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The biggest news this week was the assassination of the ex-PM of Japan – Shinzo Abe – who was a good friend to OZ incidentally.
In the US we have had a wind-up to a busy summit season – NATO etc – and the ongoing war in Ukraine which is becoming a deepening, protracted and horrible situation which it seems hard to resolve sadly.
In the UK Boris is out but not gone and the battle for the succession is off and rolling.
In OZ we have Albo back and we need to work out what to mitigate these various natural disasters and actually get on with it!!!! The response has been pathetic so far I reckon!
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Major Issues.
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Lettuce for all: how vertical farming will plug supply chain shortages
Yolanda Redrup Reporter
Jul 3, 2022 – 5.00am
Lettuce at more than $10 a head could soon be a thing of the past, thanks to a $56 million cash injection into automated vertical farming business Stacked Farm, which will increase the production of leafy greens in Australia.
Flooding and supply chain problems forced KFC to put cabbage in its burgers in lieu of lettuce last month, and products such as spinach and lemongrass have been in short supply in some supermarkets.
Stacked will use the $56 million to accelerate the establishment of its first commercial scale vertical farm, a 5000 to 7000 square metre facility that will have the largest output of leafy green produce per square metre of any indoor vertical farm in the world.
Vertical farming involves growing crops indoors in vertically stacked layers, and requires vastly less water and no pesticides or agrochemicals.
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https://thenewdaily.com.au/finance/2022/07/04/alan-kohler-australia-climate-change/
6:00am, Jul 4, 2022 Updated: 7:06pm, Jul 3
Alan Kohler: Australia’s expensive climate change double whammy
On Thursday last week – June 30 – two documents were published here and in Washington DC that together present Australia with a horrible, very expensive problem.
They were the Australian Energy Market Operator’s new Integrated System Plan and the US Supreme Court’s decision in West Virginia versus the Environmental Protection Agency.
In essence the two documents tell us that Australia will fork out hundreds of billions of dollars to transition the electricity system to near-100 per cent renewables to no avail, and we’ll end up paying even more to deal with the effects of global warming.
With slightly more than one per cent of the world’s greenhouse gas emissions, Australia’s commitment to have net-zero emissions by 2050 has always just been a matter of us doing our part of the global effort – as we should.
But that global effort is in tatters because the Supreme Court has taken America out of the game. Keeping global warming to less than 1.5 degrees above pre-industrial temperatures, and therefore something less than catastrophic, now looks impossible.
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Albanese’s foreign policy focus should be home defence
Rather than be tempted to act as a global player, Anthony Albanese’s attention should be on the nation’s core security interests in Asia and the South Pacific.
Andrew Carr
Jul 3, 2022 – 1.30pm
One of the iconic phrases in Australian foreign policy is “peace is indivisible”. Attributed to Robert Menzies, it captures the idea that threats anywhere can rebound here. As such, we must venture forth and help where we can, to keep us secure in Australia. Except it isn’t true.
The new Prime Minister Anthony Albanese has already demonstrated his rhetorical embrace of the idea. Attending the NATO summit he said of the war in Ukraine: “This invasion is also having an impact on the world, and it’s a reminder that even an island continent like Australia, across the other side of the world, has been impacted by this.” As such, Australia is now “the largest non-NATO contributor to the defence of Ukraine”.
As an energetic new prime minister, there may be a temptation to try to do it all. Recent events offer a stark lesson in the costs of that view. On March 31, 2022, the Australian parliament hosted an address by Ukrainian President Volodymyr Zelensky.
Just 24 hours before, while Australian leaders were writing their speeches about the challenges to Europe’s security, China was signing its security agreement with the Solomon Islands. The greatest foreign policy failure in a generation, and our attention was 15,000 kilometres away.
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Obituaries for ‘strategic asset allocation’ are wildly premature
Missing the best 30 days of ASX trading over a 50-year period would result in a 30 per cent reduction in annualised returns.
Duncan Burns Contributor
Jul 4, 2022 – 5.00am
It is no surprise that the recent turbulence in financial markets has investors on edge.
Interest rates have been rising amid higher inflation and for the first time in quite a while, many investors are facing losses in both the equity and bond sleeves of their portfolio.
As a result, some investors are asking: what adjustments can I make to protect my portfolio from further rate rises, inflation and lower growth, should that continue in the future?
Given the turbulence across asset classes in recent months, the idea of the traditional balanced portfolio, or one based on “strategic asset allocation” like the 60/40 portfolio, may seem antiquated.
Ongoing market volatility might therefore prompt consideration of a switch towards a strategy that strives to take advantage of market trends or economic conditions by actively shifting a portfolio’s allocations, known as “tactical asset allocation”.
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2022 census: Wealthy, uni students, stressed mortgage holders drove Coalition defeat
6:42PM July 3, 2022
The 2021 census has laid bare the demographics of the Morrison government’s defeat, showing seats with high levels of wealthy voters, university students, stressed mortgage holders and Chinese migrants led the charge against the Coalition.
Analysis of the data broken down by federal electorate reveals that in an extraordinary turnaround from long-held norms, the Liberal Party no longer holds any of the 15 electorates with the highest median personal income.
When electorates are ranked by household income, the Liberals have slipped from holding 14 of the top 20 seats to just five.
Amid debate within the Liberal Party on whether to surrender the wealthier inner-metropolitan areas of Sydney, Melbourne and Brisbane, the Morrison government lost and shift focus to outer-metropolitan, working-families seats, The Australian’s analysis reveals such a strategy would require the Coalition to win electorates on margins at least as high as 7.6 per cent, more than double the minimum required.
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https://www.afr.com/policy/foreign-affairs/albanese-must-be-a-global-prime-minister-20220703-p5aypv
Albanese must be a global prime minister
Since we developed our own foreign policies after World War II, we have never been lazy as international players – but we always tended to run out of puff. Now is the time to make a global statement.
John McCarthy Former US ambassador
Jul 4, 2022 – 2.53pm
An Australian prime minister who travels is always fair game, a target for those who argue that the leader’s job is to keep the home fires burning and the foreign stuff a glamorous distant second.
It may have always been so. No longer. In spending many of his early days in the job meeting other global leaders, Anthony Albanese has got his priorities right.
Albanese must be an international prime minister.
He is faced with several stark realities.
The first is that global tensions and uncertainties – stemming mainly from China-US competition since about 2015 – have accelerated since Russia’s invasion of the Ukraine.
This is not only because of the destabilising effect on Europe of the invasion itself. It is also because it was accompanied by a strengthened linkage between China and Russia and by the disinclination of most of the developing world to follow NATO’s lead in sanctioning Russia.
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Australia’s cultural ‘levelling mechanism’ is holding back our science
“Carping remarks” about a recent announcement of a breakthrough in quantum computing highlight a wider problem for Australian industry.
Michelle Simmons Contributor
Jul 4, 2022 – 2.00pm
After months of waiting, I was able to talk about the biggest moment in my career for the first time last week. This was not only a milestone moment for myself and my team – it was a moment for Australia.
We need to celebrate our scientific achievements as a country. But we also need to consider what Australia needs culturally and structurally to deliver commercially from our scientific achievements.
Last week, our company announced the world’s first integrated circuit manufactured at the atomic scale.
It’s something we achieved and submitted in November 2021 and have had to keep under our hats while we waited for validation from the research community and publication in the peer review journal, Nature.
It is a major technical result and the biggest single breakthrough in my career to date.
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Why asset prices could take a generation to recover 2021 peaks
As interest rates rise from the lowest level in history, bankers warn we’ve likely reached peak asset valuation for a generation. “Interest rates will never be so low again.”
Karen Maley Columnist
Jul 4, 2022 – 4.46pm
“Don’t it always seem to go that you don’t know what you’ve got ’til it’s gone,” sang Joni Mitchell back in the (stagflationary) 1970s.
I suspect many investors, as they contemplate the diminished values of their share portfolios, the fall in their house prices, and the hefty losses they’ve suffered on their crypto bets, now sympathise with Joni’s lament.
Even astute investors, such as Commonwealth Bank boss Matt Comyn, will be slightly discombobulated that the value of the bank’s stake in Swedish payments fintech company Klarna is only slightly above water.
According to a report in the Financial Times, Klarna is set to raise fresh capital at a valuation of about $US6.5 billion ($9.5 billion), a fraction of the $US46 billion it was valued at in June 2021.
CBA holds close to a 5 per cent stake in Klarna which it acquired for $US300 million in August 2019 and January 2020. At a $US6.5 billion valuation, CBA’s Klarna stake is now worth around $US325 million.
