June 09, 2022 Edition
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The Russian war on Ukraine is now well over 100 days old. The destruction and deaths are just awful and the world is being seriously re-shaped. Where this ends is unknowable but unlikely to be good.
In the US we are seeing almost daily mass shootings and no-one seems to know what to do. Just pathetic.
In the UK the hangover is slowly lifting after the 4 day royal celebration.
In OZ we are having an energy crisis which we hope we will find solutions for soon!
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Major Issues.
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Australia’s Labor government faces a whole new economic ball game
May 29, 2022
So, Anthony Albanese starts his second week as Prime Minister; perhaps even more importantly, Jim Chalmers and Katy Gallagher start theirs as joint keepers of our $626bn national purse.
Chalmers as Treasurer, when he’s not moonlighting as acting Home Affairs Minister; Gallagher as Finance Minister. Chalmers is supposed to make all the big decisions; Gallagher to make sure the numbers ‘add up’, in the unique way they do, so entirely a-politically, with government finances.
The $626bn is how much Josh Frydenberg’s budget back in March forecast the federal government would spend in the coming 2022-23 financial year.
Remember Frydenberg? He used to be the treasurer and the next Liberal prime minister. Well, he’ll never be treasurer again; we’ll get back to you on the PM bit.
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https://thenewdaily.com.au/finance/finance-news/2022/05/30/tax-inquiry-jim-chalmers-alan-kohler/
6:00am, May 30, 2022 Updated: 8:22pm, May 29
Alan Kohler: Jim Chalmers needs an inquiry into tax
It’s a good thing debt and deficits don’t matter anymore because if they did, Jim Chalmers would be in big trouble.
As it is, he is the first new Treasurer with no plan to get the budget back to surplus.
In fact, this was the first election in memory, possibly ever, in which neither major party even talked about balancing the budget.
In 2019, Scott Morrison congratulated himself and his team for delivering the first surplus in a decade and promised to “eliminate the debt within a decade”.
Bill Shorten promised to “deliver strong budget surpluses to pay down the debt that these delinquent Liberals have doubled since they have been in office”.
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Diplomacy is Australia’s destiny again under Albanese
The Labor government’s new national security team now has an opportunity to bring a greater conceptual thinking to handling China’s new assertiveness.
James Curran Historian
May 30, 2022 – 5.00am
While some commentators hoped that the Albanese government might immediately reset ties with Beijing, such expectations were both undefined and unrealistic.
The “China threat” narrative still pulses strongly through the security and intelligence apparatus so dominant on Australia’s global outlook. The result is a “debate” over Australian foreign policy that may for some time yet struggle to transcend this stifling inflexibility.
Into this climate comes a new prime minister leading a party which traditionally affirms that the only way Australia can have a say in the decisions that control its destiny is through diplomacy.
At the Quad leaders’ meeting, Anthony Albanese stressed continuity in commitment to the grouping and underlined his determination on climate policy action.
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Anthony Albanese on course for at least six years in power
By David Crowe
May 29, 2022 — 5.49pm Updated May 30, 2022, 10.20am
The eruption in Australian politics has put Anthony Albanese on course for six years in power, at least, if he acts carefully to complete the demolition of the Liberals.
The prime minister has a much stronger hold on power than the election results suggest at first glance. Labor has 75 seats, and may get 76, but the prospect of 77 seats has receded. Albanese looks like he is holding on by his fingertips.
Yet the defeat of the Liberals puts The Lodge out of reach for anyone else in this parliament for at least two terms – provided, of course, Labor learns the lessons of 2010 and gives its new prime minister its loyalty.
The electoral pendulum shows Labor is within striking distance of winning more seats from the Liberals at the next election if it governs with competence and care.
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Economists warn Chalmers RBA review must be fully independent
By Shane Wright
May 30, 2022 — 5.00am
Some of the nation’s pre-eminent economists are demanding new Treasurer Jim Chalmers ensure a review of the Reserve Bank is independent of his department, examines the bank’s structure and is headed by a foreigner.
As concerns grow the review could be dominated by bank and Treasury voices, the economists on Monday wrote to Chalmers to urge that the RBA examination also canvasses appointments to its board and its guiding charter.
Both Labor and the Coalition committed to a review of the bank after a series of stories by The Sydney Morning Herald and The Age about the institution’s charter, internal structure and handling of monetary policy.
The last time the bank faced a review was in the early 1980s, well before it began targeting the inflation rate to smooth the operation of the economy. Every major central bank in the developed world has undergone a review in the past five years due to concerns about monetary policy and its impact on inflation.
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Look to the past to predict the future for Albanese
Columnist
May 30, 2022 — 5.00am Updated May 30, 2022, 10.30am
Would it be a sort of heresy, as a political columnist, to admit I have struggled, this last week, to pay much attention to politics? And this is, of course, not just any week. It is the first week since the sharp vanquishing of the Morrison government. And it is the first week of a new Australia, under the prime ministership of Anthony Albanese.
Perhaps I am simply tired of politics after the rush of a campaign. Or perhaps it is the absence of the vigilance provoked by the last government, of always watching to see what fresh crisis had been manufactured for political purposes (Novak Djokovic, anyone?). And perhaps it is this that has had me dwelling on our tendency to give new prime ministers a pass of sorts.
Whatever their previous public performance, we offer them an act of charity: all is forgiven, or at least forgotten. Perhaps, as leader, they will surprise us. I made this mistake with both Tony Abbott and Malcolm Turnbull. Many made it with Scott Morrison. In the end, the failures of all three were discernible in their previous actions.
I have been thinking particularly of Tony Abbott’s early aphorism: “Happy is the country which is more interested in sport than in politics”, an echo of Malcolm Fraser’s quip about keeping politics off the front page. It is a common conservative refrain, the rhetorical cousin of small government. But Abbott’s opposition had been fuelled by the exact opposite approach, as had much of his ministerial career – it was never going to work. It will be interesting, then, if Anthony Albanese, a Labor man to his boots, ends up the one to come closest to fulfilling this pledge – not by keeping government small, but by somehow lowering the temperature of political debate. Already, he is being kinder to Peter Dutton than might be expected.
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Peter Dutton, Sussan Ley take over Liberal Party leadership
NCA NewsWire
May 30, 2022
Former defence minister Peter Dutton has become the leader of the Liberal Party, with former environment minister Sussan Ley his deputy.
Mr Dutton has taken over the top job from former prime minister Scott Morrison, while Ms Ley replaces the ousted federal treasurer Josh Frydenberg.
The two MPs were expected to run unopposed for their respective leadership positions when the Liberals met at Parliament House in Canberra on Monday morning.
Their appointments were confirmed about 11.30am after a party room meeting.
Queensland Liberal MP Stuart Robert said earlier on Monday that Mr Dutton and Ms Ley would run unopposed.
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Time for Australia to stop demonising its Chinese communities
The public discussion of Chinese influence that propelled foreign interference legislation through parliament placed Chinese-Australians in public life under a microscope.
Andrew Chubb
May 30, 2022 – 12.37pm
A new Australian government opens the possibility of a thaw in diplomatic relations with China.
Substantive policy concessions to Beijing are off the table, but the Labor government has the chance to lead the debate away from divisions with China while getting serious about the impact of the Chinese government on political liberties within diaspora communities.
The key to resolving this apparent contradiction is to adopt a rights-protection approach. This can focus on strengthening Australia’s democratic rights protection institutions, as opposed to the Morrison government’s security focus around a corrosive narrative of subversive “Chinese influence”.
Since 2017, Australia has adopted tough policies against China on everything from 5G communications to COVID-19. In response, Beijing has imposed a diplomatic freeze and, since May 2020, slapped sanctions and restrictions on Australian exports.
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https://www.afr.com/companies/energy/market-operator-intervenes-as-gas-passes-300-gj-20220530-p5apqf
Wholesale gas prices capped after 50-fold surge
Angela Macdonald-Smith Senior resources writer
May 31, 2022 – 8.02am
An extraordinary spike in wholesale gas prices in Victoria of up to 50 times normal levels has prompted the Australian Energy Market Operator to intervene and impose a price cap in a widening of the fall-out since the failure of NSW gas retailer Weston Energy last week.
AEMO has capped prices over the past few days in the Sydney and Brisbane markets. On Monday, it imposed a price limit in Victoria after spot prices were set to soar to an incredible $382 a gigajoule.
The crisis that has gripped the east coast gas market since the failure of Weston adds to the deteriorating situation around energy prices across Australia, where wholesale electricity prices have also surged and are feeding through to higher prices for households and industry.
The extreme gas prices will be beyond the reach of many manufacturers reliant on spot prices to source their gas because they were unable to lock in contract rates at prices they thought were affordable at the time.
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Liberal moderates fare better than conservatives in election wash-up
Contrary to the view that the ranks of the Liberal moderate faction have been thinned, the opposite is the case.
Phillip Coorey Political editor
May 31, 2022 – 5.00am Updated May 31, 2022 – 8.58am
Contrary to the post-election view that the ranks of the Liberal moderate faction have been thinned, thus giving the conservatives the whip hand under Peter Dutton, a breakdown of the numbers shows the opposite is the case.
After taking into account the Liberal MPs who lost their seats, those who retired and whose seats subsequently were won by Labor, the Greens or a Liberal successor of the opposing faction, plus the depletion of the Liberal Party Senate ranks, it is the right that has been mostly culled.
