Prime Minister Scott Morrison last week went on the offensive, with a dizzying array of policies that gave a nod to both his predecessors.
Tony Abbott's Direct Action policy was given a top-up and rerun before Malcolm Turnbull's two pet projects — a massive ramp up of the Snowy Mountains hydroelectric scheme and a kick-along for a power link between Tasmania and the mainland — were rolled out for the cameras.
At Tumut in the Snowy Mountains last week, the Prime Minister described hydroelectricity as "real, fair dinkum power".
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'Not activism': Industry super's plan to 'reshape' business for the long term
Mar 3, 2019 — 11.00pm
Industry superannuation funds will use their massive clout as investors to drive a post-Hayne transformation of corporate culture, "refashioning" business to focus on the long term.
As the Business Council of Australia complains about big business "bashing", industry super tsar Greg Combet said the fall of AMP should serve as a warning to the rest of corporate Australia about the consequences of a focus on short-term profit over customers and community.
The former Labor minister who now chairs both Industry Super Australia and IFM Investors, which is owned by industry funds, flagged a potentially painful transition ahead for some companies, especially banks and other financial services businesses but also in energy, mining and the rest of the economy.
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QSuper rewarded for keeping the faith in bonds
Mar 3, 2019 — 11.00pm
In the aftermath of the global financial crisis, Brad Holzberger and a small team within QSuper embarked on a search for the "perfect hedge".
How could the super fund protect itself from another harrowing crisis and buffer the savings of its members from the inevitable swings of the market?
After two years, that search ended, not with a mandate given to a tail-risk hedge fund, a black box of doomsday derivatives or a gold vault. It was not found in an obscure journal article penned by a genius blinded by the truth of chaos theory. Nope. It was right there in a Finance 101 textbook – good old government bonds.
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Why your unhappiness could cause the next crash
Updated Mar 4, 2019 — 7.44am, first published at Mar 3, 2019 — 11.00pm
Dave Eiswert, portfolio manager of T. Rowe Price's $13.5 billion global focused growth equity strategy, likes to ask a simple question: Why are you so unhappy?
For Eiswert, it's a markets question, rather than a psychological one.
His point is that even with all the benefits of this modern age – iPhones, limitless access to information and content, cheap clothes, cheap mortgage rates – so many citizens of the Western world seem to feel a deep sense of anger.
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The massive cultural shift Scott Morrison is in danger of missing
By Sean Kelly
March 4, 2019 — 12.04am
Politicians, like magicians, and doctors who must stick needles into children’s arms, are magnificently skilled in the art of misdirection. This is the important thing, over here, they say, waving their hands for emphasis. No no, don’t waste your time looking over there.
Unlike magicians and doctors, however, politicians are always at risk of convincing themselves that what they say is important actually is important.
I’m reminded of this danger when I hear conservatives arguing that inequality has in fact fallen over recent decades. In 2017, Scott Morrison himself told the ABC that inequality had “actually gotten better”.
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Beware of groupthink on why the economy's so weak
By Ross Gittins
March 4, 2019 — 12.00am
According to our top econocrats, the underlying cause of the economy’s greatest vulnerability – weak real wage growth – is obvious: weak improvement in productivity. But I fear they’ve got that the wrong way round.
We all agree that, in a well-functioning economy, the growth in wage rates exceeds the rise in prices by a percentage point or two each year. On average over a few years, this “real” growth in wages is not inflationary, but is justified by the improvement in the productivity of the workers’ labour.
RBA governor Philip Lowe has identified low wage growth as one of the key risks to the Australian economy.
If this real growth in wages doesn’t happen, then real growth in gross domestic product will be chronically weak. That’s because consumer spending accounts for about 60 per cent of GDP.
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https://www.smh.com.au/national/tough-times-for-shining-light-into-dark-corners-20190303-p511gz.html
Tough times for shining light into dark corners
By James Chessell
March 4, 2019 — 12.15am
These are difficult times for people who want to shine light into dark corners, hold the powerful to account and, more specifically, exercise freedom of journalistic expression.
The threats to an independent press are most acute in places such as China, Turkey and Egypt where journalists are now detained (and worse) in record numbers for doing their jobs. From Syria to Myanmar to Venezuela despotic administrations trot out the term “fake news” to dismiss legitimate criticism. Donald Trump, of course, rewrote the anti-media playbook by labelling reputable outlets such as CNN and The New York Times as the “enemy of the American people”.
White House spokeswoman Sarah Sanders and CNN's Jim Acosta got into a tense back and forth when Acosta asked Sanders if she believed the media is 'the enemy of the people'.
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Six former Liberal politicians-turned-ambassadors could be recalled under Labor hit list
By Bevan Shields and Matthew Knott
March 3, 2019 — 11.00pm
Politicians given plum overseas postings or lucrative positions on tribunals under the Coalition could have their jobs terminated by Bill Shorten should he become prime minister.
The Sydney Morning Herald and The Age have been told Labor has drawn up a hit list of six former Liberal Party MPs currently serving as ambassadors or consuls-general, as speculation swirls that Steve Ciobo – who stood down from cabinet on the weekend after announcing he will not recontest the May election – could be in line for a government job.
The Coalition is facing claims of political cronyism following a flurry of recent appointments to overseas positions and the Administrative Appeals Tribunal, where some former Liberal MPs are now commanding salaries of more than $360,000 a year.
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Unis, healthcare big winners in Indonesia-Australia trade deal
By James Massola
March 4, 2019 — 12.00am
Jakarta: Australian universities and healthcare providers could play a critical role for decades to come in Indonesia's booming economy once a landmark free trade deal is implemented, according to Trade Minister Simon Birmingham.
Barring a last-minute disaster, the Australian and Indonesian trade ministers, Senator Birmingham and Enggartiasto Lukita, will finally put pen to paper on Monday morning in the Indonesian capital on the much-delayed deal.
In the short term, Australian farmers – who will see increased annual quotas implemented for live cattle, beef, potatoes and other agricultural exports – will be major beneficiaries.
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AFR marries purpose to competitive advantage
During years of upheaval and disruption in the old Fairfax Media, the AFR has built a business model by identifying its purpose and readers, writes editor in chief Michael Stutchbury.
Mar 4, 2019 — 12.00am
There is no such thing as brand. People will mostly consume their news and information through search, so distribution is king. Expensive big newsrooms can be replaced by cheaper amateur bloggers.
In any case, information wants to be free, so people won't pay for it. The trick is to build the biggest audience possible to attract advertising.
For traditional Australian publishers, that arguably was the peak of the great media disruption of the past decade. Amid the fog of peak disruption, it was difficult to be sure of the footholds or the new commercial alchemy in a rapidly changing industry.
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Industry superannuation rise creates crisis for Liberals
Updated Mar 4, 2019 — 2.11pm, first published at 1.26pm
Industry superannuation is set to control capital worth half of Australia's economic output within five years, tormenting senior Liberals who worry union-aligned funds will increasingly use their financial clout to hurt the Coalition and its political constituency.
Some industry funds are aligning themselves to pro-union and progressive agendas on topics such as workplace relations and climate change.
Senior Liberals fret that the funds will undermine the authority of the right-of-centre party on core policy areas and threaten the freedom of business decision-making.
Treasurer Josh Frydenberg, Workplace Relations Minister Kelly O'Dwyer, former Liberal federal treasurer Peter Costello and House economics committee chair Tim Wilson are among those most concerned about activist industry super funds using member money to muscle in on political issues.
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Election will be a contest between enterprise and envy: Scott Morrison
Updated Mar 5, 2019 — 8.30am, first published at Mar 4, 2019 — 11.59pm
Scott Morrison says the next election will be a contest "between enterprise and envy", claiming the economic policy differences between the major parties are the most pronounced in more than four decades.
