December 23 2021 Edition
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There are two issues affecting the globe.
The acute one
is the Omicron variant of COVID19 which is really going ‘bonkers’ around the
world. What flows is not going to be good I suspect. It is certainly spreading like crazy as we move towards Christmas but maybe the disease caused is not quite as bad.
The more chronic is the fading power of the US and the rise of the axis of China and Russia and also Iran which are making the world less stable and safe.
Right now
Australia seems to be in a degree of denial about the risks attached to both. Our PM seems to be in denial about the risk and the need to take basic health precautions right now! I have no idea why he is ignoring clear expert health advice. Suggestions as to why welcome! Even Dom now has a mask mandate!
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Major Issues.
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Equity markets may be underestimating inflation risks
William McInnes Reporter
Dec 12, 2021 – 5.22pm
Equity markets could be in danger of miscalculating the risk of further spikes in inflation, after investors shrugged off the highest rate of inflation in 39 years, betting the worst of the price spikes are in the rear vision mirror.
The S&P 500 soared 1 per cent to a record high on Friday, despite consumer prices rising 6.8 per cent in November compared with a year earlier, the sharpest spike in inflation since March 1982.
The result was in-line with economist expectations, but it appears markets were expecting worse, propelling US equities higher and setting up the Australian sharemarket for a positive start to the week. ASX futures were up 0.2 per cent ahead of Monday’s open.
But the near four-decade high inflation rate is hardly good news for equity markets, and some investors fear sharemarkets will be eventually caught out.
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https://www.afr.com/chanticleer/investors-inflation-test-is-just-getting-started-20211212-p59gud
Investors’ inflation test is just getting started
Markets may have shrugged off the sky-high US inflation numbers for now, but the question of where inflation goes from here is far from resolved.
Updated Dec 12, 2021 – 11.52am, first published at 10.54am
The fact the S&P 500 hit its 67th all-time high of 2021 on the same day that US inflation hit a 39-year high of 6.8 per cent might suggest investors’ fears about the Federal Reserve jacking up interest rates are easing.
Goldman Sachs chief US equity strategist David Kostin ended the week with a simple message to clients: don’t worry too much about the prospect of a sudden correction in equity markets and buy high-growth, high-margin companies.
Kostin argues investors are pricing in the Goldman house view that the Fed will double the rate of tapering this week by announcing it is buying fewer bonds, and then start raising rates in June.
“While difficult to predict, the risk of a recession appears low,” he says. “Earnings and margins continue to surpass expectations. Meanwhile, nominal and real rates are expected to rise but remain low over the coming months, supporting the backdrop for both valuation and equity demand.”
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https://www.afr.com/politics/hard-to-be-an-optimist-amid-the-retreat-of-rationality-20211212-p59gve
Hard to be an optimist amid the retreat of rationality
Restoring faith in progress requires recommitting to the principles of the Enlightenment and establishing the right protocols for managing the impact of artificial intelligence on human intelligence.
Alexander Downer Columnist
Dec 12, 2021 – 12.34pm
I used to be an optimist. I assumed rationality would prevail, that society would continue to evolve positively, living standards would rise, human health would improve and overall human welfare would remain on a steady upward trajectory.
I’m not so sure any more. After all, my earlier optimism was based on two assumptions. One was that we would continue to apply the principles brought to the world through the age of Enlightenment. That is, we would rationally analyse facts, seek out new information and consider and draw conclusions on the basis of the evidence we were able to obtain.
Liberal society will become much more difficult to maintain in an environment where AI machines will be owned by large corporations and governments.
The Age of Enlightenment cast aside the prejudices and preconceptions of the Middle Ages and replaced them with science and innovation. The result was the evolution of the prosperous and relatively liberal societies that we enjoy today, societies which provide shelter, food, water and long life for the vast majority of people.
The other assumption which underwrote my optimism was that this understanding of the benefits of the Enlightenment were in and of themselves so obvious they wouldn’t be challenged.
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Australia’s shortage of diesel additive Adblue is serious, but we can stop it going critical
December 12, 2021 4.31pm AEDT
Author Flavio Macau
Associate Dean Teaching & Learning, Edith Cowan University
Australia is going through another supply chain crisis. Stocks of AdBlue, an exhaust fluid used in newer diesel cars and trucks to reduce pollution, is getting dangerously low.
The culprit is a shortage of synthesised urea, an ingredient which local AdBlue makers import mostly from Russia and China. It has uses from plywood to cosmetics and fertilisers. High demand, particularly from farmers, has led to a global supply shortage.
In July, Chinese urea makers began restricting exports in response to fluctuations in the local market. International prices soared 50% between September and October, but that was not enough to stabilise supply and demand.
For Australia the alarm bells rang loudly last week when the Australian Trucking Association warned AdBlue stocks would run out in February. Some are more pessimistic, saying supplies will be gone by Christmas.
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Chanticleer CEO poll: Election policy ideas of our 60 top CEOs
Australia’s top 60 CEOs want to see action to address climate change and skills shortages at next year’s federal election.
James Thomson, Tony Boyd and Edmund Tadros
Dec 13, 2021 – 5.00am
What policy or reform should be a priority at the 2022 federal election?
Rob Scott,
Wesfarmers
After a couple of years in crisis management mode, 2022 should mark the year
when we focus on the policies and reform necessary to sustain Australia’s
competitiveness and prosperity. The problems to solve at present are less to do
with demand, and more to do with supply-side constraints. This is where areas
such as migration, skills development and improving labour participation rates
through better childcare arrangements will all make a positive difference. The
recent Intergenerational Report highlights clearly the challenges we face. The
only way we can manage the debt accumulated through the pandemic, and fund the
escalating costs of healthcare and aged care for an ageing population, is to
undertake serious tax reform across the federation and to improve productivity.
Bracket creep and inefficient state taxes like payroll tax and stamp duty
should not be relied on for future revenue collection; this is a regressive
strategy.
Shemara
Wikramanayake, Macquarie Group
An important factor in supporting economic growth is boosting productivity.
One lever is skill base, with pre-pandemic skills shortages more pronounced
today and being felt across a wider range of sectors. Adjusting the migration
program is a near-term response and needs to be done with continued
co-operation with the states to ensure infrastructure can support a larger
population. A longer-term response could include boosting the collaboration
between our tertiary and VET education bodies and industry to ensure that we
understand and locally develop the skills that we need for the industries of
the future. Decarbonisation and emissions reduction will drive a number of
those industries of the future, and there are opportunities for public and
private capital to work together to transition to a low-carbon economy.
Australia has all the necessary attributes to develop a competitive advantage
in decarbonisation and this would bring with it investment, innovation and
talent development opportunities. Given high deficits and debt around the
world, it will be critical to leverage private capital.
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State visit shows China, climate convergence with Australia’s forgotten friend
Australia has the opportunity to renew a trade partnership and establish a clean energy foundation for the deepened security ties between Canberra and Seoul.
Dec 12, 2021 – 5.39pm
The significance of the first state visit to Australia by a South Korean leader in 12 years – and the first visit by any foreign leader since the start of the pandemic – goes far beyond the resumption of normal diplomatic intercourse. 2009 was a strategic era ago, before the change in geopolitically aggressive China under the rule of President Xi Jinping.
The summit talks on Monday between Scott Morrison and President Moon Jae-in, which will formally elevate the relationship into a “comprehensive strategic partnership”, show the deepening bilateral ties between two nations whose security interests are converging because of Mr Xi’s destabilisation of the Indo-Pacific region.
Critics of the Morrison government’s out-in-front approach to China have suggested this makes it harder to forge regional alliances with the Asian nations that seek to maintain good relations with Beijing.
Yet President Moon’s visit suggests that the importance of stronger links with Australia and an enlarged strategic role in the region has outweighed the risk of incurring the wrath of South Korea’s largest trading partner.
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Court focus on SMSFs could target ‘three-year rule’
Why you may have to rethink your inheritance plans or, at the very least, re-do the relevant documents.
Peter Townsend Contributor
Dec 13, 2021 – 5.00am
The High Court is reviewing the rules relating to how you ensure your super is paid the way you want it to be after your death.
Depending on what the court decides, you may have to rethink the plans you have in place or, at the very least, re-do the relevant documents.
You see, you don’t own your super. You’re entitled to the benefit of it, but while it’s in the fund it is actually owned by the trustee of the fund.
It follows that if you don’t own it, you can’t say in your will what is to happen to it when you die.
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Yes, Australian politics needs a shake-up, but independents aren’t the answer
By Luca Belgiorno-Nettis
December 13, 2021 — 7.32am
With so many independents running, there’s a suggestion that Australia is on the precipice of a tectonic shift in politics. If only. These aspiring independents are launching their campaigns replete with catchy slogans, brightly coloured posters and t-shirts, and all the razzamatazz of politics-as-usual. “They’re not calling them parties at the moment, but that’s not far away,” says Lachlan Harris, former comms director to Kevin Rudd. Successful independent senators Nick Xenophon, Pauline Hanson and Jacqui Lambie have shown how independents seek to capitalise on their cache by building their brand, and political power.
Admittedly, more independents are probably running now than in living memory. What’s lifting this current crop? Is it climate inaction, the stalling of a federal integrity commission or the general disillusionment with politics? One thing’s for sure, in this internet age, the “voices for” are much more readily connecting with their respective constituencies, and offering a new look and a fresh message that says: “I’m not one of the tired old faces with tired old policies you’ve seen so far.”
The challenge to the major parties’ stranglehold seemed unassailable a decade or two ago. Having said that, Labor and Liberal are still the primary political forces in Australia, each so entrenched that it’s hard to picture politics without them. Rarely has the national government been made up of a coalition of minor parties and/or independents. The first federal government was a coalition of the Protectionist Party and Labor, but that ended when Labor won a majority in 1910. The second period followed the 1940 election, when Robert Menzies won his first term as Prime Minister, supported by two independents. The most recent experience is when Rob Oakeshott and Tony Windsor shored up Julia Gillard’s government.
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‘Secret’ Chinese subsidies sustain our unis’ research
11:00PM December 12, 2021
Omicron or no Omicron, Chinese students will soon be heading back to Australia. Despite the low efficacy of Chinese vaccines, they are accepted by the commonwealth as proof of vaccination, so the only remaining barriers to a resumption of Chinese student enrolments are political. And China has not extended its trade embargo to students – yet.
Many analysts fear that Australian universities’ financial dependence on Chinese students undermines their autonomy, but that gets things completely backwards. Chinese students are much more likely to act as agents of Australian influence in China than the other way around. Studying abroad teaches them the value of freedom and democracy, and China knows it.
