August 11, 2022 Edition
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It is hard to go past just how bad the level strategic stability in the world seems to have gone backwards with the war hardly stopping, Nancy Pelosi poking Chinese bears. The UK imploding economically and Europe on the brink of collapse.
I have never seen it this bas and many senior commentators agree. Really very worrying!
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Major Issues.
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Newspoll: Record electoral satisfaction rating for Anthony Albanese
July 31, 2022
Anthony Albanese has recorded the highest satisfaction rating for an incoming prime minister, delivering the Labor leader a commanding electoral footing on the back of a surge in popular support for the new government since the election.
An exclusive Newspoll conducted for the Australian, the first since the May 21 election, shows the Prime Minister’s satisfaction ratings at 61 per cent.
This is the strongest satisfaction rating, in a first post-election poll, since this question was first measured in 1985 during the Hawke government.
While former Labor prime minister Kevin Rudd’s net approval ratings were higher on coming into office, his satisfaction rating in the first post-election poll was lower at 59 per cent.
Scott Morrison recorded a satisfaction rating of 51 per cent following the 2019 election, while John Howard and Bob Hawke both recorded satisfaction levels in the high 50s.
Labor’s primary vote has also lifted almost five points on its election result of 32.6 per cent to 37 per cent, indicating a strong stamp of approval from voters on the performance of the government in its first two months in office.
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Skills quick fix is failing, vice chancellor says
Georgie Moore Breaking news reporter
Jul 31, 2022 – 5.15pm
Quick-fix attempts to address Australia’s skills shortage are falling short, the University of Sydney vice chancellor says, as he calls for more university places to fill long-term shortages across engineering, teaching, nursing and aged care.
Mark Scott said the election of the Albanese government had given the university sector the chance to “reset” its relationship with Canberra ahead of Labor’s employment summit in September.
“We want to be in the solutions business for the government,” Professor Scott told The Australian Financial Review. “We want to be partners with them in finding solutions to the great challenges we face in society.”
He was “heartened” by the “early signs of reciprocity around that sentiment” with the Albanese government.
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The market is in a ‘things can’t get any worse’ rally
The exuberant rally in financial markets over the past six weeks suggests that investors are more than happy to participate in the Fed’s ‘wishful thinking’.
Karen Maley Columnist
Aug 1, 2022 – 5.00am
One of the best stories about market timing centres on Chris Corrigan, the founder of investment banking and funds management powerhouse BT Australia.
Back in the early 1970s, BT Australia was a fledgling funds management operation with three employees. In early 1973, the extremely brave decision was taken to sell shares and to move heavily into cash.
“We were highly liquid through the bear market – most of 1973 and into September 1974,” Corrigan told The Australian Financial Review recently. “We were very substantially in cash.”
But then Corrigan decided it was time to change tack. “In a conversation with Rob [Ferguson] and others in September 1974, I remember saying that I think it has to be time to get back into the market because things can’t get any worse than this.”
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Three reasons inflation could be lower by next year
If it’s peaking, there are opportunities for investors in fixed income and long-duration equities, including quality tech stocks.
Scott Haslem Contributor
Aug 1, 2022 – 5.00am
Fears of a global recession and a housing market crash have dominated headlines after Australia’s 6.1 per cent inflation figure last week, our fastest pace in over 20 years. Fuelling the car, building a home (or just living in someone else’s) and keeping food on the table were all key drivers of the latest spike.
Of course, we are being outdone by the US, UK and Europe, where the inflation rates of about 9 per cent are their worst in over 40 years.
There is little doubt that central banks’ ultra-loose (money printing) policies were held “too stimulatory for too long” through 2021, underpinning a faster than expected post-pandemic surge in growth, both here and offshore.
That has stressed already tight global supply chains – making the cost of getting goods here expensive – as well as the jobs markets, pushing up the cost of labour and domestic goods and services. Australia has almost half a million job vacancies and the unemployment rate is already near a 50-year low of 3.5 per cent.
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The inflation fix: protect profits, hit workers and consumers
Economics Editor
August 1, 2022 — 4.55am
There’s a longstanding but unacknowledged – and often unnoticed – bias in mainstream commentary on the state of the economy. We dwell on problems created by governments or greedy workers and their interfering unions, but never entertain the thought that the behaviour of business could be part of the problem.
This ubiquitous pro-business bias – reinforced daily by the national press – is easily seen in the debate on how worried we should be about inflation, and in the instant attraction to the notion that continuing to cut real wages is central to getting inflation back under control. This is being pushed by the econocrats, and last week’s economic statement from Treasurer Jim Chalmers reveals it’s been swallowed by the new Labor government.
I’ve been arguing strongly that the primary source of the huge price rises we’ve seen is quite different to what we’re used to. It’s blockages in the supply of goods, caused by a perfect storm of global problems: the pandemic, the war in Ukraine and even climate change’s effect on meat and vegetable prices.
Since monetary policy can do nothing to fix supply problems, we should be patient and wait for these once-off, temporary issues to resolve themselves. The econocrats’ reply is that, though most price rises come from deficient supply, some come from strong demand – and they’re right.
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Voters like what they see in PM, but time is on Peter Dutton’s side
August 1, 2022
There is nothing especially surprising in the first post-election Newspoll.
The new government is riding high with a 56-44 per cent two party lead over the Coalition.
Using the first sitting week to introduce emissions reduction legislation as well as bills to begin paid domestic violence leave are by and large welcomed initiatives. Throw in the move to scrap the cashless debit card and Labor has had a good start.
The PM is popular – a sharp contrast to Scott Morrison’s final months in the job. Anthony Albanese’s approach to a voice to parliament has highlighted his warmth and his social conscience.
It is too early for the economic headwinds – rising inflation and interest rates – to impact the new administration. Voters understand Labor has inherited the current circumstances. They also understand the global economy is weak.
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Australia’s growing inflation challenge
Ronald Mizen Economics correspondent
Jul 29, 2022 – 4.21pm
For siblings Jonathan, Simon and Ryan Cosentino, food is the family business. In 2019, the trio opened a cafĂ©/deli/bakery, Via Porta, a brief stroll from the family home in Mont Albert in Melbourne’s east.
Like many budding cafe owners, the onset of the COVID-19 pandemic forced operations to be scaled back and expansion plans to be postponed. But the downtime had an upside. It allowed the family to refine the business model and lay plans for the post-pandemic world.
“We were given some time to really sit back and work on our model, and to come up with a growth plan and get the business in a position where it was scalable,” Jonathan Cosentino tells AFR Weekend.
Businesses such as Via Porta are on the front line of the economy, which the government and the Reserve Bank of Australia are attempting to steer along a narrow path to a soft landing as inflation skyrockets and labour is in short supply.
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https://www.theaustralian.com.au/nation/politics/pork-barrelling-corrupt-conduct-says-nsw-icac-report/news-story/1770178bc9f7543d717c2847e0436f26
Pork barrelling ‘corrupt conduct’, says NSW ICAC report
8:58PM August 1, 2022
Pork barrelling could be considered corrupt conduct if taxpayers’ dollars are used by ministers for “political advantage” or to unjustifiably favour marginal electorates, following a landmark NSW ICAC report.
In a conclusion that could have major implications for the Albanese government’s nascent federal integrity watchdog, the Independent Commission Against Corruption’s Operation Jersey report concluded that pork barrelling could amount to a substantial breach of the code of conduct for ministers and MPs.
The findings are the first time an anti-corruption body in Australia has determined pork barrelling could constitute corrupt conduct, and comes after the NSW ICAC chief commissioner blasted a major government grants program created by former premier Gladys Berejiklian.
A spokesman for Attorney-General Mark Dreyfus flagged similar measures could be implemented at the federal level when asked on Monday about the ICAC findings, saying the Albanese government would not limit the investigative powers of the integrity commission.
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https://www.afr.com/chanticleer/why-a-250b-wave-of-mortgage-pain-may-be-coming-20220802-p5b6jj
Why a $250b wave of mortgage pain may be coming
Veteran bank analyst Jon Mott says even borrowers with full-time jobs might not be able to escape mortgage delinquencies as sharp rate rises collide with huge housing debt.
Updated Aug 2, 2022 – 12.37pm, first published at 11.37am
Up to $250 billion of mortgages taken out in the last few years could be at risk of delinquency if the RBA increases the cash interest rate to 3 per cent as expected, according to veteran banking analyst Jon Mott of Barrenjoey. And not even borrowers with full-time jobs will be immune.
While rising interest rates will provide a boost to banks’ net interest margins in the next few years, Mott argues that the speed at which interest rates have risen since May will create much more meaningful issues for bank profitability in the 2023 and 2024 financial years.
