June 23, 2022
Edition
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The news
globally continues to get worse with rising fears of inflation fuelled
recessions seemingly becoming more likely in the US, UK and the EU. Hard to
know but Aus does not seem to be in much better shape. Elsewhere China is still
fisting the COVID and finding it pretty hard to get rid of while slowing its
economy in the battle.
In OZ it is
hard to avoid the feeling that things are pretty rocky with a real energy
crisis, share market near collapse, rising inflation, huge debt, fiscal strains
and geopolitical stresses and no obvious plan to get things back on the rails
any time soon! I bet Albo is glad he can still blame the previous Government
for a few weeks more!
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Major Issues.
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https://thenewdaily.com.au/opinion/2022/06/13/alan-kohler-ndis-labor-government/
6:03am, Jun
13, 2022 Updated: 7:17pm, Jun 12
Alan Kohler: The NDIS could crush the Labor government
Alan Kohler
Last Thursday
Treasury Secretary Stephen Kennedy more or less told the government that NDIS
Minister Bill Shorten has the most important fiscal job in cabinet.
And yesterday
Shorten laid out the beginnings of a plan to carry it out, but after nine years
of poor administration and outright neglect of the NDIS by the Coalition, it’s
just the beginning of a very big task.
Kennedy
sounded an alarm about the budget in general in a speech to economists, saying
that government spending will increase from an average of 24.8 per cent of GDP
before the pandemic to 26.4 per cent in future, forever.
The
massive cost of a burgeoning NDIS
He didn’t
spell it out, but that is an expansion in the size of government over three
years of $50 billion a year, rising with the growth in GDP from now on.
That is, if
they’re lucky to keep it that – the growth in spending could be much more.
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https://www.afr.com/world/asia/china-bites-back-after-us-smears-talks-of-war-in-taiwan-20220612-p5at3u
Marles, Wei break Australia-China meeting drought
Emma Connors and Michael Smith
Updated Jun
12, 2022 – 5.33pm, first published at 1.19pm
Singapore/Tokyo
| Australia’s deputy prime minister and defence minister Richard Marles has had
a “very full and frank exchange” with China’s defence chief, breaking an almost
three-year drought in ministerial dialogue.
Mr Marles
described the hour-long meeting with Defence Minister Wei Fenghe on the
sidelines of the Shangri-La Dialogue in Singapore as a “critical first step”.
It was the first face-to-face meeting of its type between Canberra and Beijing
since late-2019.
“I raised a
number of issues of concern to Australia, including the incident involving Australia’s PA aircraft
on May 26, Australia’s abiding interest in the Pacific, and our concern to
ensure the countries of the Pacific are not put in a position of increased
militarisation,” Mr Marles said.
“This was an important
meeting between two countries of consequence in the Indo-Pacific region.
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https://www.news.com.au/finance/economy/australian-economy/australia-braces-for-a-week-of-economic-carnage-as-ominous-clouds-hang-over-global-economy/news-story/7ba9a8a69a111e7f9f67fc4b0683a8ba
Australia braces for a week of economic carnage as ominous clouds hang
over global economy
There are
now fears the world is teetering on the brink of a recession after horror new
data from the US sent chills around the globe.
Ben Graham
June 13, 2022
- 7:46AM
There are now
fears the world is teetering on the brink of a global recession, after horror
new inflation data from the US that has sent a chill through stock markets
around the globe.
Australians
who own stocks are probably glad it’s a public holiday today and the markets
are closed after a difficult enough week last week.
But the pain
is set to get even worse for the Australian economy after the US recorded the highest rate of inflation since 1981
— stoking fears the global economy is slowly falling into a recession.
While there
may be a recess for Australia’s pain because of the Queen’s Birthday holiday
today, it is anticipated the market will be hammered in the days that follow.
Investors
Mutual portfolio manager Daniel Moore told The
Australian he expects “significant falls” when the market reopens this
week.
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https://www.theaustralian.com.au/business/markets/asx-200-investors-brace-for-market-carnage-as-inflation-spikes/news-story/c2ef26c3c3d0c9bb2c180f6d2b9f587c
ASX 200: Investors brace for market carnage as inflation spikes
Eli Greenblat
4:23PM June
12, 2022
Equity
markets are bracing for retreats this week after the US recorded the highest
rate of inflation since 1981, spooking investors on Wall Street as fears grow
of soft corporate earnings and a possible stumble into a global recession.