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How SMSF investors should handle volatile markets
Don’t panic but focus on what you can do.
Tim Mackay Contributor
Jul 5, 2022 – 5.00am
The first half of 2022 was brutal for many self-managed super fund investors – the US S&P 500 index fell 20.8 per cent (its worst start to a calendar year since 1970), the S&P/ASX 200 fell 11.7 per cent and the Bloomberg US Aggregate Bond Index dropped 10 per cent.
While everyone’s tolerance for financial pain is different, market falls can feel incredibly lonely and uncertain for SMSF investors who are stewards of significant family wealth. Watching a portfolio balance fall can lead to fear and panic selling.
Volatile markets are a good time for investors to rebalance to ensure their portfolio mix hasn’t drifted too far from their benchmark ratio of growth and defensive assets. Simon Letch
The list of reasons to panic seems long – the Ukraine war, falling property prices, lockdowns in China, spiralling inflation and rising interest rates. But there are always reasons to panic – two years ago people thought COVID-19 would crash the world economy.
One of the most important investment skills is to tune out what you can’t control and focus on what you can.
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My visit to war zone is about more than just Ukraine: Albanese
Phillip Coorey Political editor
Jul 4, 2022 – 5.26pm
Paris | Anthony Albanese says his visit to Ukraine was not just about showing solidarity with the embattled nation but also standing up for the international rule of law.
After lending Australia’s strong support to last week’s escalation by NATO of efforts to contain Russian aggression while also putting China on notice, Mr Albanese said Ukraine was the frontline in the struggle.
“Australia stands ready to continue to support the government and the people of Ukraine for as long as it takes for Ukraine to emerge victorious in defence of your national sovereignty and your homeland,” he told Ukraine President Volodymyr Zelensky.
“Because you are fighting for the international rule of law, you are fighting for international rules in which we conduct our activity to be respected and to occur in an orderly way.
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Ukraine mission is OK but big defence decisions needed urgently
12:00AM July 5, 2022
Anthony Albanese was right to go to Ukraine – right morally, strategically, symbolically, politically. But his main work on security lies at home. And that must start soon. Appointing former defence minister Stephen Smith to run the forthcoming force posture review would be a good beginning.
Australia is not a central player in Ukraine, but it’s right to make a contribution. The Prime Minister’s visit was rich in symbolism. Symbolism has its place in foreign affairs, even in geo-strategic conflict. It has moral purpose. Albanese is right to express moral revulsion at Russia’s invasion, and solidarity with Ukraine.
Albanese’s trip underlines the link between European and Asian security. If Asian democracies contribute to NATO security, it’s more likely NATO will contribute to Asian security. NATO is the world’s biggest, richest military alliance. The US alliance system in Asia, involving Australia, Japan, South Korea, The Philippines and Thailand, plus countries that are not formal allies but that co-operate closely on security, is the main principle and guarantor of order in the Asian theatre.
But symbolism also has its risks. Australia’s overwhelming focus is our own region and we mustn’t be distracted from that.
The only military hardware we should donate to Ukraine is items we manufacture here and where we can increase the production run. It makes no sense for us to import kit from overseas, then donate it on to Ukraine.
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AusSuper warns of more market pain to come, urges members to stay the course
6:42PM July 4, 2022
Mark Delaney of the $261bn AustralianSuper oversees the nation’s single biggest investment portfolio and has a sobering message about the turmoil playing out on global markets.
Expect as much as two more years of volatility.
The four-decade market veteran has seen all the cycles and while the cause of the last shock – Covid – is new, the way it is playing out is familiar.
Delaney was speaking to The Australian as the giant AusSuper told 2.3 million members it had posted its first negative annual return since the global financial crisis.
The 2.73 per cent reversal for AusSuper’s flagship balanced option for the year to end-June comes on the heels of an eye-watering 20.4 per cent surge a year earlier. The massive gulf in performance underscores the wild ride in global markets since last September as central banks scrambled to get on top of an inflation breakout.
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Recessions are looming - but that may be good news
Senior business columnist
July 5, 2022 — 12.01pm
There’s both good news and bad news in an apparent peaking in the prices of most commodities over the past month.
The good news is that it might be a signal that the decades-high inflation rates causing central banks to hike interest rates and pull liquidity from their financial systems may have peaked.
The bad news is that the across-the-board falls in commodity prices probably reflect a conviction that recessions around the world and a slump in activity and demand are looming.
The indices of commodity prices show that prices, turbocharged by Russia’s invasion of Ukraine, soared in the first five months of the year. Broad-based baskets of metals, energy and agricultural commodities rose nearly 60 per cent from the start of the year until a month ago. Then they slumped more than 12 per cent.
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Reason behind the long, slow decline of Christian faith
12:00AM July 6, 2022
In her lament for the collapse of belief in Christianity, Peta Credlin on this page last week urges us to consider the centrality of Christian inspiration to Western civilisation and to ponder “the impact on the institutions and the attitudes we value, if the underlying religious convictions that created them are rapidly fading away”.
There’s nothing rapid about this fading. The long, slow decline of Christianity began in the 16th century as an unintended consequence of the Protestant Reformation.
In the medieval era, cultural and intellectual life had been closely linked to a Christianity centred in the Catholic Church – it was priestly and sacramental, with confession and communion central to the notion of salvation. But the Protestant reformers understood the Bible to be the inerrant word of God – it was the central pillar of faith. And faith alone (sola fide) was the key to salvation.
Of course, Bibles need to be read so there was a parallel rise in printing technology – as well as in the sciences in general – and education and literacy rates rose across Europe. It wasn’t long before certain scholars decided that scripture ought to be subject to the same objective scrutiny such as that applied to secular writings.
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Recession fears depress peak interest rate forecasts
Emma Rapaport Markets Reporter
Jul 6, 2022 – 6.08pm
Mounting expectations that global growth will come to a standstill have slashed market forecasts for the future path of Australia’s cash rate to 3.5 per cent by June 2023, still well ahead of economist consensus.
The market’s December cash rate expectations rose as high as 3.8 per cent by mid-June as traders tried to predict just how high central banks would have to raise rates to keep spiralling inflation under control. But expectations have moderated over the past few weeks.
On Tuesday, the Reserve Bank of Australia raised the cash rate by 0.5 percentage points to 1.35 per cent.
Market expectations for the June 2023 cash rate rose from 1.3 per cent in January this year to a peak of 4.4 per cent in mid-June. They’ve since fallen back below 4 per cent, settling at 3.5 per cent on Tuesday and stable on Wednesday.
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‘Political interference needs to end’: Minister to review university research grants
July 6, 2022 — 8.00pm
The controversial power of the federal education minister to veto Australian Research Council grants will be scrutinised as part of an independent inquiry into the agency, as the Albanese government vows to reset the relationship with universities.
The decision by the former Morrison government to veto $1.4 million in funding for six humanities projects last year triggered widespread outrage from university leaders and academics, with some calling for the ministerial right-of-veto to be scrapped and for a root-and-branch review of the ARC system.
New Federal Education Minister Jason Clare has gone some way to acting on these concerns, using his first speech to the university sector to declare that the “delays and the political interference in the way competitive grants operate need to end”, as he announced a review into the role and governance of the main grants body.
“It damages our international reputation. It also makes it harder for you to recruit and retain staff,” Clare told the annual Universities Australia conference on Wednesday night.
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Richard Marles to press case for locally built submarines
9:14PM July 6, 2022
Defence Minister Richard Marles has affirmed Labor’s commitment to manufacturing nuclear-powered submarines in South Australia, but acknowledged the outcome may not be in Australia’s hands.
Speaking during a visit to the Osborne naval shipyard with Premier Peter Malinauskas on Wednesday, Mr Marles said building the submarines in Australia was key to getting them running as quickly as possible.
“It is fundamentally important to that program (AUKUS) that Australia has the capability to build those submarines in our nation, and that happens right here at Osborne,” Mr Marles said.
“As a nation, what we must be doing is climbing the technological ladder in terms of our domestic economy.
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China spying at blistering pace, warns head of MI5
By Larisa Brown
The Times
July 7, 2022
MI5 is running seven times as many investigations into Chinese espionage in Britain as it was four years ago, the head of the Security Service revealed.
Ken McCallum, the director-general, said yesterday that MI5 planned to double efforts to stop Beijing’s spies operating in Britain as it faced its most “game-changing challenge” from the increasingly aggressive country.
He was joined by Christopher Wray, head of the FBI, who said that China was learning lessons from the war in Ukraine and increasing its resilience to future sanctions.