Mott has lifted his earnings forecasts for the banks in the current financial year by 2 per cent thanks to the expansion in net interest margin, but has offset these gains with cuts to earnings in 2023 and 2024 as slowing credit growth and rising bad debts start to bite.
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We're facing most 'complex environment' in 70 years: PM
Anthony Albanese says Australia is facing the most “complex strategic environment” in over 70 years, arguing it is incumbent on the government to “take stock” of the Defence Force as he announces a broad-sweeping review of the nation's defence capabilities.
The review, to be conducted by a former ADF chief, Angus Houston, and a former Labor defence minister, Stephen Smith, will be the most comprehensive reassessment of Defence in 35 years.
The Prime Minister said the review will seek to ensure the ADF is “fit for purpose” and delivers the greatest return on investment, saying that many current defence investment programs are over budget and delayed.
“I'm pleased to launch the defence strategic review which will ensure that the Australian Defence Force is well positioned to meet the nation's security challenges over the next decade and beyond,” Mr Albanese said.
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https://www.afr.com/politics/federal/worst-strategic-circumstances-prompt-review-20220803-p5b6vz
‘Worst’ strategic circumstances prompt Defence Force review
Andrew Tillett Political correspondent
Aug 3, 2022 – 3.47pm
Former military chief Angus Houston says the deteriorating strategic environment facing Australia is the worst he has seen in his lifetime as he embarks on a sweeping review of the Defence Force to prepare it for the potential of conflict with China within the next decade.
Sir Angus, who was chief of the Defence Force between 2005 and 2011, offered a grim assessment as “circumstances have changed dramatically over the recent past”.
“A land war in Europe, all sorts of issues in north-east Asia, particularly around Taiwan, East China Sea, issues in South-East Asia and issues up on the Himalayan border and northern India,” Sir Angus said.
“We also have disruptive technologies coming into play. It’s a fast-changing environment. And it’s absolutely imperative that we review the current strategic circumstances which I rate the worst I have ever seen in my career and lifetime.”
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https://www.afr.com/policy/economy/what-we-learnt-from-overdoing-the-stimulus-20220802-p5b6lc
What we learnt from overdoing the stimulus
In hindsight, the RBA and Treasury’s timely, targeted, response to the pandemic should have been able to be tweaked as the crisis unfolded.
John Kehoe Economics editor
Aug 3, 2022 – 2.08pm
As inflation soars and interest rates rise sharply, it’s becoming clearer that governments and central banks overstimulated for too long in response to the pandemic.
While we must learn from errors, this ex-post observation is not necessarily a criticism of their actions made in highly uncertain times.
“Hindsight is forever 20/20, but foresight is legally blind,” the “father” of value investing, Benjamin Graham, famously observed.
Or as psychologist Daniel Kahneman says in his book Thinking, Fast and Slow, we often suffer hindsight bias and the illusion that past events were as predictable at the time they happened as they seem now.
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Defence review a nice idea but action is needed now
Andrew Tillett Political correspondent
Aug 3, 2022 – 10.10am
The defence strategic review announced by the Albanese government will allow Defence Minister Richard Marles to put an early stamp on the portfolio.
But its most important task will be to fix the disconnect between growing strategic urgency – read China’s belligerence – and the languid pace of Australia’s arms build-up.
The 2020 defence strategic update revealed an uncomfortable truth – that the 10-years warning time of major conflict that Australian military planners had historically relied on had dramatically shrunk because of China’s militarisation and encroachment in the South China Sea.
And in 2021, the outgoing head of the US Indo-Pacific Command, Philip Davidson, warned that China could invade Taiwan within six years, the most likely flashpoint for major power conflict in the region. US House Speaker Nancy Pelosi’s visit to Taiwan this week is a reminder of the sensitivities.
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‘Abject failure’ of Liberals on display around the country
The protracted Barilaro affair is another shocking example of continuing misjudgments by Liberal leaders and parties.
Jennifer Hewett Columnist
Aug 3, 2022 – 4.32pm
So much for the last hope of the side in terms of Liberal government.
The protracted debacle of the Barilaro affair in NSW is far more damaging than the Perrottet government’s clumsy mishandling of a classic “jobs for the boys” scandal.
It is another shocking example of continuing misjudgments by Liberal leaders and parties around the country – translating into abject failure to connect with the voters they need to win government.
Of course, political longevity is inherently unpredictable – as the turnover of Australia prime ministers has repeatedly demonstrated over the past 15 years. It’s always possible the Albanese government will wilt under the economic challenges it faces despite the voters’ decisive farewell to the Morrison era.
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Australia needs a national security strategy. Now
Military leader and strategist
August 4, 2022 — 5.00am
The case for a national security strategy has been boosted by a new CSIRO report which makes for eyebrow-raising reading.
The idea of a national security strategy has been kicking around Canberra and academic circles for some time but has been resisted by previous governments. However, the number and size of the human and natural challenges facing Australia now makes this strategy, and its thorough implementation, a necessity. While this week’s announcement by the government of a defence review is necessary and welcome, it only addresses part of the national security dilemma facing Australia.
Titled Our Future World, the report is a timely document that highlights issues that have a “trajectory of change likely to have a substantial and transformative impact on individual, organisations and societies”.
It describes seven mega trends – climate change, autonomy, health imperatives, geopolitics, the digital economy, the global push to net zero, and unlocking human potential in decision-making.
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Deficit to rise by billions as Chalmers trims productivity assumptions
Aug 3, 2022 – 1.00pm
The medium-term productivity assumptions underpinning the federal budget forecasts have been downgraded from 1.5 per cent to 1.2 per cent, worsening the budget deficit by billions of dollars and potentially adding about $50 billion to the government debt by 2033.
Treasurer Jim Chalmers confirmed the downgrading of the Coalition government’s productivity growth assumption, as reported by The Australian Financial Review last week, to give “an honest assessment of Australia’s economic circumstances and challenges”.
“Australians are up for hearing real talk about where our country is positioned, so we can have an honest and serious conversation about where we need to go next. This wasn’t the previous government’s approach, but it will be our approach,” he said.
“Australians are paying the price for nearly a wasted decade on productivity under the Liberals, and the cost of that neglect will be reflected in the budget.
“In their budgets, they assumed long-term productivity of 1.5 per cent. They never got near it but budget after budget, they pretended they would and hoped no one would notice.”
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Nuclear subs must be included in review of defence spending
August 4, 2022 — 5.54pm
The war in Ukraine can seem like a battlefield from World War II but look closer and it shows how the nature of conflict has changed.
Russia has an overwhelming preponderance of WWII-style weapons, such as tanks and planes, and it has struggled to overcome Ukraine’s troops partly because they have learned to use 21st century weapons such as unmanned drones and precision-guided anti-tank and anti-aircraft weapons.
This evolution is something that Australia must bear in mind in the urgent review of military spending which Defence Minister Richard Marles announced on Wednesday.
The review has been told to make sure that the $46 billion annual defence budget is keeping up to date with “military modernisation and technology disruption”.
The other major reason for the review, which will be led by former Labor defence minister Stephen Smith and former head of the ADF Angus Houston, is the increased likelihood of “state-on-state conflict”.
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RBA tips jobless rate to fall to 3.4pc before rising
Jonathan Shapiro Senior reporter
Aug 5, 2022 – 11.44am
The Reserve Bank has outlined the challenge it expects to face to counter decade-high levels of inflation, forecasting high prices throughout next year and an unemployment rate at or below 4 per cent until the end of 2024.
In its quarterly statement of monetary policy, the RBA offered more detail about its economic forecasts that confirmed significant increases in its outlook for inflation compared with May.
On Tuesday, the central bank said the consumer price index would reach 7.75 per cent by the end of the year and a little more than 4 per cent by the end of 2023.
The updated forecasts show the RBA expects the CPI to remain high during the first half of 2023 at 6.25 per cent on a yearly basis, and 4.25 per cent by the end of next year. It would then fall to 3.25 per cent by June 2024 and 3 per cent by the end of that year.
That compares with its May forecasts of a CPI reading of 5.9 per cent by the end of the year, 4.3 per cent by June 2023 and below 3 per cent by the end of 2024. The RBA forecasts its preferred measure of inflation – the trimmed mean – to reach 6 per cent by the year-end, 5 per cent by mid-next year, 3.75 per cent by December 2023 and 3 per cent by December 2024.
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Higher interest rates are creating opportunities in bonds
While higher interest rates are crushing the housing market, they are creating attractive high-yield investment prospects.
Christopher Joye Columnist
Aug 5, 2022 – 10.55am
While the Reserve Bank of Australia raised rates by another 50 basis points this week for a record third consecutive meeting in a row, long-term interest rates actually declined on the day as investors priced in a slightly more anxious, and data-dependent, shift in tone. (There was no chance of the 75-basis point increase predicted by some pundits.)