Strong falls
in US markets fuelled by the inflation spike and felt across blue-chip
industrials and technology stocks will have a delayed impact on the Australian
sharemarket – closed for the Queen’s Birthday holiday on Monday – but will
likely land with a thud on Tuesday.
Investors
Mutual portfolio manager Daniel Moore said the futures market pointed to a
significant fall by equities when the market opens this week.
“The US
market was down to 2.73 per cent on Friday, so the Australian futures are
currently down 1.6 per cent and if you looked at the sector breakdown, nearly
all sectors were down, on fears higher inflation will lead to higher interest
rates which will cause a recession,” said Mr Moore, who looks after $5bn in
funds.
-----
https://www.afr.com/policy/economy/australia-s-biggest-investor-warns-a-material-downturn-is-coming-20220610-p5asvb
Australia’s biggest investor warns a ‘material downturn’ is coming
Michael Read Reporter
Jun 13, 2022
– 5.36pm
The chief
investment officer of the country’s largest pool of capital, AustralianSuper’s
Mark Delaney, says Australia is heading for a “material downturn” as the global
economy nears the end of a 13-year bull market.
His forecast
is backed by leading economists, who expect a sharp slowdown in the economy
from next year, amid headwinds from rising interest rates and falling real
wages.
Mr Delaney’s
predictions come amid market expectations the Reserve Bank of Australia will
raise rates to 3.1 per cent by the end of the year to tame soaring inflation, caused by a combination of
global supply chain issues, the war in Ukraine, and demand-side pressures from Australia’s tight labour market.
The $261
billion mega fund is on track to post its first financial year loss in 13
years, with AustralianSuper’s balanced investment option down 0.83 per cent in
the financial year to June 9.
Mr Delaney
said global financial markets were navigating a difficult period characterised
by short-term challenges owing to the end of COVID-19 stimulus and longer-term
pressures from the end of a 13-year economic cycle.
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https://www.theaustralian.com.au/business/retail/retailers-and-consumers-are-facing-the-worst-economic-outlook-in-15-years-and-retail-profits-will-fall/news-story/de8353b0300e7c3e8e36b35231e7d0d1
Retailers and consumers are facing the worst economic outlook in 15 years,
and retail profits will fall
Eli Greenblat
June 14, 2022
Australia’s
retailers are facing the worst economic outlook in 15 years, due to a potent
mix of soaring inflation, higher borrowing costs and flatlining wages, plunging
consumer confidence back to levels not seen since the global financial crisis
and threatening to trigger a string of profit warnings across the sector.
And while
some consumers might have stashed away money for a rainy day during the
Covid-19 lockdowns, that reservoir of savings could be quickly soaked up by the
cost of living per household which currently sits at $45,000 and is estimated
to jump 13 per cent in 2023. Low and middle income households are likely to
struggle as they look to thinning savings.
Barrenjoey
analyst Tom Kierath has penned a grim report into the expected slowdown for the
$360bn retail industry and announced he has made significant earnings cuts to
discretionary retailers to reconcile with the fragile state of the economy and
consumers.
Mr Kierath
said he has reviewed earnings forecasts across the 12 non-food retailers he
covers leading the analyst to downgrade 2023 earnings per share by as much as
34 per cent for some stocks with the most earnings risk for consumer
electronics giant JB Hi-Fi and online marketplace Kogan.com.
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https://www.theguardian.com/commentisfree/2022/jun/14/heres-why-australias-reliance-on-commodities
Here’s why Australia’s reliance on commodities is unhealthy
Satyajit Das
Our dependency
on resources and failure to use mining income to secure a post-mineral future
is
Tue 14 Jun
2022 03.30 AESTLast modified on Tue 14 Jun 2022 11.00 AEST
Of the four
engines driving Australia’s post-pandemic recovery, all but commodity prices
are spluttering. Government spending, which has more than offset the losses
from the Covid-19 recession, is likely to be reined in to repair public
finances. Consumption, which has been driven by a combination of pent-up demand
and excess savings during lockdowns, is affected by inflation pressures and
uncertainty.
Housing –
both construction activity and the wealth effect of higher property prices
encouraging spending – is now slowing because of the end of subsidies and
higher interest rates.
This leaves
Australia largely dependent on the remaining motor – commodity exports – for
economic propulsion. Australia’s terms of trade (the ratio of export prices to
import prices) reached record highs in the
first quarter of 2022, benefiting from Chinese infrastructure spending and
supply shortages created by the war in Ukraine.
But this
reliance on commodities is unhealthy, for a number of reasons.