The right lost 16 MPs and senators and gained just one, for a net loss of 15 inside the Liberal party room. The moderates lost 12 MPs but have up to five new MPs and one senator, for a net loss of six.
The moderate tally assumes former NSW state government minister Andrew Constance holds his lead in the south coast seat of Gilmore. Either way, the right’s losses are far greater.
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https://www.afr.com/companies/financial-services/apra-alert-for-loan-repayment-shock-20220531-p5apt9
APRA alert for loan repayment shock
James Eyers Senior Reporter
May 31, 2022 – 11.03am
The prudential regulator says it has targeted some banks for lending to home loan customers that carry too much debt.
In an address to The Australian Financial Review Banking Summit, APRA chairman Wayne Byres said the economy is entering “a very different environment than has existed for much of the past decade”.
“The faster-than-expected emergence of higher inflation and interest rates will have a significant impact on many mortgage borrowers, with pockets of stress likely, particularly if interest rates rise quickly and, as expected, housing prices fall,” he said.
The Australian Prudential Regulation Authority is monitoring the impact of a “sizeable repayment shock, possibly compounded by negative equity” when fixed rate borrowers roll-off to higher variable loans, he said, while it has recently targeted lenders for allowing customers to borrow at high multiples of their income.
He said the growth of high debt-to-income (DTI) borrowing had not been an industry-wide development but concentrated in just a few banks.
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‘Markets are saying your life is about to be hell’: Deloitte partner
Ronald Mizen Economics correspondent
Updated May 31, 2022 – 1.15pm, first published at 11.27am
Financial markets are effectively betting people’s lives are about to be “hell” and there is a risk banks will get caught in the political crosshairs, the Australian Financial Review Banking Summit was told on Tuesday.
With borrowing and input costs on the rise and widespread skills shortages constraining economic growth, attendees were also warned of a “profitless boom” for small businesses that could push owners to simply walk away.
Deloitte partner and economist Chris Richardson said the big money bets in financial markets were on interest rates rising above 3 per cent in coming years, and it was certainly plausible that situation could eventuate.
“If that happens, most models would suggest you’d lose 15 per cent to 20 per cent out of housing prices in Australia – there goes $2 trillion,” he said. “Markets are saying your life is about to be hell.”
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What the ATO will be looking for in your tax return this year
On top of a crackdown on work expenses, holiday homes and crypto, the ATO is warning it will snaffle old tax debts from this year’s refunds
Duncan Hughes Reporter
Jun 1, 2022 – 5.00am
Taxpayers owing money to the Australian Taxation Office can expect to have their refunds, or credits with other government agencies, clipped by the outstanding amount as a COVID-19 moratorium on recouping outstanding payments is lifted.
Tax agents have been contacted by the ATO warning that “you may notice that your client’s refund is less than expected” as authorities seek to recoup unpaid debts.
The ATO will also be intensifying its monitoring of rentals on holiday homes.
The debts had been placed on hold because they were uneconomical for authorities to pursue through their usual procedures (SMS texts and letters to pursue legal action).
“From June, we will recommence offsetting clients’ tax refunds or credits to pay off their debts on hold,” authorities state in a letter to tax authorities.
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The teal win is a tectonic shift in Australian politics
Two major parties more interested in maintaining power than purposeful policy have left Australia falling behind the rest of the world.
Kylea Tink
Jun 1, 2022 – 12.00am
The message from federal election ballot boxes is clear: Australians want politics to be done differently.
Over the past 10 years, we had very little legislative reform. Politics, it seemed, had become a contest of egos and the two major parties were unable to work together to bring our country to a better place.
Time and time again we saw reasonable legislation blocked without debate. Our political system was gridlocked, with parties more interested in retaining power than in using the power they had to work towards long-term progress.
Many Australians watched in frustration as the nation slipped further behind international standards on measures as important as climate targets, the gender pay gap, workforce participation and basic human rights.
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The Greens could fatally wound Labor, as they have done before
Columnist
June 1, 2022 — 5.00am Updated June 1, 2022, 11.23am
One of the less appealing features of Australian politics is the reflexive reaction to election results, in which the winners are hailed as geniuses and the losers are dismissed as hapless dopes. Over the years, the directors of the winning campaigns have even been given a chance post-election to expound on their brilliance in an address to the National Press Club. Their explanations of what happened have then been accepted as holy writ by the media.
To be sure, winners deserve to be grinners. The Labor Party is now in office, so it got more than a few things right. But every election result contains complexities and surely this election more than any in living memory was overflowing with them. The national electorate has hedged its bets.
There are still two seats undecided, but the provisional count suggests that the Coalition lost 19 seats, Labor picked up an extra nine, independents seven and the Greens three. The Albanese government has a majority of one or two.
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Ruinous oil and gas prices could lead Australia into recession
The rising cost of energy is so “ruinous” that it could see Australia plunge into recession before Christmas. There is an easy solution though.
David Llewellyn-Smith
June 1, 2022 - 12:04PM
ANALYSIS
Mining and extractive industries like oil and gas often say that they are “saving Australia”. So their argument goes, when commodity prices are high, Australia can prosper no matter what is happening elsewhere.
This was always only half of the argument, though, because commodity prices often fall and when they do extractive industries lead Australia down.
But what happens when commodity prices are so high that it is actually doing harm to Australia? And what is the appropriate response when those high prices are being driven by human suffering such as war?
These are the critical question facing the Albanese Government in the first days of office. Australia’s gas and coal miners are imposing economically ruinous international prices upon the local economy owing to the Ukraine war and, if nothing is done soon, then every Australian east of Western Australia is going to get a lot poorer in a hurry.
WA is OK because it has a domestic gas reservation policy so its local price is under $6 gigajoule (Gj).
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Household, government spending underpins solid March quarter growth
June 1, 2022
The Australian economy shrugged off Omicron, devastating floods, and intensifying labour shortages to grow by a robust 0.8 per cent over the first three months of the year.
The annual pace of growth slowed from 4.2 per cent to 3.3 per cent, reflecting the end of the Delta lockdown bounce experienced through the December quarter, the seasonally adjusted figures from the Australian Bureau of Statistics showed.
Strong domestic demand was the backbone of the economy, with household and government spending adding 1.4 percentage points to GDP in the quarter
ABS acting head of national accounts Sean Crick said “household consumption continued to drive growth this quarter”.
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Bridging subs ‘capability gap’ is top priority in Defence, says Marles
June 1, 2022
Australia‘s new Defence Minister Richard Marles says bridging the “capability gap” between the retirement of the Collins-class submarines and the arrival of the AUKUS nuclear-powered boats is his top priority in the role.
Potential options to plug the gap include a “Son of Collins” interim submarine, more Hobart-class destroyers, or even buying into the United States’ B-21 bomber program.
Mr Marles claimed the capability gap would be up to two decades long, and addressing it would be “pretty well the number one agenda item in this portfolio”.
“What we saw under the former government was a gap of 20 years open up in terms of capability in relation to our submarines in just ten years,” he told Sky News.
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https://www.afr.com/policy/economy/the-economy-is-strong-but-chalmers-talks-up-risks-20220601-p5aq9g
The economy is strong, but Chalmers talks up risks
Solid economic growth in the March quarter suggests the economy has momentum, but Treasurer Jim Chalmers highlights the economic problems that Labor has inherited.
John Kehoe Economics editor
Jun 1, 2022 – 4.06pm
Solid economic growth in the March quarter suggests the economy has momentum as it emerges from COVID-19, but underlying the figures are also big challenges for the new Albanese government.
Positively, consumers are back spending strongly at restaurants, cafes and pubs as most people move on from COVID-19.
Treasurer Jim Chalmers is giving his first speech, on the state of the budget.
Unemployment is a low 3.9 per cent. Mining profits are booming.
The upbeat assessments of market economists in response to the national accounts contrasted to new Treasurer Jim Chalmers who was more interested in highlighting the economic problems that Labor has inherited.
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https://thenewdaily.com.au/opinion/2022/06/02/alan-kohler-monopolies-agl-bubs/
6:00am, Jun 2, 2022 Updated: 6:32pm, Jun 1
Alan Kohler: We all lose when monopolists prosper
On Monday this week, there were two unconnected events that had an invisible, but important common thread.
First, AGL Energy gave up its plan to split into two and lost its CEO and chairman, finding itself without leadership or a plan; and second, the share price of a small local goat milk baby formula business, Bubs Australia, shot up 40 per cent because the company caught a break.
AGL is the leader of Australia’s energy oligopoly, one of many holding this country back, and Bubs is the beneficiary of the failures of an American oligopoly.
The company announced on Monday that the United States Food and Drug Administration had rushed through approvals for Bubs’ product to sell in the US because of a dire national shortage of infant formula.
Monopoly winners and losers
Bubs was founded in 2005 by Kristy Carr in her kitchen when she was on maternity leave with the first of her three daughters, and since then she has built a $50 million-revenue-a-year business from nothing.
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There are no natural majorities anymore. Albanese’s might be the last one
Columnist, co-host of Ten's The Project and academic
June 3, 2022 — 5.00am
And so, one of the least inspired election campaigns in Australian history has delivered us to one of its most fascinating political moments.