Wray said western companies should learn from the conflict too, adding that if China invaded Taiwan it would represent “one of the most horrific business disruptions the world has ever seen”.
He said western companies needed to act to “prevent catastrophe later” or they would lose billions of dollars.
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https://www.afr.com/politics/federal/dreyfus-orders-bernard-collaery-case-dropped-20220707-p5azvx
Dreyfus orders Bernard Collaery case dropped
Tom McIlroy Political reporter
Jul 7, 2022 – 2.17pm
Attorney-General Mark Dreyfus has ordered the prosecution of lawyer Bernard Collaery be dropped, ending a four-year legal saga over the leaking of classified information about Australia’s efforts to spy on the government of East Timor.
The former ACT attorney-general was set to face trial in Canberra later this year, after being charged in 2018 with offences under the National Security Information Act for allegedly seeking to help his client, the intelligence operative known as Witness K.
Witness K, a former Australian Secret Intelligence Service (ASIS) officer, was handed a three-month suspended sentence over the leaking of sensitive information about Australia’s bugging operations during negotiations over resources revenue from oil and gas in the Timor Sea.
Mr Collaery opted to fight the charges, amid challenges over secrecy orders for the proceedings which reached the High Court.
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Tales from the active versus passive frontline
It’s a myth that index funds are sitting ducks taken advantage of by fast money. But big profits can be extracted by hard to access data sets, or opportunities in fringe index changes.
Jonathan Shapiro Senior reporter
Jul 7, 2022 – 10.26am
When the managing director of lithium play Lake Resources marked the company’s ascent into the S&P/ASX 200 index by quitting and dumping all of his stock, it raised all sorts of issues about the credibility of our key market benchmarks.
These sorts of controversies, and the power that index providers wield by setting the rules, are only likely to escalate.
So, too, is the amount of capital being directed by their rules and decisions, and that in turn will create opportunities for hedge funds and short-term traders that can anticipate where the index providers are going to direct the money.
The Australian Financial Review sat down earlier this week with David Rabinowitz from UBS, who oversees a team devoted to analysing the machinations of the main global market indices.
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https://www.afr.com/wealth/personal-finance/how-the-rba-duped-aussie-households-20220707-p5azxo
How the RBA duped Aussie households
Martin Place risks destroying economic prosperity with some of the most aggressive rate increases in the world that are based on forecasts not worth the paper they are written on.
Christopher Joye Columnist
Jul 8, 2022 – 10.15am
One of our finest institutions, the venerable Reserve Bank of Australia, is in turmoil. Riddled by extreme group think and a hierarchical and tenure-based organisational structure that suffocates dissent, the RBA is once again blindly repeating mistakes that have plagued its policy decisions
It is on a path to impose one of the most aggressive interest rate hiking cycles in the developed world on the globe’s most interest rate sensitive economy despite not having clear evidence that Australia has a protracted core inflation problem.
The official wage price index has expanded at an anaemic 2.4 per cent over the last year, well below the 3-4 per cent the RBA claims is required to sustain inflation within its target 2-3 per cent.
Real-time wage data from CBA deriving from salary payments into 300,000 bank accounts tracks the wage price index very closely. It indicates that in the period since the last official release, Aussie wages have continued to run at a modest 2.5 per cent.
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Albanese bans blind trusts and shares for ministers, keeps ‘bonk ban’
Tom McIlroy Political reporter
Jul 7, 2022 – 10.30pm
Federal government ministers have been told to sell off shareholdings and divest from blind trust arrangements under a tough new code of conduct implemented by Anthony Albanese.
Maintaining a ban on sex between ministers and their staff, the Prime Minister said frontbenchers would be held personally responsible for managing their private financial affairs and could not delegate their responsibility for pecuniary interests to anyone else.
Only shares held through superannuation and other broadly diversified managed funds will be allowed under the new rules.
Any minister required to sell shares or restructure their financial arrangements will be expected to do so as quickly as possible. Ministers were told about the new code of conduct, based on Rudd-Gillard era guidelines from 2013, this week.
Ministers and assistant ministers will be required to act with due regard for integrity, fairness, accountability, responsibility and the public interest under the code.
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Fewer than half Sydney homes sell at auction
Nick Lenaghan Property editor
Jul 7, 2022 – 4.40pm
Fewer than half the homes listed for auction in Sydney to the end of last week found new owners, in a strong signal the housing market correction has lurched another notch lower.
Final clearance rate figures compiled by CoreLogic confirm the trend already apparent in preliminary numbers over the weekend, with Sydney’s clearance rate of 49.9 per cent falling below the 50 per cent mark for the first time since mid-April in 2020, when it slumped to 33.8 per cent in the pandemic’s initial onslaught.
In another sign of weakness in the market, Sydney also recorded the highest withdrawal rate, 27.5 per cent, since that time.
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‘The first step to better ties with Beijing’, says Penny Wong after meeting Chinese foreign minister
11:43PM July 8, 2022
Foreign Minister Penny Wong says Australia has taken an “important first step” towards stabilising ties with China following the first bilateral meeting in almost three years with its top diplomat Wang Yi, at which Beijing’s detention of Australian citizens and its trade coercion were raised.
Senator Wong met her Chinese counterpart on the sidelines of the G20 foreign ministers meeting in Bali on late Friday after earlier this week calling on China to use its influence with Russia as a “no limits” partner to help end the war in Ukraine.
Senator Wong said after the meeting that the two ministers “spoke frankly and we listened carefully to each other’s priorities and concerns”.
But, she added, it would “take time and work” to mend ties.
The meeting in Bali follows Defence Minister Richard Marles’ meeting with his Chinese counterpart, General Wei Fenghe, in Singapore last month, which represented the first face-to-face minister-to-minister dialogue between the two nations since late 2019. A request by Trade Minister Don Farrell to meet his Chinese counterpart in Geneva was rebuffed. Former foreign minister Marise Payne last spoke to her Chinese counterpart by phone in early 2020, soon after the first cases of Covid-19 were detected in Wuhan.
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Anthony Albanese to tackle ‘aggressive China’
9:00PM July 8, 2022
Anthony Albanese will raise concerns over the security agreement between Solomon Islands and Beijing in his talks with national leaders at the Pacific Islands Forum in Fiji next week, arguing it served the national interest for him to attend.
Speaking at a joint press conference with Mr Albanese in Sydney, New Zealand Prime Minister Jacinda Ardern said on Friday that she expected the security agreement to be raised. But she did not share her Australian counterpart’s more robust comments on the regional outlook, signalling the two leaders had different approaches to the new era of growing strategic competition.
Ms Ardern has used the two leaders’ meeting this week to champion the sovereignty of Pacific Island nations, arguing they should be free to pursue closer relations with nations of their own choosing without outside interference.
On Friday, she said that Australia and New Zealand “shouldn’t suddenly say to sovereign nations that they have to pick for whom their relationships are with”.
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Staring into the abyss of war
The West is at last responding to the threat posed by Moscow and Beijing. But three crucial ‘fronts’ now require buttressing if this situation is not to spiral out of control.
By PAUL MONK
July 9, 2022
One could be forgiven for thinking right now that we are teetering on the brink of World War III. Russia has started a brutal war of conquest against Ukraine, demands that NATO retreat to its 1997 boundaries and openly talks of rescinding the independence of the Baltic states (as if it had the right to do any such thing).
China, meanwhile, is becoming more and more assertive, has backed Russia’s war and is harassing and threatening Taiwan, while browbeating other countries, including our own. NATO, at its recent summit in Madrid, included three key Asia states: Japan, South Korea and Australia, and, to Beijing’s intense annoyance, stated plainly that it is, as a body, increasingly concerned about China’s actions and declared intentions.
There is plenty of scope for apprehension and the imagining of dramatic, even catastrophic, scenarios. Vladimir Putin has threatened to use nuclear weapons and has noted that this gave Washington and NATO pause.
Beijing is rapidly expanding its own nuclear arsenal as well as its blue water naval forces. It is strident in its rhetoric and keeps insisting that opposing it is “futile” – a stock rhetorical trope of totalitarian regimes.
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‘Security of everything’ key for portfolios
The security of food and energy, supply chains, income and health are driving thematics, asset class returns, volatility and risk across the investment landscape.
Scott Haslem Contributor
Jul 5, 2022 – 2.24pm
There have been few places to hide in markets this year. Estimates suggest the double-digit drop in returns in a classic 60:40 stock-and-bond portfolio will be among the worst outcomes since 1928. Thankfully, portfolios have been adding diversification through unlisted alternatives that have almost certainly added defensive ballast.