In his address to open The Australian Financial Review Business Summit on Tuesday, the Prime Minister backed his claim by citing opposing policy positions with Labor on tax, industrial relations and free trade.
"A Shorten Labor government would not be a slightly more progressive version of the Coalition government," he said.
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Julian Burnside blindsides Josh Frydenberg with Kooyong challenge
Mar 5, 2019 — 9.27am
Barrister and human rights advocate Julian Burnside has emerged as a second high-profile challenger to Treasurer Josh Frydenberg's grip on the blue ribbon seat of Kooyong.
The Greens have recruited Mr Burnside as their candidate for the seat in Melbourne's inner east, which takes in some of the city's most exclusive suburbs such as Kew and Hawthorn.
He will be officially unveiled by party leader Richard Di Natale in Hawthorn on Tuesday morning.
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Almost every Australian equity fund lagged the market last year
Updated Mar 4, 2019 — 5.29pm, first published at 5.14pm
Almost nine in 10 actively managed mainstream Australian equity funds failed to beat the market last year, according to the latest figures from S&P Dow Jones Indices.
The SPIVA scorecard is promoted by S&P as the "de facto scorekeeper of the ongoing active versus passive debate", and surveys performance of active fund managers against the benchmark for a range of countries.
The results are less than flattering for Australia's professional funds management industry, at least for those who claim to be able to add value by picking stocks and charge fees for that skill.
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Business might find it even harder than politicians to win trust
Mar 4, 2019 — 7.00pm
Just about everyone in big business and politics wants to talk about trust. How to earn it, how to keep it. Just how much of this is rhetoric and how much of it is real – or realistic – is a tougher conversation.
Politicians, particularly federal politicians gearing up for an election, know they start from way behind in either earning or keeping community trust. That has only become more difficult as prime ministers come and go according to the whims of politicians rather than the public.
It's one reason why Scott Morrison keeps fervently repeating terms like "fair dinkum" to try to brand his government as the genuine article, delivering solid achievements to the community at large.
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Sinking billions on an outdated weapon
Underwater drones will make duds of our 'future' submarines, even before they're built.
By Clive Williams
March 5, 2019 — 12.09am
Australia is locked in to a diesel-electric submarine capability after signing a $50 billion "framework agreement" with French shipbuilding company DCNS to build 12 Shortfin Barracuda subs in Australia. It is said to be the largest, most complex defence-acquisition project in our history.
Neither major political party questioned the need for the future submarine project; they feared voters would see them as soft on national security.
Our first new "attack-class" sub is due to enter service about 2035. The construction of the rest of the fleet will probably extend to 2050. The subs should remain in service until the 2070s.
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RBA governor hoping to quieten fears over house price correction
By Shane Wright
March 4, 2019 — 2.09pm
While Josh Frydenberg and Chris Bowen talk about how they will manage the economy, strengthen it and generally knead it into submission, the reality is the top economic chef in the country is Philip Lowe.
The Reserve Bank governor, along with its board, plays a vital role not just via setting interest rates, but by acting as an honest broker when it comes to commentary about key economic issues.
Voters know the treasurer of the day is, ultimately, a politician. But the RBA governor is supposed to float over the political hurly-burly, looking after the best interests of us all.
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Libs failed to tame our superannuation leviathan
- 12:00AM March 5, 2019
If Labor wins May’s election, we’ll have well passed the tipping point where government is capable of governing in the public interest when it comes to superannuation.
The Coalition government’s inability to reform the structure of superannuation — from its failure to stop the legislated increase in the compulsory rate to 12 per cent, to tidying up the default system and requiring more independent directors on fund boards — shows how little can be achieved, even when the case for reform is overwhelming.
It’s worth pondering why, more than 25 years after superannuation became compulsory, the allocation of new members to super funds remains a dog’s breakfast for members and a Michelin-star feast for super funds, especially industry funds which benefit so richly from their $30 billion a year flow in default contributions.
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Competition regulator fires east coast energy shutdown warning
- 10:33AM March 5, 2019
Australian manufacturers and heavy industry will shut down operations on the nation’s east coast if high gas prices persist with the problem exacerbated by suppliers failing to properly engage with customers, the competition regulator has warned.
Commercial and industrial users are struggling to cope with a big spike in the cost of energy which remains three times the price of traditional tariffs amid a supply squeeze in markets stretching from Queensland through NSW, Victoria and South Australia.
The Australian Competition & Consumer Commission reinforced concerns raised by commercial giant Dow Chemical that high power and gas bills will force big business to shut operations.
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Retail activity continues to shrink, index shows
- By Michael Mehr
- AAP
- 10:50AM March 5, 2019
Retail trade contracted in February to its lowest level since 2012 as consumer spending dried up, a trend reading by an industry index suggests.
The Ai Group’s Performance of Services Index released today recorded a second straight month of contraction in the Australian services sector in February.
Although the index reading improved 0.2 points from 44.3 in January - when a sharp contraction snapped a 22-month positive run stretching back to early 2017 - it still remained below the 50-point mark separating expansion and contraction.
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'Wealth effect' limited to cars, furniture
Updated Mar 6, 2019 — 9.46am, first published at 9.23am
Falling house prices will cause consumers to cut spending on new cars and furniture, according to new Reserve Bank of Australia research, but the "wealth effect" on the broader economy should be limited governor Philip Lowe says.
In a speech titled "The housing market and the economy", Dr Lowe said a bigger threat to household consumption was persistent weak income growth, because lower expected wages was probably restraining people's spending more than asset values.
Speaking at The Australian Financial Review Business Summit on Wednesday before the December quarter economic growth figures were published, Dr Lowe maintained a relatively upbeat outlook for the economy and said weaker Sydney and Melbourne house values should not derail the economy, particularly if the employment market remains strong.
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Bill Shorten to make the election a 'referendum on wages'
Mar 5, 2019 — 11.45pm
Labor Leader Bill Shorten has taken the economic fight to Scott Morrison on Wednesday, declaring the next election to be a referendum about wages.
A day after the Prime Minister said the election would be a contest between envy and enterprise, and stoked fears of a recession under Labor, Mr Shorten accused him of denigrating the low paid and hit back at claims Labor's industrial relations policy would help drive an economic downturn.
Mr Shorten told the Financial Review Business Summit that the co-operation between government, the unions and employers which was the hallmark of the Hawke-Keating accord era fostered productivity and economic growth.
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How to lose water, waste money and wreck the environment
By Ross Gittins
March 5, 2019 — 11.00pm
If you want a salutary example of the taxpayers’ money that can be wasted and the harm that can be done when governments yield to the temptation to prop up declining – and, in this case, environmentally damaging – industries, look no further than Melbourne’s water supply.
The industry in question is the tiny native-forest logging industry in Victoria’s Central Highlands. The value it adds to national production of goods and services is a mere $12 million a year (using figures for 2013-14).
The industry's employment in the region was 430 to 660 people in 2012 – though it would be less than that by now. Few of those jobs would be permanent, with the rest being people working for contractors, who could be deployed elsewhere.
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House price falls could feed into the wider economy: Lowe
By Shane Wright
March 6, 2019 — 9.44am
Falling house prices could slow the overall economy, Reserve Bank governor Philip Lowe has conceded while arguing there were still positive signs a strong jobs market will underpin the nation over the next year.
Speaking at the AFR Business Summit in Sydney on Wednesday, the governor said the main factors behind the sharp run-up in house prices in Sydney and Melbourne over recent years were a surge in population and a lack of supply of new residential dwellings.
Prices were now correcting because supply had caught up with demand.
Dr Lowe released research by the Reserve Bank into the impact of housing prices on consumer consumption, showing a 10 per cent increase in net housing wealth lifted consumption by 0.75 per cent in the short term and 1.5 per cent over the longer term.