This week, Labor finally claimed a majority with its lowest primary vote this side of World War II. The Coalition has suffered the worst defeat I’ve ever seen, not in numbers of seats, but in their kind: it has a Liberal party with no liberal seats, and is therefore not so much wounded as dismembered – a bird with one wing. Meanwhile, the Greens march to third-party status, snatching seats off both major parties. This isn’t hype, it’s seismic. The very structure of Australian politics might be being remade.
To see this, consider the trends that are more coherent and durable than the apparently patchwork, chaotic results of one election.
For instance, progressive politics is becoming increasingly a politics of the rich. The Coalition suffered swings against it in all our highest-income, most-educated seats. But this is unlikely to be about the discrete issues of the last three years because the Coalition suffered adverse swings in those seats at the last election, too. Those swings mostly didn’t result in losses, but they made this year’s defeats much more possible.
It wasn’t just about the teals, either: the Coalition also surrendered these seats variously to Labor and the Greens. The Greens have wound up with four seats, three of which are made up of wealthy people and upwardly mobile students. The irony of this result is that despite progressive politics’ rhetorical tendency to rail against the privilege of rich white people, it is precisely these people who delivered this result.
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‘Draw the battle lines’: how the Libs must rebuild to win the next election
Editor of Australia Tomorrow and the director of programming at ADH TV
June 2, 2022 — 12.00pm
Australians did not overwhelmingly vote for this Labor government. They overwhelmingly voted against Scott Morrison’s Liberal Party. Like most Western leaders today, Morrison lacked policy initiative, political courage, and conviction in his messaging.
I wrote in Australia Tomorrow, an anthology of essays for the centre-right movement in Australia published last year, that there is a difference between being active in power and purely holding office. In the end, the Coalition was purely holding office. I then asked, “What has been done to strengthen Australia during this period of governance?”
It is a fair question to ask. For too long, the Coalition government blinked and baulked at the big policy ideas of our time that, if embraced, would boost the prosperity of individuals.
On most issues where he should have stood tall and defended the rights and freedoms of individuals, Scott Morrison walked away. Even worse, the former prime minister always described himself as a “pragmatist”, which is code for not having any political convictions or beliefs.
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Morally reckless, politically foolhardy. Who was counselling Morrison?
Political historian
June 2, 2022 — 5.00am
Over the next few weeks and months we can expect to see the minutiae of the parties’ strategies and the performance of the leaders among the focal points of the post-mortem accounts of the 2022 federal election campaign.
Already, however, material has surfaced that gives pause for reflection. Perhaps the most eyebrow-raising revelations to date concern what was going on inside prime minister Scott Morrison’s bunker.
In particular, the hateful and fantastical strategy to target transgender athletes in a perverse (and failed) attempt to win votes in the regions and the outer suburbs affords a disturbing insight into national leadership gone rogue.
As Niki Savva first described in a column published by The Sydney Morning Herald and The Age, this was allegedly a strategy owned by Morrison and directed from inside his Prime Minister’s Office (PMO). Katherine Deves, the mouthpiece for the attack on the transgender community, was Morrison’s handpicked candidate in the electorate of Warringah.
Morrison slyly obfuscated when asked to condemn her offensive remarks – instead giving them succour by praising her for sticking by her views and intimating that she was speaking for the so-called “quiet Australians”.
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The great house price correction has begun
A 15-25 per cent correction has commenced after house prices declined in May for the first time since the short-lived, pandemic-induced falls that ended in September 2020.
Christopher Joye Columnist
Jun 3, 2022 – 11.22am
The great Aussie house price correction has begun: the all-regions (metro plus non-metro) national dwelling value index published by CoreLogic declined by 0.1 per cent last month, which is the first time it has fallen since the short-lived, pandemic-induced correction that ended in September 2020.
The real devil is in the detail, however, with much larger losses being recorded by Australia’s two biggest cities, Sydney and Melbourne, where home values declined by 1 per cent and 0.7 per cent, respectively, in May alone. Unsurprisingly, dwelling values also fell in contiguous Canberra, albeit by 0.1 per cent only.
Sydney dwelling values have now dropped 1.6 per cent since their technical peak in February (the market started flat-lining in November 2021). Home values in Melbourne have also corrected almost 1 per cent since their own January apogee.
In past cycles, we have seen the vanguard cities of Sydney and Melbourne lead the way. This is, once again, the prevailing dynamic: dwelling values in Brisbane, Adelaide, Perth, Darwin and Hobart continue to climb, although the Brisbane boom does appear to be grinding to a halt.
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https://www.afr.com/policy/foreign-affairs/what-should-we-talk-to-beijing-about-20220601-p5aqe0
What should we talk to Beijing about?
There no longer seems to be a question of whether Australia and China should be talking. It’s now down to how we actually do so.
Richard McGregor Columnist
Jun 3, 2022 – 12.25pm
Ahead of the election, there were many people, in Australia and abroad, who tried ahead to make sure they were well positioned to take advantage of a possible Labor victory.
Among them was Xiao Qian, Beijing’s man in Canberra, who arrived as ambassador in January this year with a clear brief to test Australia’s willingness to shift its policy on China.
Beijing had long given up on Scott Morrison’s government, and vice versa. Both sides were too well dug in to their foxholes and had fired too many diplomatic rounds at each other to be able to come out.
In readiness to wipe the slate clean, Xiao has been doing the rounds in Canberra and elsewhere, talking to ministers and their shadows, retired officials, chief executives, academics and think tankers.
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New ministers enter a world that is both power and pain
If the Albanese government wants to do one thing while it is in office, it might be just to clean up the way that government delivers services to the public
Laura Tingle Columnist
Jun 3, 2022 – 4.53pm
For the ministers sworn in to their new jobs this week, there will likely be no sweeter moment than when they were congratulated by the governor-general and posed for a picture with their colleagues on the front steps at Yarralumla.
All those years of political grind, climbing up the ranks, long days and late nights, the daily flummery: they all dissolve. They are replaced by a sense of having finally made it. It’s not just about politics now but about being in government.
Being confirmed in your new job in front of your loved ones is a truly heady and emotional experience for most of those who have walked that path.
There’s also the sudden weight of responsibility.
And then it is to work: an avalanche of briefings, crises, crash courses in issues that you may have thought you understood but realise with a sickening crunch are much more complicated than you ever imagined.
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The one thing that matters for investors in a world of crises
As the rising inflation, energy crises and labour shortages rage, US fund manager Rob Almeida is looking to something decidedly old school.
Jun 3, 2022 – 12.06pm
It’s not every day that a fund manager quotes Lenin. Rob Almeida, chief strategist at $US600 billion ($825 billion) giant MFS Investment Management, might be a self-confessed permabear, but even he admits food security is starting to keep him up at night.
“As Lenin said, every society is three square meals away from chaos,” he tells Chanticleer during his trip to Australia this week. “That’s pretty scary.”
Of course, food is only one example of the crises the world and Australia are facing right now.
The Australian Financial Review Banking Summit on Tuesday was dominated by discussions of labour shortages, with warnings that firms could face a “profitless boom” if a lack of workers prevents businesses from fulfilling demand in an economy still running hot.
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https://www.afr.com/markets/equity-markets/asx-rallies-0-9pc-in-third-weekly-advance-20220603-p5aqso
ASX rallies 0.9pc in third weekly advance
Cecile Lefort Markets reporter
Jun 3, 2022 – 4.28pm
Australian shares rallied on Friday as strong gains in materials and tech stocks pulled the benchmark higher for the third week in a row.
The S&P/ASX rose 0.9 per cent, or 62.9 points, to 7238.8, taking its weekly gain to 0.8 per cent.
Materials advanced the most, boosted by demand for iron ore.
Champion Iron was the biggest index outperformer, up 8.1 per cent to $7.84. BHP Group jumped 2.5 per cent to $46.76 and Rio Tinto rallied 2.7 per cent to $116.03. Fortescue Metals rose 4.1 per cent to $21.46.
Lithium stocks extended their rebound from Wednesday’s sell-off, led by Pilbara Minerals, up 7.5 per cent at $2.45, closely followed by Liontown Resources, 6.7 per cent higher at $1.27.
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Dutton will defy the teal tide and await the next wave to the right
Political and international editor
June 4, 2022 — 5.00am
Anthony Albanese said it over and over again in the election campaign: “We will end the climate wars.” If so, it’s a unilateral surrender. Because the commanding officer of the opposing army has an entirely different view.
“The Coalition supported strong climate change policy and will in the future, but we won’t support any policy that makes it unaffordable to turn the lights on for families or small businesses,” Peter Dutton tells me. “And we won’t support any policy that drives businesses and jobs and investment overseas because of unreliable power supply” under Labor. The new opposition leader has no intention of ending the climate wars, not if he thinks they might work for him.
And the Coalition’s “strong climate change policy” that Dutton speaks of? The Coalition remains committed to the same one that it took to the election last month.
That’s the one with the 2030 emissions cuts of 26 to 28 per cent conceived by Tony Abbott in 2015, before the rest of the developed world pretty much doubled its pledges. Scott Morrison added a commitment to net zero by 2050 but didn’t revise the 2030 targets. Even as Labor promised a more active climate policy.