It’s tough enough battling a pandemic-led, but policy-empowered, outbreak of inflation. Getting this under control has also been hampered by central banks, foiled by their own dalliance with reactive (read “late”) policy responses.
These cyclical forces buffeting portfolios come at a time when structural tailwinds appear to be coming to an end. In particular, 30 years of hyper-globalisation, driving trade, competition and inflation to historic lows, appears to be fraying at the edges. Trade restrictions and tariffs have been on a steady rise.
We also appear to be waking from 80 years of relative geopolitical calm, reflected in trade wars, real wars and a rapidly evolving re-think of political and economic alignment. Sanctions have been rising, and Russia had most of its currency reserves “confiscated” because it wouldn’t play by Western-world rules. There is also the challenge of climate change, affecting society, technology, biodiversity and the traditional return drivers in portfolios.
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COVID-19 Information.
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NSW COVID-19 numbers in as expert flags ‘concerning’ case numbers
By Ashleigh McMillan
NSW has recorded 8958 new cases of COVID-19 on Monday morning and one additional life lost.
There are now 1725 people in hospital with the virus, with 50 people in intensive care.
Earlier today, the Doherty Institute director Professor Sharon Lewin told ABC RN Breakfast that “as we head into winter and seeing these numbers, it is concerning”.
“Our numbers are going up, and also hospitalisations are going up. We need to make sure that we can prevent those hospitalisations and deaths as we head into winter,” she said.
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Virologists predict new ‘centaurus’ variant will drive next virus wave
Tom Burton Government editor
Jul 4, 2022 – 5.09pm
Virologists are warning that a highly contagious new second-generation COVID-19 variant nicknamed “centaurus”, which has multiple immune-evading mutations and has grown rapidly in India, is likely to take over from omicron variants and drive a new wave of infection.
The new BA.2.75 sub-variant is a mutation of the omicron BA.2 variant that caused high caseloads over summer. In less than a month, it has begun ousting omicron variants in India where it is now showing up in 20 per cent of sequences.
A number of leading virologists are now predicting that BA.2.75, which is able to evade vaccine protection against transmission, will fuel the next wave of cases around the world. Sequencing shows centaurus has already spread to other countries including Australia, New Zealand, United Kingdom, Israel and the US.
It is too early to draw conclusions about the disease impact of BA.2.75, but lab work suggests it is multiple times more infectious than the current highly contagious BA.5 variant – already the most infectious of all the COVID-19 mutations.
The existence of eight additional mutations, two of which are already known to be highly dangerous, has led leading virology labs to warn about BA.2.75.
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https://thenewdaily.com.au/finance/finance-news/2022/07/07/omicron-third-wave-alan-kohler/
6:00am, Jul 7, 2022 Updated: 9:12pm, Jul 6
Alan Kohler: It’s the third wave of Omicron, but we’re not worried
My mother and sister both got COVID-19 this week. Mum’s 94 but we’re not too worried: She’s had four vaccine doses and isn’t very sick. My sister is pretty crook, but no worse than a bad cold.
Our family is Australia in 2022.
This year Australia is getting more COVID than ever and we are dying of it in greater numbers than last year or the year before. But are we worried? Not much.
On this day in 2020, a worried Reserve Bank kept the cash rate at 0.25 per cent before cutting it to 0.1 per cent in November, and a very worried Victorian Premier Dan Andrews took the state into a six-week lockdown, with 191 new cases that day taking the total to 772 active cases, 35 of them in hospital.
There were no deaths the previous day.
On Tuesday this week in Victoria there were 1811 new cases and 16 deaths. Total active Victorian cases (that the authorities know of) are 49,253, of which 543 are in hospital.
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Climate Change.
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How Australia can be a clean energy industrial success
European countries have de-industrialised to cut emissions. Our competitive advantage means we can follow a different path in a net zero global economy.
Tony Wood Contributor
Jul 4, 2022 – 5.00am
Australia can be a 21st century industrial success. Climate change provides the imperative; our vast renewable energy and mineral resources provide the opportunity. As coal and gas decline, we should build export-oriented industries based on these renewable energy and mineral resources to thrive in a net zero global economy.
Meeting global and domestic emission reduction targets will impose transformative change on Australia’s heavy manufacturing and mining sectors – change for which we are ill-prepared. However, we have an opportunity, based on our comparative advantage in the competitive renewable energy sector, to add value to globally significant mineral resources, and support employment in the regions where carbon-intensive industries will decline.
A strategic partnership between government and industry would help deliver this opportunity.
Australia and many other countries have committed to emission reduction targets of net zero. Meeting our target will affect every corner of our economy, most profoundly the heavy industry and mining sectors. Many European countries reduced their emissions by de-industrialising and outsourcing their emissions to China. Australia can follow a different path.
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Albanese blames global inaction on climate change for flooding disaster in Sydney
By Lucy Cormack
July 6, 2022 — 5.55pm
Prime Minister Anthony Albanese says a global failure to act on climate change has thrust disaster on the state’s flood-ravaged communities, as he visited the Hawkesbury to face locals inundated for the fourth time in 18 months.
In his first visit to the region, Albanese vowed to heed the lessons of the emergency and work with all levels of government on flood mitigation strategies in the national interest.
“My government has changed Australia’s position on climate change from day one,” he said.
“The science told us that if we continued to not take action globally on climate change, then these events, extreme weather events, would be more often and more intense. And what we’re seeing, unfortunately, is that play out.”
The prime minister travelled to Windsor and Richmond on Wednesday with Premier Dominic Perrottet to survey the impacts of the flood, after receiving a briefing at the state emergency operations centre in Homebush.
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‘Move house’: Insurers struggle with year of floods
Insurers warn rebuilding is not the answer to protecting flood hit communities against the next natural disaster, with one calling for 15 per cent of homes to be removed from flood plains.
By David Ross
July 9, 2022
For some NSW residents, the latest flooding will be the fourth time they have been turfed from their homes and been forced to rebuild – in the last 12 months alone.
The latest rains have also exposed an emerging crisis among insurers, with some of the largest companies taking on major losses – leading to higher premiums – and revealing many families lack any real cover.
But doing something about it won’t be easy. Insurance Australia Group natural perils executive manager Mark Leplastrier says no easy solutions exist. The only way to stop runaway losses and price rises is to remove up to 15 per cent of buildings in flood plains.
Leplastrier tells The Weekend Australian that the data shows insurance claims in flood prone areas are overwhelmingly coming from a small proportion of the housing stock. Many of these homes have been built on land subdivided long before modern planning and are causing misery for their owners and driving massive insurance losses.
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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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RBA’s inflation battle splits market on peak rates
Alex Gluyas Markets reporter
Jul 4, 2022 – 5.00am
The Reserve Bank will increase interest rates on Tuesday but the prospect of further aggressive rate rises needed to tame inflation could cause a sharp economic slowdown, warned market economists.
Although most of the respondents in The Australian Financial Review’s survey of 31 economists expect an imminent half-a-percentage-point rate increase to take the cash rate to 1.35 per cent from 0.85 per cent, the central bank’s tightening path for the rest of this year is less clear.
The median forecaster expects the cash rate to reach 2.35 per cent in December and peak at 2.85 per cent.
But some economists cautioned that households are suffering from a real income squeeze and declining wealth, challenging the course of monetary tightening.
House prices fell 1.6 per cent in Sydney last month and by 1.1 per cent in Melbourne, CoreLogic data revealed on Friday. This slashed the annual rate of growth to 5.9 per cent from 25.5 per cent in Sydney and 3.1 per cent from 14.9 per cent in Melbourne.
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The contrarian economist who read the economy right
Cecile Lefort Markets reporter
Jul 4, 2022 – 5.00am
MLC Asset Management chief economist Bob Cunneen is not shy when it comes to appraising the Reserve Bank of Australia’s steering of the economy.
The RBA sat six months too long on emergency policy settings when alarm bells were ringing, he says. Back in October and November of last year, economic activity was accelerating against a backdrop of stronger commodity prices and persistent price pressures.
And like many of his peers, he disagreed with the central bank’s belief that inflation was going to be transitory.
“The Reserve Bank was basically looking at the rear vision mirror and has finally awoken from a coma,” Mr Cunneen said.
The RBA started tightening policy in May and followed up with a surprise half a percentage point lift last month to 0.85 per cent, the largest increase in 22 years. It is widely expected to tighten by the same margin on Tuesday, to an expected 1.35 per cent.
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As RBA prepares to lift rates the next wave of inflation is yet to come
July 4, 2022
The Reserve Bank board is hoping this week’s aggressive cash rate hike will burst the inflation bubble, but a new shock looms on the horizon for consumers.