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Retirees marooned as banks retreat on reverse mortgages
By Eryk Bagshaw
March 6, 2019 — 12.01am
Retirees are being blocked from accessing the money trapped in their property as banks pull out of the reverse mortgage market, fuelling a growing income inequality among older Australians.
A new report has warned Baby Boomers have been dudded by only having half of their working lives to accrue super, while having most of their wealth tied up in the family home - putting a strain on families and the government to finance a rapidly growing ageing population.
The Household Capital white paper findings - backed by former superannuation minister Nick Sherry, former chair of the Productivity Commission Peter Harris and Per Capita founder Joshua Funder - said while 80 per cent of retired Australians own their own home the economy has failed to adequately fund their retirements.
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Economy slows to 2.3pc growth
Updated Mar 6, 2019 — 11.52am, first published at 11.08am
The Australian economy expanded at a slower pace in the December quarter at 0.2 per cent bringing annual growth rate to 2.3 per cent down from a revised 2.7 per cent.
The quarterly growth was a sharp drop from the 0.5 per cent pace in the preceding three months.
Market expectations were for a 0.3 per cent growth, above the estimate of three of the big four banks - CBA, Westpac and ANZ - which forecast 0.2 per cent for the quarter, but well below the 0.6 per cent that the Reserve Bank forecast.
Household final consumption expenditure increased 0.4 per cent in the December quarter 2018, with annual growth at 2 per cent.
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Business still seeking answers for trust deficit
Mar 6, 2019 — 11.00pm
Australia's premier forum for in-depth analysis of how business can contribute to a more prosperous society ended on Wednesday with considerable soul searching by a range of business leaders.
The robust roundtable discussion at the fourth annual Financial Review Business Summit revealed that business is struggling to formulate a coherent strategy for rebuilding trust following the devastating findings of the Hayne royal commission.
Several participants in the roundtable discussion, which was moderated by the Financial Review's editor-in-chief Michael Stutchbury, highlighted the gap between the high level of trust and loyalty staff have in the companies they work for, as shown in staff engagement surveys, and the findings of public opinion polls showing distrust in business.
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Australian companies urged to disclose climate change risks, ASX says
Mar 7, 2019 — 9.30am
The Australian Stock Exchange and the Australian Accounting Standards Board have added their voices to the mounting pressure on companies to disclose their financial risk from strong global action to limit temperature increases to levels that avoid dangerous climate change.
New ASX governance guidelines released last week by the ASX's governance council included for the first time a specific clause requiring directors of listed companies to follow new international guidelines from the Task-force on Climate-related Financial Disclosures (TCFD). The clause was largely overlooked because of intense focus on the council's retreat on requiring directors to take into account a company's "social licence to operate".
The clause adds to growing pressure from the Australian Securities and Investments Commission the Australian Prudential Regulation Authority, global investors controlling $US32 trillion ($45 trillion) of assets through the Climate Action100+ group and changes in the law, such as last month's decision by the NSW land and Environment Court adding carbon emissions to the grounds for rejecting a new coal mine.
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'Low-cost gas has gone', east coast producers advise
Updated Mar 6, 2019 — 5.07pm, first published at 12.28pm
Gas producers across the east coast insist they are doing all they can to bring on new supply but caution that higher prices are inevitable and have urged users to make longer-term purchase commitments amid criticism they are neglecting domestic customers.
Historical prices for gas would not even cover the cost of production now, said Johanna Boothey, commercial head of ExxonMobil Australia, which spent $120 million on a fruitless two-well search for new gas in the Bass Strait last year and recently brought online a new $5.5 billion gas development.
Exxon is now studying a liquefied natural gas import terminal in Victoria to offset the impact of declining output at mature fields, as well as looking at further exploration, Ms Boothey said.
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Global economic warning comes as Australia falls into per-capita recession
By Eryk Bagshaw and Shane Wright
March 6, 2019 — 9.00pm
Global and Australian growth will probably slow even further, the OECD has warned in the wake of figures confirming the national economy has fallen into a ''per-capita recession'' for the first time since 2006.
The Australian dollar dropped sharply to a two-month low of $US0.703 as economists slashed their predictions for official interest rates to reach a record low of 1 per cent by September.
Prime Minister Scott Morrison has repeatedly said economic growth will be weaker under Labor, but the final two results of this term of government show the Coalition will lead Australia back to the polls struggling to lift a slowing economy.
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When figures like this roll in, it's best to not mention the economy
By Shane Wright
March 6, 2019 — 7.45pm
Labor. Jobs for women. Bill Shorten. New Zealand. Credit ratings.
All got more attention from Treasurer Josh Frydenberg than the state of the economy on his watch in a press conference that was supposed to be about the national accounts.
The figures were clear.
The Australian economy has gone through a pretty poor six months. So poor, in fact, that for the first time since 2006 economic growth per head contracted quarter-on-quarter.
That's only occurred twice since the recession of 1991. In 2000, per capita GDP
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House-building contracts at fastest pace in over six years in February
Mar 7, 2019 — 10.44am
House building contracted at its fastest pace in over six years in February, as the pipeline of new orders and prices declined amid lending constraints and weaker confidence.
The Performance of Construction Index, based on a survey of industry managers, dropped 0.6 of a point to 35.2 for house building activity last month. A reading above 50 indicates growth, while a reading below 50 shows contraction. The further the number from the 50-median level, the faster the pace of growth or contraction.
New orders in detached house building - a leading indicator of activity - also declined for a seventh straight month and suggest further weakness to come in the sector. Official figures earlier this week showed building approvals of new standalone houses slipped to 119,053 over the 12 months to January, the weakest total since November 2017.
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Have living standards fallen as claimed by the ACTU? Not even close
By Eryk Bagshaw
March 8, 2019 — 11.44am
It was an extraordinary claim.
Australians living standards are now lower than during the 1991-92 recession, the Australian Council of Trade Unions said on Tuesday, as it conjured up a political, economic and social disaster three months out from the federal election.
Look back 28 years and you will find unemployment at 11 per cent, widespread bankruptcies, collapsing investment, interest rates at 17 per cent and the death of Freddie Mercury.
Is there any truth to the claim by the ACTU and its champion Sally McManus that Australians are worse off now despite 28 years of economic growth?
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Supermarket giants beware: Kaufland is coming
- March 8, 2019
Global German supermarket chain Kaufland will unleash a $500 million assault on the nation’s leading supermarket giants Woolworths, Coles and Aldi after winning planning approval for its first three supermarkets and a new distribution centre in Victoria.
Kaufland Australia managing director Julia Kern was this morning to announce the three maiden stores in Melbourne and the construction of a distribution centre, which will be a vital link in its supply chain as it spreads its supermarkets through Australia.
With its arrival in Victoria, Kaufland is laying down a challenge to the heavyweights in Australia’s $90 billion grocery sector.
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Labor given steer on how to target the truly rich
Mar 8, 2019 — 11.45pm
Fund manager Don Hamson has thrown his support behind an alternative to Labor's franking credit policy that would cap the super fund balances of the wealthy at $3.2 million.
There is an estimated $187 billion sitting in self-managed super funds with balances of $5 million-plus.
The top 100 funds hold $7.9 billion collectively.
To target the truly rich, Labor could force amounts over $3.2 million to be removed from super, elevating tax payable from a light 15 per cent to as much as 49 per cent, according to Mr Hamson, the managing director of Plato Investment Management.
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The pendulum of opinion keeps swinging
Updated Mar 8, 2019 — 5.01pm, first published at 4.45pm
If there was ever a moment when you might have expected the pendulum of opinion about the power of markets and big business to have swung decidedly away from 'free markets are just excellent' to 'why would you trust business', it might have been in the immediate wake of the global financial crisis.