Yet Australia’s universities, and particularly its elite Group of Eight research-intensive universities, are clearly vulnerable to Chinese influence. It doesn’t come through the students, or the embarrassingly opaque Confucius Institutes they host on behalf of the Chinese government. The main pathway through which China influences our universities is much more direct. China exerts influence by subsidising Australian university research.
Ordinary Australians might be forgiven for believing the core business of universities is teaching. After all, that’s why the commonwealth funds them. But talk to any academic, or skim the university job listings, and you find the truth: research is everything. Research productivity is the one overarching metric on which universities are judged – and judge themselves.
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https://www.afr.com/policy/economy/lh-13-dec-20211212-p59gxg
Morrison’s new age of stagnation
Yes, the economy has rebounded – but only to its pre-pandemic levels of unreformed mediocrity.
Craig Emerson Columnist
Dec 13, 2021 – 3.16pm
While markets will applaud the improved bottom line in Thursday’s budget update, all political eyes will be on two sets of numbers – inflation and wages.
Both sides of politics agree that the cost of living will be a decisive issue at the coming election. If the government forecasts wages to barely keep pace with inflation over the next four years, it will officially admit it expects living standards to remain stagnant under its stewardship.
The Mid-Year Economic and Fiscal Outlook (MYEFO) may be the Morrison government’s last fiscal statement before the election. If the Prime Minister decides to avoid a rerun of the spectacle of government members squabbling in Parliament and crossing the floor, he will call an election for early March.
But if his pollsters advise him that he can’t win a March election he will delay and allow his Treasurer to bring down a budget as scheduled and head to a May election.
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This is how big tech avoids full financial disclosure and scrutiny
An outdated set of regulations is making it much harder for regulators, investors, customers and citizens to really understand the individual market positions of the tech giants. That makes it impossible to protect markets – or democracy.
Rana Foroohar Contributor
Dec 13, 2021 – 10.39am
We know companies like Alphabet, Amazon, Meta (aka Facebook) and even Microsoft track many things about us. What is less certain is how they monetise that information across all the various platforms that they own – from search and e-commerce, to social media and cloud computing.
This information asymmetry is one of the core criticisms of big tech.
Regulators on both sides of the Atlantic are investigating how platform companies exploit this to create an uneven playing field between themselves and consumers or enterprise customers.
A new report from University College London’s Institute for Innovation and Public Purpose adds to the case against big tech, arguing that such companies are also using information asymmetry to navigate Securities and Exchange Commission 10-K disclosure rules that would otherwise require them to provide far more detailed financial data.
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The US inflation canary is not singing in Australia yet
Inflation pressures are as much local as global. But Australia will still need to keep a wary eye on the highest inflation in the US since 1990.
Jo Masters Contributor
Dec 13, 2021 – 1.06pm
Rapidly accelerating inflation in the United States is causing trepidation across advanced economies – worried that they too may be on the brink of a similar acceleration in inflationary pressures.
Headline inflation in the US hit 6.8 per cent in November, up from pandemic impacted 1.1 per cent just a year ago. This near four-decade high is more than three times the 10-year average of 1.9 per cent.
It’s no wonder that Australian businesses are feeling a little anxious.
Inflation in Australia decelerated in the September quarter as our two largest states were locked down. But even before that, inflation had accelerated to 3.7 per cent – around half that of the US, representing a 10-year high, and about double the 10-year average of 1.8 per cent.
Is Australia simply lagging the US? Or will inflation remain more muted?
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Why Australia won’t have a US-style inflation spike
Ronald Mizen Economics correspondent
Dec 14, 2021 – 12.15am
Australian businesses need to plan for higher inflation but price spikes in the United States won’t be replicated in Australia, according to EY.
A booming house and rental market in the US pushed inflation to a near 40-year 6.8 per cent high in November, driving expectations the US Federal Reserve would hike interest rates at least three times in 2022.
In Australia, headline inflation was at 3 per cent in the year to September 30, while underlying inflation was 2.1 per cent, the first time in six years it’s been within the Reserve Bank of Australia’s 2-3 per cent target band.
“When we look at the detail, however, strong inflationary pressures are confined to a handful of items rather than being broad-based,” EY chief economist Jo Masters said.
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https://www.afr.com/policy/tax-and-super/more-tax-refunds-reckless-treasurer-warned-20211213-p59h3c
More tax refunds ‘reckless’, Treasurer warned
John Kehoe Economics editor
Dec 13, 2021 – 6.07pm
Treasurer Josh Frydenberg and Labor would be economically reckless to make an election pledge to extend a “temporary” $8 billion tax refund for low and middle-income earners for a fifth straight year, economists have warned.
They said that with the economy rebounding from the NSW and Victoria lockdowns, and budget spending pressures in social welfare programs and defence, it did not need more stimulus via an extension of the low and middle-income tax offset (LMITO).
The extra refund at the end of the income tax year does little to improve work incentives, complicates the tax system and has become a vote-buying measure by politicians, they said.
Speculation is building that the Morrison government will again extend the tax offset worth up to $1080, to negate pre-election warnings that people earning up to $126,000 a year will face a tax rise from 2023.
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Liberals step up fight against ‘faux independents’
Phillip Coorey Political editor
Dec 14, 2021 – 4.15pm
The Liberal Party has stepped up efforts to combat the “Voices of” movement by appealing for funds to fight what it calls a network of well-funded, faux independents with a left-wing agenda.
Liberal Party federal director Andrew Hirst emailed party members on Tuesday with the warning that “the last thing Australia needs is more left-wing independents putting Labor into power”.
The “Voices of” movement is a growing group of independents funded by and ideologically aligned with Climate 200, an organisation headed by climate activist Simon Holmes Court. All are targeting Liberal seats, mostly those held by moderates, and Mr Holmes a Court said last week he hoped to raise $20 million.
The candidates are predominantly socially progressive and economically conservative women calling for stronger climate change action, a greater voice for women and a robust federal anti-corruption body.
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Superannuation’s looming debt index conundrum
Australia’s superannuation funds learnt the hard way that their bond index can lead them astray. Now some are being forced to double down on it at arguably the worst time.
Jonathan Shapiro Senior reporter
Dec 14, 2021 – 3.56pm
One of my enduring memories as a young fixed income reporter back in the mid-2000s was meeting with the conveyer belt of global corporate treasury teams dispatched to Australia to raise money in our bond market.
Little did I appreciate it at the time, but I had a front-row seat to financial history.
Over the course of 18 months, I sat down with the super-enthusiastic delegation from US bank Wachovia, who told me sub-prime was an opportunity, not a threat; the Zenga-suited Icelandic bankers at Kaupthing Bank who were gracious, albeit baffled, that Moody’s upgraded them to a “Aaa” rating; and the bumbling treasurer at UK building society Bradford & Bingley who cursed the fact that he was forced to carry a Blackberry.
They joined the likes of Lehman Brothers, Countrywide, Northern Rock and others that populated our bond market with securities that imploded just a few months later as the credit crunch hit hard.
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Defence quietly cancels another navy contract – after denying problems
Andrew Tillett Political correspondent
Dec 14, 2021 – 4.35pm
The Defence Department has quietly cancelled a contract for the gun to be fitted to the navy’s new fleet of patrol boats, less than three months after denying there was a problem, an Auditor-General’s report reveals.
The Australian National Audit Office’s annual major projects report also shows that key defence programs beset by delays are running on average almost 3½ years late.
While Defence Minister Peter Dutton has killed off two programs, the French submarines and European helicopters, the ANAO report shows a cumulative schedule slippage of 405 months since the 21 projects were initiated. However, this was down from 507 months a year earlier because several projects were removed from the list following rectification.
The audit also reveals the extent of disruption caused by the coronavirus pandemic, with 16 projects suffering from supply chain delays or workforce limitations, such as travel restrictions on skilled staff or social distancing in workplaces. Those COVID-19 delays also resulted in underspending across a number of programs.
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Charade of political ‘free money’ is finally being exposed
Politicians have embraced “off-budget” spending that magically doesn’t hit the bottom line, but the NSW controversy is a warning shot before the federal election.
John Kehoe Economics editor
Dec 15, 2021 – 10.43am
Some years ago, politicians discovered a pot of seemingly free taxpayer money known as “off-budget” spending that magically doesn’t detract from the budget bottom line.
Now, federal and state politicians are increasingly setting up special “investment” funds to deploy money to pet projects.
The charade is particularly popular around election time, as we already see from plans by the Coalition and Labor for climate, social housing and fast-rail spending in the lead up to next year’s federal poll.
Former federal Department of Finance deputy secretary and former NSW Parliamentary Budget Officer, Stephen Bartos, says, “ministers have the illusion that cash on the balance sheet is free money”.
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https://www.smh.com.au/interactive/2021/electorates-government-grants/index.html
How $2.8 billion of your money is spent — it grossly favours Coalition seats
Liberal electorates received three times more taxpayer money than Labor-held seats, as a detailed analysis of more than 19,000 grants reveals a highly politicised system rife with uneven spending. See the funding your electorate received.
by Katina Curtis and Shane Wright
December 15, 2021
The multibillion-dollar grants system used by MPs and federal ministers has become so politicised that Coalition-held seats around the country received more than $1.9 billion over three years while Labor electorates got just under $530 million.
A special analysis of more than 19,000 individual grants shows huge discrepancies among the nation’s 151 electorates, with a boundary line such as a road or a creek separating communities from potentially millions of dollars.
In the case of Labor leader Anthony Albanese, his Sydney electorate of Grayndler received just $718,000 while the neighbouring, Liberal-held marginal seat of Reid received $14.8 million. Prime Minister Scott Morrison’s home electorate of Cook received $8.2 million.
In Victoria, former Labor leader Bill Shorten received $717,000 in assistance for his western Melbourne electorate of Maribyrnong while Liberal-held but marginal seats in the city’s east received up to $20 million in handouts.
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Inheritance: the major life event no politician wants to mention
Economics Editor
December 15, 2021 — 4.30am
When I was growing up, my family didn’t have much. We lived rent-free in a succession of down-at-heel manses (the Salvos called them “quarters”), but my father’s stipend was a small one on which to support four kids.
Mum worried about where my parents would live after they retired but, with much scrimping and saving (including making my sisters hand over almost all their wages), they built and paid off a small cottage at Lake Macquarie, near Newcastle.
After my father died, Mum spent many impatient years in God’s waiting room, longing to be “promoted to Glory” and thus reunited with my Dad.