The two largest supermarket operators, Coles and Woolworths, have settled on August 1 for negotiated price-rise requests from dozens of major suppliers, which apply to a range of household items.
This plus a cocktail of higher mortgage rates, soaring winter energy costs and the looming end of the fuel excise holiday in September represent a new inflationary wave set to slam households over the next two quarters.
Treasurer Jim Chalmers over the weekend said it would be “incredibly hard” to continue the Morrision government’s temporary fuel tax holiday.
With inflation picking up pace, market economists are tipping the RBA to hike the cash rate by 50 basis points on Tuesday. This matches the June hike and will take the cash rate to 1.35 per cent.
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Why the RBA must not over-react and slam on the brakes
Smashing the demand for groceries in order to fix a supply side problem is a wrong-headed monetarist solution.
Craig Emerson Columnist
Jul 4, 2022 – 1.00pm
Lettuce prices are through the roof. Beans too. If monetarist thinking prevails at the Reserve Bank board’s meeting on Tuesday, the bank will lift interest rates sharply to bring down the prices of groceries and everything else to prevent a wage-price spiral.
That is a prescription for a recession.
It is not even clear which prices are falling and which are rising.
Smashing the demand for groceries seems a strange way of dealing with supply shortages. Much of Australia’s inflation is being caused by supply chain problems arising from disruptions caused by the COVID-19 pandemic and the war in Ukraine.
Instead of crushing the demand for goods and services in short supply we should be working hard and fast to fix supply problems where possible.
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Higher interest rates may not slow inflation, and central banks are partly to blame
The Reserve Bank of Australia’s decision to raise the cash rate may backfire and cause economic instability
Tue 5 Jul 2022 03.30 AESTLast modified on Tue 5 Jul 2022 08.30 AEST
Contrary to earlier assurances that interest rates would remain low until 2024, the Reserve Bank of Australia’s aggressive policy – being pursued by central banks globally – follows failures to forecast rising prices and may not be effective in achieving its objective.
Instead, the reserve bank’s actions may result in a combination of economic instability, inflation and rising rates – coinciding with great power competition and a difficult energy transition – which will exacerbate inequality, dilute living standards and frustrate ordinary people’s expectations.
Why interest rates may not slow inflation
Designed to reduce demand by slowing discretionary spending, higher interest rates will be counteracted by billions of dollars in federal government spending and tax offset payments. State governments, such as New South Wales and Victoria, have announced large expenditure programs. Even where these initiatives target essential infrastructure and living costs, they add to demand, effectively contradicting the RBA’s efforts.
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https://www.rba.gov.au/media-releases/2022/mr-22-20.html
Statement by Philip Lowe, Governor: Monetary Policy Decision
Number 2022-20
Date 5 July 2022
At its meeting today, the Board decided to increase the cash rate target by 50 basis points to 1.35 per cent. It also increased the interest rate on Exchange Settlement balances by 50 basis points to 1.25 per cent.
Global inflation is high. It is being boosted by COVID-related disruptions to supply chains, the war in Ukraine and strong demand which is putting pressure on productive capacity. Monetary policy globally is responding to this higher inflation, although it will be some time yet before inflation returns to target in most countries.
Inflation in Australia is also high, but not as high as it is in many other countries. Global factors account for much of the increase in inflation in Australia, but domestic factors are also playing a role. Strong demand, a tight labour market and capacity constraints in some sectors are contributing to the upward pressure on prices. The floods are also affecting some prices.
Inflation is forecast to peak later this year and then decline back towards the 2–3 per cent range next year. As global supply-side problems continue to ease and commodity prices stabilise, even if at a high level, inflation is expected to moderate. Higher interest rates will also help establish a more sustainable balance between the demand for and the supply of goods and services. Medium-term inflation expectations remain well anchored and it is important that this remains the case. A full set of updated forecasts will be published next month following the release of the June quarter CPI.
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https://www.afr.com/policy/economy/reserve-bank-lifts-cash-rates-0-5pc-to-1-35pc-20220705-p5az6t
Reserve Bank lifts cash rates 0.5pc to 1.35pc
Ronald Mizen Economics correspondent
Jul 5, 2022 – 2.31pm
The Reserve Bank increased the official interest rate for a third consecutive month on Tuesday with a double “business as usual” 0.5 percentage point rise to 1.35 per cent, as it moves quickly to curb strengthening inflation.
If fully passed on to borrowers, recent rate rises would add $333 to monthly repayments for a typical $500,000 mortgage, $499 for a $750,000 mortgage, and $665 for a household with a $1 million loan, according to RateCity.
The RBA’s push to normalise the cash rate from the emergency level record low 0.1 per cent is adding pressure to household budgets already being squeezed by price rises on everything from fruit and vegetables to petrol.
But it’s inflation forecast to hit 7 per cent by December RBA governor Philip Lowe is trying to tame.
“Today’s increase in interest rates is a further step in the withdrawal of the extraordinary monetary support put in place to help insure the Australian economy against the worst possible effects of the pandemic,” Dr Lowe said.
“The resilience of the economy and the higher inflation mean that this extraordinary support is no longer needed.
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The going is about to get a lot tougher for the Reserve Bank
There was little doubt the RBA would raise interest rates by half a percentage point on Tuesday. But future rate rise decisions will be more finely balanced.
Karen Maley Columnist
Updated Jul 5, 2022 – 5.55pm, first published at 5.46pm
When they wrapped up their discussion on Tuesday, Reserve Bank board members would have experienced the rare satisfaction of knowing they’d come up with a decision that no one could criticise.
After all, there was universal recognition that the Reserve Bank had no alternative but to raise rates in response to the surge in inflation, which the bank’s boss, Philip Lowe, expects will peak at a “very high” 7 per cent late this year.
And even after Tuesday’s 50 basis point rate rise, official interest rates – at 1.35 per cent – are still well below a level that would restrain consumer and business spending.
What’s more, consistent with the observation from the former head of the US central bank, Ben Bernanke, that “monetary policy is 98 per cent talk and only 2 per cent action”, Lowe also wanted an emphatic rate rise to send an unequivocal message to households and businesses.
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Reserve Bank sends interest rates sky-high to throttle spending speeds
By Shane Wright
July 5, 2022 — 5.35pm
In May, people in NSW spent a record $1 billion eating out across the state’s restaurants, cafes and takeaways.
South of the Murray, Victorians spent a record $750 million eating out.
Canberrans and Northern Territorians also spent record amounts on pad thai, pizza and pilaf. South Australians, Queenslanders and Tasmanians weren’t far off either.
The RBA is seeking to avoid the danger zone of low interest rates and high inflation.
For a country with inflation at its highest level since Tom Cruise was starring in Mission: Impossible 2, the rush to our favourite restaurants seems strangely at odds with the narrative of economic end days just around the corner.
The half percentage point rise in the cash rate by the Reserve Bank on Tuesday marks the most aggressive tightening in monetary policy since the second half of 1994.
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RBA not done yet with blockbuster rate hikes
6:58PM July 5, 2022
The Reserve Bank of Australia delivered a second blockbuster interest-rate rise Tuesday, taking the official cash rate to 1.35 per cent from 0.85 per cent, but it’s not done yet.
The reality for Australia’s vast swathes of highly indebted mortgage holders is that the RBA will almost certainly sting homeowners again with a further 50-basis-point rise in interest rates in August, and depending on the look of second-quarter inflation data at the end of this month, it could line up even more.
The RBA hurriedly revised up its inflation forecasts just a few weeks ago when RBA Governor Philip Lowe did a television interview. The decision to communicate on the fly like that was unprecedented for Dr Lowe, and demonstrated just how fluid the inflation environment is.
If the second-quarter consumer-price index report is uglier than expected, the RBA will adjust to the news and set up expectations for a further hastening toward achieving a so-called neutral cash rate, currently put at around 2.5 per cent.
To be sure, it’s already expected that the data on July 27 will confirm that inflation has well and truly flown the coop. A headline annual inflation outcome of 7 per cent or more is widely forecast.
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https://www.afr.com/policy/economy/rba-playing-a-game-of-hokey-pokey-with-government-20220706-p5aze6
RBA playing a game of ‘Hokey Pokey’ with government
Ronald Mizen Economics correspondent
Jul 6, 2022 – 11.07am
The Reserve Bank of Australia is playing a game of “Hokey Pokey” with the federal government, with one taking money out of the economy and the other putting it right back in, economist Chris Richardson says.
With the cost of living on the rise, the March federal budget contained about $17 billion in household support, which Mr Richardson said was largely offset by the central bank’s May and June interest rate rises.