It turned out that policy makers and politicians were too absorbed at the time trying to prop up their economies and stop their banking systems collapsing to really stop and reflect too much.
Then other stuff happened and everyone sort of moved on.
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Super funds poised to control half of Aussie shares by 2030
By Jessica Irvine
March 9, 2019 — 12.00am
Superannuation funds are poised to own more than half of the Australian sharemarket by 2030, raising concerns they could soon wield too much influence.
The total value of Australian shares owned by Australian superannuation funds rose from $279 billion in 2008 to $650 billion at the end of 2018, according to a Rainmaker analysis for The Sydney Morning Herald and The Age.
That includes all ASX-listed shares held by both self-managed funds and larger regulated funds, both industry and retail.
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https://www.smh.com.au/national/bill-shorten-grasps-the-most-powerful-issue-yet-20190308-p512u5.html
Bill Shorten grasps the most powerful issue yet
By Peter Hartcher
March 9, 2019 — 12.00am
Wages. That's what the federal election will be about, according to Labor. Finally. The political debate breaks out of the "Canberra bubble".
This is the most powerful idea yet to emerge for the campaign to come. "The next election will be a referendum on wages," Bill Shorten said this week. "It will be a contest about who the economy should work for, whose interests the system should serve.
Shorten wants wages to go up: "We now have record lows in wages growth, stagnant real wages and cuts to penalty rates," he said. "Our system needs to be renovated and renewed for the future."
Opposition Leader Bill Shorten has confirmed he will boost the minimum wage should he win the next election.
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Revealed: Labor's plan to divide self-managed super funds
Updated Mar 9, 2019 — 2.40pm, first published at Mar 8, 2019 — 11.00pm
Depending on which side of the debate you listen to, franking credit refunds are either welfare for the wealthy or an antidote to double taxation. But the most compelling argument against Labor's proposal is that it produces different outcomes for retirees in the same financial position, depending on how they choose to invest.
Suppose Daryl and Sandy are a retired, home-owning couple. And let's assume, for simplicity's sake, they have $500,000 in a self-managed superannuation fund, all of which is invested in Australian shares yielding 4.5 per cent.
If either Daryl or Sandy was in receipt of a Centrelink age pension on March 28, 2018, they will have qualified for Labor's "pensioner guarantee". Their SMSF will therefore continue receiving refunds for excess franking credits.
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Rates could be cut three times this year as worries grow over economy
By Shane Wright
March 9, 2019 — 12.00am
A slowdown across the economy and signs consumers are reacting to falling house prices by reducing spending has forced financial markets and most of the nation's top economists to bet the Reserve Bank will slice interest rates in the days before the May election.
At least one prominent economist, AMP Capital's Shane Oliver, believes the central bank could be forced into cutting the rate three times this year, while on Friday the NAB changed its position, arguing the cash rate could tumble to 1 per cent by November.
As the Morrison government attempts to paint itself as a safe pair of hands, it could face defending its policies as the RBA takes official rates to a new record low to prop up the economy.
Four months ago markets and economists believed the Reserve would increase the official cash rate, currently at 1.5 per cent, this year. But back-to-back poor GDP results, tumbling house prices, continuing low inflation and stagnant wages have forced a major rethink.
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Forget what's happening in the economy, just latch on to a scary label
By Ross Gittins
March 9, 2019 — 12.00am
If you want the unvarnished truth, the economy’s rate of growth slowed surprisingly sharply in the second half of last year. If you prefer titillating silliness, we’ve entered a “per capita recession”.
The national accounts for the December quarter, issued by the Australian Bureau of Statistics this week, show real gross domestic product growing by only 0.2 per cent during the quarter, following growth of only 0.3 per cent in the September quarter.
That compares with growth in the first half of 2018 of 0.8 in the June quarter and 1.1 per cent in the March quarter. Six months ago, it looked like the economy was moving into top gear. Now we realise it was changing down.
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Sharemarket still living in the shadow of 2008-09's almighty crash
By Matthew Lynn
March 9, 2019 — 1.03pm
There won't be any candles, balloons or cards. Indeed, it is unlikely anyone will be celebrating at all. But today, March 9, marks the 10th anniversary of the last great bear market.
Exactly a decade ago, the S&P 500 touched what turned out to be the low point in the deepest collapse in equity prices since the Wall Street crash of the Twenties. From that day, equities staged a long although not terribly exciting recovery.
US stocks slumped for a fifth straight session on Friday as a weak US jobs report ignited more concerns about the global economy.
And yet, in reality, we are still gripped by that collapse. The bull market remains pitifully weak by historical standards, investors are still nervous that any slowdown in growth will immediately blow up the financial system, and the markets are still hooked on cheap money from the central banks. It may be another decade at least before the trauma of 2009 is finally put to rest.
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Royal Commissions And Similar.
ASIC interviewing CBA's Ian Narev, Catherine Livingstone
Mar 4, 2019 — 11.45pm
Commonwealth Bank of Australia's top bankers and directors are being interviewed by the corporate regulator as it moves closer to launching a landmark case against the bank and its board alleging breaches of directors duties and continuous disclosure.
Former CEO Ian Narev and chairman Catherine Livingstone are among the serving and former bank executives and directors the regulator has issued notices to interview, plans to interview or has recently questioned.
"CBA continues to engage with ASIC regarding a number of matters and responds to requests made by the regulator. We won't be commenting on any individual matter," a CBA spokesman said on Monday.
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Banks warn of credit risk as Labor goes beyond Hayne
Updated Mar 4, 2019 — 4.59pm, first published at 4.51pm
Australia's major banks are warning of a growing credit risk for individuals and small business following pledges by Labor to "clamp down" on farm foreclosures and impose a new levy to help domestic violence victims.
With Labor already promising a bigger bank victim compensation scheme than the government, including re-prosecuting cases that have already been settled, the banks are urging the opposition that should it win the election, to at least consult with them before proceeding with measures that go beyond the recommendations of the Hayne royal commission.
"Banks will study this policy in detail and would expect that should Labor form government, it will consult extensively about these proposals, including sharing the economic modelling and legal advice on which the policy is based," said Australia Bankers Association chief executive Anna Bligh.
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https://www.afr.com/brand/boss/ing-chief-uday-sareen-unpacks-the-banks-special-sauce-20190121-h1ab8e
What is the secret to ING's success?
Sally Patten
Mar 5, 2019 — 12.15am
As Australia's big banks begin the task of repairing their battered reputations after the Hayne royal commission, ING stands apart as being something of a poster child for simplified, trustworthy, tech-savvy financial services providers.
It may not be a fair comparison, given the tiny market share of the Dutch banking behemoth’s local subsidiary. But then again, the royal commission may provide a tailwind for ING if disgruntled savers and borrowers decide to vote with their bank accounts.
In Roy Morgan's latest survey of Australia's most trusted brands, ING came in at number six, one of just two banks in the top 10. (Bendigo Bank was in ninth spot.) According to a survey by the Reputation Institute, ING – which in 2019 celebrates 20 years of operating in Australia – is the most reputable financial services company in this country.
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Trying to arrange in-home aged care like 'going to war', new report finds
By Caroline Winter
New government-funded research has revealed there are "systemic problems" in the delivery of aged care home support for older Australians, with extortionate fees, potential rorting and untrained staff all highlighted as concerns.
Key points:
- Fees of up to 50 per cent are being charged by some providers for home support of elderly Australians
- There are concerns that government funding for packages is disappearing in fees instead of going to frontline care
- Report comes as the Federal Government commits to funding 10,000 more high-level at-home care packages
Those interviewed in the report said dealing with providers was like "going to war" and raised concerns that the taxpayer was being "ripped off", with profits being put before caring for the vulnerable.