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https://www.afr.com/markets/equity-markets/tips-for-riding-out-current-market-turmoil-20220614-p5atnu
Tips for riding out current market turmoil
Lex is
holding to its expectation of a long, grinding market correction amid extempore
monetary policymaking. Here are some defensive strategies for the months ahead.
The Lex
Column
Jun 14, 2022
– 3.48pm
As one
contagion ends, another begins. The symptoms of a stagflationary slowdown are
pronounced. About two-thirds of economists polled
by the Financial Times expect a US recession. UK gross domestic product
fell unexpectedly in April. Cryptocurrencies, a prime indicator of speculative
exuberance, are slumping.
As equities
and bonds lurch
downward, investors are rushing for safety. The MSCI All-Country index
(ACWI) has already lost about 20 per cent in dollar terms this year.
Lex is
holding to its expectation of a long, grinding market correction amid extempore
monetary policymaking. Here are some defensive strategies for the months ahead.
Bonds deserve
attention, especially those denominated in the strong US dollar. Any bet on
fixed income is dependent on where you think inflation will peak. In corporate
credit, favour businesses with strong balance sheets and cash flows. A zero
weighting to high-yield bonds makes sense.
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https://www.theaustralian.com.au/nation/labor-gives-its-oneword-reason-for-poll-success-morrison/news-story/44e9e0696356db14e860fc5cd2148cda
Labor gives its one-word reason for poll success: Morrison
Greg Brown
7:21PM June
14, 2022
Labor
capitalised on the unpopularity of Scott Morrison to prevent swaths of
undecided voters from sticking with the Coalition at the May election.
ALP national
secretary Paul Erickson will use a speech at the National Press Club in
Canberra on Wednesday to outline the strategy that delivered Anthony Albanese
victory.
Mr Erickson
will say a key part of the campaign was accounting for a group of voters who
“held out until the very end, those who would describe themselves … as sitting
on the fence”.
He will say
the Labor machine targeted undecided voters by ensuring they were “haunted” by
the prospect of three more years of Mr Morrison as prime minister.
“The biggest
barrier Labor had to overcome was not voters’ evaluation of our proposition, or
a counter offer from the Coalition, it was a widespread and deep sense of
fatigue, anxiety, and aversion to risk after some of the most difficult years
we’ve endured,” Mr Erickson will say.
-----
https://www.afr.com/companies/media-and-marketing/trust-in-journalism-drops-as-fatigued-readers-return-to-print-20220614-p5atob
Trust in journalism drops as ‘fatigued’ readers return to print
Julie Hare Education editor
Jun 15, 2022
– 9.01am
The
pandemic-induced boost in Australians’ interest and trust in news and media is
waning, and social media is the biggest loser as readers return to print
editions of newspapers.
Consumption
of news in print has increased for the first time in six years, largely in
regional and rural areas, according to the 2022 Digital News Report, compiled
by the News & Media Research Centre.
However, the
number of Australians avoiding or reducing their consumption of news is growing
as feelings of being overwhelmed and fatigue hit home.
“The top
reason why people avoid news is because they are sick of politics and coronavirus,” said Sora Park, the report’s
lead author.
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https://www.smh.com.au/money/investing/five-ways-to-help-your-share-portfolio-beat-market-carnage-inflation-20220613-p5atbb.html
Five ways to help your share portfolio beat market carnage, inflation
By John Collett
June 15, 2022
— 5.05am
Things are
looking dire on sharemarkets as the war in Ukraine acerbates surging inflation
and a resultant global rise in interest rates.
The benchmark
S&P/ASX 200 Index fell more than 5 per cent at one point on Tuesday on the
back of a big dive in US equity markets. The heavy losses took its decline so
far this year to 10 per cent – a technical correction.
However,
investors who remain calm and do not submit to panic selling are seeing
opportunities. By looking beyond the doom and gloom – and taking a longer-term
view – they could be rewarded with some good returns.
David
Bassanese, chief economist at exchange-traded fund (ETF) provider BetaShares,
says the outlook for the energy, agriculture and banking sectors remains
positive.
Oil and food
prices were already rising before Russia invaded Ukraine, but the conflict has
accelerated the trend, Bassanese says.
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https://www.theaustralian.com.au/nation/consumer-confidence-plunges-to-recessionary-levels-westpac/news-story/d1c232cb9d96cc9018c9734cc940234c
Consumer confidence plunges to recessionary levels: Westpac
Patrick Commins
June 15, 2022
Surging
inflation and the prospect of an aggressive series of rate hikes has hammered
consumer confidence down to recessionary levels, Westpac’s latest monthly
survey has revealed.