The RBA on Tuesday announced a further 0.5 percentage point rate rise, pushing the cash rate from 0.1 per cent to 1.35 per cent in the three months to July and taking a further $11 billion out of the economy.
That pretty much covered the $9 billion from boosting the minimum and award wages from July 1, Mr Richardson said, labelling it “a draw”.
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Health Issues.
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Medicare fraud, errors are costing $7b a year
Leakage is costing taxpayers a fortune each year due to crime, billing mistakes and an ineffective watchdog. A root-and-branch review is overdue.
Adele Ferguson Investigative journalist and columnist
Jul 4, 2022 – 5.00am
Medicare fraud and billing errors by medical practitioners are costing taxpayers at least $7 billion a year, according to Dr Margaret Faux, a health regulation expert who has been administering Australian medical billing since Medicare began.
Faux says the level of leakage – taxpayer money lost through fraud, errors and abuse – was as much as 30 per cent of the total Medicare scheme’s costs.
And while she believes much of the non-compliant billing is unintentional, taxpayers pay the price at a time when health bills are rising and spending is being reined in.
Faux should know. She’s a registered nurse and lawyer who has worked in the health system for more than 40 years and recently completed a PhD into Medicare claiming and compliance.
Her business – medical billing and coding processing group Synapse Medical Services, which advises doctors, hospitals and regulators – constantly finds problems in client billing practices.
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What an Australian CDC should look like
The national body for public health and prevention proposed by the Labor government needs to focus on noncommunicable illness as much as communicable viruses.
Antony Blakely Contributor
Jul 5, 2022 – 12.44pm
The federal Labor government has included the establishment of a Centre for Disease Control in its election promises. Word on the street is public consultation will happen later this year on what its roles might be, with implementation presumably before the next federal election.
Australia has done exceptionally well at minimising COVID-19 deaths and morbidity. And we do well on global comparisons of life expectancy (top 10 globally). We also have a very good National Preventive Health Strategy that was launched in December 2021, building on other strategies (e.g. obesity) and sitting beside the lessons we take away from COVID-19.
So, we start from a strong position. But we do not want to lose that strong position. And we have major health inequalities to address. We also need to evolve from aiming for longer lives “just” to live longer, to healthier lives that reduce burdens on health systems, the environment and the planet (think food, transport and housing systems).
So, what are some of the key considerations for establishing a CDC in Australia?
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Sore point: Australian patients hit by bill shock question private health costs
By Emma Koehn
July 7, 2022 — 5.00am
More than a third of Australian patients are experiencing bill shock when it comes to paying for their treatment, leading many to put off making appointments and questioning the value of private health insurance.
The findings from a study by KPMG and the Commonwealth Bank have prompted the private health industry to urge members to check their cover before treatment, while KPMG analysts say more investment is needed in all-in-one tools for patients to understand the costs.
The study of more than 1100 health consumers reveals 42 per cent have been hit by higher than expected out-of-pocket costs for treatment, either because of the gap between their health cover and the provider’s bill or because their claims have been rejected outright.
KPMG financial services partner Hessel Verbeek said despite the high quality of care across the country more investment was needed in digital health services to try to bring together booking, billing and private health insurance and rebate information into one platform.
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International Issues.
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Russian fury as war spills into city near Ukraine border
By Pavel Polityuk, Simon Lewis and Nick Starkov
July 3, 2022 — 4.14pm
Key points
· Separatists say Lysychansk ‘under control’ but not liberated
· Ukrainians say big battles, but Lysychansk not surrounded
· Blasts hit Russia’s Belgorod, three injured - governor
Kyiv/Konstyantynivka: At least three people were killed and dozens of homes damaged in the Russian city of Belgorod near the Ukraine border, the regional governor said on Sunday, as Kyiv acknowledged it could lose its last big bastion in eastern Ukraine to Kremlin forces.
Governor Vyacheslav Gladkov reported a number of blasts in the city of nearly 400,000 some 40 kilometres north of the border with Ukraine.
At least 11 apartment buildings and 39 houses were damaged, including five that were destroyed, Gladkov said on the Telegram messaging app.
“The sound was so strong that I jumped up, I woke up, got very scared and started screaming,” a resident of the city told Reuters, adding the blasts occurred around 3am.
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https://www.afr.com/world/europe/erdo-an-is-an-infuriating-but-indispensable-ally-20220705-p5az4s
Erdoğan is an infuriating but indispensable ally
Despite the leader’s patchy record, NATO would not be better off without him. The expulsion of Turkey, even if it were legally possible, would be a strategic disaster.
Gideon Rachman Columnist
Jul 5, 2022 – 10.08am
Why not chuck Turkey out of NATO? It sounds like a great idea – particularly after a few post-summit drinks.
There is no doubt that Recep Tayyip Erdogan is an infuriating ally. After dropping his objections last week to Finland and Sweden joining NATO, the Turkish president immediately created fresh doubts – suggesting that Turkey’s parliament will not ratify the agreement, unless Sweden extradites 73 people Turkey accuses of terrorism.
Surrendering anyone to the mercies of Erdogan’s justice system is a tough ask for any democracy. Selahattin Demirtas, a Kurd and leading opposition politician, has been in prison since 2016 – despite a ruling of the European Court of Human Rights that he should be released and that his imprisonment had “merely been cover for an ulterior political purpose”.
His case is not an isolated example. Osman Kavala, a businessman and philanthropist, was jailed for life without parole in April for allegedly plotting a coup. The weakness of the evidence against him led to protests by Western governments, human rights groups and the European Court of Human Rights.
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Cryptocurrencies are not the new monetary system we need. So what is?
The crypto crash (and preceding bubble) shows that cryptocurrencies are objects of speculation rather than stores of value.
Martin Wolf Columnist
Jul 6, 2022 – 8.23am
Money has already evolved from coins, to notes, entries in balance sheets and bits on computers. The institutions that provide, operate, guarantee and regulate money have evolved with it.
So, how should it evolve in the digital era? The invention of cryptocurrencies has forced everybody involved and above all the central banks — the agents of the state in managing the public good of money — to confront this question. If crypto is not the answer, what is?
The Bank for International Settlements — the club of central banks — has been prominent in the effort to address this question. The latest result is part of its Annual Report, which analyses the emerging ecosystem of cryptocurrencies, stablecoins and exchanges.
This brave new system is — it concludes — inherently flawed. The crypto crash (and preceding bubble) shows that cryptocurrencies are objects of speculation rather than stores of value. That also makes them unusable as units of account.
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Boris Johnson’s leadership in crisis as cabinet ministers quit
July 6, 2022 — 3.24am
Key points
· Chancellor of the Exchequer Rishi Sunak and UK Health Secretary Sajid Javid quit overnight.
· Javid told Boris Johnson he had lost his confidence after the handling of the latest sex scandal to rock Westminster.
· It is the third resignation from cabinet in a fortnight. Oliver Dowden, an influential figure, quit after two byelection losses.
London: Boris Johnson’s prime ministership is in fresh crisis following the resignation of two of his cabinet ministers, including Chancellor of the Exchequer Rishi Sunak.
Johnson ploughed on appointing two cabinet ministers to replace them, including Nadhim Zahawi who is widely considered to be making a tilt for No.10 himself.
The resignations began when UK Health Secretary Sajid Javid told the prime minister that he had lost confidence in him over his handling of the latest sex scandal to rock Westminster.
“We may not have always been popular, but we have been competent in acting in the national interest,” Javid said.
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Recession fears unleash carnage across commodity markets
Alex Gluyas Markets reporter
Jul 6, 2022 – 10.26am
Commodity prices collapsed and the Australian dollar plunged to a two-year low as anxiety about a global recession zapping demand for raw materials hit fever pitch.
Traders were spooked as the US 10-year and two-year bond yields inverted again overnight, flashing a recession alert. That meant short-term rates briefly exceeded long-term rates, indicating a growth shock ahead.
Oil posted its worst trading session in nearly three months as expectations for weaker demand overpowered concerns about tight supply.
West Texas Intermediate crude futures settled below $US100 a barrel after falling more than 8 per cent, the most since March 9. Brent crude futures fell more than 9 per cent, dipping below $US103 a barrel.
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Why energy prices will stay high even if global economy tanks
It is notable that the protesters who have successfully pressed some universities to divest from fossil fuels do not seem to be lobbying nearly as hard to turn down heating and air conditioning.
Kenneth Rogoff Columnist
Jul 6, 2022 – 1.01pm
Over the past two and a half years, world oil and gas prices have been subject to demand shocks and supply shocks – and sometimes both simultaneously. The resulting volatility in energy markets is both a reflection and a microcosm of a careening global economy.