That was in 2004 but, though all she had was the cottage and a thousand or two in the bank, that was enough for the four of us to receive one or two hundred thousand each. By then, we were middle-aged and well established. It was nice to add it to the pile, but we didn’t desperately need it.
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China’s unambitious economic goal for 2022 sends an ominous signal to Australia
Senior business columnist
December 14, 2021 — 11.48am
With its growth engine spluttering, China has adopted a rather unambitious goal for its economy in 2022. It is seeking “stability.” In a potentially ominous signal to Australia’s iron ore miners and LNG producers, it is also seeking a “strategic baseline” to ensure self-sufficiency in energy, grains and minerals, with a “safety line” for imports that can’t be exceeded.
Those were two of the major takeaways from last week’s annual central economic work conference, a meeting at which China’s leaders set their priorities for the next year’s economic agenda. The meeting was held against the backdrop of an uncharacteristically chaotic year for China’s economy.
The pandemic, global supply chain blockages, semi-conductor shortages, an energy crisis, a surge in iron ore prices, implosions in its property development sector and a structural shift in policy away from China’s version of capitalism towards a more socialist model generated an over-lapping series of disruptions and threats.
Beijing’s crackdown on billionaires, the fintech and social media sectors, the private education sector, ride-sharing and even entertainment created fear and uncertainty and wiped out billions, if not trillions, of value and wealth. Externally, the trade and geo-political tensions between the US and China began spreading elsewhere as the Biden administration re-established relationships with its traditional allies that had been sundered by Donald Trump.
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Supply chain blues: AdBlue crisis a symptom of larger problems in the world economy
Senior business columnist
December 15, 2021 — 12.18pm
The global shortage of the chemical compound urea that is threatening Australia’s entire logistics system provides a disconcerting insight into the complexities and distortions of global supply chains in this pandemic.
Urea is crucial for the nation’s transport sector as it’s key to the availability of the diesel exhaust fluid AdBlue, which is made from the compound. Its shortage has sent the federal government scrambling to secure supplies to avert a shutdown of the trucking industry that is critical to the movement of goods around the country.
The simple explanation for the sudden shortfall in the supply of the compound is that China and Russia, two of the world’s major suppliers, are restricting exports.
The more sophisticated version illustrates how a myriad of factors has caused the broader problems bedevilling global supply chains since the pandemic began.
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https://www.afr.com/policy/economy/rba-bond-buying-likely-to-end-in-may-20211216-p59i2l
RBA bond buying likely to end in May
Ronald Mizen Economics correspondent
Dec 16, 2021 – 10.40am
The Reserve Bank of Australia’s extraordinary $350 billion bond buying program will likely start being wound back at the bank’s February board meeting and finish in May, governor Philip Lowe said.
But the emergence of the omicron COVID-19 variant represents a significant “downside risk” to Australia’s strong economic outlook, and therefore the future of the RBA’s monetary stimulus program.
Addressing the CPA Australia Riverina Forum on Thursday morning in Wagga Wagga – where the governor grew up – Dr Lowe said the future of bank’s monetary stimulus policies would be determined by three factors.
These are “the actions of other central banks, how the Australian bond market is functioning and, most importantly, the actual and expected progress towards the goals of full employment and inflation”.
He outlined three potential scenarios for the new year.
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WA project to make key AdBlue ingredient ‘sold out several times over’
Angela Macdonald-Smith Senior resources writer
Dec 15, 2021 – 5.51pm
A $3 billion urea project planned by John Poytnon-chaired Strike Energy in Western Australia could have sold out several times over amid keen appetite from buyers in Australia, which will next year lose any domestic manufacturing for a compound critical for the agricultural sector.
A process that kicked off seven to eight months ago to seek customers for the 1.4 million tonnes a year of urea planned at Project Haber near Geraldton in the WA wheat belt “has been oversubscribed for offtake several times over”, said Strike chief executive Stuart Nicholls.
The worldwide market for urea – a naturally occurring molecule also known as carbamide, which is found abundantly in mammalian urine and used to make fertilisers – is in crisis. A surge in gas prices and supply chain interruptions has caused shortages and high prices, and affected not just agriculture but the heavy transport sector, which relies on urea-based diesel exhaust fluid AdBlue, which is running short in Australia.
He said the project was intended not just to establish a domestic supply source for urea, but to ensure it is low-carbon and sustainable for the long term, with the ability to switch from running on natural gas to green hydrogen.
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New data shows just how much money is pouring into Australian tech
The technology deals boom has been revealed as old and new business worlds collide, but questions remain about the sector’s ability to grow and create jobs.
Paul Smith Technology editor
Dec 16, 2021 – 5.00am
It is easy to get caught up in hyperbole when talking to the founders and investors in fast-growing technology companies because as a breed, they have always possessed more than their fair share of self-belief and delusions of grandeur, but it is getting harder to deny that the sector is changing the world.
Few industries have prospered more because of pandemic restrictions than the one that has let us work, shop, socialise and learn without leaving the confines of our homes, and the money is pouring in.
Tracking the deals that involve investments in tech companies is an inexact science because there are so many that it is impossible to report on them all, some are done on the quiet and others just fall through the cracks.
So, any figures you see are generally conservative estimates.
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Financial Review rings bell on market intel and integrity
The relationship between the Financial Review and the ASX has been symbiotic, amid this newspaper’s dual roles of disseminating market-relevant information and protecting market integrity.
Dec 15, 2021 – 6.16pm
To mark The Australian Financial Review’s Platinum 70 Year, the Australian Securities Exchange granted this newspaper the honour of ringing the bell to start yesterday’s trading on the national bourse, a ceremonial flourish usually reserved for new company listings.
As ASX chief executive Dominic Stevens said at the event, both the stock exchange and the national business publication have played significant roles in the market for raising and allocating the equity capital that has built today’s Australian prosperity. As with the financial press in comparable countries, the relationship has been symbiotic, amid the Financial Review’s dual roles of disseminating market-relevant information while seeking to promote and protect market integrity.
The chosen bell ringer was distinguished business journalist Trevor Sykes, the Financial Review’s fabled Pierpont columnist. This was the nom de plume of the famous column originally written from the perspective of a portly, crusty, cigar-smoking gentlemen’s club stockbroker, whose witty, acerbic, world-weary observations on the goings-on in sharemarkets appeared for some 44 years.
Appropriately enough, Pierpont was invented one evening in 1972, as our Mr Sykes was walking back to the office after a few gin and tonics with Michael McAlister, the chairman of Sydney’s Australian Associated Stock Exchanges, and the former private secretary to the Duke of Windsor, otherwise known before his abdication as King Edward VIII.
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Disaffection and rise of independents makes for hard-to-predict poll
Award-winning political commentator and author
December 16, 2021 — 5.00am
Scott Morrison was confident from the moment he ascended to the leadership that he could make Bill Shorten his John Hewson. Morrison figured he could reprise Paul Keating’s success in 1993, despite the upheaval in the wake of the coup against Malcolm Turnbull, by focusing on Shorten’s personal and policy shortcomings.
And so it came to pass. Thinking about this after the most shocking few weeks for Morrison, one former Liberal cabinet minister mused that if the 2019 election was Morrison’s 1993, then 2022 could well be his 1996, where a long-term, decaying, fraying government with a domineering leader was beaten by a bespectacled man with thinning hair and a nondescript personality who curled up into a small ball then rolled himself to the centre.
It is possible but by no means certain. There are so many known unknowns, including where, when or who COVID will strike, and now more than ever what the impact will be of the votes of the disaffected from the Coalition’s left and right to independents, Clive Palmer and Pauline Hanson.
In 2007, the non-major party primary vote was 14 per cent. In 2019, it was 25.22 per cent. Recent polls suggest it could now be more than 27 per cent.
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Watch out for these investment risks in 2022
In what could be a challenging 2022, experts suggest investors protect their portfolios by taking a more cautious approach.
Jeremy Chunn
Dec 17, 2021 – 5.00am
Investing is a noisy business full of distractions. An easy way to turn down the volume, and achieve a better long-term outcome, is to take a core and satellite approach. With a core portfolio split between risky growth assets (local and global equities) and reliable defensives (cash and bonds), an investor is then left to ponder the opportunities for a satellite strategy.
The satellites, traditionally a place to speculate and seek high growth, can also be marshalled in times of fear. As 2021 winds to a close, investors are concerned about lofty valuations and flat-on-their-stomach interest rates.
The custodians of managed portfolios of exchange-traded funds (ETFs) and more sophisticated investments will always say their models are ready for what happens tomorrow and beyond. To test their convictions, Smart Investor asked five managers how they would allocate an extra 10 per cent of capital to a satellite strategy. Hypothetically, of course…
Andrew Connors, managing director of Quilla Consulting, picks up the phone fresh out of an investment committee meeting. “I can give you some insights straight off the bat,” he says. A growth core portfolio would be well complemented over the next six to 12 months, he adds, by a satellite tilt at local and global “quality” stocks with low debt, strong earnings outlooks and price-earnings valuations below market average. In Australia, the banks and major miners may be of interest. (They also make up most of the S&P/ASX 200, so keep that in mind.)
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Dark times ahead as Australia faces crisis on crisis
The four Cs – Covid anxiety, cancel culture, climate hysteria, China’s bullying – have well and truly put an end to the golden age Australia enjoyed for decades.
By Tom Switzer
From Commentary
December 16, 2021
I used to be an optimist about the world but now I am depressed. When I was born in the early 1970s, the popular wisdom warned that, unless prompt and drastic action was taken to limit population and industrial growth and to end nuclear weapons, the world would face disaster by the end of the 20th century.
Yet population growth estimates declined. Biotechnology advances found ways to slash global poverty. The Cold War, as far as the US and Soviet Union were concerned, turned out to be “the long peace” (as historian John Lewis Gaddis called it).
For the past 30 years – which is to say all my adult life – the world witnessed unprecedented peace and prosperity. By any measure – poverty, sanitation, malnutrition, literacy, security, child labour, infant mortality, personal freedom – life had improved dramatically for the vast majority of humans all across the world. In 1900, average life expectancy globally was about 30 years; today it is about 70.
True, the post-September 11 wars on terror across the broader Middle East were self-defeating. But more people died in conflicts across the Persian Gulf in the ’80s. And no world war has been fought in more than 75 years.
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Britain and Australia conclude free trade deal
AFP
December 17, 2021
Britain and Australia finalised in a virtual ceremony on Thursday a free trade deal that is expected to unlock more than £10 billion in trade annually.