Westpac chief
economist Bill Evans said “over the 46-year history of the survey, we have only
seen index reads at or below this level during major economic dislocations”:
during the height of the pandemic, the GFC, and in the severe downturns of the
early 1990s, and in the mid-and early 1980s.
“Those last
three episodes were associated with high inflation; rising interest rates; and
a contracting economy – a mix that may be threatening to repeat,” Mr Evans
said.
The survey of
1200 households was conducted from June 6-9, and so largely included the
Reserve Bank’s 0.5 percentage point rate hike on June 7. Westpac’s consumer
sentiment gauge fell 4.5 per cent from to 86.4 points, from 90.4 in May. A
reading below 100 points indicates more pessimists than optimists.
-----
https://www.theaustralian.com.au/business/property/largest-house-price-correction-since-1980-to-hit-warns-jarden/news-story/65e17686f1174b882f9cd9e3f2e0aa57
Largest house price correction since 1980 to hit, warns Jarden
Ben Wilmot
June 15, 2022
Australian
house prices could suffer a peak to trough decline of up to 20 per cent with
falls in Sydney and Melbourne tipped to be larger and hit sooner, according to
economists at investment bank Jarden.
The bank has
downgraded its expectations for residential property and warned that the
country is facing the largest house price correction in four decades.
It is blaming
a cocktail of interest rate hikes, which will eat into borrowing capacity, and
the more hawkish Reserve Bank cracking down on lending, with material falls
expected in home loans, credit growth, and building approvals.
The bank’s
chief economist Carlos Cacho warned the softer housing outlook would drag on
economic activity through 2023 but is tipping that regulators could ease off
from the middle of next year.
-----
https://www.afr.com/politics/federal/an-important-early-win-for-albanese-20220615-p5atu0
An early win for Albanese, not so flash for small biz
From a sheer
political perspective, the Commission delivered the Albanese government a win.
The PM can say that he has delivered for the workers.
Phillip Coorey Political
editor
Jun 15, 2022
– 11.21am
One of
Labor’s most potent lines of the election campaign was “everything is going up
except your wages”.
Not any more.
Not for minimum wage earners at least.
In a decision
that took even the government by surprise, the Fair Work Commission
surpassed Anthony Albanese’s call to increase the minimum wage by 5.1 per
cent, which was the headline inflation rate when he made it, and opted for 5.2
per cent.
Another 2.6
million award workers received 4.6 per cent, or a guaranteed $40 a week if they
earn less than $869.60 a week.
It could have
been higher, as the commission alluded, had it not been for “moderating
factors” such as the 0.5 per cent increase to the superannuation guarantee on
July 1, and the one-off, post-July 1 tax rebate of up to $1400 for 10 million
low and middle income earners, a parting cost-of-living gift from Josh
Frydenberg and Scott Morrison.
-----
https://thenewdaily.com.au/opinion/2022/06/16/kohler-recession-albanese-crises/
6:00am, Jun
16, 2022 Updated: 9:06pm, Jun 15
Alan Kohler: Albanese’s note to self – Don’t get blamed for the Morrison
crises
Alan Kohler
Governments
usually change after recessions, not before them, so the job is a nice one – to
manage the recovery.
But not only
is the new Labor government facing a sharp economic slowdown, and possibly a
Whitlam-style recession, it’s dealing with multiple crises from the failures of
its predecessor.
Tuesday’s
suspension of the National Electricity Market by the Australian Energy Market
Operator is the latest, and worst, of many. It’s hard to imagine a worse legacy
than the collapse of the national energy system.
I suggested in this column before the election that the Morrison
government was going to lose despite presiding over a strong economy, mainly
over its failures on climate change, and as we are now discovering there was
more to it than that.
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https://www.afr.com/politics/federal/turnbull-is-the-shadow-figure-in-morrison-s-downfall-20220613-p5atb7
Turnbull is the shadow figure in Morrison’s downfall
The 29th
prime minister turned himself into a quasi opposition leader – and channelled
wavering inner-city Liberals towards the independents, Labor and Greens.
Aaron Patrick Senior
correspondent
Jun 16, 2022
– 5.00am
Analyses of
the Morrison government’s downfall – an administration removed more for
personal resentment towards its leading figures than administrative or economic
incompetence – have failed to recognise the contribution of one man: Malcolm
Turnbull.