The price of Brent crude oil declined from a “normal” $US68 a barrel at the end of 2019 to $US14 per barrel in April 2020 as the COVID-19 pandemic spread worldwide. Two years later, in March this year, the price surged to $US133 a barrel after Russia invaded Ukraine.
Now it is falling again amid growing fears of a recession in the US. But the price could rise sharply if the Chinese economy bounces back from the stupor induced by its zero-COVID policies.
What will happen next, and how can policymakers keep their eye on environmental sustainability in the face of this market turmoil?
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Why it’s too early to tell if Putin’s war marks a new period in history
It has been only two years since the start of another world crisis thought to mark a new era.
David Bell
Jul 7, 2022 – 8.00am
Earlier this year, a student asked me how I thought historians would characterise the period of world history he believed had just begun with Russia’s invasion of Ukraine. I couldn’t resist replying: “I have no idea. I just hope they won’t be calling it the ‘prewar period’.”
But are we, in fact, at the beginning of a new period in history? Many have been quick to affirm the idea. Even before the invasion began, the Wall Street Journal columnist Gerard Baker was opining that “the crisis over Ukraine … marks the definitive end of the post-Cold War era”.
And no sooner had Russian forces crossed the Ukrainian border than the Brookings Institution’s Daniel S Hamilton agreed: “The post-Cold War period has ended. A more fluid and disruptive era has begun.”
A few days later, the political scientist Sean Illing called the invasion a “world-historical event,” adding that “the effects of it will likely ripple out for years to come”. All three were confident that one day, historians would begin new chapters in their textbooks with the year 2022.
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Ardern’s Sydney speech ‘will go down well with Beijing’
Aaron Patrick Senior correspondent
Jul 7, 2022 – 2.06pm
New Zealand Prime Minister Jacinda Ardern said that China, her country’s biggest trading partner, should not be regarded by the West as an automatic Russian ally, and it could help apply international pressure to President Vladimir Putin’s government over its invasion of Ukraine.
The Labour Party leader said the global response to the war should not become “democracy versus autocracy” because there was a need to convince non-democracies to join sanctions and other measures taken against Russia.
“Let’s not assume that China does not have a role to play in placing pressure in response to what is the loss of territorial integrity,” she said at the Lowy Institute, a foreign affairs think tank in Sydney.
“Let’s not just isolate and assume that it is only democracies that take this view.”
Among analysts and diplomats, China is seen as an important Russian supporter. It has either abstained or voted with Russia on several United Nations Security Council resolutions condemning the attack on Ukraine and the humanitarian crisis caused by the war. Other countries that have supported Russia at the UN include Cuba, North Korea, Iran, Syria and Vietnam.
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China’s great foreign policy shake-up
Beijing’s two most senior foreign policy officials are set to retire within the next nine months giving Xi Jinping the chance to promote a new generation of ‘wolf warrior’ diplomats.
Richard McGregor and Neil Thomas
Jul 7, 2022 – 9.19am
Xi Jinping is expected to win a third five-year term at a Chinese Communist Party conclave in Beijing later this year, a mark of the Chinese leader’s ruthless determination to upend retirement conventions and rule for life.
In foreign policy, a very different story will unfold, with the country’s two most senior diplomats preparing to step down, in what will be the largest turnover of top personnel in the sector for decades.
After a decade as China’s top diplomat, the 72-year-old Yang Jiechi is set to leave the Politburo and his post as director of the general office of the Central Foreign Affairs Commission at the 20th party congress, likely to convene in October or November.
If Xi excepts only himself from retirement norms, Wang Yi, the 68-year-old Foreign Minister, and China’s number-two diplomat, will also step down. His tenure ends in March, when government positions turn over at the country’s annual legislative session. Collectively, the pair have a quarter-century of experience at the top.
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US, UK spy leaders raise fresh alarms about Chinese espionage
Demetri Sevastopulo and John Paul Rathbone
Updated Jul 7, 2022 – 12.43pm, first published at 12.33pm
London | The heads of the FBI and MI5 have warned that China’s industrial espionage poses a growing threat to Western groups, including through special purpose acquisition companies.
In a joint appearance in London, the chiefs of the US and UK intelligence agencies called on companies to be much more vigilant about China.
MI5 director general Ken McCallum, left, and FBI director Christopher Wray give a joint press conference at MI5 headquarters in central London. AP
FBI director Christopher Wray said Beijing was using “elaborate shell games” to disguise its spying and was even taking advantage of SPACs.
“The Chinese government poses an even more serious threat to Western businesses than even many sophisticated businesspeople realise,” Wray told corporate leaders at an event with his MI5 counterpart, Ken McCallum. “I want to encourage you to take the long view as you gauge the threat.”
The intelligence chiefs were holding the first public event between the two agencies, a move Mr Wray said underscored the need to tackle the expanding espionage challenge from Beijing.
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https://www.afr.com/world/europe/boris-johnson-quits-finally-forced-out-by-scandals-20220707-p5b00n
‘Them’s the breaks’: Johnson quits, sets off Tory leadership race
Hans van Leeuwen Europe correspondent
Updated Jul 7, 2022 – 11.17pm, first published at 7.39pm
London | British Prime Minister Boris Johnson has bowed to the inevitable and agreed to quit, after suffering a haemorrhage of ministers that made governing impossible.
His belated exit, following days of turmoil, triggers a race within his party to become the fourth Conservative prime minister since the Tories took office under David Cameron in 2010.
It also signals a probable end to the chaotic post-Brexit period, following the “Leave” vote in 2016 and an election Mr Johnson won in 2019 on a promise to “get Brexit done”. His successor is likely to represent a break with the country’s lingering Brexit schisms.
In a brief statement on the doorstep of 10 Downing Street, Mr Johnson said he had tried to persuade his ministerial colleagues that he had a mandate and was “actually only a few points behind in the polls” despite the difficult economic circumstances and “relentless sledging”.
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The great showman is gone, so what now?
As Boris exits centre stage, the new PM might be able to soothe the Brexit rancour. But the real challenge is deciding how to fight the looming economic crunch.
Hans van Leeuwen Europe correspondent
Jul 8, 2022 – 8.20am
London | “Thank God something’s happening, and he’s going,” a relieved elderly man in the safe Conservative seat of Chichester, on England’s south coast, told BBC television on Thursday. But the very next vox-pop, a middle-aged woman, was aghast. “He’s resigned? Oh no!”
Even as British Prime Minister Boris Johnson gave up his dogged effort to cling to power on Thursday morning (late Thursday AEST), his departure seemed as divisive as his 1078 days as leader.
Johnson began his premiership’s controversial, and often chaotic, three years as a politician who just wanted people to like him, and to be united in cheerful optimism. His breezy, boisterous approach found this unorthodox Conservative many fans in former Labour Party heartlands.
But his administration gradually came to preside over a rancorous pit of culture wars, Brexit divisions, pandemic trauma and personal loathing.
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Going forward or back, successor faces long, hard road
The Economist
7:26AM July 8, 2022
Boris Johnson’s premiership started collapsing to the sound of Zadok the Priest. On July 5, beneath the windows of Downing Street, the bands of the Household Division were conducting the Beating Retreat, an annual parade marking the closure of camp gates at nightfall. One hour before, Rishi Sunak, the chancellor of the exchequer, and Sajid Javid, the health secretary, had resigned. In the offices of Whitehall, all hell was breaking loose. On the square below, immaculate precision.
Johnson has failed to match the three years and 11 days Theresa May, his predecessor, spent in office. He promised to end the instability that blighted her premiership. He has matched it.
At the front of the queue to succeed Johnson is new Chancellor Nadhim Zahawi, 55. A child refugee from Iraq, who supported Brexit and oversaw a successful vaccine program, he is a popular figure in the party. But the field will be large. Liz Truss, the Foreign Secretary, is keen; so is Tom Tugendhat, the chair of the foreign affairs committee, and Attorney-General Suella Braverman. Sunak and Javid are expected to have a tilt.
Whoever succeeds Johnson will inherit a monstrous in-tray. The Bank of England forecasts inflation to reach 11 per cent in the autumn; the pound is fragile. The National Health Service is grappling with a backlog of 4.3 million patients waiting for elective procedures. The long-term growth outlook is poor. He or she will also confront a deeper question: can the Conservative party reinvigorate itself while continuing to hold office?