Before becoming prime minister, Boris Johnson had touted Brexit as allowing the construction of a "Global Britain" that would become a trading powerhouse thanks to better trade deals than when it was in the EU. The free trade deal, which states that "£10.4 billion ($13.8 billion, 12.2 billion euros) of additional trade" will be unlocked, will be submitted to lawmakers for review.
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Subs programs pegged as serious fiscal risks
4:40AM December 17, 2021
The costs of acquiring nuclear submarines and terminating the French Attack-class subs have been identified as key fiscal risks.
The mid-year budget update said the initial 18-month consultation process with the US and Britain to flesh out the AUKUS program would be met from within the defence budget.
But it warns: “The costs associated with the acquisition of a nuclear-powered submarine capability will be assessed as part of this process and are not fully reflected in the budget estimates for Defence.”
Taxpayers have already paid about $2.4bn for the now-cancelled Attack-class submarines, and the government is in talks with France’s Naval Group and US combat system provider Lockheed Martin to determine the final bill for dumping the planned diesel-electric boats.
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https://www.afr.com/chanticleer/supply-crisis-will-outlast-omicron-adblue-crises-20211217-p59ikk
Supply crisis will outlast omicron, AdBlue crises
Omicron’s threat to Australian supply chains is limited for now, but the volatility we’ve seen in the last two years will outlast the pandemic.
Dec 17, 2021 – 4.29pm
’Twas the week before Christmas and all through the supply chain, retailers are praying to be spared any more pain…
The mix of vigilance and anxiousness you can feel building throughout the community at the threat of omicron is magnified in the retail sector, where one of the most important trading weeks of the year looms.
So far, there’s calm. Because quarantine rules in NSW and Victoria have changed greatly in recent months, the likes of Coles and Woolworths are not being forced to isolate entire shifts of workers anymore.
This has greatly relieved pressure on logistics, but there’s still a heightened focus on protecting the distribution centres that will play a crucial role in putting Christmas dinner on the table.
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https://www.afr.com/technology/how-government-data-is-helping-to-save-a-rural-town-20211207-p59fhm
How data is helping to save a rural town
Jessica Sier Journalist
Dec 17, 2021 – 1.51pm
The township of Bourke in rural NSW has long had a serious youth crime problem.
For the past 10 years, the town has watched helplessly as more and more kids were expelled from school, thrown in jail, and ended up with few options to get their lives back on track.
But thanks to new access to government data that offers granular insight into everything from youth reoffending to school attendance to family violence, Bourke has begun to combat some of its deep-rooted problems.
“Kids being taken away and families being broken again and again has been our Achilles heel for years,” Alistair Ferguson, leader of the Bourke Tribal Council and founder of Maranguka, an indigenous self-governance organisation, told AFR Weekend.
“But we’ve managed to use concrete data from what’s actually happening in our community to build some programs and policies that are working. We are actually seeing a drop in the number of kids getting caught up in the criminal justice system and the ability to see what’s going on is very powerful.”
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‘This mess will not be over before mid-2024’: Supply chain pain hits retailers
By Dominic Powell, Jessica Yun and Nick Toscano
December 18, 2021 — 5.00am
On Tuesday morning, Woolworths boss Brad Banducci delivered a grim prognosis for the beating heart of Australia’s retail sector. The country’s supply chains, essential for everything from shipping parcels to keeping food on shelves, were on their last legs, having sustained months of continued battering by the COVID-19 pandemic.
On a call with media and analysts, the experienced executive calmly painted a picture of a logistics network besieged on all fronts: shipping costs near all-time highs, pallets (and the wood and nails needed to make them) scarce, fuel costs soaring, essential fuel additives unavailable, and reliable labour in short supply. It was a perfect storm, with retailers right at the centre.
“It would be fair to say there is enormous pressure on all aspects of that supply chain currently,” Banducci says. “I wouldn’t gild the lily on that one.”
For months, market watchers had flagged supply chain issues as a risk for major retailers, but until last Tuesday the raw reality of the situation hadn’t been laid bare. The problems, which Banducci made clear were still unresolved, would cost the company at least $220 million, seriously denting its half-yearly profits. Woolworths’ shares were swiftly sold off, with nearly $4 billion in value wiped from the company’s valuation by the day’s end.
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Why we need to kiss and make up with the French
11:00PM December 17, 2021
The freshly drafted free-trade agreement with Britain is an example of what can be done when two countries decide to put some priority and effort into co-operation. Good results flow. What a shame that free-trade agreement with the EU seems harder to attain.
Australia has a Europe problem and Europe has an Australia problem. Failures of trust, attention and priority are at the heart of our difficulties. Key relationships are not being handled well. Our interests demand a better performance.
The change of mind on submarines was always going to test the friendship with Paris but how it was done, rather than the decision itself, has led to anger.
A “two-plus-two” meeting of Foreign and Defence ministers barely two weeks before the AUKUS bombshell “underlined the importance of the Future Submarine program”.
Then we have the prime ministerial photobombing of French President Emmanuel Macron at that Rome reception, as if a quick grin-and-grip would make the problem go away.
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A changed world will bring new economic challenges
11:00PM December 17, 2021
The transformation of the Liberal Party is on display on the eve of Christmas with the mid-year budget update revealing a government pledged to a big-spending social contract, a surge in jobs and ongoing tax cuts, but with budget repair now a forlorn priority in the march to the election.
Our politics as well as our economy have been up-ended by Covid-19. This is a new world with new challenges. The Howard/Costello Liberal Party era is consigned to history in a new pandemic age of spending, cheap money and the demise of any public appetite for serious reform. The immediate urgency is about economic recovery and restoration of human freedoms.
Australia’s economy is roaring back. The unemployment rate fell to an astonishing 4.6 per cent in November, surprising the markets and the Treasurer. After the suffering and east coast lockdowns, Australia has triumphed over the Delta variant despite the misery it inflicted. “Employment is now at a record high, with 180,000 more people in work today than at the start of the pandemic,” Josh Frydenberg said. He said it twice to ensure the news sank in.
Labor said during the 2020 recession the government’s test was jobs – but if this is the election test then Scott Morrison and Frydenberg will win. The update shows one million new jobs over the next four years yet its forecasts of unemployment falling to 4.5 per cent this year and 4.25 per cent in 2022-23 already seem too modest.
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COVID 19 Information
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The omicron paradox is starting to reveal itself
Vaccine-induced antibodies can blunt the variant’s onslaught, but transmissibility remains alarming.
Anjana Ahuja
Dec 12, 2021 – 2.51pm
Three spikes and it’s out. That is the hopeful message emerging from studies into how well vaccines are holding up to Omicron, the fifth and latest COVID-19 variant of concern. Three doses of a vaccine, or two doses plus immunity gained from infection may produce sufficient antibodies to quash this unwelcome viral newcomer.
Omicron, found in 57 countries as of last week, has sparked deep concern since it was reported to the World Health Organisation in November. More than 30 mutations are clustered on the spike protein, the portion of the virus on which most vaccines are based. Rapidly filling hospital and paediatric wards in South Africa’s Gauteng Province, home to the first major outbreak, compounded those fears. The surge pointed to greater transmissibility, including among the previously infected or vaccinated, and among children.
Dispatches from the wards, however, are painting a portrait of a somewhat milder disease, with shorter hospital stays, fewer patients needing oxygen and fewer children progressing to severe illness. There is still an outside chance this could prove a mirage: the early wave was mostly in younger people, including university students.
The full clinical picture will only become clear once the new virus has cycled through the successive stages of infection, illness and death in all age groups. Even so, the WHO has not reported any deaths specifically due to omicron.
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Britain faces ‘tidal wave’ of Omicron cases, nationwide boosters flagged
By Jill Lawless
Updated December 13, 2021 — 7.55amfirst published at 5.53am
London: Prime Minister Boris Johnson warned Monday (AEDT) that Britain faces a “tidal wave” of infections from the Omicron coronavirus variant, and announced a huge increase in booster vaccinations to strengthen defences against it.
In a televised statement, Johnson said everyone aged 18 and older would be offered a third shot of vaccine by the end of this month in response to the Omicron “emergency.” The previous target was the end of January.
He said cases of the highly transmissible variant were doubling every two to three days in Britain, adding, “there is a tidal wave of Omicron coming”.
“And I’m afraid it is now clear that two doses of vaccine are simply not enough to give the level of protection we all need,” Johnson said. “But the good news is that our scientists are confident that with a third dose – a booster dose – we can all bring our level of protection back up.”
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Surge in omicron cases in Denmark, UK sends warning to rest of Europe
Richard Milne, John Burn-Murdoch and Sarah Neville
Dec 14, 2021 – 6.25pm
Oslo/London | Omicron will become the dominant coronavirus variant in Denmark this week, epidemiologists say, driving a rise in cases to record levels and offering a warning to the rest of Europe about the more transmissible mutation.
Cases in Denmark have surged, contributing to a record daily tally of COVID-19 infections, with some statisticians expecting omicron to represent a majority of cases in the Scandinavian country by Wednesday.
The omicron variant is having a clear impact on case numbers in Denmark and Britain, the first evidence outside southern Africa of its ability to change the course of the pandemic. Epidemiologists say the two countries offer an early warning of how infections and hospital admission rates could spike across Europe this winter and show the need for effective booster programs.
“Denmark is a frontrunner here. We were one of the first countries to have initial spreading domestically, but other countries in Europe will see the same,” said Soren Riis Paludan, professor of biomedicine at Aarhus University.
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For the sake of our health, most vaccine mandates must now go
Compulsory jabs have done their job. The division they cause may now do more medical harm than good.
Nathan Grills Contributor
Dec 15, 2021 – 2.40pm
Long term, widespread mandates have a diminishing marginal return and an increasing marginal cost. For the good of the public’s health we need to move beyond vaccine mandates except in high-risk settings – as NSW has done and Victoria has begun to do.
From an infectious disease perspective, yes, vaccine mandates are effective. For example, school vaccine mandates (no jab, no play) have helped nearly eradicate measles and whooping cough in Australia.
And COVID-19 vaccine requirements have driven up vaccination rates to record levels – because people have little choice if they wish to work and live normally. These high rates have helped slow viral spread and, more importantly, protected our intensive care units and saved thousands of lives.
Vaccine mandates also doubtlessly protect high-risk environments such as nursing homes and hospitals, where staff are at risk of contracting COVID-19 as well as passing it on. Remember Victoria’s dramatic second wave last year? In the absence of vaccines, staff unwittingly became vectors for outbreaks, with tragic consequences.
I am thankful that the hospital where I work has various requirements to ensure the safety of staff and patients. For example, not smoking in the workplace, not working while drug-affected or sick, and being vaccinated against various diseases.