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The new secret to power: Albanese can only keep it if he’s willing to share it
Columnist
June 4, 2022 — 5.00am
Anthony Albanese allowed himself a moment of “I told you so” indulgence this week when he formally welcomed his Labor team back into government, after nine years in the wilderness. He told the caucus room it was his idea to launch their election campaign in the former Liberal heartland of Perth.
“Not everyone [of his advisers] was rapt,” Albanese revealed. “But wasn’t that a good call in WA? So we have an opportunity to shape the future from this position.” By “this position”, he meant the privilege of a two-seat majority on the floor of the House of Representatives. The four seats Labor seized from the Liberals in Perth were, in the end, the difference between minority government and power in its own right with 77 seats out 151 in the lower house.
Every incoming prime minister could be forgiven a small moment of self-praise. But no one likes a show-off. And Albanese cannot afford to misread a victory that involved a historic collapse in the primary votes of both main parties as vindication for his own world view.
The new PM would recall his predecessor Scott Morrison’s equivalent shout-out to the other frontier state on election night in 2019, when he declared “how good is Queensland?” Morrison believed he had single-handedly navigated the Coalition to the electoral high ground of regional and outer suburban Australia, where Labor could never threaten his haul of 77 seats. Yet, he destroyed the Liberal Party’s institutional base in the capitals with a re-election campaign that was both wilful in its divisiveness, and clueless about the national mood for a new type of politics.
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Labor backs 5.1% rise for low-paid
7:41PM June 3, 2022
The Albanese government has backed a 5.1 per cent pay rise for low-paid workers on minimum and award wages, highlighting how the 21-year high inflation rate and falling real wages are creating cost-of-living pressures.
In its highly anticipated submission to the Fair Work Commission, the government backed an increase in line with inflation to ensure “the real wages of Australia’s low-paid workers do not go backwards”.
Workplace Relations Minister Tony Burke said the government’s recommendation was not confined to the estimated 184,000 workers paid the national minimum wage rate of $20.33 an hour and extended to “low-paid” award-reliant workers such as shop assistants, cleaners and workers in the care economy.
Employment Minister Tony Burke says the government "do not want low paid workers to go backwards". “The… Albanese Labor government's support for wages to get moving and to make sure that in particular low wage Australians don't go backwards started today with this submission,” he said. Mr Burke More
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COVID-19 Information.
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No entries in this category.
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Climate Change.
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Mini nuclear reactors have a big waste problem, warn scientists
Will Mathis
Jun 1, 2022 – 8.28am
London | A new generation of smaller atomic reactors, designed to tout nuclear power’s role as a clean-energy alternative, may also come with an outsized waste problem that could send costs surging.
Small-modular reactors, known as SMRs, could produce as much as two to 30-times more waste than conventional atomic power plants in operation today. That is according to scientists including Allison Macfarlane, the former chairman of the US Nuclear Regulatory Commission, in research published on Monday by the US Proceedings of the National Academy of Sciences.
SMRs have drawn billions of dollars of support from countries and investors including Bill Gates and Warren Buffett. There are more than 70 designs in different stages of development worldwide. Some vendors predict commercialisation by the end of this decade. Unlike today’s giant reactors that can generate a gigawatt of electricity, SMRs are being designed to produce less than a third of that energy and work with intermittent solar and wind power.
“Small modular reactors have garnered attention because of claims of inherent safety features and reduced cost,” wrote the authors of the research. But the higher volumes of “SMR waste will need to be treated, conditioned, and appropriately packaged prior to geological disposal. These processes will introduce significant costs.”
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Business faces gas ‘apocalypse’ from European oil blockade
June 1, 2022
Business leaders have warned companies face “apocalyptic’’ damage from spiking gas prices as motorists confront months of pain at the bowser, with petrol to remain above $2 a litre, driven by Europe’s oil blockade on Russia.
The rise in energy costs, coupled with a predicted 10 per cent rise in food prices, threatens to deepen cost-of-living pressures and extend a surge in inflation, which reached a 20-year high of 5.1 per cent in the March quarter.
The rise in global oil prices to above $US120 a barrel came after the European Union said it would ban all imports of Russian oil by ship in retaliation for the Ukraine war, a move that would block about two-thirds of Russia’s oil exports.
The Australian Energy Market Operator on Tuesday scrambled to impose a cap on gas markets in Sydney, Melbourne and Brisbane after wholesale prices soared 80 times normal levels.
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Manufacturers caught in energy crunch are ‘stressed and traumatised’
June 3, 2022 — 5.15am
Manufacturers buying energy on the spot market are shouldering losses to keep customers, as they call on the federal government to secure gas reserves amid an east-coast price crunch.
Sanctions on Russia, outages in Australia’s ageing coal-fired power stations, and a blast of cold weather are fuelling a sharp rise in east coast energy spot market prices, with businesses fearing losing customers to overseas competition and warning costs will be passed onto suppliers and consumers.
Causmag International, which manufactures a magnesium supplement for agricultural products from Young in NSW, is paying 350 per cent more for gas than it was two months ago after its wholesale gas provider, Weston Energy, collapsed.
“We are making losses to keep bare minimum business from our customers,” said the company’s director, Aditya Jhunjhunwala. “We are very stressed and traumatised by this, and we’re not the only ones.”
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The war footing required to save us from the energy crisis
By Innes Willox
June 3, 2022 — 5.00am
Even though Australia is one of the world’s biggest energy producers, we face an immense energy affordability crisis from which nobody is immune. Why? Power prices have surged in the face of global coal prices, driven by the Russian invasion of Ukraine. Outages at ageing Australian coal power generators have increased reliance on gas. Now gas prices are surging too, also driven by the war in Ukraine.
The situation is becoming chaotic, as price pressures drive smaller retailers from the markets. Even when this settles down, industry and households face years of high power and especially high gas prices.
Treasurer Jim Chalmers has said there is no quick fix to Australia's energy crisis.
Energy matters. Power and gas make up a significant part of household spending, especially for the most vulnerable. But they are also important inputs for the industries that supply the rest of Australians’ needs, from tinned tomatoes to bottled milk to bricks and beyond.
Given this is a global crisis that also afflicts our competitors, some businesses will be able to pass on higher costs to consumers. But others will be under dire pressure. Business failures and household pain loom. So, what can be done?
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Labor eyes gas reserve fix for energy crisis
Greg Brown Perry Williams Patrick Commins
4:35AM June 3, 2022
A scheme to reserve gas for use by east coast consumers or direct intervention to force more supply are options “on the table’’ as the Albanese government battles energy shortages that have driven a spike in electricity prices and ignited a three-day crisis.
Resources Minister Madeleine King held phone hook-ups with the heads of Shell and Origin on Thursday to discuss how industry could voluntarily work with the government to alleviate skyrocketing gas prices.
Ms King said “all options are on the table” to improve stability and reliability in the energy market, including a potential east coast domestic gas reserve, as the spike in power prices extended into a third day driven by a cold snap and disruptions from unscheduled outages at coal-fired power plants.
Ms King told The Australian the so-called gas trigger, introduced by the Turnbull government, could not be invoked until next year and was not a solution to the current crisis.
The trigger would force exporters to divert more of the resource to domestic users, via the untested Australian Domestic Gas Security Mechanism.
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https://www.afr.com/companies/energy/perfect-storm-inside-australia-s-energy-crisis-20220602-p5aqk2
Perfect storm: How Australia’s energy crisis ignited
High electricity and gas prices are the tip of the iceberg for the Albanese Labor government which is facing a full-blown energy crisis in its first few weeks in office.
Mark Ludlow Queensland bureau chief
Jun 3, 2022 – 4.59pm
Incoming governments traditionally experience a brief honeymoon period after winning office – allowing senior ministers to get their feet under their desks, hire staff and get on top of their brief – before starting to address the promises they made during the election campaign.
But Prime Minister Anthony Albanese, Treasurer Jim Chalmers and Energy and Climate Change Minister Chris Bowen were confronted by a full-blown energy crisis only a day after the Labor government’s full ministry was sworn in at Government House on Wednesday.
Soaring electricity and gas prices, big industrial users on the brink of collapse and pressure on the new federal government to pull the “gas trigger” which would force more gas to be diverted from exports into the domestic market – it’s all happening.
This, just a few weeks after a federal election campaign fought on the cost of living and dubious promises that power prices would go down under Labor’s energy and climate policies.
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Energy: AGL’s Liddell coal unit fails as Tomago and Alcoa’s Portland aluminium smelters forced to cut production
6:55PM June 3, 2022
A major coal-fired unit at AGL’s Liddell power station has failed, compounding the crisis in the national electricity market.
The latest outage comes as two of the country’s biggest industrial energy users were forced to curtail production in an attempt to take pressure off the grid.
It is unclear exactly when the unit failed, but AGL confirmed on Friday that one of three units at Liddell had this week been taken out of service for at least a month. The company blamed a generator transformer malfunction.
The failure at the plant compounds the “perfect storm” afflicting the energy market, already suffering from issues at other coal generators amid skyrocketing gas prices and a cold snap that has led to lower-than-expected generation from renewable sources.
An AGL spokesman said the company was looking for ways to mitigate the impact of the failure.
“We’ve completed an investigation into the issue, and we’ve arranged for an on-site replacement transformer. The unit is expected to return to service in July,” he said in a statement. “We’re working through some measures that we may be able to take in the meantime to mitigate the impact.”