The essential dilemma is that the RBA is shadow-boxing against a highly nebulous threat – permanently elevated inflation expectations.
If households and businesses were to become entrenched in the view that Australia’s underlying consumer price pressures will remain stubbornly above the RBA’s 2-3 per cent target band, this would drive actual inflation outcomes higher, which would in turn warrant much more aggressive interest rate increases.
The RBA is, therefore, once again waging a pre-emptive monetary policy campaign against an unknowable future risk that relies heavily on its fragile forecasting process.
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https://www.afr.com/policy/foreign-affairs/our-lessons-from-ukraine-and-taiwan-20220804-p5b76k
Australia’s lessons from Ukraine and Taiwan
If the point is ultimately to make the world a better, safer, saner place, that demands engagement – and to recognise there can be a wrong and a right side of history.
Rory Medcalf Geopolitical analyst
Aug 5, 2022 – 12.46pm
This week, as China signalled its armed aggression in our Indo-Pacific region, Ukraine President Volodymyr Zelenskyy was conveying the awful realities of warfare directly to young Australians.
It was authentic democratic leadership: a readiness to be self-aware and utterly committed, engaging across geography and across generations.
In an extraordinary address to the Australian National University – joined by thousands of students on more than 20 campuses around the country – Zelensky had a confronting message.
Here was a wartime leader giving an immediate window onto his people’s world of horror and heroism in the face of Russia’s illegal and atrocity-riddled invasion. Things once unimaginable, he said, were now commonplace.
At one level, it felt surreal: a violent world away from our accustomed sense of sanctuary, whether as Australians on this peaceful island continent or as scholars whose habit is to study and teach this century’s great challenges at objective distance.
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‘Extraordinary setback’: Real wages to keep falling as inflation, rates hit households
By Shane Wright and Rachel Clun
Updated August 5, 2022 — 6.42pmfirst published at 12.21pm
Real wages could drop to levels last seen in 2009, forcing households to cut spending to make ends meet, as new forecasts flag high inflation and rising interest rates over the next two years.
In its most recent monetary policy update, released on Friday, the RBA admitted low-income households might have to rein in spending as they struggled to deal with soaring prices for necessities such as food and petrol. The bank revealed it expects real disposable household income to fall for almost a year and a half, including a 3.1 per cent drop in the June quarter of next year.
Unions and economists urged the federal government to fast-track policies to protect the nation’s most vulnerable households from the cost-of-living crisis.
IFM Investors’ chief economist, Alex Joiner, said the revised forecasts showed real wages falling to where they were in 2009, describing the situation as an “extraordinary setback” for the nation’s households.
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Six ways Australia can get real about boosting our defence forces
12:00AM August 6, 2022
The Albanese government’s announcement of a new defence strategic review, to be led by former defence minister Stephen Smith and former chief of defence force Sir Angus Houston, comes not a minute too soon to deal with the darkening strategic environment. It does not matter that the review is to look to “2032-33 and beyond” – the real challenge is to see what can be done to deter or prevail in an Indo-Pacific conflict with China in perhaps three to five years.
Why a war in the mid-2020s? That’s the period when many strategic analysts across the West’s national security establishment believe the People’s Liberation Army will be at its strongest relative to its opponents, when the democracies will be at their distracted nadir, and Xi Jinping will be at the zenith of his personal power in his mid-70s.
Xi sees himself as a world historical figure taking advantage of America’s terminal decline to realise the great China dream of global dominance. He is not going to step away from power – or, more likely, have power taken from him – wondering if he could have forcefully put Taiwan under Communist Party control.
Forget the AUKUS promise of nuclear-powered submarines to be delivered in the later 2030s. By then the Chinese Communist Party will be a relic of history or dictating to the Indo-Pacific.
For several years now Australia has been the sand in Beijing’s gears, showing the world that appeasement, or “nuanced diplomacy” as its advocates call it, is not the solution. Working with like-minded allies, building strong military capabilities and giving our Southeast Asian and Pacific Island neighbours better options for co-operation will deter China.
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COVID-19 Information.
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A quiet week but it has not gone away!
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Climate Change.
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https://thenewdaily.com.au/finance/2022/08/01/labor-climate-change-kohler/
6:00am, Aug 1, 2022 Updated: 8:03pm, Jul 31
Alan Kohler: Labor’s climate change safeguard mechanism is going to be a minefield
Adam Bandt and the Greens won’t have to worry too much about arguing alone against new gas projects and coal mines for long – every existing mine and big business will soon join them in the fight.
That’s because the Climate Change Bill 2022 introduced into Parliament last week makes it clear that 43 per cent by 2030 and net zero by 2050 will be firm national targets.
If big new emitters raise the starting point, as they would, everyone else will have to cut emissions faster and further than they would have.
When the Reputex modelling for Labor’s ‘Powering Australia’ plan, as it was called, was released in December, 43 per cent was a “projection”, the calculated outcome of Labor’s plan.
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Treasurer puts gas companies on notice as supply shortfall looms
By Mike Foley
August 1, 2022 — 9.26am
Treasurer Jim Chalmers has put gas exporters on notice over a looming shortfall, urging them to “do the right thing by Australians” and ensure they offer any available supply to local companies that are struggling under sky rocketing energy prices.
The warning follows the release of the Australian Competition and Consumer Commission’s latest report from its ongoing inquiry that Chalmers said “highlights some alarming features of the east coast gas market”.
“It projects a significant gas shortfall for next year unless gas producers supply more of their uncontracted or excess gas to the domestic market,” Chalmers said.
East coast gas prices are soaring on the back of a global energy crunch that has been intensified on a ban on Russian energy exports, which was imposed after Vladimir Putin invaded Ukraine.
Australia’s gas exporters are making record profits and many local companies are struggling under the soaring prices.
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What is going on in Australia’s gas market explained
The competition regulator has effectively accused big gas exporters of failing to supply enough gas to the domestic market. Gas producers disagree. Here’s what you need to know.
Mark Ludlow and Angela Macdonald-Smith
Updated Aug 1, 2022 – 6.31pm, first published at 4.01pm
The Australian Competition and Consumer Commission has effectively accused big gas exporters of failing to supply enough gas to the domestic market.
It wants the federal government to stop the exporters selling “excess” gas – or gas that isn’t already contracted to overseas buyers – into offshore markets next year, saying this will lead to a shortfall in domestic supplies.
But big gas producers say there won’t be a shortage of supply next year and that any new regulations will risk Australia’s reputation as a low-risk destination for foreign investment. Here’s what you need to know about what is happening in Australia’s gas market.
Australia has abundant gas resources
The east coast of Australia is forecast to produce 1981 petajoules (PJ) of natural gas in 2023.
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Gas giants hold emergency talks as minister threatens intervention
By Nick Toscano and Mike Foley
August 2, 2022 — 3.54am
Australia’s three largest east-coast gas exporters have held an emergency meeting to discuss boosting domestic supplies after federal Resources Minister Madeleine King threatened unprecedented export controls if the industry fails to act first.
Representatives from the three Queensland producers – Origin Energy-backed APLNG, Shell’s QCLNG joint venture and Santos’ GLNG – joined a conference call on Monday afternoon, according to senior gas industry sources familiar with the talks.
The meeting was convened by their industry group, the Australian Petroleum Production and Exploration Association, and discussed the drafting of a non-binding “heads of agreement” to take to government in a bid to formalise their commitment to plugging a shortfall predicted to hit the eastern seaboard next year.
In its latest report, the Australian Competition and Consumer Commission said a shortage of 56 petajoules was now expected in 2023, equivalent to 10 per cent of domestic demand. The shortfall is the largest since the ACCC began its inquiry into the east-coast gas market in 2017, and has intensified its warnings over rising costs for households with gas heaters and gas-reliant manufacturers that are already struggling to remain viable.
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Pull the gas trigger - and hit producers with a super profits tax too
The ACCC recommendations are a mixture of the good, the bad, and the OK. The federal government should implement all of them and further.
Tony Wood Contributor
Aug 2, 2022 – 11.11am
The stated objective of Australia’s national gas market is to supply natural gas services for the long-term interests of consumers. This is not the market described in the latest, six-monthly Gas Inquiry Report released on Monday by the Australian Competition and Consumer Commission (ACCC).
The report identifies serious concerns in four areas: a potential east-coast supply shortfall in 2023, high and increasing domestic prices, ineffective competition in pipeline transmission and between gas producers, and breaches of compliance with competition legislation.
In the face of these concerns the ACCC’s recommendations are a mixture of the good, the bad, and the OK. The federal government should implement the recommendations, and go further.