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UK hits record daily caseload as omicron reaches warp speed
Hans van Leeuwen Europe correspondent
Dec 16, 2021 – 4.24am
London | Britain has posted its highest ever number of new COVID-19 infections in one day, as health authorities warned that the “staggering” growth in omicron cases is creating “the most significant threat since the start of the pandemic”.
There were 78,610 new infections on Wednesday, surpassing the previous record from the horrific second-wave peak last January by more than 10,000 cases.
“I’m afraid that we have to be realistic that records will be broken a lot over the next few weeks as the rates continue to go up,” England’s chief medical officer Chris Whitty told a televised briefing on Wednesday (Thursday AEDT).
He warned against taking any solace from South African medics’ suggestions that the new variant was a less severe illness, saying that the sheer pace of omicron’s spread still made it a dire threat.
“If the rate of hospitalisations were to halve, but you are doubling every two days, then in two days you are back to where you were. If the peak is twice as great as the halving in the hospitalisation rate, you still end up in the same place,” he said.
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Vaccine boosters ‘essential’ to combat Omicron’s threat
8:11PM December 15, 2021
The first Australian study into how effective vaccines will prove against the Omicron variant has found that protection against symptomatic infection from the new strain drops to 40 per cent.
Protection against severe disease from Omicron holds up at about 80 per cent, but boosters will still be essential to boost immunity against the variant, research by the Kirby Institute found.
Emerging studies from around the world have found there is an approximately tenfold reduction in neutralising antibodies against Omicron following two doses of an mRNA vaccine.
The Kirby Institute research found having a booster shot had the potential to raise efficacy against the Omicron variant to 86.2 per cent against symptomatic infection and 98.2 per cent against severe disease. “Emerging data on the loss of neutralisation against the Omicron variant reveals considerable escape of neutralising responses, but indicates that high levels of protection to symptomatic and severe infection are likely to be achieved by boosting with existing vaccines that target ancestral spike protein,” it said.
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How Britain is banking on boosters to ride the omicron wave
Hans van Leeuwen Europe correspondent
Dec 17, 2021 – 9.54am
London | In omicron Britain, more and more Premier League soccer matches are being cancelled, as COVID-19 ransacks the teams’ benches. But that doesn’t mean the stadiums will be empty at the weekend,
Both Wembley Stadium and Chelsea’s Stamford Bridge will be repurposed as giant walk-in clinics for booster doses of the COVID-19 vaccine. An army of volunteers - possibly literally, as troops will be deployed in some locations - will shepherd what Prime Minister Boris Johnson hopes will be hundreds of thousands of willing Britons into a nationwide collection of pop-up jab factories.
Johnson’s favourite prime minister is Winston Churchill - he’s written the book - and this week he used a televised press briefing to invoke the “fight them on the beaches” rhetoric as he urged the country to get inoculated as fast as possible.
“We’re jabbing in hospitals, we’re jabbing in surgeries. We’re jabbing in pharmacies and in pop-up centres. We’re jabbing in shopping centres and on high streets, and in football stadiums,” Johnson said. “We’re throwing everything at it. Wherever you are, we’ll be there with a jab for you.”
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Omicron may multiply 70 times faster than delta
John Bacon
Dec 17, 2021 – 3.22pm
Hong Kong | The omicron variant multiplies 70 times faster in the human bronchial tubes than the initial COVID-19 infection or the delta variant, according to a new study from the University of Hong Kong.
The lightning-fast spread within people may explain why the variant may transmit faster among humans than previous versions, the researchers say. Their study also showed the omicron infection in the lung is significantly lower than the original SARS-CoV-2, which may be an indicator of lower disease severity. The research is currently under peer review for publication.
By infecting many more people, a very infectious virus may cause more severe disease and death even though the virus itself may be less dangerous, said Dr Michael Chan Chi-wai, the study’s principal investigator.
“Taken together with our recent studies showing that the omicron variant can partially escape immunity from vaccines and past infection, the overall threat from omicron variant is likely to be very significant,” he said.
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Denmark to shut down public venues as COVID infections rise
By Jan M Olsen
December 18, 2021 — 2.58am
Copenhagen: Denmark’s Prime Minister has announced that theatres, cinemas, concert halls, amusement parks, museums and art galleries across the country will be closed down under new restrictions to contain the spread of the coronavirus.
Prime Minister Mette Frederiksen said on Friday, local time, the measures also require stores smaller than 2000 square metres and restaurants to limit their number of customers. Restaurants must serve their last meals and alcoholic beverages at 10pm and close at 11pm.
The partial shutdown order was approved later Friday by Parliament’s 21-member Epidemic Committee. Most restrictions apply as of Sunday at 8am.
The Danish government is advising residents to limit social contacts over the Christmas holidays, and urged public and private companies to have employees work from home where possible.
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Omicron 5.4 times more likely to reinfect than Delta: study
By Clara-Laeila Laudette
December 18, 2021 — 10.47am
Talking points
- A new study of British cases by the Imperial College suggests Omicron is five times more likely to reinfect than Delta
- The study, which is not yet peer-reviewed, says there is no evidence yet that Omicron cases are milder than Delta, but some say it is too early to know.
- Results suggest that two-dose vaccines offer little protection against Omicron infection.
Madrid: The risk of reinfection with the Omicron coronavirus variant is more than five times higher than Delta and shows no convincing signs of being milder, a study suggests, as cases soar across Europe and threaten year-end festivities.
The results of the study by Imperial College London were based on UK Health Security Agency and National Health Service data on people who tested positive for COVID-19 in a PCR test in England between November 29 and December 11.
“We find no evidence (for both risk of hospitalisation attendance and symptom status) of Omicron having different severity from Delta,” the study said, although it added that data on hospitalisations remains very limited.
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Omicron threatens to tip Morrison’s path to victory over a cliff
Political and international editor
December 18, 2021 — 5.00am
Scott Morrison said that his government was “building a bridge to get Australia to the other side of the pandemic”.
But just when we thought we were coasting down the bridge to the other side, we see a looming junction named Omicron.
The road ahead forks. The mild infection route leads to the off-ramp, an easy summer holiday season and an accelerating economic recovery. It’s also the turn that keeps alive Morrison’s hopes of winning the federal election due by May.
But if the Omicron variant turns out to be a savage one that fills the ICU wards to overflowing, the bridge ends abruptly and a chasm awaits. Morrison’s hopes of victory plunge into the abyss.
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A Covid wave is crashing over us. How long before the waters recede?
Thursday December 16 2021, 12.01am GMT, The Times
The tidal wave, Boris Johnson had told us, was coming. We would see a “staggering” number of infections, his advisers warned.
The thing about tidal waves, though, is that before they arrive, there is a quiet period when the tide goes out; when all seems well. So it has been with the coronavirus.
Yesterday the wave broke. With 78,610 recorded cases we are comfortably past the record since mass testing began, and with no sign of slowing. The Omicron waters are coming in. Professor Chris Whitty said that more records would be broken. The questions are how bad and how high it will get.
What do we
know about case growth?
Omicron is such a worry, in part because it is so mutated. But this
“constellation” of mutations, as one scientist put it, is also a surprise
blessing. The virus has changed so much that a quirk in our testing process
means we have early warning. Normally, to spot a variant we have to sequence
its genome — a costly process that adds as much as a week or more to the
turnaround time. This means that new variants can spread unseen, growing
unnoticed beneath an existing wave.
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https://www.afr.com/politics/federal/omicron-is-no-milder-than-delta-a-study-finds-20211218-p59iq5
Omicron is no milder than delta, a study finds
Clara-Laeila Laudette
Dec 18, 2021 – 7.30pm
The risk of reinfection with the omicron coronavirus variant is more than five times higher, and it has shown no sign of being milder than delta, a study showed, as cases soar across Europe and threaten year-end festivities.
The results of the study by Imperial College London were based on UK Health Security Agency and National Health Service data on people who tested positive for COVID-19 in a PCR test in England between November 29 and December 11.
The new Omicron variant of concern arrived in Australia only weeks ago but NSW Health says it has likely taken over Delta in today's infections.
“We find no evidence (for both risk of hospitalisation attendance and symptom status) of omicron having different severity from delta,” the study said, although it added that data on hospitalisations remains very limited.
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Climate Change.
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Catch the energy superpower tide to defeat recovery headwinds
Committing to stronger action on the climate is an opportunity for Australia to put the years of stagnation behind it, and move into a new era of rising real incomes.
Ross Garnaut Contributor
Dec 12, 2021 – 3.46pm
The pandemic recession has prompted rethinking of the fiscal, monetary and immigration policies that contributed to stagnation of labour incomes, persistent unemployment and rising underemployment in the half-dozen years before the pandemic.
If the rethinking leads to sustained policy change, Australia may return to full employment for the first time in nearly half a century. That would be of historic importance for the welfare of most Australians and the health of our polity.
Full employment would provide a favourable environment for economic reform. It would not in itself bring sustained growth in productivity, output per person and incomes. Without that growth, Australia will struggle with the huge public debt accumulated during the pandemic, and the strategic challenges and systemic competition in today’s geostrategic environment.
Return to sustained growth in productivity, output and real incomes faces large headwinds: the weak pre-pandemic starting point; the China trade problem; the pandemic recession’s legacy of damaged service export industries, especially education; and the decline in coal and gas demand that is an inevitable consequence of the rest of the world’s carbon policies.
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Arctic temperature soared to unprecedented 38 degrees in 2020, scientists say
December 15, 2021 — 3.14am
Geneva: The UN weather agency has certified a 38-degree reading in the Russian town of Verkhoyansk last year as the highest temperature ever recorded in the Arctic, the latest in a string of “alarm bells about our changing climate”.
The World Meteorological Organisation said the temperature “more befitting the Mediterranean than the Arctic” was registered on June 20, 2020, during a heat wave that swept across Siberia and stretched north of the Arctic Circle.
Average temperatures were up to 10 degrees more than usual in Arctic Siberia, playing a key role in forest fires, loss of sea ice and global temperature rises that made 2020 one of the three hottest years on record.
“This new Arctic record is one of a series of observations reported to the WMO Archive of Weather and Climate Extremes that sound the alarm bells about our changing climate,” said WMO Secretary-General Petteri Taalas in a statement on Tuesday, local time.
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Power giants AGL, Origin, EnergyAustralia lay down climate challenge
11:00PM December 15, 2021
Australia’s most powerful energy companies have demanded a dramatic hike in the nation’s response to climate change, calling for a 55 per cent cut in emissions by 2035 across the economy to ensure the country can meet its net-zero target by the middle of the century.