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Royal Commissions And The Like.
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No entries in this category.
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National Budget Issues.
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Labor’s budget repair job just got easier by $10b
Tom McIlroy, Michael Read and John Kehoe
May 29, 2022 – 6.33pm
Updated May 30, 2022 – 10.01am
The strong state of the economy is set to help Labor’s planned budget repair job as new figures reveal the deficit bequeathed by the Morrison government has shrunk by $10 billion so far this financial year.
As Prime Minister Anthony Albanese and Finance Minister Katy Gallagher warn of growing pressures and seek savings through a line by line review of spending, new Finance Department figures show the deficit has fallen to $46 billion in the first 10 months of the financial year.
The improvement since the March budget comes as low unemployment of 3.9 per cent helped reduce total government spending by $6.5 billion.
Government revenue was $3.7 billion higher than forecast, because of higher company and personal taxes. The underlying cash balance for the 2021-22 financial year to April 30 was a deficit of $45.9 billion, against the March 29 budget forecast deficit of $56 billion, according to the figures.
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There’s no use mincing words: our challenges are dire
12:00AM June 2, 2022
Australia’s future can be bright if we work together to navigate three defining challenges in our economy, which the Albanese government has now inherited from our predecessors.
The first is skyrocketing inflation, putting extreme pressure on family budgets and increasing input costs for businesses, which the independent Reserve Bank of Australia has said is an important factor in its decisions regarding interest rate rises.
The second, falling real wages, is a consequence of almost a decade of the deliberate undermining of pay and job security now coming home to roost in the form of a full-blown cost-of-living crisis.
The third is a budget heaving with more than $1 trillion in debt, with almost nothing to show for it because it’s chock-full of rorts and waste.
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Health Issues.
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‘More to do’: plea for action as cancer tipped to claim 1.45m lives
Screening programs for bowel cancer would help cut cancer death rates.
8:37PM June 3, 2022
More than 4.5 million Australians are expected to be diagnosed with cancer during the next 25 years, with 1.45 million people predicted to die from the disease.
Research by the Daffodil Centre at Cancer Council NSW and the University of Sydney has found breast cancer, prostate cancer, melanoma and colorectal cancer will remain the most commonly diagnosed cancers. Despite the grim prediction of the large number of cases, the incidence of cancer is expected to be 20 per cent lower in the next 25 years compared to the past 25. The incidence of lung cancers and melanoma is expected to drop the most, thanks to public health campaigns that have brought about tobacco control and sun awareness.
Lung cancer is expected to decline by 43 per cent for males and 31 per cent for females, while the incidence of melanoma is predicted to fall by 49 per cent for men and 28 per cent for women.
Screening programs for bowel, breast and cervical cancer are also expected to cut cancer death rates.
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International Issues.
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Aggressive interest rate tightening could trigger housing crash
Central banks should not compound the failure to control inflation with a second error by weakening growth too much. This would risk a prolonged and painful ‘balance sheet’ recession.
Alex Joiner
Updated May 29, 2022 – 3.09pm, first published at 2.51pm
There is a real economic challenge coming for the newly minted federal government.
Buoyed by policymakers’ success in staving off the worst of the pandemic-induced recession, some dared to think that the post-pandemic environment would be somehow different, somehow better. What’s becoming abundantly clear is that it won’t, at least not in the near term.
Advanced economies have emerged from the pandemic no “better” than they were in the years leading up to it. They still face deep structural issues that are constraining potential economic growth rates, most notably a dearth of productivity growth and a business sector reluctant to invest.
Unprecedented fiscal stimulus and monetary accommodation is no panacea for these deficiencies. As this realisation has dawned, market economists have rushed to downgrade their 2022 and 2023 economic growth forecasts for the US, UK, Eurozone, Japan and China. But not for Australia – well, not yet.
Like most economists, we always expected that developed economies, including Australia, would experience a growth slowdown after a post-pandemic spike.
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Long-range arms needed to defend Kyiv, says British PM
Joe Barnes
May 28, 2022 – 1.32pm
British Prime Minister Boris Johnson has called for advanced long-range weapons to be sent to Ukraine as Russia makes gains in the eastern Donbas region.
With Ukrainian resistance fighters in the area under mounting pressure from Russian forces, Mr Johnson said it was “absolutely vital” to give Kyiv the kit to defend itself against the artillery bombardment.
He intervened as the United States was preparing to send multi-launch rocket systems (MLRS) to Ukraine as part of a significant upgrade to its offerings of military aid.
Ukraine president Volodymyr Zelensky has repeatedly called on Western nations to deliver heavy weapons that would allow his troops to hit back at Russian targets hundreds of miles away.
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Ukraine pleads for long-range weapons to hold off Russia
Max Hunder and Natalia Zinets
May 29, 2022 – 6.01pm
Kyiv | Russian forces intensified their assault on the largest city held by Ukrainian forces in the Donbas region in the east on Sunday as Kyiv said it was hopeful longer-range weapons it desperately needs from Western allies could soon arrive.
Slow, solid Russian gains in recent days in eastern Ukraine’s Donbas, comprising the Luhansk and Donetsk regions, point to a subtle momentum shift in the war, now in its fourth month.
Invading forces appear close to seizing all of the Luhansk region, one of the more modest war goals the Kremlin set after abandoning its assault on the capital, Kyiv, in the face of Ukrainian resistance.
Russia’s defence ministry said its troops and allied separatist forces were in full control of Lyman, the site of a railway junction west of the Siverskyi Donets River in the Donetsk.
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Five maps that show why China’s Pacific pivot is alarming
China wants to sign a region-wide deal with almost a dozen Pacific islands. Here are five maps that explain why security experts are worried about what that means for Australia.
Ingrid Fuary-Wagner Explainer editor
May 29, 2022 – 11.00am
The news on May 25 that China is seeking a region-wide deal with almost a dozen Pacific islands has Australia scrambling to shore up its position in the “Pacific family”.
Security experts were already deeply concerned after the mid-April deal between China and the Solomon Islands, which could allow Chinese warships to be based in the South Pacific, a three hour flight from Brisbane.
Foreign ministers from China and Australia are now both headed to the Pacific and while the details of the region-wide deal are not yet clear, the Solomons agreement shows why experts are concerned. Here are five maps that explain why.
1. Strategic position
The Solomon Islands is a small country comprising more than 900 islands in the South Pacific, wedged between Papua New Guinea and Vanuatu, 2000 kilometres north-east of Queensland. With a land area of 29,000 square kilometres, it is less than half the size of Tasmania. Its population, about 686,900, is similar to that of Washington DC.
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The world is totally unprepared for a recession
By Kate Andrews
May 28, 2022 — 1.00pm
When Bank of England chief Andrew Bailey used the word “apocalyptic” to describe what could happen to food prices, officials in the Treasury trembled. Such words are not supposed to be bandied about Whitehall, not least by the man running the UK’s monetary policy, whose words have the power to move markets. Was it carelessness, or was he trying to issue a real warning? Did he misspeak, or did his cold calculations around Russia’s war on Ukraine and wheat and grain supplies really lead him to conclude that a hunger crisis is on the way?
In the case of Bailey, it’s hard to say. The Bank’s Governor has been on a public tour since this infamous appearance in front of the Treasury select committee, trying to blame everyone and everything for spiralling inflation apart from the Bank. So I take his words with a pinch of salt.
But Bailey is not the only figurehead warning of grim times ahead. This week the head of the World Bank, David Malpass, issued his own warning, daring to use another word that tends to make economic officials quake: recession.
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In Ukraine, Vladimir Putin has regained the military initiative
By Richard Kemp
May 30, 2022 — 10.05am
London: A victory in Donbas - if he manages to secure it - is not the endgame for Vladimir Putin.
He means to bend the entirety of Ukraine to his will and humiliate NATO and the US.
Those, like former US diplomat Henry Kissinger and Emmanuel Macron, who think making peace is a matter of handing a slice of territory to Moscow, fail to understand a fundamental point: Putin’s strategic perspective goes much further than eastern Ukraine, and he has far more time and leverage than we assumed.
Many commentators had warned the West against complacency after Russia’s failed attempt to seize Ukraine in one blow in February. Putin’s army may have displayed tactical ineptitude and low morale, but it was always clear that a regrouped force could nevertheless achieve some of his objectives.
That is precisely what is happening now, with the tide beginning to turn against the Ukrainians in the Donbas district of Luhansk.
Moscow has been making steady territorial gains there and inflicting heavy casualties on Ukrainian forces. President Zelensky admitted last week that up to 100 of his troops are being killed every day in the eastern region. That level of attrition will be severely degrading Ukrainian military morale and fighting strength. And, given what we know about Russian war tactics, it is unlikely they will be attaining anywhere near as many casualties.
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Russian victories in east Ukraine damage hopes for peace
By Yuras Karmanau
Updated May 29, 2022 — 12.37pmfirst published at 4.39am
Kramatorsk: Russia has asserted progress in its goal of seizing the entirety of contested eastern Ukraine, raising concerns that renewed efforts to persuade President Vladimir Putin to enter peace talks will be in vain.