The ACCC report is focused on the east coast market in 2023. LNG producers are expecting to produce 167 petajoules more than required to meet their long-term contracts. If the producers decide to export all the surplus, the east-coast gas market will be undersupplied by 56 petajoules (10 per cent of demand).
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Record coral cover for Great Barrier Reef: Australian Institute of Marine Science
12:00AM August 4, 2022
The Great Barrier Reef has set a new record for hard coral cover over two-thirds of its 2300km length, results of the Australian Institute of Marine Science official long-term monitoring program show.
The annual survey found coral cover in the northern and central zones of the Reef, stretching from Cape York to Mackay, had increased despite another episode of bleaching this year.
Coral cover in the southern section of the Reef which stretches from Mackay to Bundaberg had reduced slightly due to a continued outbreak of crown of thorns starfish, but coral cover was comparable to the northern and central regions at 34 per cent.
The AIMS long-term monitoring program has been going for 36 years and is the most rigorous and detailed survey of Reef health.
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Royal Commissions And The Like.
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Urgent review of Australia’s defence ordered as security threats grow
By David Crowe
August 2, 2022 — 10.30pm
Australians will be warned of the risk of state-on-state conflict in an urgent review of the nation’s defence amid fears that $44.6 billion in annual spending is not doing enough to prepare the country for growing threats to its security.
Defence Minister Richard Marles will call in two external experts to conduct the snap review while the government considers pivotal decisions on nuclear submarines, a fleet of guided-missile destroyers and plans to build a bigger army.
The review, to be led by former Labor defence minister Stephen Smith and former defence force chief Sir Angus Houston, will run in parallel to the deliberations of a working group into the new submarine fleet, set up under the AUKUS alliance struck with the United States and United Kingdom last year.
With the Russian invasion of Ukraine raising concerns that China might use force against Taiwan, the review will question the spending priorities on all major defence programs and whether the outlays are giving the country the security it needs.
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Revealed: Defence force overhaul for decade of challenges
10:30PM August 2, 2022
Australia’s Defence Force will be reshaped under an ambitious review to be announced on Wednesday by Anthony Albanese and the Defence Minister.
The review, to be conducted by a former Australian Defence Force chief, Angus Houston, and a former Labor defence minister, Stephen Smith, will be the most comprehensive reassessment of the ADF in 35 years, taking into account the risk of “state-on-state conflict”. It will assess and make recommendations on the ADF’s “structure, posture and preparedness” for 10 years, starting in 2023.
Force structure means main defence assets, such as submarines, frigates and fighter jets. Force posture refers to where these assets are stationed.
The reassessment could provide the Albanese government with the impetus to scrap, or at least scale back, defence investments that have limited relevance to Australia’s growing maritime security challenges brought about by China’s massive military expansion and newly aggressive posture.
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National Budget Issues.
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RBA must not repeat the mistakes of two decades ago
Interest rates have to rise. But central banks must ask themselves again if they are targeting the right aspects of inflation for a changing era.
Warwick McKibbin Contributor
Updated Aug 1, 2022 – 2.07pm, first published at 1.48pm
The review of the RBA announced by the Treasurer is a welcome development. Unfortunately, the review is being undertaken when Australia faces difficult economic conditions.
It would have been better if Australia had already adopted the international model of periodically reviewing the central bank.
In New Zealand, it is legislated that the RBNZ undertakes a review of its performance every five years, which is then sent to expert international reviewers for assessment.
This approach is a normal review process rather than a response to public outcry in the face of major policy shifts and significant global economic shocks.
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https://www.afr.com/policy/economy/july-inflation-gauge-chalks-up-20-year-record-20220801-p5b66t
July inflation gauge chalks up 20-year record
Ronald Mizen Economics correspondent
Aug 1, 2022 – 5.55pm
The pace of inflation accelerated in July, with the Melbourne Institute prices gauge rising 1.2 per cent, the fastest rate in two decades, which stemmed in part from higher energy prices flowing through to household budgets.
Some relief is trickling through with national average petrol prices on the decline last week, falling 11.2¢ a litre to $1.81.
That relief will be temporary, however, with the Reserve Bank of Australia on Tuesday expected to raise its overnight cash rate by a half a percentage point for the third month in a row.
“The sharp rise in the [Melbourne Institute] monthly inflation gauge for July means it is all but certain the Reserve Bank will lift rates at least by 50 basis points tomorrow,” CommSec chief economist Craig James said.
That would take the cash rate to 1.85 per cent from May’s record low 0.1 per cent low, the fastest pace of tightening in almost 30 years.
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https://www.rba.gov.au/media-releases/2022/mr-22-21.html
Statement by Philip Lowe, Governor: Monetary Policy Decision
Number 2022-21
Date 2 August 2022
At its meeting today, the Board decided to increase the cash rate target by 50 basis points to 1.85 per cent. It also increased the interest rate on Exchange Settlement balances by 50 basis points to 1.75 per cent.
The Board places a high priority on the return of inflation to the 2–3 per cent range over time, while keeping the economy on an even keel. The path to achieve this balance is a narrow one and clouded in uncertainty, not least because of global developments. The outlook for global economic growth has been downgraded due to pressures on real incomes from higher inflation, the tightening of monetary policy in most countries, Russia's invasion of Ukraine and the COVID containment measures in China.
Inflation in Australia is the highest it has been since the early 1990s. In headline terms, inflation was 6.1 per cent over the year to the June quarter; in underlying terms it was 4.9 per cent. Global factors explain much of the increase in inflation, but domestic factors are also playing a role. There are widespread upward pressures on prices from strong demand, a tight labour market and capacity constraints in some sectors of the economy. The floods this year are also affecting some prices.
Inflation is expected to peak later this year and then decline back towards the 2–3 per cent range. The expected moderation in inflation reflects the ongoing resolution of global supply-side problems, the stabilisation of commodity prices and the impact of rising interest rates. Medium-term inflation expectations remain well anchored, and it is important that this remains the case. The Bank's central forecast is for CPI inflation to be around 7¾ per cent over 2022, a little above 4 per cent over 2023 and around 3 per cent over 2024.
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https://www.afr.com/policy/economy/reserve-bank-lifts-cash-rate-to-1-85pc-20220802-p5b6gz
RBA raises rates to 1.85pc, lowers growth outlook
Ronald Mizen Economics correspondent
Aug 2, 2022 – 2.34pm
The Reserve Bank of Australia is forecasting higher inflation and weaker economic growth this financial year and the next, and warned the current 48-year low 3.5 per cent unemployment rate would rise as a result.
The RBA on Tuesday lifted the official interest rate by 0.5 percentage points for a third consecutive month, taking the cash rate to 1.85 per cent, in an attempt to run down growing inflation.
If fully passed on to borrowers, the recent series of rate rises adds $472 to monthly repayments for a typical $500,000 mortgage, $708 for $750,000, and $944 a month for a household with a $1 million loan.
Financial markets are pricing in a cash rate at 3 per cent by December and a peak at slightly above 3 per cent by March before edging lower later in 2023 and early in 2024 as higher borrowing costs stymie rising costs.
Despite growing criticism, RBA governor Philip Lowe said rising interest rates were necessary to bring inflation back to the 2 per cent to 3 per cent target and to create a sustainable balance of demand and supply.
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https://www.afr.com/policy/economy/rba-treads-narrow-uncertain-path-on-rates-20220802-p5b6jr
RBA treads narrow, uncertain path on rates
The Reserve Bank’s latest rate rise was not a surprise, with more expected. But household behaviour and the impact on the economy is far less formulaic than central bank forecasts suggest.
Jennifer Hewett Columnist
Aug 2, 2022 – 4.29pm
That makes four - and counting. The Reserve Bank’s decision to raise the cash rate by another 0.5 of a percentage point was anything but a surprise to the market or aggrieved mortgage holders. It’s what happens in coming months that is far more of an economic conundrum.
Governor Philip Lowe politely describes the latest rise as another step in the normalisation of monetary conditions in Australia with the bank expecting to take further steps in the months ahead. But he insists it is “not on a pre-set path”.
“The size and timing of future interest rate increases will be guided by the incoming data and the board’s assessment of the outlook for inflation and the labour market,” he said in his monthly statement.
That assessment is definitely more a matter of art than science, no matter the detailed forecasts that buttress any decision. Exhibit A is the RBA’s “embarrassing” gaffe in persistently expressing its belief the cash rate would remain at 0.1 per cent until 2024. Try explaining that to a recent home buyer feeling the pain of a 1.85 per cent cash rate and the near certainty of sharper pain to come.