The emissions goal has been laid out by Australia’s biggest electricity and renewable energy businesses, many of which are also big emitters, in an attempt to push the transport and heavy industry sectors to lift their commitment to cutting pollution.
The move is a big jump from the Morrison government’s plan for a 26 to 28 per cent emissions cut by 2030 on 2005 levels, but energy companies say greater action is needed to ensure Australia can deliver on its bid for net zero by 2050.
Hitting net zero implies a 58 per cent reduction in 2035 from 2005 levels, according to the Australian Energy Council, justifying at least a 55 per cent cut given its conclusion that Australia is already behind the “straight line” required to hit its goals.
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‘Little chance, if any’ of 1.5 degrees as coal rebounds
Angela Macdonald-SmithS enior resources writer
Dec 17, 2021 – 5.00pm
Coal power generation across the world is on track to surge to a record this year, and while Australian exporters are profiting, the rebound is ruining the chance of meeting global climate goals.
Despite rising renewable energy, global coal power generation is set to surge by 9 per cent this year to a new all-time high of 10,350 terawatt-hours, driven by the economic recovery and high gas prices, the International Energy Agency said in its closely watched annual coal market report.
The findings have dashed hopes that coal power generation, the biggest contributor to carbon emissions, peaked in 2018 and mean there is “little chance, if any” of limiting global warming to 1.5 degrees celsius, unless governments spring immediately into action, IEA executive director Fatih Birol said.
They challenge the declaration of British Prime Minister Boris Johnson that the COP26 climate summit in Glasgow last month had sounded the “death knell” for coal.
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Royal Commissions And The Like.
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No entries in this section.
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National Budget Issues.
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MYEFO’s hundred billion reasons for the government to smile
The good news on jobs and on the budget coming this Thursday is no coincidence heading into an election year.
Chris Richardson and Stephen Smith
Dec 13, 2021 – 5.00am
Mark Thursday this week in your calendars as good news day.
The Bureau of Stats will announce more than 200,000 extra jobs were created in the month of November alone, while the Treasurer will smile as he announces that the budget is set to show a $100 billion improvement over the forecasts made back in May.
Having those two developments on the same day – good news on jobs, and good news on the budget – isn’t a coincidence.
They’re not a coincidence politically because, with an election coming, the government thinks it has one last chance to get a strong message of economic success in the minds of the punters before they switch off for Christmas.
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Stop kidding: the 2024 tax cut will be economically irresponsible
Economics Editor
December 12, 2021 — 1.50pm
It’s a safe bet that, after we’ve seen the mid-year budget update on Thursday, we’ll hear lots of economists and others saying the government should be getting on with budget repair: spending cuts and tax increases.
That’s despite the update being likely to show that the outlook for the budget deficit in the present financial year and the following three years is much better than expected in the budget last May.
It’s also true even though the case for “repairing the budget by repairing the economy” is sound and sensible. The federal public debt may be huge and getting huger, but, measured as a proportion of gross domestic product, the present record low-interest rates on government bonds mean the interest burden on the debt is likely to be lower than we’ve carried in earlier decades.
It’s true, too, that recent extensive stress-testing by the independent Parliamentary Budget Office has confirmed that the present and prospective public debt is sustainable.
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Covid-19, NDIS in $50bn blow to mid-year budget and economic update
6:18AM December 15, 2021
A combined $50bn blowout in the cost of delivering the NDIS over the next four years and Covid support payments triggered by state government lockdowns during the Delta wave have all but wiped out federal budget revenue windfalls from the economic recovery.
The Australian understands that Thursday’s mid-year budget and economic update will reveal future costs associated with the National Disability and Insurance Scheme are forecast to grow another $26bn over the next four years to an annual cost to the commonwealth of almost $30bn a year by 2024-25.
This will lift the commonwealth’s share of funding with states and territories for the scheme — originally designed as a 50-50 split — to 70 per cent by mid-decade and to 75 per cent by the end of the decade.
The sharp increase in funding projections is on top of the $13bn extra promised in the 2021 budget and will take total NDIS spending by all governments to more than $150bn over the next four years with the commonwealth facing a 16 per cent increase in uncapped contributions.
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Budget revenue surge but spending plans stashed away ahead of 2022 election
By Shane Wright and David Crowe
December 16, 2021 — 12.40pm
A $106 billion surge in revenue will barely make a dent in the health of the federal budget, with Treasurer Josh Frydenberg stashing away $16 billion in secret decisions ahead of next year’s federal election.
In the mid-year budget update, released on Thursday, the Treasurer showed a surge in tax receipts – largely out of mining companies and due to a stronger than expected jobs market – is going to be recycled back into the economy and the election campaign.
This year’s deficit, forecast in May to reach $106.6 billion, is now tipped to be $99.2 billion. The deficit for 2022-23 is forecast to edge down slightly to $98.9 billion, from $98.9 billion expected previously.
Further out, the government is expecting the budget deficit to be at $84.5 billion in 2023-24. This is higher than the $79.5 billion forecast in May.
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Government bonds on issue to peak at $1.2trn in 2024-25
Cecile Lefort Markets reporter
Dec 16, 2021 – 5.12pm
Australian bonds in circulation will balloon to $1.21 trillion in 2024-25 because of a widening budget deficit following the pandemic, and with the Morrison government expected to reveal more spending before a federal election due within five months.
The Mid-Year Economic and Fiscal Outlook, released on Thursday, forecasts the budget deficit to fall to $99.2 billion in the year ending next June 30, a small improvement from the $106.6 billion shortfall in last May’s budget thanks to a stronger recovery and robust labour market.
Economists had forecast a deficit of some $75 billion, suggesting the government has budgeted election spending commitments yet to be unveiled.
Indeed, the scale of the budget improvement underwhelmed market forecasters.
“We had expected a much smaller deficit given the strength of year-to-date tax revenues, and despite extra COVID-19 support spending,” said Robert Thompson, a strategist at RBC Capital Markets.
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https://www.afr.com/policy/economy/budget-is-spinning-out-of-control-20211215-p59hpd
Budget is spinning out of control
The extraordinary $300 billion of emergency spending in response to COVID-19 has desensitised politicians – and possibly the public – to multibillion-dollar cost blowouts.
John Kehoe Economics editor
Dec 16, 2021 – 4.31pm
The economy is humming, but the federal budget is spinning out of control under a Morrison government that has become addicted to spending in the run-up to an election.
Despite the excellent news of the unemployment rate falling to a remarkably low 4.6 per cent on Thursday – thanks to massive government stimulus – the mid-year budget update bakes in entrenched structural deficits over a decade. Australia is living beyond its means.
A stronger economy will deliver an extra $106 billion in government revenue over the next four years.
But the government is blowing almost the entire windfall on the National Disability Insurance Scheme, emergency COVID-19 support for recent lockdowns and at least $16 billion for the election and secret deals for vaccines, quarantine facilities and national security.
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The economy is getting better but the budget is not
The decision on whether to extend the LMITO for another year will be a litmus test of how serious both sides are about budget repair.
Phillip Coorey Political editor
Dec 16, 2021 – 8.00pm
When Malcolm Turnbull and his treasurer Scott Morrison unveiled in the 2018-19 budget plans for income tax cuts to be delivered in three stages, they came up with a new, temporary mechanism to target short-term relief to low and middle-income earners.
The low and middle-income tax offset was an income-tested, lump sum payment of up to $1080 paid at the end of the financial year after tax returns were lodged.
The offset, known as LMITO, was supposed to expire on July 1, 2022, by when stage two of the income tax cuts would begin.
Adjustments to the tax thresholds for low and middle-income earners under stage two, and a permanent increase to another existing offset for low-income earners only, would lock in the benefits of the LMITO and deliver it as a permanent tax cut, rather than an end-of-year payment.
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MYEFO charts no return to surplus this decade or the next
We really need to wake up now and start getting our fiscal house in order. Projections say we are surely living beyond our means.
Stephen Anthony Contributor
Dec 16, 2021 – 4.06pm
Treasurer Josh Frydenberg yesterday revealed a modest improvement in the May budget over the four-year outlook by a razor-thin $2.3 billion.
But the Treasurer can be commended for restraint in terms of including so little pre-election pork in the estimates. Based on our tally there can only be $2 billion to $3 billion each year hidden from view for election promises.
Some bank economists and consultants had expected a little more Christmas cheer in the federal midyear update. But apparently they had missed the memo from the Parliamentary Budget Officer detailing the parlous path of the NDIS and other social spending.
Sadly, the mid-year economic and fiscal outlook charts no feasible path back to surpluses this decade, and perhaps the next, based on the following:
- A structural deficit of about 3 per cent of GDP.
- A growing trillion-dollar debt burden just as we face higher global interest rates and debt servicing charges, with about half the debt held by foreigners.
- We are moving into the high-cost phases of population ageing, defence procurement and zero carbonisation.
- Our capacity to maintain strong and stable growth has been diminished after 20 years of economic deform benefiting big business and vested interests. Daniel “Dictator Dan” Andrews is a case in point. The Victorian Premier appears to be running a protection racket for the construction sector and property council. This only continues the state’s addiction to property taxes and the population Ponzi scheme, kicking the reform can down that very long toll road.
- It appears that most observers have missed that China is beginning a GFC-style property collapse, although the MYEFO says the sector is “delicately poised”. Australia may now pay the price for relying so heavily on China, given our own unwillingness to reform.
Macroeconomic Analysis has modelled the fiscal path for the Australian government over the next 50 years in forthcoming analysis for the Taxpayers Research Foundation journal. We find similar-sized deficits over the outlook, but widening deficits out to the end of the decade.
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https://www.afr.com/policy/economy/why-the-spending-binge-will-require-higher-taxes-20211214-p59he3
Why the spending binge will require higher taxes
The federal government’s twin budgets problems, revealed this week, must be confronted by whoever wins the next election.
John Kehoe Economics editor
Dec 18, 2021 – 5.00am
The federal government’s budget has both a spending and taxation problem that must be confronted by whoever wins next year’s election.
If someone said two years ago the budget would be in a $100 billion deficit with debt heading towards $1.2 trillion, but unemployment would be just 4.6 per cent, people would have told them they were crazy.
But in a great paradox, that is the reality the Australian economy and political system faces. Despite the omicron virus outbreak, a stimulus-fuelled economy is roaring back out of pandemic lockdowns and is poised to boom approaching the federal election, most likely to be held in May.