The Russian Defence Ministry said Lyman, the second small city to fall this week, had been “completely liberated” by a joint force of Russian soldiers and Kremlin-backed separatists, who have waged war for eight years in the industrial Donbas region bordering Russia.
Ukraine’s train system has ferried arms and evacuated citizens through Lyman, a key railway hub in the east. Control of it also would give Russia’s military another foothold in the region; it has bridges for troops and equipment to cross the Siverskiy Donets river, which has so far impeded the Russian advance into the Donbas.
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Humiliated and weakened, Putin more dangerous
12:00AM May 30, 2022
The military humiliation of Russia in its Ukrainian quagmire raises the ultimate question for Moscow: is this now the end of Russia as a major power? In many ways, what we are witnessing in Ukraine today may be the prolonged death throes of the Russian empire, which started 30 years ago with the end of the Soviet Union. But how much weaker and smaller may it become?
During the past 30 years, the Russian Federation has lost more than a quarter of its territory and half its population. What was once one of only two superpowers in the world was divided into 15 separate countries with the rump of the Russian Federation having an economy scarcely the size of that of Australia or Italy.
However, today’s Russia still has around 6000 strategic nuclear warheads and at least 1900 tactical nuclear weapons. Other than the US and China, Russia is the only country able to wage global nuclear war.
Moscow’s military power and sheer size have led most commentators to describe it as a major power. In view of the dismal performance of Russia’s conventional miliary power in Ukraine we must revisit that judgment.
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We’re turning to China because you neglect us, says East Timor president
By Richard Lloyd Parry
The Times
May 30, 2022
China’s efforts to win over the South Pacific island nations are a warning to Australia and the West, which have neglected the region and bred resentment among its leaders, according to one of east Asia’s elder statesmen.
Jose Ramos-Horta, a Nobel peace prize winner who is president of the small nation of East Timor, will receive Wang Yi, the Chinese foreign minister, at the end of his eight-nation tour of the South Pacific and southeast Asia.
On his first stop in the Solomon Islands this week Wang finalised a deal that will permit Chinese security forces to operate there, arousing anxiety in the US and especially in Australia, which regards the Pacific as its back yard.
Ramos-Horta, 72, said East Timor would not enter into any such security agreement with China — but he hopes, anyway, that China will invest as much as $AU 4.23 billion in a huge offshore oil and gas field, which Australia has so far failed to do.
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https://www.afr.com/policy/economy/why-us-inflation-has-probably-peaked-20220530-p5apmc
Why US inflation has probably peaked
There is no hint in the data that inflation is becoming entrenched. Consumers expect a lot of inflation in the short run but much less in the medium term.
Paul Krugman
May 30, 2022 – 12.59pm
Inflation in the United States has probably peaked. I realise in saying that, I risk coming across as the boy who cried “no wolf”. I called inflation wrong last year.
Much of current inflation reflects huge price increases in sectors strongly affected either by pandemic distortions or, lately, by Russia’s invasion of Ukraine, but at this point measures that try to exclude these exceptional factors are also running high, suggesting that the US economy as a whole is overheated.
But the economy is probably cooling off as the Federal Reserve’s monetary tightening gains traction. And the news flow on inflation has changed character. For most of the past year, just about every report on prices surprised on the upside.
These days, many, although not all, reports are surprising on the downside. Measures that attempt to gauge underlying inflation, like the “core” consumption deflator released on Friday, are mostly, although not all, drifting down.
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Europe’s unity ‘crumbling’ on Russia sanctions, Germany warns
Javier Espinoza, Valentina Pop and Andy Bounds
May 30, 2022 – 2.02pm
Brussels | Europe’s unity on sanctions against Russia is “starting to crumble”, Germany’s economy minister has warned as diplomats highlight continued divisions over a package of sanctions set to be discussed by member states on Monday.
Robert Habeck spoke as EU ambassadors meeting in Brussels on Sunday (Monday AEST) failed to agree on the bloc’s latest package of sanctions against Moscow, including a plan to stop imports of Russian oil which Hungary has been blocking for weeks.
Diplomats had hoped to agree on measures to put to EU leaders who are due to start a two-day summit on Monday.
“After Russia’s attack on Ukraine, we saw what can happen when Europe stands united. With a view to the summit tomorrow, let’s hope it continues like this. But it is already starting to crumble and crumble again,” Mr Habeck, who is also deputy chancellor, told reporters in Germany on Sunday.
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https://www.afr.com/world/europe/talk-of-doing-good-rings-hollow-among-global-elite-20220530-p5apog
Talk of doing good rings hollow among global elite
Davos is a high-profile measure of the fact that despite all the talk over the past several decades about stakeholder capitalism and “doing well by doing good”, the state of the world isn’t improving.
Rana Foroohar Contributor
Updated May 30, 2022 – 4.06pm, first published at 3.51pm
If the rich don’t give a bit more today, they may have to give a lot more tomorrow. That was my conclusion from last week’s World Economic Forum in Davos.
I came away feeling that the 0.1 per cent was more out of touch with the state of the world than it has ever been in the 20-odd years I’ve attended the conference.
Maybe it was the Saudi-sponsored café on the promenade, branded with the name of Crown Prince Mohammed bin Salman, the man who, according to declassified US intelligence, was responsible for the murder of exiled journalist Jamal Khashoggi. Or perhaps it was the socialite who told a Ukrainian official addressing her luncheon to “keep it short”.
It could have been the conversations about climate change held over beef dinners. Or the massive armed police and security presence, which always makes me wonder if the global elite ever consider why so much protection is needed at these gatherings in the first place.
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https://www.afr.com/policy/foreign-affairs/the-west-must-hold-its-nerve-on-ukraine-20220531-p5apu9
The West must hold its nerve on Ukraine
The Ukrainians are increasingly edgy because they worry that Western support is going soft.
Gideon Rachman Columnist
May 31, 2022 – 9.38am
Is the Ukraine war finally turning Vladimir Putin’s way? The Russian army is grinding forwards in the Donbas. If Putin’s military can capture Ukraine’s industrial heartlands and cut the country off from the sea, Ukraine’s survival as a viable state would come into question.
That grim scenario is certainly possible. But it is not inevitable - or even likely. However, to prevent Russia achieving a semblance of victory, the Western alliance backing Ukraine has to hold its nerve and increase its support for Kyiv. The momentum in the war must shift back towards Ukraine before there is any prospect of an acceptable peace settlement.
The war in Ukraine is essentially being fought on three fronts and among three protagonists. The first front is the battlefield itself. The second front is economic. The third front is the battle of wills. The three participants are Russia, Ukraine and the Western alliance backing Ukraine.
The Ukrainians are increasingly edgy because they worry that Western support is going soft. They know that, in a straight fight with Russia, Ukraine has the advantage only on the third front - the battle of wills. As a country fighting for its freedom and independence, the Ukrainians are much better motivated.
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No one can hide from this weapon in the war in Ukraine
Military drones are seemingly everywhere in Ukraine, from sniping on enemy targets to checking damage, but there is also plenty of misinformation about them.
Alex Kingsbury
May 31, 2022 – 9.14am
All wars have their iconic weapons, from the AK-47 to the IED (improvised explosive device). In Ukraine, it’s the drone.
A vast number and variety of drones – unmanned aerial vehicles – have been used on both sides of the war, including large military-grade machines and smaller consumer models. Drone operators are the new snipers, even though they are often miles from the battlefield.
Consider a video that circulated widely on social media in the past few weeks: a drone hovers above a bomb-shattered neighbourhood in Ukraine.
Below it, several troops in Russian uniforms get into a truck. The drone releases a small explosive, which plummets towards their parked truck.
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EU leaders clinch compromise deal on Russian oil ban
Emily Rauhala and Quentin Aries
Updated May 31, 2022 – 9.04am, first published at 7.48am
Brussels | European Union countries finally reached a deal to wean off Russian oil, their most significant effort yet to hit Russia’s economy over the war in Ukraine, though the impact will be blunted by an exemption for pipeline oil - a concession to landlocked holdouts, most notably Hungary.
After weeks of negotiations, the 27 countries agreed on Monday to end seaborne deliveries of Russian oil, according to an EU official. Pipeline deliveries will continue to flow for now. Several countries will also get extensions or exemptions.
Hungarian Prime Minister Victor Orban - a perennial EU spoiler and one of Russian President Vladimir Putin’s closest allies in Europe - had obstructed a deal, insisting on more time and money to upgrade his country’s oil infrastructure. Mr Orban said a faster phaseout would be like dropping “a nuclear bomb on the Hungarian economy”
While there was sympathy for Hungary’s position, some diplomats said Mr Orban used the situation to hit back after the EU withheld economic recovery money, and threatened to hold back billions in subsidies, for democratic backsliding.
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Russian missile tests Nordic NATO resolve
By Tom Ball
The Times
2:18PM May 30, 2022
Russia has test fired a hypersonic missile from a warship in the Barents Sea in an apparent warning to Sweden and Finland as they seek to join NATO.
The Russian defence ministry said a Zircon cruise missile was fired from the Admiral Gorshkov, a frigate, at a target almost 1000km away in the White Sea.
The Zircon, described as the world’s fastest non-ballistic missile, can be armed with a conventional or nuclear warhead and is believed to be able to evade existing defences.
The ministry released a 30-second video of a missile being fired from the frigate and vanishing into the clouds. No further details were released.