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Older people living well with in-home support
5 Mar 2019
Significant changes have been made to the way in- home support for older people is delivered in Australia. The Australian government, via the Commonwealth Department of Health, funded Dr Russell to investigate the impact of these changes from the ‘consumer’ perspective. Dr Russell partnered with Peninsula Health to undertake this research.
The report begins with some background information about the aged care reforms, the different types of inhome care, consumer directed care, the wellness and reablement model and recent research.
The next section describes the research method, including its strengths and limitations. The strength of this research is that the researcher does not work in the aged care sector, for a government agency or for an agency that receives federal funding. This enabled participants to speak frankly and without fear of repercussions.
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National Budget Issues.
Why Labor's housing policy is self-defeating, fraught with peril
By Noel Whittaker
March 3, 2019 — 12.26am
Housing will be a hot topic as we go to the next federal election.
It is one area where the policies of the Coalition and Labor are markedly different.
Labor is proposing a massive change to existing arrangements, first by restricting negative gearing to new properties only, and second, effectively increasing capital gains tax by reducing the present 50 per cent discount to 25 per cent.
It has announced these policies will be grandfathered, so they will only apply to assets acquired after a certain date (yet to be announced).
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Home building approvals notch first rise in four months
- By James Glynn
- Dow Jones
- March 4, 2019
Homebuilding approvals rebounded slightly in January, offering some relief that what has been a sharp downturn in the sector might be finally slowing.
The rise in January was the first in four months.
The number of Australian home building permits rose 2.5 per cent in from January, from December, but fell 28.6 per cent from a year ago, according to the Australian Bureau of Statistics.
Permits to build private houses rose 2.1 per cent in January, while approvals for apartments and other dwellings rose 2.7 per cent.
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Scott Morrison warns of economic downturn under Labor
By David Crowe
March 5, 2019 — 10.02am
Prime Minister Scott Morrison has ramped up his warnings of an economic downturn under a Labor government, declaring it the “truth” to tell voters of the risk of recession under the opposition's policies.
“I’m saying the economy will be weaker under Labor – that’s exactly what I’m saying, because they’re going to put $200 billion worth of taxes and take Australia’s industrial relations system back to the times when we had recessions in this country,” Mr Morrison said at a business summit in Sydney.
Philip Lowe says high household debt and low wages growth continue to be problems for the economy, with household borrowing outstripping the growth in hourly earnings.
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Health Issues.
Brighter future for cancer patients with DNA screening program
- 12:00AM March 4, 2019
Queensland has set a 15-year target to upgrade cancer testing with breakthrough genomic sequencing, creating one of the first government benchmarks for the rollout of the technology.
State Health Minister Steven Miles said “nearly all” patients with significant cancers would ultimately be given whole of exome DNA screening to guide their treatment.
“I want to see this kind of testing accessible for more people in Queensland as soon as possible,” Dr Miles told The Australian.
“We’re positioning Queensland to use the translation of genomics more, where healthcare is tailored to individual DNA profiles for better diagnosis and personalised treatment options.”
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Australian health services: too complex to navigate
A review of the national reviews of Australia's health service arrangements
28 Feb 2019
The Australian health care system performs well by international standards in terms of health services and outcomes. However, it also struggles to provide equitable access to care for all Australians and often fails to prevent and manage chronic disease effectively.
Medicare is regarded as the backbone of Australia’s health care and accessibility. The original intentions of Medicare – a funding system for universal health care that is simple, fair and affordable – are largely agreed and valued. The scheme however, was superimposed on an existing set of health care services provided by the states, not-for-profit and private providers and private insurance policies held by about half the population. Over the last 45 years, there have been many amendments, workarounds, superimposed fixes and band aids applied to our health system from multiple sources with competing agendas.
The result is less an Australian health system than a complex set of services, with multiple providers and multiple payers generating complexity for both patients and providers alike.
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Older Australians are ignoring health advice
Jill Margo
Updated Mar 4, 2019 — 8.24am, first published at 12.15am
It seems older Australians are reluctant to look after themselves. Even when the government sends free bowel cancer kits right into their homes, only four of out of every 10 use them.
When Australians get diagnosed with glaucoma and are prescribed drops to prevent them losing more vision and becoming legally blind, about 45 per cent don't use them regularly.
So much genuine help available, so little compliance. In both cases, experts in the field would like health care professionals, such as GPs, to encourage patients to take advantage of these important measures.
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Major study shows no link between measles vaccine and autism
By Stuart Layt
Updated March 5, 2019 — 10.00amfirst published at 9.59am
A major decade-long study has found there is no link between the Measles-Mumps-Rubella vaccine and autism, even among children with other risk factors for the disorder.
The study examined every child born in Denmark between 1999 and 2010, a group of more than 650,000.
The study found no increased risk of developing autism after getting the MMR vaccine, no clustering of autism cases among children who were given the vaccine, and no increase in the rate of autism among susceptible children who were given the vaccine.
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Labor pledges to tie hospital funding to abortion services
By Judith Ireland
March 6, 2019 — 12.00am
Public hospital systems would need to provide abortion services to qualify for federal funding under a wide-ranging new Labor plan, which will also look at improving access to some contraceptives.
As the Coalition battles perceptions it has a "woman problem," Labor is also pledging to "progress" the decriminalisation of abortion in New South Wales under its national sexual health strategy released on Wednesday.
Opposition spokesperson for women Tanya Plibersek said that if Labor is elected the Commonwealth-state hospital funding agreements "will expect termination services to be provided consistently in public hospitals".
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Cell success gives hope on AIDS
- 12:00AM March 6, 2019
An HIV-positive British man has become the second known person to have been sent into lasting remission from AIDS, rekindling hopes of a cure after a decade-long gap between the breakthrough cases.
The so-called London Patient received bone marrow stem cells from a donor carrying the rare genetic mutation that scientists in China used last year to “edit” the DNA of baby twins born HIV-resistant.
The transplant was credited with saving the man’s life when he had run out of treatment options for AIDS-related cancer. A year and a half on, he remains free of the HIV infection he contracted in 2003, with no need for the antiretroviral (ART) drugs conventionally used to manage the disease.
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Health insurers call for workplace FBT break
- 12:00AM March 7, 2019
Australia’s health insurers have called for a rethink on the fringe benefit tax charged to employers who subsidise private healthcare, arguing an exemption could lift falling participation rates.
Medibank chief executive Craig Drummond said FBT was a significant burden on any health benefit an employer funded.
“If we had the corporate sector helping to fund their employees’ healthcare that could take some burden off the whole health system,” he said.
Matthew Koce, who heads up Members Health Fund Alliance, added that FBT represented a major barrier to employers salary packaging health insurance for millions of Australians.
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Millions of Australians in dark on hospital cover
- March 7, 2019
More than half of Australians paying for hospital insurance don’t know what their policy covers, new research shows.
A survey of 1217 Australians with hospital cover, conducted by comparison website Finder, found 55 per cent – equivalent to 6.2 million policyholders – were not across the full details of their policy.
One in five of those surveyed said they had no idea what procedures they would be covered for.
Sophie Walsh, insurance specialist at Finder, said given that the Morrison government’s reform to simplify health cover was set to be rolled out from April 1, now was the time for consumers to review their cover.
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DNA detectives and the end of family secrets
Sign up to a DNA site and you might uncover Viking ancestry – or who your father was. Adoptees and donor-conceived people can now make shock genetics discoveries with a simple saliva swab and they're doing it in droves.
By Aisha Dow
March 8, 2019
Rose Overberg used to stare in the mirror at her “funny” eyebrows and wonder where they came from. She says they are short – like they are missing a finishing flourish. But she didn’t inherit them from the mother or the father who lovingly raised her.