An extraordinary 366,100 extra people secured a job in November, the Australian Bureau of Statistics said on Thursday. The government’s unprecedented $300 billion pandemic stimulus over the past two years and near-zero interest rates have driven the rapid rebound.
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Health Issues.
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https://www.smh.com.au/politics/nsw/health-system-must-own-its-mistakes-20211213-p59h1r.html
Health system must own its mistakes
December 13, 2021 — 6.38pm
A joint investigation by The Sydney Morning Herald and A Current Affair raises serious questions about whether enough is being done within the NSW hospital system to avert catastrophic incidents and if preventable patient deaths are being covered up.
As our investigations reporter Carrie Fellner discovered, Adam Fitzpatrick was an exuberant 20-year-old with big dreams before his life was taken from him as a result of a series of disastrous errors at St George Hospital.
When Mr Fitzpatrick’s breathing tube became dislodged, doctors failed to recognise the problem and were unable to fix it. They decided against calling for the help of a specialist who could have replaced the tube and saved his life.
Instead, the young man was starved of oxygen for 40 minutes and died as a result.
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Moderna to produce millions of mRNA vaccines in Australia in new deal
By Rachel Clun
December 14, 2021 — 12.00am
Australia will produce millions of mRNA vaccines a year from 2024 in a deal secured by the federal government with Moderna and the Victorian government to build a local manufacturing facility in the state.
The in-principle agreement to create the country’s first mRNA manufacturing facility will also allow priority access to non-pandemic vaccines including potential influenza shots, which Prime Minister Scott Morrison said would be critical for protecting Australians.
“The new mRNA manufacturing facility in Victoria will produce respiratory vaccines for potential future pandemics and seasonal health issues such as the common flu, protecting lives and livelihoods,” he said.
Health Minister Greg Hunt said the facility would be key to the country’s medical manufacturing future and help meet the country’s COVID-19 vaccine needs.
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CSL heading for global pharma stage after Vifor Pharma tie-up, mRNA saga
December 14, 2021
The mRNA saga and the Vifor Pharma deal show that Australia’s largest biotechnology company, CSL, is set to be very different from the CSL of old.
Many analysts see CSL as a company that develops vital drugs out of plasma with a flu vaccine adjunct. That’s no longer CSL of 2021 and beyond; it’s set to be a global pharmaceutical company that takes its research successes into production and marketing.
For decades, CSL has been pumping vast sums into research. It now has 1700 researchers and has spent around $5.5bn over the past five years. That research thrust is now set to fundamentally change the company over the next 10 years.
CSL is already a global player in flu vaccines and in the very early days of the pandemic approached Moderna about working together in mRNA vaccines. Understandably, the US company wanted to take its own path.
The company responded by stepping up its research to develop its own mRNA technology with initial emphasis on new flu vaccines, but with the aim of becoming a global player in mRNA vaccines over a wider spectrum.
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CSL puts $16.4b bet on ageing, obesity
Carrie LaFrenz and Jemima Whyte
Updated Dec 14, 2021 – 7.17pm, first published at 5.10pm
Biotech giant CSL has sealed a $16.4 billion buyout of Switzerland’s Vifor Pharma Group, gaining a foothold in rapidly growing markets for kidney disease and iron deficiency treatments that complements its core immunodeficiency and haemophilia therapies.
CSL has offered $US179.25 per Vifor Pharma share – valuing the Swiss pharmaceutical company’s equity at $US11.7 billion ($16.4 billion) – and secured a unanimous recommendation from the target’s board.
The Melbourne-based blood products giant said kidney disease was a rapidly growing market estimated to exceed $US25 billion annually by 2026, driven by ageing populations and rising rates of obesity, diabetes and heart disease.
Key Vifor Pharma investor and billionaire Martin Ebner – who holds a 23.2 per cent stake via Patinex AG – will accept CSL’s offer for his shares.
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Push for health fund cuts steps up
7:38PM December 16, 2021
The medical device industry, private hospitals and consumer groups have hit out at health funds’ claims that premiums must rise next year, saying record profits and fewer claims because of Covid-19 should mean there be no need to raise premiums at all.
The Medical Technology Association of Australia disputed private insurers’ claims the price of medical devices is driving up premiums and that reform to the prostheses list is being delayed by vested interests.
Private Healthcare Australia has said the cost of medical device claims to insurers is rising as more devices and consumables are used during each operation.
“The insurers lobby group has a clear disconnect from reality and the actual official data,” MTAA chief executive Ian Burgess said. “Clearly insurers are using the prostheses list as a smokescreen simply to hide the fact that they are collecting record profits and they’re using this to put pressure on the health minister to approve higher premium increases.
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International Issues.
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‘It will really poke the panda’: New Zealand’s defence document breaks new ground on China
Specialist on Chinese domestic and foreign policy
December 13, 2021 — 5.30am
In the last few weeks, Australian, Fijian, New Zealand and Papua New Guinean peacekeepers were deployed to the Solomon Islands to stabilise the situation for a pro-China leader, alleged to have used a Chinese government slush fund to bribe militants to withdraw support from the violent protests in Honiara. CCP-mouthpiece Global Times, approvingly praised the arrival of the foreign forces in the Solomons to restore order.
The situation is invidious, but New Zealand and Australia’s longstanding timidity on publicly confronting China’s malign activities in the Pacific meant that it was inevitable they would find themselves using their militaries to protect Chinese interests in the Pacific.
On December 6, despite a mountain of damning evidence of his unfitness for office going back many years, Prime Minister Manasseh Sogavare easily survived a non-confidence vote in the Solomons Parliament. All those who voted in support of Sogavare had allegedly been promised money from the Chinese-backed fund.
Just two days after this vote, the New Zealand government published its 2021 Defence Assessment, a comprehensive look at the challenges facing the country from a defence and security perspective. In Australia, there is a perception that New Zealand has been too timid in its approach to China. This new assessment should put an end to that; it will really poke the panda.
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The dark side of China’s breakthrough on digital currencies
Political and international editor
December 14, 2021 — 5.30am
The chief cyber warrior for the US government was able to speak more freely once he’d retired from his twin posts as head of the US National Security Agency and concurrently head of US Cyber Command.
So when I interviewed Mike Rogers in 2018, I wanted to know how deeply Russia and China had penetrated America’s critical infrastructure systems? How much malware had they planted? Which systems could Moscow or Beijing shut down in a crisis?
“We don’t know,” the retired admiral told me. “We’ll only know when it happens.” I’d heard other top American officials vent privately their frustrations in trying to protect US systems from Chinese and Russian intrusions, but I was struck by the bluntness of Rogers’ admission.
Three striking implications followed. One, the US was a blind giant. It was vulnerable to unseen cyberbombs, planted in advance and silently lurking in its central nervous system until activated from afar.
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This crisis will weigh heavily for years
11:00PM December 13, 2021
The pursuit of happiness is among the most quintessential American aspirations, but fewer Americans are achieving it. Lack of money isn’t the problem. Trillions in cash handouts to households in the US and supercharged unemployment benefits in the past two years more than made up for the loss of jobs and income caused by the pandemic and the response to it.
The share of Americans who say they experienced an economic crisis in the past 12 months dropped to its lowest level during the past two years according to the American Enterprise Institute’s latest survey of US households, published in October.
High-income earners, those earning more than $US80,000 ($111,500) a year, were more likely to say their finances had improved during the pandemic, something that normally doesn’t happen in a conventional downturn.
The American economy is limping back to its pre-pandemic income and employment levels, but the population’s mental and physical health has taken a significant turn for the worst, problems that could take far longer to heal.
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China has ’no capacity’ for swift invasion of Taiwan
By Didi Tang
The Times
December 14, 2021
China could invade the self-governed island of Taiwan by 2025 but it is not equipped to do so now, according to the latest threat assessment by Taiwan’s defence ministry.
In a report the ministry said that China’s People’s Liberation Army did not have enough amphibious ships for a swift invasion.
“[Taiwan’s] military strongly defends ports and airports, and they will not be easy to occupy in a short time. Landing operations will face extremely high risks,” the ministry said.
It also said that the Chinese military had limited capacity in logistical support and that the island’s armed forces could disrupt its supply lines by harassing the transport ships and planes on which Beijing would rely to send ammunition, food and medicines to its troops across the more than 100-mile wide Taiwan Strait.
The ministry warned that by 2025 China would have improved its ability to control the waters. China is rapidly modernising its navy, adding bigger and more powerful warships to its fleet.
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Ten years into Kim Jong-un’s rule, North Korea is more North Korean than ever
The Economist
5:22PM December 13, 2021
Looking across the Han river estuary from the Aegibong peace park observatory in Gimpo near Seoul, South Korea’s capital, North Korea is just a short paddle away. Less than a mile from the observatory, North Koreans can be seen tending to fields, driving lorries along the road to a small quarry and riding bicycles past a cluster of low-rise blocks of flats not far from the river bank.
If any of them took a moment to peer back the other way, they could see gaggles of South Korean school children trying to get a closer look at their village through the row of binoculars erected at the viewpoint.
Attempting to cross the border has always been ill-advised, whether by land or water. But the sense of closeness that comes from looking out over the river in Gimpo has rarely been more deceptive than today, 10 years into the rule of Kim Jong-un, the North’s millennial dictator. The latest hope for opening and reform was dashed when Kim and Donald Trump, then US president, failed to come to an agreement to exchange relief from sanctions for arms control at their final meeting in Vietnam in 2019.
Over the past two years, ever more of the few remaining links between North Korea and the outside world have been severed as Kim has instituted one of the world’s strictest border closures in response to the coronavirus pandemic.
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https://www.afr.com/policy/economy/what-2021-has-taught-us-about-inflation-20211214-p59hii
What 2021 has taught us about inflation
The Federal Reserve has admitted inflation is more than a passing side effect of the pandemic. But how bad will the situation get in 2022?
John Authers
Dec 14, 2021 – 5.25pm
If 2020 was the year we all learnt about epidemiology, 2021 has taught us more than we ever wanted to know about inflation.
Price rises had remained calm and controlled for four decades, ever since the US Federal Reserve under Paul Volcker raised interest rates aggressively in the early 1980s. Barely anyone working today has any practical memory of inflation as a serious and problematic reality.
That explains the intensity of 2021’s year-long debate over whether new stirrings of inflation were merely “transitory” or the US and global economies should prepare for a regime where inflation is once again a fact of life.
At year’s end, US inflation has reached a stunning 6.8 per cent, the fastest annual rate since 1982, and the Fed has admitted it is more than a passing side effect of the pandemic. The debate is effectively over.