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Reserve Bank drains a witches’ brew of economic woes and orders another round
By Shane Wright
August 2, 2022 — 6.28pm
If the Reserve Bank and the Albanese government thought economic conditions would get easier any time soon, they will be sorely disappointed.
The RBA’s decision to lift the official cash rate for a fourth successive month to 1.85 per cent was entirely expected.
Financial markets, economists and Treasury boffins believed another 0.5 percentage point lift in rate increase was a foregone conclusion as the RBA struggles to get inflation under control.
The country is now in the grips of the most aggressive tightening of monetary policy since a band out of Newcastle called Silverchair delivered the song Tomorrow to the nation.
Almost as unexpected as Silverchair’s success in 1994 was the commentary on Tuesday from RBA governor Phil Lowe explaining the bank’s thinking about its rate rise.
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https://thenewdaily.com.au/finance/finance-news/2022/08/04/government-tax-cuts-alan-kohler/
6:00am, Aug 4, 2022 Updated: 6:42pm, Aug 3
Alan Kohler: Labor must abandon the Stage 3 tax cuts. Big government must be funded
The anger in Australia over the behaviour of the natural gas cartel, described in infuriating detail this week by the ACCC, is another symptom of the growing global disillusionment with free markets.
The global energy crisis caused by the Russian invasion of Ukraine on top of the growing evidence of the impact of global warming is leading to more and more calls for much greater government intervention.
In Europe, where gas prices have already increased 52 per cent with more rises certain, politicians are under pressure to find solutions that the market is unable to provide.
This week I spoke to Kevin Bailey, Australian chairman of a small locally listed company called Po Valley Energy, which own gas fields in the north of Italy and the Adriatic Sea. After years of fighting environmentalists and the Italian bureaucracy to start producing gas, suddenly the government in Italy, egged on by Germany, is falling over itself to help Bailey get production going.
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Interest bill on debt could be $75b by 2030
Ronald Mizen Economics correspondent
Aug 5, 2022 – 11.58am
The yearly interest bill on more than $1 trillion in federal government debt could quadruple by the end of this decade if the Reserve Bank’s official cash rate returns to pre-GFC levels, the Institute of Public Affairs has warned.
In a push to put debt and deficit reduction at the centre of the economic debate, the conservative free-market think tank said a 5 per cent overnight cash rate by 2030 could push Australia’s annual interest bill to $75 billion.
Although most economists expect the cash rate to steady between 2.5 per cent and 3.5 per cent in the current tightening cycle, the IPA said even with a 2 per cent cash rate, annual debt interest payments could edge to $44 billion.
An annual interest bill of $75 billion is triple the current forecast of $25.6 billion by 2025-26; it is more than double government spending on aged care in 2022-23; and triple spending on schools and students in the same year.
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Health Issues.
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CSL clears hurdles to settle $16.4b Vifor deal
By Emma Koehn
August 2, 2022 — 9.34am
CSL will complete its biggest purchase to date after receiving regulatory clearance to buy Swiss pharmaceuticals maker Vifor in a mammoth $16.4 billion acquisition.
The biotech giant told investors on Tuesday morning that it will have cleared all required hurdles for the deal by midnight US time and that the deal is expected to be complete on August 9.
CSL surprised the market last December when it revealed its pitch to buy Vifor, which specialises in iron deficiency treatments and treatments for kidney disease. This focus is different from CSL’s core product suite, which includes vaccines and blood plasma products.
CSL chief executive Paul Perreault said last year that Vifor’s pipeline would complement his company’s existing product portfolio and the expansion in focus made a lot of sense for CSL.
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Bulk billing ‘on verge of collapse’
6:43AM August 5, 2022
Doctors have warned that the nation is facing the “collapse of bulk billing” in general practice, with many surgeries forcedto charge gap fees to all patients including pensioners as clinics face a financial “tipping point” pushing some towardsgoing broke.
A large proportion of general practices that had offered bulk-billing have begun writing to patients to advise they can no longer continue such consultations.
“It’s very widespread,” said Royal Australian College of General Practitioners vice-president Bruce Willett. “It’s now got to a point where practices can no longer sustain bulk billing.”
The crisis has prompted seven of the largest corporate medical centre operators in the country to form a new alliance in an attempt to address the decline of general practice, which federal Health Minister Mark Butler has described as a “terrifying trend”.
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International Issues.
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Earth records shortest day, putting clocks (slightly) out of time
By Sarah Knapton
August 1, 2022 — 8.00am
London: If it feels like there is never enough time in the day, there may be a reason.
Earth had its shortest day since records began last month, with 1.59 milliseconds shaved off the usual 24 hour spin on June 29 - raising the prospect that a negative leap second may soon be needed to keep clocks matched up with the heavens.
Usually, Earth’s average rotational speed decreases slightly over time and timekeepers have been forced to add 27 leap seconds to atomic time since the 1970s as the planet slows.
But since 2020, the phenomenon has reversed with records being frequently broken over the last two years. The previous fastest day was -1.47 milliseconds under 24 hours on July 19 2020 and it was almost broken again on July 26, when the day was -1.50 milliseconds shorter. While the effect is too small to be noticeable by humans, it can accumulate over time, potentially impacting modern satellite communication and navigation systems which rely on time being consistent with the conventional positions of the Sun, Moon and stars.
It means that it may soon be necessary to remove time, adding a negative leap second, and speeding up global clocks for the first time ever.
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Al-Qaeda leader Zawahiri killed in CIA drone strike
Idrees Ali and Jeff Mason
Aug 2, 2022 – 8.01am
Washington | Al Qaeda leader Ayman al-Zawahiri was killed in a US strike in Afghanistan over the weekend, President Joe Biden said on Monday, the biggest blow to the militant group since its founder Osama bin Laden was killed in 2011.
Zawahiri, an Egyptian surgeon who had a $US25 million ($36 million) bounty on his head, helped coordinate the September 11, 2001, attacks that killed nearly 3000 people.
US officials, speaking on the condition of anonymity, said the United States carried out a drone strike in the Afghan capital Kabul on Sunday morning at 6:18 am local time.
“Now justice has been delivered, and this terrorist leader is no more,” Biden said in remarks from the White House. “We never back down.”
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Why Pelosi’s proposed Taiwan visit is ‘playing with fire’
China claims Taiwan, a self-governing island democracy, as its territory and has vowed to take it back — by force, if necessary. Here is a look at the issues around Pelosi’s proposed visit.
Jane Perlez
Aug 2, 2022 – 8.16am
Taiwan, an island of 23 million people located 128 kilometres off the coast of China, has long been a point of tension between Washington and Beijing. Now those tensions are at a new high.
US Speaker Nancy Pelosi is on a tour of several Asian nations that is expected to include a stop in Taiwan on Wednesday night. Pelosi would be the highest-level American official to go to the island since 1997, when Newt Gingrich made a visit.
China claims Taiwan, a self-governing island democracy, as its territory and has vowed to take it back – by force, if necessary.
In his call with President Joe Biden last Thursday, China’s leader, Xi Jinping, sharply warned the US against intervening in the dispute. Beijing has vigorously protested Pelosi’s potential trip there, warning of unspecified consequences for the US. He told Biden not to “play with fire”, ominous language that he also used in a call in November.
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Eagle eyes are on Taiwan, but is China distracting us from a ‘second Pearl Harbour’?
Political and international editor
August 2, 2022 — 5.00am
The first sign that it’s started is when the world’s internet fails and showers of shooting stars fill the sky.
Vital undersea cables have been cut by specialist subs and ships and intensive cyberattacks are under way; the shooting stars are satellites falling to earth.
With surveillance satellites destroyed, they can’t detect the launch of China’s missiles. The first wave slams into US air force and navy bases across the Western Pacific, almost simultaneously.
Beijing has not used its nuclear warheads, but it doesn’t need to. Its high-explosive missiles are accurate to within 10 metres through mid-course correction.
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Why Biden’s surprise political win is also good for the economy
The recent success of the Chips and Science Act shows that the US can still govern itself, and it could save the country hundreds of billions of dollars.
Rana Foroohar Contributor
Aug 2, 2022 – 12.35pm
Joe Biden’s political prospects have just built back better. Last week’s passing of the Chips and Science Act by Congress breathed new life into the White House’s plans for industrial policy and support for US manufacturing.
Meanwhile, the famously intransigent West Virginia Democrat Joe Manchin, the king of coal country, performed a shocking turnabout on climate change. He agreed to back clean energy investment and healthcare subsidies to be paid for, in large part, by a 15 per cent minimum tax on big corporations.
Thus, in a week that was even more economically dismal than usual – featuring the Federal Reserve’s latest rate increase to battle inflation, dismal consumer confidence numbers and news that the US was now in a technical recession – Biden managed to score a big political win by doing something almost unheard of in Washington these days: orchestrating compromise. His win matters politically. The question now is what it might mean economically.