Instead, the archaeologist is the product of one of Australia’s earliest insemination clinics, recognised for their culture of secrecy and strict promise of donor anonymity.
While she had always known she was a sperm-donor child, by the time she began searching for her biological father, almost four decades after her 1975 conception in Melbourne, records of her early beginnings had been ‘“lost or misplaced”, as she was told in a letter from the doctor who performed the procedure.
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Choice of meal may be in the genes
- 12:00AM March 8, 2019
Why do you eat what you eat? Is your diet the result of a meticulous selection process, through background reading, intensive research and a thorough review of product labels? Or do you simply eat what you want, when you want, returning to the same food again and again, influenced more by hunger, emotion and budget than nutritional values?
Whether you are a mindful eater or a creature of habit seeking creature comforts, it is worth paying attention to your dietary choices before you take a bite.
With rising obesity rates and chronic illness, your future health may depend on what you are thinking as you walk down supermarket aisles or venture off for a bite to eat.
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An unvaccinated child contracted tetanus. It took two months and more than $800K to save him.
By Amy Wang
March 10, 2019 — 7.17am
For more than 30 years in Oregon in the US, cases of tetanus in children were almost mythical - studied in textbooks but never seen in person - thanks to the effectiveness of pediatric vaccination programs.
That streak ended in 2017 when an unvaccinated six-year-old boy arrived at a hospital in the state, experiencing jaw spasms and struggling to breathe, according to a case study from the Centers for Disease Control and Prevention published Thursday.
The child was playing on a farm when he cut his head on something, the report said. His parents cleaned and stitched the wound at home, but alarming symptoms emerged six days later. The boy's jaw began clenching, and his neck and back were arched - a trademark indication of tetanus called opisthotonus that is caused by involuntary muscle spasms.
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$50m funding boost for brain trauma research
- March 10, 2019
Health Minister Greg Hunt says there is a “desperate need” to find better outcomes for more than 20,000 Australians suffering from brain trauma, as the government puts $50m into brain research.
The $50m will be spread out over 10 years through the federal government’s Medical Research Fund and will look at developing new technologies and treatments for brain trauma.
“There is a desperate need for options to better chart the patient journey following traumatic brain injury,” Mr Hunt said.
“By addressing the unmet needs in traumatic brain injury research, we will be able to improve the lives of thousands of Australian children and adults.
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International Issues.
Huawei CFO Meng Wanzhou suing Canada over her arrest
March 4, 2019 — 10.03am
Toronto: An executive of Chinese tech giant Huawei is suing the Canadian government, its border agency and the national police force, saying they detained, searched and interrogated her before telling her she was under arrest.
Lawyers for Meng Wanzhou said on Sunday they filed a notice of civil claim in the British Columbia Supreme Court. Canada arrested Meng, the daughter of Huawei's founder, at the request of the US on December 1 at Vancouver's airport.
She is wanted on fraud charges that she misled banks about the company's business dealings in Iran.
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The financial bomb that blew up in 2008? We're planting another one
By Satyajit Das
March 4, 2019 — 11.11am
Financial markets have short memories. Of late, they've convinced themselves that collateralised loan obligations (CLOs) are much safer instruments than the collateralised debt obligations, or CDOs, on which they're based and which helped precipitate the 2008 crisis. They're wrong - and dangerously so.
Current CLOs outstanding globally total around $US700 billion ($986 billion), with annual new issues of over $US100 billion. That's broadly comparable to subprime CDO volumes in 2008. Both Bank of England Governor Mark Carney and former Fed Chair Janet Yellen have warned about potential risks; regulators in Japan, where banks have been big CLO buyers, are particularly concerned.
The structure of CLOs is economically similar to CDOs. Each pools multiple loans to create synthetic, bond-like investments. Investors buy a slice (or tranche) of the underlying interest and principal cash flows of the portfolio. A defined order of which investors get repaid first and which bear the most losses allocates risk differentially.
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US-China Cold War far from over
Updated Mar 5, 2019 — 11.00am, first published at 10.58am
Sometimes it takes a person of the world to make Australia's position so starkly clear.
So it was that on the opening morning of The Australian Financial Review's Business Summit, economic historian Niall Ferguson – with his Scottish accent, Irish first name, US passport and proudly Australian boots – explained the long-term choice facing Australia and its politicians.
That is: China or America?
Ferguson, a senior fellow at the Hoover Institution, painted a picture of potentially large changes in two of the world's most influential institutions – the Federal Reserve and the White House – in the next two years
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Trump's 'historic' China deal could be a bit of a horror for us
By Stephen Bartholomeusz
March 5, 2019 — 12.00am
The United States and China appear to be inching towards a deal on trade. If it is as outlined, that might be a relatively good outcome for the US and China but it could be quite damaging for China’s other trading partners.
White House economic advisers are talking about an "historic’’ deal that would see China agreeing to increase its purchases of US products by $US1.2 trillion ($1.7 trillion) over six years, dropping the tariffs on US imports it imposed in response to Donald Trump’s own tariffs on $US250 billion of China’s exports to the US, removing restrictions on foreign ownership of auto joint ventures and ending forced technology transfers.
Global shares rose on Monday amid growing optimism the United States and China will reach a trade agreement as soon as this month.
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'Take it seriously': North Korea nuclear threat looms over northern Australia
By Peter Hartcher
March 5, 2019 — 12.00am
North Korea publicly painted a nuclear target on Australia in April 2017. Kim Jong-un's regime seized on the fact that a contingent of US marines is now in a permanent, rotating deployment in the Northern Territory.
Specifically, the regime's main mouthpiece, the official party newspaper Rodong Sinmun, said: “If Australia persists in following the US moves to isolate and stifle the DPRK [Democratic People's Republic of Korea] and remains a shock brigade of the US master, this will be a suicidal act of coming within the range of the nuclear strike of the strategic force of the DPRK.”
With all the excited talk of Donald Trump's two meetings with Kim in June and again last week, has anything changed?
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With sweeping document request, Democrats launch broad Trump corruption inquiry
By David Morgan and Sarah N. Lynch
March 5, 2019 — 4.06am
Washington: Democrats in Congress unleashed a slew of demands in their investigations of President Donald Trump on Monday, seeking information about his communications with Russian President Vladimir Putin and documents from 81 sources in an obstruction probe.
Donald Trump's former personal lawyer Michael Cohen described the President as a 'racist', a 'conman' and a 'cheat.'
The chairmen of the House Intelligence, Foreign Affairs and Oversight committees wrote to the White House and Secretary of State Mike Pompeo seeking documents and interviews with personnel about Trump's conversations with Putin.
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'Cosmetic' US-China trade fix could strengthen Xi Jinping's grip on power
Updated Mar 5, 2019 — 2.39pm, first published at 2.15pm
A "cosmetic" trade deal between the US and China which leaves unresolved the most intractable points of difference between the two world powers could help consolidate President Xi Jinping's authority just as it was being undermined by his counterpart Donald Trump.
This is the view of Michael Smith, The Australian Financial Review's China Correspondent.
Speaking at the AFR Business Summit in Sydney, Smith said that from being blind-sided by Trump's tariff war, Xi could now benefit from some breathing space to steady China's slowing economy before being forced to tackle hard reforms on foreign investment and intellectual property rights.
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Memo to Bernie and AOC: Debt and deficits still matter
By Stephen Bartholomeusz
March 5, 2019 — 3.00pm
Last week the US Federal Reserve Board chairman, Jerome Powell, said something that would have sounded quite odd to those unaware of a fierce debate occurring among economists about a novel theory on monetary policy.
"The idea that deficits don’t matter for countries that can borrow in their own currency, I think, is just wrong," he said.