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https://www.afr.com/world/asia/former-japan-pm-shinzo-abe-dies-after-being-shot-20220708-p5b06m
Japan in shock after assassination of former PM Shinzo Abe
Michael Smith North Asia correspondent
Updated Jul 8, 2022 – 1.54pm, first published at 1.26pm
Tokyo | Former Japanese prime minister Shinzo Abe has died after being shot at an election rally, in an attack that has shocked a country with little gun crime and halted campaigning ahead of Sunday’s parliamentary polls.
Mr Abe was shot by a man with what appeared to be a homemade gun while he was giving a speech at a street rally in the central Japanese city of Nara just before midday local time.
Police at the shooting scene in Nara arrested Tetsuya Yamagami, 41, a former member of Japan’s navy, on suspicion of murder. Police said he used a gun that was obviously homemade — about 40 cm long — and they confiscated similar weapons and his personal computer when they raided his nearby one-room apartment.
Police said Yamagami was responding calmly to questions and had admitted to attacking Abe, telling investigators he had plotted to kill him because he believed rumours about the former leader’s connection to a certain organisation that police did not identify.
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US economy adds 372,000 jobs in June, bolstering case for higher rates
Reade Pickert
Jul 9, 2022 – 4.22am
Washington | US employers added more jobs in June than forecast and the unemployment rate held near a five-decade low, signs of both strong demand and a tight labour market that will keep Federal Reserve officials tilted toward another jumbo interest-rate hike.
Nonfarm payrolls rose 372,000 last month following a revised 384,000 in May, a Labor Department report showed on Friday. The unemployment rate was unchanged at 3.6 per cent as the pool of available workers shrank, and wage growth remained firm.
The unexpected strength in hiring bucked forecasts for a slowdown and underscores the stark contrast between the resilience of the jobs market and fears of a recession. Meanwhile, a drop in the participation rate corroborates many complaints about worker shortages and the difficulty employers face filling millions of open positions -- a recipe for sustained wage pressures.
“The labour market is very hot,” Jeffrey Rosenberg, senior portfolio manager for systematic multi-strategy at BlackRock, said on Bloomberg Television. “The Fed has to do more.”
Atlanta Fed president Raphael Bostic said after the report that he backs raising the benchmark rate 0.75 percentage points at the central bank’s meeting later this month.
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The US Supreme Court went off the rails long before the Roe decision
Without the principle of stare decisis, the court is just nine costumed political appointees looking for the votes they need to get the outcomes they want.
Ezra Klein
Jul 8, 2022 – 4.21pm
Since the Dobbs decision [overturning the 1973 Roe v. Wade decision on abortion rights] came down, I’ve heard a lot of liberals lamenting the Republican theft of the Supreme Court. As the story goes, Mitch McConnell stole the majority when he refused to give Merrick Garland so much as a hearing in 2016, holding the vacancy open until Donald Trump took office in 2017.
McConnell’s justification was his deep commitment to small-d democracy: No seat should be filled in a presidential election year; the people should be given a chance to weigh in. In 2020, he lit that invented principle aflame when he rushed to confirm Amy Coney Barrett to replace Ruth Bader Ginsburg. The vote on Barrett took place eight days before Election Day.
McConnell gaslit the nation, but he didn’t steal any seats. Nothing he did was against the rules, which was why Democrats found themselves powerless to stop him. Liberals, in their anger, have too often ignored the logic of McConnell’s actions. He understood what too many have ignored: America’s age of norms is over. This is the age of power. And there’s a reason for that.
The Supreme Court has changed. In the 1950s and ’60s, you would have had a hard time inferring a justice’s political background from his votes, as an analysis by professors Lee Epstein and Eric Posner shows. In the ’90s, Byron White, a Democratic appointee, had a more conservative voting record than all but two of the Republican-appointed justices – Antonin Scalia and William Rehnquist. John Paul Stevens, an anchor of the court’s liberal wing until his retirement in 2010, was appointed by President Gerald Ford, a Republican.
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Why central banks need to be clearer on policy risks
Stephen Miller
Jul 8, 2022 – 3.24pm
The passing of peak pandemic anxiety and a pivot by central banks to a more concerted focus on fighting inflation appears to have unleashed a torrent of critical ink directed at central bank communications.
Much of the criticism is justified. Undoubtedly, central banks have been slow to recognise the persistence, magnitude and momentum in inflation and, more arguably, the diversity of its underlying causes. However, some of the criticism is of the 20/20, hindsight variety.
In part that reflects too high a level of expectation of what central banks can achieve. This is true not just of markets but governments, the media, and the populace at large.
Economics is a dismal science and to think that central banks can forecast economic variables with precision is fanciful. This also applies to the projected path of the cash rate.
It is true that central banks might have more effectively communicated the challenges of negotiating an uncertain world to their constituencies; markets, governments, the media and the populace at large, and perhaps central bank chiefs should desist from strident assessments of market-pricing of the policy rate.
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Australia must be the Pacific’s preferred security partner: Albanese
Andrew Tillett Political correspondent
Jul 8, 2022 – 5.14pm
Australia must be the preferred security partner of Pacific nations, Anthony Albanese said ahead of a crucial leaders’ meeting set to be dominated by talk of China’s designs on building influence in the region.
New Zealand Prime Minister Jacinda Ardern has also flagged the need for more frequent talks among Pacific members on security matters after the region was blindsided by the China-Solomon Islands security deal and Beijing’s sidelined bid for a 10-nation pact.
Mr Albanese and Ms Ardern held talks in Sydney on Friday ahead of next week’s Pacific Islands Forum leaders meeting in Fiji, where Australia and New Zealand are expected to take the leading role in warding off Chinese efforts to secure more security agreements.
The maneuvering ahead of the PIF came before a scheduled meeting between Foreign Minister Penny Wong and her Chinese counterpart, Wang Yi, on the sidelines of the G20 Foreign Ministers’ summit in Bali late on Friday night.
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Putin’s desperation on show as he slowly loses the financial battle
By Ben Marlow
July 8, 2022 — 7.00pm
The simplistic take on events in eastern and southern Ukraine is that Russian troops have finally gained the advantage over their battle-weary, vastly outgunned opposite numbers.
The capture of Lysychansk, a key strategic city in the Luhansk region of the breakaway industrial Donbas republic by Russian forces suggests that Moscow has been able to grind down spirited resistance, as Western officials begrudgingly acknowledge.
On the other hand, Vladimir Putin is still a long way away from taking the whole of the Donbas region, with half of the Donetsk area still under the control of tens of thousands of Ukrainian troops, and fighting in the east taking a heavy toll on his army.
An unnamed Western official claims that Russia is experiencing “very serious issues” with munitions stocks and morale, while long-range weapons systems are starting to make a “significant operational difference for Ukraine”, The Guardian reports. The intelligence presents a very mixed picture.
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Biden signs executive orders to safeguard abortion as frustration mounts
July 9, 2022 — 3.09am
Washington: US President Joe Biden has taken executive action to protect access to women’s health services amid growing frustration over his response to abortion rights being wound back in America.
Two weeks after the Supreme Court overturned Roe v Wade – removing the constitutional right to terminate a pregnancy in the US – Biden has used his presidential powers to try to mitigate some of the devastating consequences of the decision.
An executive order signed by the president on Friday (US time) will formalise instructions to the Department of Justice and the Department of Health and Human Services on protecting women’s access to reproductive health services where possible, including expanding access to abortion pills, contraception and family planning services.
Under the order, the federal government will also convene pro bono lawyers and public interest organisations to legally represent patients who want to travel across state lines to get an abortion, as well as the health providers who continue to offer services.
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Sri Lanka’s president, PM to resign after tumultuous protests
Krishan Francis
Jul 10, 2022 – 7.51am
Colombo | Sri Lanka’s president and prime minister agreed to resign Saturday after the country’s most chaotic day in months of political turmoil, with protesters storming both officials’ homes and setting fire to one of the buildings in a rage over the nation’s severe economic crisis.
Prime Minister Ranil Wickremesinghe said he will leave office once a new government is in place, and hours later the speaker of Parliament said President Gotabaya Rajapaksa would step down Wednesday.
Pressure on both men grew as the economic meltdown set off acute shortages of essential items, leaving people struggling to buy food, fuel and other necessities.
Police had attempted to thwart promised protests with a curfew, then lifted it as lawyers and opposition politicians denounced it as illegal. Thousands of protesters entered the capital, Colombo, and swarmed into Rajapaksa’s fortified residence.
Video images showed jubilant crowds splashing in the garden pool, lying on beds and using their cellphone cameras to capture the moment. Some made tea, while others issued statements from a conference room demanding that the president and prime minister go.
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I look forward to comments on all this!
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David.