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Russia and China’s dangerous decline amid US weapons leap
The rising threat of high-intensity state-on-state war arises not because Beijing and Moscow are strong but because they foresee their advantages slipping away unless they act soon.
By Andrew A. Michta
December 15, 2021
The risk of confrontation between the U.S. and China is greater than it has been in decades, and a broader war, triggered by a Chinese action against Taiwan, is a possibility. In “Destined for War: Can America and China Escape Thucydides’s Trap?” (2017), Graham Allison likened the situation to the Peloponnesian War, which the Athenian historian thought inevitable because Sparta feared the rising power of Athens.
Yet the real reason for the current tensions has less to do with the decline and rise of great powers than with threat perceptions, balance-of-power estimates, autonomous assessments and internal decisions that have been driving China — and Russia — for several years now. (They have increasingly aligned in their opposition to the U.S. and the post-Cold War international order.) The rising threat of high-intensity state-on-state war is driven by the growing elite conviction in Beijing and Moscow that their power disadvantage relative to the U.S. and its allies will worsen unless they move soon, making victory increasingly unattainable.
There are three principal reasons why China and Russia may want to confront the U.S. and its allies sooner rather than later, possibly within five years. First, the U.S. military will require time to restructure and refit away from counter-terrorism and toward high-intensity state-on-state great-power conflict. The Army Modernization Strategy published in 2019 sets 2035 as the deadline for transforming the Army into a multidomain-capable force. From a Russian or Chinese perspective, that means each additional year will shift imbalances, which currently favour them in some areas, in America’s favour.
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US to lift rates three times in 2022
Updated Dec 16, 2021 – 8.59am, first published at 6.03am
Washington | Federal Reserve officials intensified their battle against the hottest inflation in a generation by shifting to an earlier end of their asset-buying program and signalling they favour raising interest rates in 2022 at a faster pace than economists were expecting.
Heralding one of the most hawkish policy pivots in years, the central bank said it will double the pace at which it’s scaling back purchases of Treasuries and mortgage-backed securities to $US30 billion ($42 billion) a month, putting it on track to conclude the program in early 2022, rather than mid-year as initially planned.
The faster pullback puts Fed chairman Jerome Powell in position to raise rates earlier than previously expected to counter price pressures if necessary, even as the pandemic poses an ongoing challenge to the economic recovery.
The Fed flagged concerns over the new omicron strain, saying that “risks to the economic outlook remain, including from new variants of the virus”.
Projections published alongside the statement showed officials expect three quarter-point increases in the benchmark federal funds rate will be appropriate next year, according to the median estimate, after holding borrowing costs near zero since March 2020.
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Turning off the tap: The Fed accelerates its big pivot to fight inflation
Senior business columnist
December 16, 2021 — 11.56am
The Federal Reserve’s big pivot is finally gathering momentum. But the critical issue for markets and economies is whether the US central bank has left it too late to recognise that inflation at levels not seen for nearly 40 years isn’t a “transitory” phenomenon.
It took until last month, when chairman Jerome Powell said it might be time to retire the word “transitory,” for the Fed to acknowledge that the view it had maintained throughout the year might have been misguided.
It was that comment that prepared the way for the Fed to announce this morning it would accelerate the rate at which it scales back the massive bond and mortgage purchasing program it launched in response to the pandemic.
Last month, it started tapering its $US150 billion-a-month ($210 billion-a-month) of bond and mortgage purchases by $US15 billion a month – which would have seen the $US5 trillion program end in June next year. Now it says that rate will be doubled, allowing to cease buying assets in March.
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UK free trade deal sets us firmly on road to recovery
5:00AM December 17, 2021
If Richard Cobden was right when he said free trade was God’s diplomacy, then the Australia-UK Free Trade Agreement is a diplomatic coup.
Britain will eliminate tariffs on more than 99 per cent of Australian exports by value entering the UK. Australia will eliminate tariffs on more than 99 per cent of British exports by value entering Australia, saving Australian households and businesses more than $200m a year on tariffs.
This is a true free trade agreement. It is the fastest major agreement Australia has signed and the most comprehensive and ambitious agreement we have concluded outside of New Zealand. It is the first full agreement negotiated from scratch that Britain has completed since leaving the EU.
It will strengthen the deep connection between our peoples, with Australians now having similar access to Britain as EU nationals, and British nationals having access to Australia similar to our best FTAs. Additionally, both countries will enhance our youth mobility by increasing the age limit from 30 to 35 for a total stay of up to three years.
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Xi doesn’t know what to do after popping real-estate bubble
Columnist, The Wall Street Journal
The Wall Street Journal
December 17, 2021
Xi Jinping wants you to know he’s got China’s economy under control — a point he re-emphasised last week when the Communist Party released its top-level economic strategy for next year. But does he really? Funny you should ask.
China’s economy has reached a perilous phase. Data for November, released this week, show investment and consumption slowing. New home prices are gliding downward, and property investment is letting up.
The one bright spot, an uptick in industrial production, isn’t all that bright. Its 3.8% year-on-year growth exceeded expectations, but it still represents an unusually low level for China — even though production ought to be recovering rapidly now that the energy-supply issues that dented output during the autumn have been addressed.
The economy is feeling the aftershocks of Mr. Xi’s biggest economic project of the past year, a controlled implosion of China’s outsize property market. The loudest kaboom has come from Evergrande Group, a property developer indebted to the tune of around $300 billion that finally defaulted on a bond payment earlier this month. The company appears to have entered a form of government-managed administration, and Beijing probably has the wherewithal to foist most of the losses onto foreign bondholders and domestic state-owned banks.
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https://www.afr.com/policy/foreign-affairs/behind-china-s-great-pandemic-wall-20211216-p59i9u
Behind China’s great pandemic wall
A post-pandemic Xi regime may expect that the world will come to it, rather than the other way around.
Richard McGregor Columnist
Dec 17, 2021 – 1.19pm
The last time China hosted the Olympics, in 2008, Russia used the distraction of the opening ceremony to invade neighbouring Georgia. George W. Bush could only fume impotently at Vladimir Putin, seated a few rows away in the stadium.
Unless he sends his forces into Ukraine to coincide with the start of the Beijing Winter Olympics next February, Putin is likely to star in a different drama at the Games this time round.
Putin has accepted Xi Jinping’s invitation to attend the Olympics, ensuring that he will be the first foreigner to meet the Chinese leader face-to-face since February last year, when COVID-19 was raging in China and spreading around the world.
The leaders of Cambodia and Mongolia turned up in Beijing in early 2020 at the start of the national COVID-19 lockdown in a display of solidarity with their giant neighbour. Since then, Xi hasn’t shaken hands with a single foreigner, as far as we can tell, nor has he left the country.
https://www.nytimes.com/2021/12/15/opinion/republicans-democracy-minority-rule.html
How to Tell When Your Country Is Past the Point of No Return
Dec. 15, 2021
Top of Form
Bottom of Form
Mr. Edsall contributes a weekly column from Washington, D.C., on politics, demographics and inequality.
Political analysts, scholars and close observers of government are explicitly raising the possibility that the polarized American electoral system has come to the point at which a return to traditional democratic norms will be extremely difficult, if not impossible.
The endangered state of American politics is the dominant theme of eight articles published by the National Academy of Sciences on Tuesday, with titles like “Polarization and tipping points” and “Inter-individual cooperation mediated by partisanship complicates Madison’s cure for ‘mischiefs of faction.’”
The academy is not alone. On Dec. 6, The Atlantic released “Trump’s Next Coup Has Already Begun,” by Barton Gellman, and “Are We Doomed? To head off the next insurrection, we’ll need to practice envisioning the worst,” by George Packer.
On Dec. 10, The Washington Post published “18 Steps to a Democratic Breakdown,” which warned:
Democracy is most likely to break down through a series of incremental actions that cumulatively undermine the electoral process, resulting in a presidential election that produces an outcome clearly at odds with the voters’ will. It is this comparatively quiet but steady subversion, rather than a violent coup or insurrection against a sitting president, that Americans today have to fear most.
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Russia demands talks on US, NATO containment amid Ukraine showdown
Western countries have sounded the alarm over a build-up of Russian troops around Ukraine
AFP
6:51AM December 18, 2021
Russia on Friday unveiled proposals to contain the United States and NATO in the former Soviet Union and Eastern Europe, calling for urgent negotiations with Washington as it amasses forces near Ukraine.
Another US official told reporters that the United States would respond "sometime next week" on a format for talks and said that Russia should already know that parts of the proposal will be "unacceptable" to Washington.
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Weak US emboldens China, Russia and Iran in global flashpoints
The security picture for Australia has never been darker or more complex. But several key events this year offer clues into the challenges we’ll be facing in the year ahead.
From Inquirer
December 17, 2021
As we look forward into next year, the geostrategic and security picture for Australia has never been more complex and rarely more challenging. In security terms, this year was one of American weakness, Afghan betrayal, rising Russia-NATO tension and the emergence of space warfare and advanced technologies as domains in a new Sino-American Cold War.
But it was also the year of AUKUS and the year Australia found its feet despite increasingly belligerent bullying from Beijing. Several key events shaped 2021, and these in turn give us a clue as to how things might develop next year.
US weakness
The year began in chaos as Donald Trump’s supporters stormed the US Capitol, seeking to stop what they saw as a stolen election. Belief that an election has been stolen is one of the most well-documented triggers for revolutionary unrest.
Many Republicans, independents and even some Democrats still see the election as rigged – and, by extension, the Biden administration as illegitimate – boding ill for US stability into next year. The unrest that peaked during deadly riots in 200 US cities and all 50 states through the summer of 2020 seems to have subsided. But this is an illusion, since last year’s tension was stoked by the media and anti-Trump politicians.
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China and Russia uniting against what they call ‘violation’ and ‘interference’ from the West
The relationship between these two superpowers has been flourishing and now they’re strengthening their pushback against the West.
December 18, 2021 - 4:58PM
Chairman Xi Jinping and President Vladimir Putin met virtually this week. The resulting message was clear: “The West should not underestimate China and Russia’s ability to protect each other’s core security concerns.”
And it’s already much more than a post-summit press release.
There is as yet no formal alliance between the two bastions of autocracy. But, according to Chairman Xi, that’s a good thing. He reportedly said that the relationship between Moscow and Beijing “in its closeness and effectiveness … even exceeds an alliance”.
President Putin was equally effusive.
“A new model of co-operation has been formed between our countries — one based on foundations like noninterference in each other’s internal affairs and respect for each others’ interests,” he told state-controlled media immediately after the summit.
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I look forward to comments on all this!
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David.