"US debt is fairly high to the level of GDP and, much more importantly, it’s growing faster than GDP, really significantly faster. We are going to have to spend less or raise more revenue," he told Congress.
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The subcontinent was just a heartbeat away from nuclear war
By Nicholas Stuart
March 6, 2019 — 12.00am
If you don’t bother paying much attention to the foreign pages you could easily have missed it, but the interesting thing is that the world was just a heartbeat away from a nuclear war last week.
As with all the most dangerous conflicts, it was a tiny spark that ignited what could have become a hugely dangerous bonfire – another war (there have been two major wars and innumerable incidents and skirmishes) between India and Pakistan. The combustible materials just kept accumulating on the heap the British began in 1947.
It was the inept viceroy, Louis Mountbatten, who decided (against advice) to partition the subcontinent, and it was he who ceded Kashmir – a majority-Muslim area – to India. Seemingly perpetual violence has resulted.
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Money trail: China has a $1.6 trillion secret
By Shuli Ren
March 6, 2019 — 7.11am
Investors trying to gauge how much appetite China has for stimulus should ignore official targets and look at local government bond issues instead.
Premier Li Keqiang set a 2019 GDP growth target of 6 per cent to 6.5 per cent at the National People's Congress on Tuesday, down from "around 6.5 per cent " in 2017 and 2018. While Beijing's targeted fiscal deficit of 2.8 per cent is higher than last year's 2.6 per cent , billions will be going to cuts in personal-income and value-added taxes instead of on infrastructure projects. Tax cuts work like ayurvedic medicine – it may be years before real benefits are seen. Hardly thrilling, is it?
In reality, though, Beijing has found a new way to finance its spending, off the books and under the radar for outside observers.
Special purpose bonds are the new fad. Just like debt issued by local-government financing vehicles, or LGFVs, these aren't included in the balance sheets of municipal authorities. The argument is simple: In theory, cash flow from underlying projects can cover interest and principal payments; therefore, the credit profile of these bonds is independent of a local government's fiscal situation, and should be excluded from its budget.
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Modern monetary nonsense
Mar 6, 2019 — 11.00pm
Just as the US Federal Reserve seems to have beaten back blistering tweets from Donald Trump, the next battle for central-bank independence is already unfolding. And this one could potentially destabilise the entire global financial system.
A number of leading US progressives, who may well be in power after the 2020 elections, advocate using the Fed's balance sheet as a cash cow to fund expansive new social programs, especially in view of current low inflation and interest rates. Prominent supporters of this idea, which is often referred to as "Modern Monetary Theory" (or MMT), include one of the Democratic Party's brightest new stars, congresswoman Alexandria Ocasio-Cortez. Although their arguments have a grain of truth, they also rest on some fundamental misconceptions.
Fed chairman Jerome Powell could barely contain himself when asked to comment on this new progressive dogma. "The idea that deficits don't matter for countries that can borrow in their own currency I think is just wrong," Powell insisted in US Senate testimony last month. He added that US debt is already very high relative to GDP and, worse still, is rising significantly faster than it should.
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US trade gap surged to $US621b in 2018, 10-year high
Katia Dmitrieva
Updated Mar 7, 2019 — 3.41am, first published at 3.30am
Washington | The US trade deficit widened in 2018 to a 10-year high of $US621 billion ($884 billion), bucking President Donald Trump's pledges to reduce it, as tax cuts boosted domestic demand for imports while the strong dollar and retaliatory tariffs weighed on exports.
The annual deficit in goods and services increased by $US68.8 billion, or 12.5 per cent, Commerce Department data showed. The December gap jumped from the prior month to $US59.8 billion, also a 10-year high and wider than the median estimate of economists.
The merchandise-trade deficit with China - the principal target of Trump's trade war - hit a record $US419.2 billion in 2018.
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Beijing's militarisation of the South China Sea irreversible, says Turnbull
Updated Mar 6, 2019 — 6.22pm, first published at 6.06pm
China's militarisation of the South China Sea has effectively created a network of "forward operating bases" and it is unrealistic to think Beijing would relinquish claims to these disputed territories, former prime minister Malcolm Turnbull says.
In a speech in London on Tuesday night London time, Mr Turnbull also counselled Britain to keep Chinese tech company Huawei out of its 5G network, warning that assurances of no malicious intent cannot be relied upon.
Addressing the Henry Jackson Society, a hawkish foreign policy think tank, Mr Turnbull insisted his government had acted on its own initiative to ban Chinese tech companies from participating in the 5G roll out and was not leant on by the Trump administration as part of its trade fight with China.
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Justin Trudeau's former right-hand man comes to his aid over corruption scandal
By David Ljunggren
March 7, 2019 — 10.06am
Ottawa: A former key aide to Canadian Prime Minister Justin Trudeau has denied he inappropriately pressured a cabinet minister, in comments that could help ease a political crisis for the ruling Liberals ahead of an October election.
Allegations that Gerald Butts and other political officials inappropriately tried to help a favoured construction company in a legal case has fuelled a scandal that has already cost Trudeau two senior cabinet ministers.
Former Justice Minister Jody Wilson-Raybould told the House of Commons justice committee last week that she and her staff had been subjected to persistent unwelcome pressure over the case.
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Trump 'very disappointed' in Kim Jong-un if launch site reports are true
By Jeff Mason and David Brunnstrom
March 7, 2019 — 9.34am
Washington: US President Donald Trump has said he would be "very disappointed" in North Korean leader Kim Jong-un if reports are correct that he is rebuilding at a rocket launch site that he had previously begun to dismantle.
Two US think tanks and South Korea's Yonhap News Agency reported on Tuesday that work was underway to restore part of North Korea's Sohae Satellite Launching Station even as Trump met with North Korean leader Kim Jong-un at a second summit in Hanoi last week.
"I would be very disappointed if that were happening," Trump told reporters in the Oval Office, when asked if North Korea was breaking a promise.
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Satellite images show N Korea started rebuilding rocket site two days after failed summit
By Hyung Jin-Kim
March 7, 2019 — 3.21am
Seoul: North Korea is restoring facilities at a long-range rocket launch site that it dismantled last year as part of disarmament steps, according to foreign experts and a South Korean politician who was briefed by Seoul's spy service.
The finding follows a high-stakes nuclear summit last week between North Korean leader Kim Jong-un and US President Donald Trump that ended without any agreement.
Reports have emerged that North Korea restored part of a rocket test site it began to dismantle after pledging to do so in a first summit with US President Donald Trump last year.
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Trump says trade wars are 'easy to win', but he is losing all the ones he started
By Stephen Bartholomeusz
March 7, 2019 — 12.15pm
If, as Donald Trump has said, trade wars are good and easy to win, why is the US losing the wars it initiated and losing so bigly?
The destructive and pointless absurdity of the Trump administration’s aggressive trade policies showed up, quite predictably (to those outside the Trump administration) in a blow-out in the US trade deficit in 2018.
The deficit in goods of $US891.3 billion ($1.27 trillion) was the largest in US history. If the $US270 billion surplus in services (the element of trade that Trump usually ignores) were included it was, at $US621 billion, still the worst in a decade.
The "Tariff Man," who has described tariffs as "the greatest negotiating tool in the history of our country," and has said that "trade wars are good, and easy to win," created a benchmark for the success, or failure of his trade policies. At this point he’s failing.
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China lowers its growth target, but not its ambitions
By Stephen Bartholomeusz
March 6, 2019 — 12.09pm
China’s economy is set to produce its lowest economic growth for 28 years if it meets its official forecasts, with the trade confrontation with the US cited as one of the factors in the lowering of expectations.