Although the budget bill is yet to pass, and the Senate semiconductor support comes with far fewer strings attached for business than progressives would have liked (Senator Bernie Sanders has labelled it corporate “extortion”), there is a case to be made that simply getting to yes in Washington carries some economic benefits at present.
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Why deglobalisation brings war closer over Taiwan
Decoupling was thought to be the path to stabilising superpower competition. But greater self-sufficiency may make the US and China think they can survive a military conflict and therefore more likely to start one.
Richard McGregor Columnist
Aug 2, 2022 – 12.45pm
Before Nancy Pelosi’s arrival in Taiwan, Beijing and its proxies have promised a thunderous response, one that befits the House Speaker’s stature in Washington as third in line to the US presidency.
Such threats usually conjure the prospect of a military response. The worst-case scenario in the current stand-off is Chinese fighter jets preventing Pelosi’s plane from landing in Taipei.
The prospect of a potential military conflict between nuclear-armed superpowers the US and China naturally occupies most of the political commentary on Taiwan, in Australia and elsewhere.
The threat is real enough. Because Pelosi will be travelling on an air force plane, any attempt to intercept her would trigger a response from US jets that will be flying nearby.
But the focus on war saps attention from the economic fallout from a conflict over Taiwan, which would arguably be far greater and which would be felt in almost every corner of the globe.
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China announces military drills in waters close to Taiwan
Amy Qin and Paul Mozur
Aug 3, 2022 – 8.14am
Taipei | Shortly after Speaker Nancy Pelosi’s plane touched down in Taiwan, China’s military said it would conduct drills that appeared to infringe on Taiwan’s territorial waters, setting the stage for a potential showdown between China and the United States over the self-governed island.
Beijing announced plans for six zones encircling Taiwan where it said it would carry out live-fire military drills from Thursday to Sunday, according to a statement released by Xinhua, China’s state news agency. Ships and aircraft were warned against trespassing in those areas — some of which overlap with the island’s territorial waters — for “safety reasons”, the statement said.
In a separate statement, China’s People’s Liberation Army said that starting Tuesday evening, it would begin conducting a series of joint naval and air exercises in the waters and airspace to the north, south-west and south-east of Taiwan, according to a statement attributed to Colonel Shi Yi, spokesperson for China’s Eastern Theatre Command.
Those exercises would include “long-range live firing in the Taiwan Strait” and “regular-guided fire testing in the eastern waters” off Taiwan, the statement said. The timing leaves open the possibility that the drills could begin while Ms Pelosi is still in Taiwan.
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Here are six ways China could hit back after Pelosi’s visit
Rebecca Choong Wilkins and Colum Murphy
Aug 3, 2022 – 7.54am
With US House of Representatives speaker Nancy Pelosi visiting Taiwan, the world is now bracing for China’s response.
China’s President Xi Jinping told US leader Joe Biden during a phone call last week that “whoever plays with fire will get burnt” in reference to Taiwan, which China regards as its territory. Foreign Ministry spokesman Zhao Lijian then said the People’s Liberation Army “won’t sit idly by” if Pelosi visited. She is the highest-ranking American official to visit Taiwan in 25 years.
Neither Xi nor Biden have an interest in triggering a conflict that could do even more economic damage at home, and the call last week indicated they were preparing for their first face-to-face meeting as leaders in the coming months.
But the bellicose rhetoric and growing animosity in both countries adds to pressure on Xi to take a strong response, particularly as he prepares for a twice-a-decade party meeting later this year at which he’s expected to secure a third term in office.
Here are options for actions China could take:
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Secret US ‘ninja bomb’ in the spotlight after Zawahiri death
The macabre Hellfire R9X, a warhead-less missile believed equipped with razor-like blades that slice through its target, has become America’s weapon of choice for killing extremists. This is why.
By AFP
August 3, 2022
Notorious Al-Qaeda head Ayman al-Zawahiri was killed by two missiles fired at his Kabul home — but pictures showed no sign of an explosion, and US officials say no one else was harmed.
That points to the use again by the United States of the macabre Hellfire R9X, a warhead-less missile believed equipped with six razor-like blades extending from the fuselage that slices through its target but does not explode.
Never publicly acknowledged by the Pentagon or CIA — the two US agencies known to undertake targeted assassinations of extremist leaders — the R9X first appeared in March 2017 when Al-Qaeda senior leader Abu al-Khayr al-Masri was killed by a drone strike while traveling in a car in Syria.
Photos of the vehicle showed a large hole through the roof, with the car’s metal, and all of the interior, including its occupants, physically shredded. But the front and rear of the car appeared completely intact.
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https://www.afr.com/world/asia/taiwan-braces-against-china-s-fury-over-pelosi-visit-20220803-p5b6z6
Taiwan braces for China’s fury over Pelosi visit
Emma Connors South-East Asia correspondent
Aug 3, 2022 – 6.40pm
Singapore | A furious China blasted US House Speaker Nancy Pelosi’s visit to Taiwan as a “complete farce” on Wednesday as the self-governing island braced for days of live-fire war games on its doorstep.
Within minutes of her arrival late on Tuesday, the People’s Liberation Army announced provocative drills and missile launches encircling Taiwan. That was followed by economic sanctions on Taiwanese agricultural goods and imports of Chinese sand.
State broadcaster China Central Television said the country had launched joint navy and air force exercises around Taiwan. The operations would include “regular-guided fire testing in the eastern waters”, or missiles, off Taiwan, the PLA said.
Beijing’s response has sparked concerns about a new Taiwan Strait crisis, similar to that of 1995-96, when China held threatening military exercises and bracketed the island with missile strikes in waters north and south of its main ports.
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Zawahiri’s Kabul life proof of Joe Biden’s folly
12:00AM August 4, 2022
The killing of Ayman al-Zawahiri in Kabul last weekend was symbolically important but its operational impact will be minimal. If anything, despite its tactical precision, the strike emphasised the limitations of Washington’s preferred “over-the-horizon” counter-terrorism strategy.
As President Joe Biden said in announcing the strike, Zawahiri’s death offered closure for families who lost loved ones in the attacks of September 11, 2001. Zawahiri was a founding member of al-Qa’ida and one of the key thinkers behind its declaration of war on the US. His vision drove the decision to launch so-called spectacular attacks such as 9/11, which dramatically escalated the terrorism threat, raising what had once been seen as a law enforcement and intelligence problem to the level of large-scale warfare and regime change.
Zawahiri’s strategic vision led to the largest and deadliest terrorist attack in history. It provoked the war in Afghanistan, launched the war on terror and triggered the catastrophic invasion of Iraq. The worldwide “forever wars” touched off by 9/11 contributed to the decline of the US from its post-Cold War pinnacle as the sole global superpower. Indeed, in part, today’s diminished America is a result of two decades spent inconclusively chasing Zawahiri and those he inspired.
In this sense, Zawahiri’s death ties up one of the loose ends from the early war on terror – among the al-Qa’ida leaders responsible for 9/11, Zawahiri was one of the last left alive. The 9/11 attackers themselves, of course, died on the scene. Khalid Sheikh Mohammed, operational planner for the attacks, was captured in 2003 and remains in detention at Guantanamo Bay. Osama bin Laden was killed in 2011.
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Kansans reject bid to eliminate abortion rights from constitution
By Laura Kusisto and Joe Barrett
The Wall Street Journal
5:05PM August 3, 2022
Kansas voters soundly rejected a proposed state constitutional amendment that would have ended protections for abortion, in the first statewide referendum on the issue since the US Supreme Court eliminated abortion rights at the federal level.
The closely watched vote, in a state where Republicans outnumber Democrats, means abortion is likely to remain legal and accessible in Kansas. The result, projected by the Associated Press at 60 per cent for the No vote, also provides an early political victory to abortion rights supporters weeks after their resounding defeat at the Supreme Court.
“This vote makes clear what we know: the majority of Americans agree that women should have access to abortion and should have the right to make their own healthcare decisions,” President Joe Biden said following the vote. “Congress should listen to the will of the American people and restore the protections of Roe as federal law.”
The referendum was planned months before the Supreme Court’s June 24 ruling that the US Constitution doesn’t protect the right to an abortion. The decision, Dobbs v. Jackson Women’s Health Organisation, upheld abortion restrictions in Mississippi and overruled the 1973 decision in Roe v. Wade that recognised abortion as a constitutional right.