Sergei Shoigu, the defence minister, said last week that Russia would increase its military spending and form new military units in the west in response to the countries’ application to join NATO. Russia’s invasion of Ukraine prompted the two countries to seek membership after years of neutrality.
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Ukraine invasion: Russian army loses generation of young officers
By Larisa Brown
The Times
May 31, 2022
Russian forces are likely to be less effective on the battlefield in future because of a lack of junior military leaders following devastating losses among the army’s lower ranking officers, according to British intelligence.
The UK Ministry of Defence said that brigade and battalion commanders were being deployed into harm’s way because they were “held to an uncompromising level of responsibility for their units’ performance”.
Junior officers have also been forced to lead low-level tactical assaults because the Russian army lacks the cadre of highly trained non-commissioned officers who fulfil that role in western forces, the assessment said.
“The loss of a large proportion of the younger generation of professional officers will likely exacerbate ongoing problems in modernising its approach to command and control. More immediately, battalion tactical groups which are being reconstituted in Ukraine from survivors of multiple units are likely to be less effective due to a lack of junior leaders,” the MoD said.
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https://www.afr.com/policy/economy/twelve-challenges-to-the-state-of-the-world-20220601-p5aq68
Twelve challenges to the state of the world
Global leaders face formidable problems, from dizzying technological progress and geopolitical tension to climate change.
Martin Wolf Columnist
Jun 1, 2022 – 9.50am
How do we make sense of the world? Time spent in Davos last week crystallised my answers in the form of twelve propositions.
Proposition one: the world is menaced “by the sword, by famine and by pestilence”, as Ezekiel warned: first COVID-19, then war on Ukraine and then famine, as exports of food, fertilisers and energy have been disrupted. These remind us of our vulnerability to unpredictable - alas, not unimaginable - shocks.
Proposition two: “it’s the politics, stupid”. James Carville, Bill Clinton’s campaign strategist famously said that it’s “the economy, stupid”. The primacy of economics can no longer be assumed. Ours is an age of culture wars, identity politics, nationalism and geopolitical rivalry. It is also, as a result, an age of division, within and among countries.
Proposition three: technology continues its transformative march. The COVID-19 shock brought with it two welcome surprises: the ability to carry out so much of our normal lives online; and the capacity to develop and produce effective vaccines with amazing speed, while failing to deliver them equally. The world is divided in this way, too.
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The noose around Russia is tightening
Senior business columnist
May 30, 2022 — 11.56am
If Russia’s currency is any barometer of its economic condition then it would appear, at face value, that it has weathered the initial storm of the West’s myriad of sanctions. Appearances can, however, be deceptive.
When the West responded to Russia’s invasion of Ukraine with a blitzkrieg of financial and trade sanctions the Russian rouble initially collapsed. At its nadir in March it had imploded from exchange rate of about 75 roubles to the US dollar to almost 150 to the dollar.
Since that low, however, it has steadily trended stronger and is now trading at about 66 roubles to the dollar; strengthening to the point where the Russian central bank is now trying to weaken it by cutting its policy rate – which was nearly doubled to 20 per cent when the sanctions were first imposed – three times in recent weeks. The latest cut, from 14 per cent to 11 per cent, was made last week.
Does the rebound in the rouble signal the sanctions aren’t working? Not really.
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Investors who believe the worst is over may be deluded
Senior business columnist
May 31, 2022 — 11.59am
Last week’s bounce in sharemarkets ended a near two-month losing streak. Could that signal the end of the sell-off or are investors deluding themselves that the worst is over?
The turnaround in sentiment was in response to an apparent peaking of the US inflation rate and therefore a sense that investors could see the light at the end of tunnel or, in this case, a point in the not to distant future where the current cycle of anticipated US Federal Reserve Board interest rate rises would end in a softish landing.
The perception that the Fed might not need to tighten US monetary policy as much as previously feared isn’t supported by the data. The April inflation numbers did show a slight dip in the headline rate, from 8.5 per cent to 8.3 per cent, but core inflation (excluding fuel and food) rose from 0.3 per cent in March to 0.6 per cent.
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‘Strong willed and militarily capable’: World prepares for a long war in Ukraine
Military leader and strategist
May 31, 2022 — 12.00pm
Over the weekend, reports emerged that the Ukrainian army had launched an offensive in southern Ukraine. Centred on objectives in the Kherson Oblast, the scale, duration and impact of this counteroffensive remains, at this point, unknown. It is possible that this is an effort to draw off some of the Russian forces that have been concentrated in the brutal cauldron that is the eastern front.
In the lead up to the Ukrainian attacks in the south, it had become clear that the Russians had gained ground in their concentrated efforts in the Donbas. Capturing the town of Lyman, advancing from the previously seized city of Popasna, and beginning their encirclement of Severodonetsk, the slow, steady Russian advance is finally giving Putin something that might be considered success.
More broadly, however, these two events are evidence that the war in Ukraine has much in common with the thousands of years of warfare that preceded the Russian invasion. In particular, war features constantly changing tides of fortune.
In April and early May, in the wake of Ukraine’s victory in the battle of Kyiv, a degree of triumphalism crept into narratives about the war. But as the Russians have shown recently, by reducing the breadth of their war aims, and concentrating their forces on smaller regions of Ukraine, they can generate tactical victories.
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Yes, it’s bad, but it’s not the end of the world
The Times
1:17PM May 31, 2022
I have apocalypse fatigue. I am tired of the looming apocalypse, and maybe you are too. But which one to pick? There are just so many horsemen thundering towards us. Or at least that’s how it feels.
Yesterday’s newspaper alone had about eight different apocalypses in the first ten pages. Wait, is that right? “Apocalypses"? I feel I should know, but I also feel that apocalypse shouldn’t even have a plural for obvious reasons, and the fact that we seem to currently need one may be a sign of a certain pervasive melodrama, which is getting worse and worse. The Melodrama Apocalypse. That one is coming for sure.
The big horsemen to worry about are of course the nuclear apocalypse and the climate apocalypse. “Just one launch, Boris, and England is gone,” said a pundit on Russian state TV at the start of last month, over a graphic showing the entire British Isles being wiped out by a radioactive tsunami. Thanks, mate.
Then there are the smaller ponymen and donkeymen trotting along behind. Come winter we may be spending our evenings in the cold and dark, because of the looming fuel apocalypse. That, we learnt yesterday, is a “reasonable worst-case scenario”.
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Author of Trump-Russia dossier says Putin might not last a year
Former spy Christopher Steele talks about the controversy surrounding his famous file, Londongrad oligarchs, Ukraine and the vulnerability of the Russian President.
Jeremy Cliffe
Jun 2, 2022 – 8.00am
The meeting is at a London restaurant, smart but neither grand nor flashy, and quiet but for a few tourists and a couple of parents with prams in the corner. A man with silver hair and of average height appears at the door and makes his way over.
The only feature that might make the former spy, Christopher Steele, stand out from the crowds of besuited commuters on the concourse at nearby Victoria Station is his lapel badge, bearing the flags of the UK and Ukraine. I have been asked to find somewhere discreet, so am sat at a table towards the back of the room.
If our encounter sounds cloak-and-dagger, it is not – or at least, it is much less cloak-and-dagger than it would have been a few years ago.
Steele joined the UK’s Secret Intelligence Service (SIS, popularly known as MI6) after graduating from Cambridge University in 1986, and was soon posted under diplomatic cover to Moscow, where he saw the decrepit Soviet order give way to the chaotic Boris Yeltsin presidency. A posting in Paris was followed by a senior job on the SIS Russia desk from 2006 to 2009. He then set up his own firm, Orbis Business Intelligence, in the barely less secretive world of non-state spying.
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JPMorgan chief Jamie Dimon is bracing for an economic ‘hurricane’
By Sally Bakewell and Steve Dickson
June 2, 2022 — 7.02am
Jamie Dimon warned investors to prepare for an economic “hurricane” as the economy struggles against an unprecedented combination of challenges, including tightening monetary policy and Russia’s invasion of Ukraine.
“You know, I said there’s storm clouds but I’m going to change it … it’s a hurricane. That hurricane is right out there down the road coming our way,” the JPMorgan Chase & Co. chief executive officer said at a conference in New York.
“We don’t know if it’s a minor one or Superstorm Sandy. You better brace yourself.”
Dimon said at JPMorgan’s investor day in May that there were “storm clouds” looming over the US economy, but he said he’s since updated that forecast given the challenges faced by the Federal Reserve as it attempts to rein in inflation.
“Right now it’s kind of sunny, things are doing fine, everyone thinks the Fed can handle it,” Dimon said.
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Egypt unearths 250 mummies in ancient necropolis
By Rachel Pannett
June 1, 2022 — 3.46pm
Archaeologists in Egypt have uncovered a trove of ancient artefacts at the necropolis of Saqqara near Cairo, including mummies and bronze statues dating back 2500 years.
Among the treasures were 250 sarcophagi - or painted coffins - with well-preserved mummies inside, unearthed during recent excavations at a burial ground outside Cairo, said Mostafa Waziri, the secretary general of Egypt’s Supreme Council of Antiquities.