Last year China said it generated GDP growth of 6.6 per cent, fractionally above the targeted rate of 6.5 per cent it had in place for the past two years and was originally aiming for in 2019. It has replaced that 2019 objective now with a range of 6 to 6.5 per cent.
If achieved, that would be the lowest growth rate since 1990, when China's economy was hit by sanctions imposed by the West after the Tiananmen Square "incident".
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Simon Schama: Brexit is the ultimate 'economic and cultural self-strangulation'
Simon Schama
Mar 7, 2019 — 11.30am
Hard by Mornington Crescent Tube station in north London stands a statue, its limestone stained with the grime of time, its face much eroded, its base speckled with the usual rain of pigeon droppings. Despite these indignities, Richard Cobden, Victorian liberal reformer and MP, stands four-square against the oncoming traffic, his right hand clutching a rolled up document – the treaty that prompted the erection of this modest monument.
Remembered principally as one of the two patriarchs (the other being John Bright of Rochdale) of the Anti-Corn Law League, a cause that grew under their evangelical zeal into a crusade for the future of Britain, Cobden has been memorialised all over the country but principally in the manufacturing north, which was his and Bright's parish. There's a Cobden statue in Stockport; another in St Ann's Square, Manchester.
But the Camden Cobden is different and the inscription tells us why. This was a tribute to the maker of the first free-trade agreement of the industrial era: the 1860 Cobden-Chevalier Treaty, which sharply reduced duties on goods flowing between those ancient enemies, Britain and France. Accordingly, although the statue was erected "by public subscription" (as was the case for most Victorian monuments), the inscription announces that the "principal contributor" was none other than Emperor Napoleon III.
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Mario Draghi slashes outlook for eurozone, announces return to stimulus
Jack Ewing
Updated Mar 8, 2019 — 9.23am, first published at 2.40am
Frankfurt | The European Central Bank has signalled deep concern about the state of the region's economy by unexpectedly reversing course and reviving stimulus measures originally designed for times of crisis.
The move by the normally cautious bank on Thursday (Friday AEDT) to try to forestall recession showed how much trade tensions have reverberated through a slowing world economy while clouding the outlook for growth.
The decision, coming amid a slowdown in China, also revealed how difficult it has been for much of the world's central banks to return policy to normal a decade after the beginning of the global financial crisis.
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Why the ECB followed the Fed's flip-flopping
Mohamed A. El-Erian
Updated Mar 8, 2019 — 5.43am, first published at 5.39am
The European Central Bank announced four dovish policy measures that went beyond what markets had expected.
At the conclusion of its policy meeting, the bank stressed that its extraordinary steps would be highly responsive to data and provide greater policy optionality. The markets will most likely hear messages that have broader implications.
The ECB said it would introduce a new round of targeted longer-term refinancing operations, known as TLTROs, that provide additional funding to banks; push back to December the guidance on a first interest rate hike; reinvest in full the maturing principal payments; and operate fixed-rate tender procedures with full allotment.
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'Pervasive uncertainty': Europe sounds alarm bells about global economy
By Howard Schneider and Balazs Koranyi
March 8, 2019 — 10.15am
"Patient" monetary policy. "Muted" inflation. "Uncertainty" over global trade and government policies that may be undermining the economy.
Evidence of a world slipping back to an inflation-less, slow-growth norm - the outlook that prompted the US Federal Reserve to halt its interest rate hikes in January - has now forced a broader pivot among major trading nations as governments from Beijing to Ottawa take stock of a decaying outlook.
In announcing a sharp downgrade of euro zone growth and a surprise move to loosen monetary policy, European Central Bank President Mario Draghi on Thursday coined what may be the motto of the times: "Continued weakness and pervasive uncertainty."
Those five words sum up why the ECB pushed back consideration of any rate increase to next year and expanded lending to banks to stave off a credit crunch.
The action was a response to weak inflation and growth data.
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Bill Gates is right about poverty, the world really is getting richer
By Noah Smith
March 8, 2019 — 8.46am
Last month, Microsoft co-founder and philanthropist Bill Gates touched off a high-profile debate about global poverty after tweeting out a graph from the website Our World in Data showing that the number of people living on less than $US1.90 a day (adjusting for inflation and price difference between countries) has fallen dramatically. That graph looked something like this:
Anthropologist Jason Hickel, writing in the pages of the Guardian, took exception, disputed the graph and denied Gates's assertion. Two of Our World in Data's creators, Joe Hasell and Max Roser, defended their methodology for measuring poverty, which Hickel then criticised more. The debate was well summarised by Dylan Matthews in Vox.
It's understandable that some people in the UK and the US would want to embrace a narrative of increasing global immiseration. These rich countries are struggling with their own economic problems -- inequality, reduced mobility and wage stagnation -- and no doubt those in Hickel's camp also feel guilty for the imperial conquests of past centuries. But that narrative is false. Hickel is wrong, and Gates, Hasell and Roser are correct -- global poverty has indeed been dropping at a dramatic and unprecedented rate.
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Niall Ferguson: This is what happens if China wins the new cold war
Updated Mar 8, 2019 — 2.54pm, first published at 12.00am
The winter of a new cold war is coming between the US and China, renowned Hoover Institution and Harvard historian Niall Ferguson warned The Australian Financial Review Business Summit this week.
Winning it might decide the 2020 US election. Losing it might be the end of a US dollar-dominated global financial system, if not worse. That's very scary coming from the man who called the scale of the Soviet communist collapse in 1989 and the US mortgage implosion two years early in 2006.
Ferguson is not strictly in the prediction game. "Most things since 1989 we missed," he grins. There are no grand patterns or an end to history, certainly not predictable ones. But historians digging about in the past find more about the future than economists and their elegant forecasts, he says. History is non-linear, more like a chaotic pile of sand. Things look stable, then collapse suddenly: a bit like July 1914 out of a clear blue sky, or perhaps a very plausible great fall of China's economy too.
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S&P 500 slips to end worst week of year
Reade Pickert
Updated Mar 9, 2019 — 8.59am, first published at 8.23am
New York | US stocks slumped with the dollar after a report showed American hiring was the weakest in more than a year while wage gains were the fastest of the expansion.
The S&P 500 Index closed slightly lower for its fifth straight drop and worst week of the year, and Treasury yields fell to a two-month low amid concern the labour market is starting to slow.
Shares pared declines late in the day as some analysts focused on the longer-term positive trend for jobs.
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China's iron ore imports fell to a 10-month low
Muyu Xu
Updated Mar 9, 2019 — 5.38am, first published at 5.01am
Beijing | China's imports of iron ore fell to a 10-month low in February, customs data showed on Friday, curbed by a slowdown in trade during a week-long national holiday and a steep run-up in prices.
China brought in 83.08 million tonnes of iron ore last month, the least since April, General Administration of Customs data showed, well down on 91.26 million tonnes in January and 1.5 per cent below 84.27 million tonnes a year ago.
China celebrated its Lunar New Year in early February causing steel mills and traders to shut down business for holiday breaks of up to two weeks, which crimped ore demand.
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China's cloud has silver lining for Australia's big miners
By Kirsty Needham
March 9, 2019 — 12.07am
The chief executive of one of Australia’s biggest mining exporters to China sees an upside for Australia in the sober report on China’s slowing economy delivered this week by Chinese Premier Li Keqiang.
Fortescue Metals Group chief executive Elizabeth Gaines said Mr Li’s work report - closely watched globally for its clues to the China’s economic plan - showed Beijing would spend on infrastructure to support the economy driving Australia's resources exports.
“At a time when people were anticipating the economy would shift to a more services economy, we are actually seeing infrastructure is still underpinning the strength of the Chinese economy,” she told The Age and Sydney Morning Herald in Beijing on Friday.
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I look forward to comments on all this!
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David.