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https://www.afr.com/world/asia/taiwan-scrambles-jets-to-warn-away-chinese-fighters-20220804-p5b741
China begins ‘illegitimate, irresponsible’ live-fire military drills
Yimou Lee
Updated Aug 4, 2022 – 3.01pm, first published at 3.18am
Taipei | China launched unprecedented live-fire military drills in six areas that ring Taiwan on Thursday, a day after a visit by US House of Representatives Speaker Nancy Pelosi to the self-ruled island that Beijing regards as Chinese territory.
Soon after the scheduled start at 0400 GMT (2pm AEST), China’s state broadcaster CCTV said the drills had begun and would end at 0400 GMT on Sunday. They would include live firing on the waters and in the airspace surrounding Taiwan, it said.
Taiwan officials have said the drills violate United Nations rules, invade Taiwan’s territorial space and are a direct challenge to free air and sea navigation.
China is conducting drills on the busiest international waterways and aviation routes and that is “irresponsible, illegitimate behaviour,” Taiwan’s ruling Democratic Progressive Party (DPP) said.
Taiwan’s cabinet spokesman, expressing serious condemnation of the drills, said also that websites of the defence ministry, the foreign ministry and the presidential office were attacked by hackers.
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Vladimir Putin is heading for ‘economic oblivion’
By Hugh Tomlinson
The Times
August 4, 2022
Sanctions have had a disastrous impact on the Russian economy with the country headed for “economic oblivion”, a study by Yale University has found, despite Moscow’s efforts to downplay the repercussions of the invasion of Ukraine.
Although President Vladimr Putin’s government had raked in billions of dollars from energy sales at inflated prices since the invasion on February 24, indicators from other sectors suggested much domestic economic activity had ground to a halt, the study found. The exodus of international business and a slump in exports belie the claims that its economy remains robust and is winning the “war of economic attrition”.
Experts at the Yale School of Management used consumer data from Russia’s international trade and shipping partners to measure economic activity five months after the invasion. “The findings of our comprehensive economic analysis of Russia are powerful and indisputable: Not only have sanctions and the business retreat worked, they have thoroughly crippled the Russian economy at every level,” the report said. “Russian domestic production has come to a complete standstill with no capacity to replace lost businesses, products and talent.”
Russia has halted or censored the release of official economic statistics, including trade figures, issuing only favourable, cherry-picked statistics, but the authors studied wider data to establish a fuller picture.
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https://www.afr.com/policy/foreign-affairs/putin-s-looming-defeat-in-ukraine-20220802-p5b6hw
Putin’s looming defeat in Ukraine
Russia has sunk into a self-destructive confrontation with its own customers by weaponizing its gas exports.
Simon Johnson
Aug 4, 2022 – 4.37pm
It is easy to see who is losing the most from the Russian invasion of Ukraine: Ukrainian civilians, victims of war crimes and missile terror, and the millions around the world for whom food is now more expensive, because Russia has until recently been blocking Ukrainian grain shipments through the Black Sea (and launching strikes on Ukrainian ports even after agreeing to a ceasefire). But who exactly is winning from this dreadful conflict?
The Russian authorities are behaving as if things are going well for them. Their tone is arrogant, and they respond to entreaties with disdain. Their media proxies threaten to blow up Europe one day and, when rebuked, to destroy the world the next day. And now Russia is choking off the supply of natural gas to Europe – throwing its weight around as if victory is just around the corner.
But all of this is just a bizarre delusion. In fact, Russia is losing the war badly in both military and economic terms.
On the military front, the Russian position looks increasingly dire. After suffering a catastrophic defeat in its initial attempt to take Kyiv and Kharkiv, in recent months the Russians gained some territory in the Donbas region. But this advance was entirely due to massive artillery bombardment. Now that the Ukrainians have longer-range artillery, this Russian advantage is dwindling rapidly.
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UK faces long recession as BoE lifts rates by the most since 1995
Hans van Leeuwen Europe correspondent
Updated Aug 4, 2022 – 10.43pm, first published at 9.07pm
London | Britain will spend all next year in a stagflationary recession, the Bank of England has warned, even as it pushed through its steepest interest-rate increase in 27 years.
The bank raised its benchmark rate by 0.5 percentage points to 1.75 per cent – the first increase of that magnitude since 1995, following five quarter-point increases on the trot – as it tries to put a lid on Britain’s runaway inflation.
The BoE’s monetary policy committee (MPC) left the door open to “forcefully” raise rates again, even though the bank now sees the British economy shrinking 2.1 per cent between the fourth quarter of this year and the end of 2023.
The BoE’s action will help drive the sharpest drop in living standards since the Second World War, but will not immediately tame an inflation breakout driven by factors largely outside its control: soaring energy prices, a buoyant post-pandemic labour market, and persistent supply-chain problems.
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Bank of England’s lesson in honest central banking
UK policymakers have reminded the world what a politically independent central bank can and should do, though it’s not risk-free.
Mohamed A. El-Erian
Aug 5, 2022 – 5.29am
The Bank of England announcements on Thursday will go down in history, not only because of the largest interest-rate increase in 27 years but, perhaps more importantly, for the sort of analytical directness and intellectual honesty that seems to consistently elude other top central banks.
Also, the central bank’s unpleasant outlook for the UK economy has implications for the global economy, but not all because of some of the unique circumstances there.
In an 8-1 decision, the Bank of England raised interest rates by 50 basis points and warned that inflation would peak above 13% in October and was unlikely to return to the 2% target before 2025.
It cautioned that, given the current policy configuration, the country was staring at the prospects of a recession that would start in the fourth quarter and last through next year, resulting in a peak-to-trough drop in gross domestic product of some 2% and painful declines in real income for many households. Its assessment of the balance of risks to this baseline was not reassuring.
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BRITAIN SLIDES INTO CRISIS
By Arthi Nachiappan and Mehreen Khan And Oliver Wright
The Times
August 5, 2022
Britain is heading for a protracted recession as inflation surges above 13 per cent, causing the worst squeeze on living standards for more than 60 years, the Bank of England has warned.
In a drastic set of forecasts for the economy, the Bank said households would suffer a record two years of falling incomes as the global gas crisis pushed up energy bills.
The Bank raised its main interest rate from 1.25 to 1.75 per cent, the largest single increase since 1995, as it tried to get a grip on the inflationary spiral.
Households’ real income, which is the value of pay after adjusting for inflation, will drop by 1.5 per cent this year and 2.25 per cent next year, the biggest fall since records began in the 1960s.
Andrew Bailey, the Bank’s governor, said the rise in borrowing costs was necessary to prevent inflation worsening and hitting living standards further. He blamed the “consequences of Russia’s restrictions of gas supplies to Europe” for the rise in inflation and said he had “huge sympathy” for struggling households.
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‘Sizzling’ US jobs data bolsters case for faster rate rises
Steve Matthews and Jonnelle Marte
Aug 6, 2022 – 3.55am
Washington | A blowout US jobs report for July means the Federal Reserve will need to keep going with the most aggressive rate hikes in decades to curb demand and inflation.
US employers added 528,000 jobs last month, more than all estimates, the unemployment rate fell to a five-decade low of 3.5 per cent, and wage growth accelerated, the Labor Department said.
The data add impetus for the Federal Open Market Committee to raise interest rates by 0.75 percentage point when it meets in September, matching the moves it made in June and July as it works to cool an inflation rate that’s running at a 40-year high. The strong momentum could also suggest the central bank will need to keep rates higher for longer, contrary to market expectations for rate cuts in 2023.
The labour market is “still sizzling” and that can feed into inflation, said Diane Swonk, the chief economist at KPMG LLP. “This argues for another 75 basis point hike by the Fed.”
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With five missiles, China sends stark signal to Japan and US
Beijing wants to remind Washington that it can strike not only Taiwan but also US bases in the region.
Ben Dooley
Aug 5, 2022 – 11.54am
Tokyo | North Korea has for years lobbed missiles into Japan’s waters without great incident. But for an increasingly powerful and aggressive China to do the same – as it did on Thursday as a part of military exercises –has heightened concerns in political and security circles from Tokyo to Washington.
Beijing’s firing of five missiles into Japanese waters east of Taiwan has sent a warning to both the United States and Japan about coming to the aid of Taiwan in the event of a conflict there, analysts said.
Beijing wants to remind Washington that it can strike not only Taiwan but also US bases in the region, such as Kadena air base on Okinawa, as well as any marine invasion forces, said Thomas Mahnken, a former Pentagon official who is president of the Centre for Strategic and Budgetary Assessments in Washington.
It also reminds the Japanese that the US military presence on Okinawa makes Japan a target, he added.
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Hard times: UK faces 15-month recession and biggest drop in living standards in 60 years
By Rob Harris
Updated August 5, 2022 — 1.22pmfirst published at 6.01am
Birmingham: Britain is facing a lengthy recession, the worst decline in living standards for a generation and inflation could hit 13 per cent by Christmas, forcing the Bank of England to raise interest rates sharply.