Painted coffins with well-preserved mummies inside, dating back to around 500 BC at a makeshift exhibition at the feet of the Step Pyramid of Djoser in Saqqara, Egypt.Credit:AP
“In one of the wooden sarcophagi, we found, for the first time, a complete and sealed papyrus,” he told reporters at a makeshift exhibit. The document was immediately moved to a museum for further study. Waziri said he believed it was similar to those found 100 years ago that discuss the Book of the Gates and the Book of the Dead. Both are ancient Egyptian funerary texts.
The dig also uncovered 150 bronze statues of Egyptian deities and instruments used for rituals dating back to the Late Period of ancient Egypt, about 500 BC, said Waziri, who led the archaeological mission.
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The West has had a great run, but the label doesn’t fit anymore
In Davos last week, Western leaders looked silly beseeching India and Indonesia, Turkey and South Africa, and Pakistan and Saudi Arabia to join the “Western coalition”.
Andrés Velasco
Jun 3, 2022 – 5.00am
The following confidential memo from a top consultancy to a well-known Western leader has found its way into our hands: It is over. As a first step on the consulting journey that we have embarked on together, we propose to rebrand you out of existence. We know it will be tough, but there is no alternative.
We must get rid of “the West” as a concept. The “Western alliance,” “Western values” – all of it must go. Anything that has to do with the West has been on its way out, marketing-wise, for a long time now. Sustainable, eco-friendly, and free from animal testing? Fine. Just not Western.
The last straw for “the West” came in Davos last week. With all due respect, Western leaders like you looked silly beseeching India and Indonesia, Turkey and South Africa, and Pakistan and Saudi Arabia to join the “Western coalition” against Russian President Vladimir Putin’s aggression. You only got to see the nonplussed look on the faces of these countries’ leaders when you popped the question. We also overheard the unkind things they said about you afterward in the corridors and cafés.
Geography, for one, is dead set against you. Japan has long been part of the West, but it happens to be in the East. Likewise, South Korea. Australia and New Zealand look like they are in the West only if you live in Vancouver or Pacific Palisades. To inhabitants of Asia, Australia and New Zealand are in the East.
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Time to ‘minimise Russia’ or watch a Ukrainian genocide from afar
Former Liberal Party adviser
June 3, 2022 — 5.00am
There was no whistling before the artillery shell. The dead older man on the pavement by the neighbourhood shops in Kharkiv, Ukraine would not have heard the incoming Russian salvo that killed him. A younger man sobbed by his corpse.
Fifty metres away, I watched humanitarian volunteers, who were in the area during the attack, apply tourniquets on another man. Shrapnel had ripped off one of his legs and arms. He was alive when carried to an ambulance. Maybe, he was going for a coffee at his recently re-opened cafe.
The local florist had opened too. In a bloodied yellow top and with a fresh manicure, the young woman lay injured among shattered glass, metal shards, and the blooms of a Ukrainian spring like blue daffodils and purple lilac.
Russian forces are in retreat around Kharkiv, but they continue to lob artillery from 20 kilometres away. Local commanders say it is to maintain terror and tie up medical resources. Nine civilians died on the day I was there.
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China threatens to put NZ in freezer with Australia
Anne Barrowclough
8:59PM June 2, 2022
Beijing has threatened New Zealand’s trade access to its huge market and denounced Prime Minister Jacinda Ardern for joining an American “disinformation” campaign to “discredit China.”
China’s ambassador in Wellington, Wang Xiaolong, said New Zealand should be a “friendly country” and not take its biggest trade partner “for granted”.
In a speech published by China’s embassy in Wellington hours after Ms Adern shared concerns about Beijing with President Joe Biden at the White House, Ambassador Wang said the perception of NZ as a “green, clean, open and friendly country” in the world’s second biggest economy should not be “squandered”.
“This asset of ours did not come out of nowhere or as a matter of course, but has been slowly built up with hard work over the years from both sides,” he said in an address to the New Zealand China Council.
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Jacinda Ardern faces difficult decisions over emerging world order
Hayden Munro
2:38PM June 2, 2022
New Zealand Prime Minister Jacinda Ardern’s efforts to reconnect New Zealand with the rest of the world have come at a time when the global picture is rapidly darkening, in ways that have massive implications for the country’s foreign policy and the way it interacts with the world.
Ardern spent the last week on a diplomatic trip to the United States, pushing the message that New Zealand was open for business and promoting the country’s tourism, agriculture and hospitality sectors.
It was only her second overseas trip since New Zealand closed its borders at the height of the original wave of COVID-19 back in April 2020.
Ardern shamelessly plugged New Zealand as a tourist destination on The Late Show, launched a new range of net-zero carbon beef in New York and helped introduce New Zealand companies to Black Rock, the world’s largest mutual fund company.
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Jamie Dimon says US consumers still have six to nine months of spending power
By David Benoit
The Wall Street Journal
12:29PM June 2, 2022
JPMorgan Chase chief executive Jamie Dimon said US consumers still have some six to nine months of spending power left in their bank accounts.
The head of the nation’s biggest bank said the recent drop in Americans’ savings rate hadn’t altered his view that the government’s pandemic stimulus is still padding consumers’ wallets. He estimated that some $US2 trillion ($A2.79 trillion) in extra funds are still waiting to be spent.
“That fiscal stimulation is still in the pocketbooks of consumers. They are spending it,” he said at an investor conference Wednesday.
US households boosted spending for a fourth straight month in April, but the rate at which they were setting aside savings fell to its lowest point in 14 years, according to data released last week. That raised concerns that consumers were tapping into savings to keep up with inflation and that the pandemic stimulus had run out.
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https://www.afr.com/world/north-america/us-economy-adds-390-000-jobs-in-may-20220604-p5ar0t
US economy adds 390,000 jobs in May
Olivia Rockeman
Jun 4, 2022 – 4.04am
Key Points
· Nonfarm payrolls increased 390,000 last month after a revised 436,000 gain in April.
· The unemployment rate held at 3.6 per cent.
· Average hourly earnings rose a less-than-forecast 0.3 per cent from April.
Washington | US employers hired at a robust clip in May while wage gains held firm, suggesting the economy continues to power forward as the Federal Reserve raises interest rates at a steep pace to tame red-hot inflation.
Nonfarm payrolls increased 390,000 last month after a revised 436,000 gain in April, a Labor Department report showed. The unemployment rate held at 3.6 per cent, and the labour force participation rate crept higher.
The median estimate in a Bloomberg survey of economists called for a 318,000 advance in payrolls and for the unemployment rate to fall to 3.5 per cent.
The report suggests that employers had success filling open positions in the month. It also potentially provides some broader reassurance that the economy can achieve a soft landing as wage gains moderate from their more rapid pace of most of 2021.
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Threat by Putin to use the bomb overturns nuclear order
The Economist
5:52PM June 3, 2022
One hundred days ago on Friday Vladimir Putin launched his invasion of Ukraine by warning of a nuclear strike. Having exalted Russia’s atomic arsenal and promised Ukraine’s subjugation, he threatened countries tempted to interfere with consequences “such as you have never seen in your entire history”. Russian TV has since tantalised viewers with chitchat about Armageddon.
Even if he never uses the bomb in Ukraine, Putin has thus already upset the nuclear order. After his threats, NATO limited the support it was prepared to offer, with two implications that are all the more worrying for having been drowned out by the drumbeat of Russia’s conventional campaign. One is that vulnerable states that see the world through Ukraine’s eyes will feel that the best defence against a nuclear-armed aggressor is to have weapons of their own. The other is that other nuclear-armed states will believe that they can gain by copying Putin’s tactics. If so, someone somewhere will surely turn their threat into reality. That must not be this war’s devastating legacy.
The nuclear danger was growing before the invasion. North Korea has dozens of warheads. Iran has enough enriched uranium for its first bomb. Although the New START treaty will limit Russia’s and America’s intercontinental ballistic missiles until 2026, it does not cover weapons such as nuclear torpedoes. Pakistan is rapidly adding to its arsenal. China is modernising its nuclear forces and expanding them.
All this proliferation reflects the weakening of the moral revulsion that restrains the use of nuclear weapons. As memories of Hiroshima and Nagasaki fade, people fail to grasp how the detonation of a small battlefield weapon, of the sort Putin might lob, could escalate into the tit-for-tat annihilation of entire cities. The US and the Soviet Union only just coped with a two-sided nuclear stand-off. There is insufficient alarm at the prospect of many nuclear powers struggling to keep the peace.
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https://www.afr.com/world/europe/how-100-days-of-war-reshaped-the-world-20220604-p5ar2u
How 100 days of war reshaped the world
Justin Huggler
Jun 4, 2022 – 3.34pm
One hundred days after Vladimir Putin’s forces invaded Ukraine, the war has changed the world in ways few could have predicted.
It has redrawn the geopolitical map. The US has forged a global coalition in support of Ukraine, while Russia is more isolated than at any time in recent history.
“Putin has failed to achieve a single one of his strategic games,” Anthony Blinken, the US secretary of state, said this week. “Instead of weakening the international order, he has brought countries together to defend it.”
Yet the war has also unleashed frightening forces, from global food shortages to surging energy prices and inflation. Liz Truss, the Foreign Secretary, said: “Putin’s invasion has brought death and destruction on a scale not seen in Europe since the Second World War. This war has huge ramifications for global peace, prosperity and food security. It matters to us all.”
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I look forward to comments on all this!
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David.