The bank lifted rates by 0.5 percentage points to 1.75 per cent on Thursday evening, the biggest increase in 27 years, with forecasts suggesting the country is now facing a much bleaker economic outlook than either the United States or Europe.
The bank said the country would slide into a 15-month recession later this year, and GDP would shrink by 1.5 per cent next year. Officials expect the slowdown to begin in the fourth quarter and continue until the end of 2023 – indicating a steady economic decline throughout next year.
Households are also more exposed to the energy price shock arising from Russia’s war on Ukraine than in the US, and less protected by government measures than in the eurozone. At the same time, the British economy has also been damaged by the effects of leaving the European Union.
The cost of household gas and electricity is expected to rise in October by another 75 per cent, up from the bank’s previous forecast of 40 per cent, to about £3500 ($6100) a year. By the northern autumn, energy bills, which have already risen by 54 per cent this year, will be at triple their level a year earlier.
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Airstrikes, rocket attacks: Fresh fighting between Israel and Palestinian militants
By Nidal al-Mughrabi
August 6, 2022 — 8.30am
Gaza: Palestinian militants in Gaza fired dozens of rockets into Israel on Friday in response to Israeli airstrikes which killed at least 10 people, including a senior commander of the Palestinian Islamic Jihad movement.
As darkness fell, Israeli authorities said sirens had been sounded in southern and central areas, while images broadcast by Israeli television stations appeared to show a number of missiles being shot down by air defence systems. In Tel Aviv, Israel’s economic centre, witnesses said they could hear booms but there were no reports of sirens.
Islamic Jihad, a militant group with a similar ideology to Hamas, the Islamist movement in charge of Gaza, said it had fired more than 100 rockets on Friday into Israeli cities, including Tel Aviv. Israel’s ambulance service said there were no reports of casualties.
The strikes came a little more than a year after an 11-day war between Israel and Hamas in May 2021, which killed at least 250 people in Gaza and 13 in Israel and left the blockaded enclave’s economy shattered.
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China scraps cooperation with US over Pelosi-Taiwan spat
By Agencies
AFP
August 6, 2022
China says it is ending cooperation with the United States on key issues including climate change — a move Washington decried as “fundamentally irresponsible” as relations between the two superpowers nosedive over Taiwan.
The damaging rift, which carries significant geostrategic risk, was triggered by Chinese fury over a visit by US House Speaker Nancy Pelosi to Taiwan, which Beijing claims as its territory and has vowed to retake — by force if necessary.
It has since Thursday encircled the self-ruled, democratic island with a series of huge military drills that have been roundly condemned by the United States and other Western allies.
And Friday saw China’s foreign ministry hit back further against the United States, suspending talks and cooperation on multiple agreements — including on climate change.
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https://www.afr.com/policy/economy/the-meaning-of-falling-inflation-20220806-p5b7r6
The meaning of falling inflation
Petrol and food prices are falling, and business surveys are suggesting a broader decline in inflation: that’s bad news for Republicans.
Paul Krugman
Aug 6, 2022 – 9.47am
Inflation in the US is coming down — fast.
Gas prices, defying predictions of a nightmare summer for motorists, are leading the parade.
The majority of gas stations in the United States are already charging less than $US4 a gallon, and declining wholesale prices suggest that retail prices still have further to fall.
Food prices are also coming down, and business surveys are suggesting a broader decline in inflation. For example, the widely cited Institute of Supply Management survey of purchasing managers shows that prices paid for raw materials are still rising, but at a slower rate than they have in many months.
All of this means that official data on consumer prices will almost certainly show much smaller increases over the next few months than the shocking numbers we’ve become accustomed to lately. But what will this improvement mean?
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https://www.afr.com/politics/federal/taiwan-says-china-is-simulating-an-attack-20220807-p5b7um
Taiwan says China simulating attack on main island
Bloomberg 7 August 2022
Taiwan said China’s military drills on Saturday appeared to be simulating an attack on its main island, as Chinese warplanes and warships crossed the strait’s median line in a continued show of force.
China is engaging in increasingly destabilising action, US Secretary of State Antony Blinken told reporters, saying he has communicated this to his Chinese counterpart Wang Yi. Blinken said tensions between the US and China need to be de-escalated and he told Wang that lines of communication between the two sides must be kept open.
The People’s Liberation Army said it conducted live-fire drills in the sea and airspace of northern, southwestern, and eastern Taiwan as planned on Saturday. Taiwan’s Defence Ministry said it detected 20 PLA warplanes and 14 warships around the Taiwan Strait as of 5pm local time.
Taiwan said its army monitored the situation with the Patriot missile system, and sent air patrols and naval ships. Chinese drills are unilaterally changing the regional status quo and sabotaging peace in the Taiwan Strait, it said.
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Why this Taiwan crisis is more dangerous than the last one
In the decades since the last Taiwan crisis, China’s rapid military build-up has shifted the balance of power around the island decisively in its favour.
Richard McGregor Columnist
Aug 5, 2022 – 5.00am
If revenge is a dish best served cold, then Xi Jinping might quietly be savouring the trip to Taiwan by Nancy Pelosi, the US House Speaker, a visit which the Chinese have condemned so thunderously in public.
The parallels between the Pelosi visit this week and the last Taiwan crisis just over a quarter-century ago are eerily similar, with the US Congress defying the White House on both occasions to support the self-governing island in the face of threats from Beijing to butt out.
In 1995, Congress forced Bill Clinton to allow then-president Lee Teng-hui to visit his alma mater in the US, even after the then US president had promised Beijing he would not give the Taiwanese leader a visa.
When Lee held the island’s first democratic presidential elections early the following year, Beijing began shelling the waters near Taiwan in a show of force to intimidate voters.
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China slams Wong's 'finger-pointing' over missile blasts
7 July, 2022
China has erupted over “finger-pointing” comments by Foreign Minister Penny Wong, after Beijing blasted 11 ballistic missiles over Taiwan and near Japan.
In the biggest diplomatic dispute of the three-month-old Albanese government, China launched a 'Wolf Warrior' attack after Australia’s Foreign Minister joined her counterparts from the United States and Japan to condemn Beijing’s unprecedented military aggression in one of the world's most volatile regions.
“We are seriously concerned and strongly discontent with the remarks on the situation across the Taiwan Strait by the Foreign Ministers of Australia, Japan and the Secretary of State of the US,” said a spokeswoman at China's Embassy in Canberra in a statement released late on Saturday evening.
“It is absolutely unacceptable for the finger-pointing on China’s justified actions to safeguard state sovereignty and territorial integrity. We firmly oppose and sternly condemn this.”
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Taiwan mobilises military as China drills ramp up
By Agencies
AFP
11:10PM August 6, 2022
Taiwan accused the Chinese army of simulating an attack on its main island Saturday, as Beijing continued its retaliation for US House Speaker Nancy Pelosi’s Taipei visit.
Relations between the two superpowers nosedived following Pelosi’s trip to China’s self-ruled neighbour – which it claims as its territory – prompting calls from the UN for an urgent de-escalation of tensions.
Beijing maintained some of its largest-ever military drills around Taiwan on Saturday – exercises aimed at practising a blockade and ultimate invasion of the island, analysts say.
Taipei said it observed “multiple batches” of Chinese planes and ships operating in the Taiwan Strait, some of which crossed a demarcation line that divides the strait, but which Beijing does not recognise.
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China is ratcheting up pressure on Taiwan. What will the US do next?
The Pelosi visit to Taipei was designed to demonstrate support for the country in the face of the growing threat of a Chinese invasion. But some in Washington now fear it has left Taiwan even more exposed.
Kathrin Hille and Demetri Sevastopulo
Updated Aug 7, 2022 – 8.58am, first published at 8.36am
Taipei/Washington | For three days straight, Chinese military officials have been delivering a message of triumph to the public. The exercises with which the People’s Liberation Army is punishing Taiwan for hosting US House Speaker Nancy Pelosi feature “multiple firsts”, they gloated on state television.
“Our firepower covers all of Taiwan, and we can strike wherever we want,” said Zhang Junshe, a researcher at the PLA Navy Research Institute. “We got really close to Taiwan. We encircled Taiwan. And we demonstrated that we can effectively stop intervention by foreign forces.”
Defence Minister Richard Marles says Chinese military drills break global maritime laws.
The Pelosi visit to Taipei, the first in 25 years by a Speaker of the House, was designed to demonstrate support for the country in the face of what many in the US believe to be a growing threat of a Chinese invasion.
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I look forward to comments on all this!
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David.