More than any
other person outside of parliamentary politics – even more so than the teal
independents’ financier Simon
Holmes à Court – Turnbull used his eloquence, fame and media connections to
define his successor government as amoral and unworthy of office.
The 29th
prime minister, who remains a Liberal Party member, turned himself into a quasi
opposition leader – one who represented and channelled wavering inner-city
Liberals towards the independents, Labor and the Greens.
Turnbull
involved himself in every significant scandal and challenge of the Morrison
government.
-----
https://www.afr.com/policy/economy/soft-landing-hopes-falter-as-inflation-takes-off-20220614-p5atih
‘Soft landing’ hopes falter as inflation takes off
John Kehoe Economics editor
Jun 18, 2022
– 5.00am
Australians
are living through a series of remarkable and historic economic disruptions.
Post-pandemic
forces are colliding to bring into sharp focus the challenges facing central
banks, business, investors, households and the new Albanese government.
Economies
appear to be overheating, so engineering a soft landing and avoiding recession
will be a delicate balancing act.
This week,
the world’s most powerful financial institution that sets the price of money –
the US Federal Reserve – imposed
its largest interest rate rise since 1994, lifting rates by 0.75 of a
percentage point. It also admitted jobs may be lost to cool the
economy.
-----
https://www.afr.com/markets/debt-markets/attack-of-the-hawks-seven-days-that-killed-the-easy-money-era-20220617-p5auhw
Attack of the hawks: seven days that killed the easy money era
Around the
world, central banks that flooded the money with cheap funds for over a decade
are in a rapid, uncomfortable and dramatic retreat.
Jonathan Shapiro
Senior reporter
Jun 17, 2022
– 3.59pm
Only twice
previously in 40 years had a Reserve Bank of Australia governor made an
unscheduled appearance on national television to discuss the economy.
In October
1988, Bob Johnston appeared on Channel Nine’s Business Today to defend his
institution from slurs it was holding back rate rises to favour the then-Labor
government. It was not until April 2010 that Glenn Stevens showed up on Seven’s
Sunrise to warn property speculators to cool it, as interest rates were heading
higher.
So, when Phil
Lowe’s interview with
the ABC’s Leigh Sales was beamed into the living rooms of more than 500,000
households on Tuesday evening, the gravity of the situation could not be
ignored.
Lowe’s
message was of a similar tone. He would do “what’s necessary” to stem an
inflationary outbreak that he did not predict and bring the rate back within
his target.
-----
https://www.afr.com/wealth/personal-finance/aussie-house-prices-could-fall-more-than-30pc-20220617-p5auhv
Aussie house prices could fall more than 30pc
New
research shows that house prices could fall more than 30 per cent if the Reserve
bank of Australia meets the market’s interest rate expectations.
Christopher Joye
Columnist
Jun 17, 2022
– 11.35am
Aussie house
prices could fall by more than 30 per cent if the Reserve Bank of Australia
fulfils uber-aggressive market expectations for an increase in its cash rate
from the post-pandemic nadir of 0.10 per cent all the way to 4.25 per cent.
This would
translate into an increase in the cheapest discounted variable mortgage rate
from around 2.25 per cent to 6.50 per cent, or possibly higher given bank
credit spreads (or funding costs) have widened sharply.
This newly published research represents an effort to further
refine our Australian house price forecasts, which since October 2021 have anticipated a 15-25 per cent decline in dwelling values if
the RBA lifts rates by more than 100 basis points.
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https://www.afr.com/wealth/investing/markets-are-in-meltdown-here-s-why-you-shouldn-t-20220615-p5atyg
Markets are in meltdown. Here’s why you shouldn’t be
Crashing
sharemarkets and rising interest rates are a bitter concoction, but the lessons
of history provide a sweetening tonic.
Lucy Dean Wealth reporter
Jun 17, 2022
– 5.00am
It’s the sort
of cocktail no one wants to drink. Take one shot of high inflation, another of
slowing growth, add one more of increasing interest rate expectations, and you
get widespread carnage.
The
S&P500 entered a bear market on Monday for the first time since March 2020,
having fallen 21 per cent from its January peak.
Markets had
already been limping along for a while as a mass
tech sell-off dragged. However, worsening supply chain challenges caused
first by the COVID-19 pandemic and then by Russia’s invasion of Ukraine have
seen inflation go through the roof, domestically and abroad. The US is
currently battling an annual
inflation rate of 8.6 per cent, a 40-year high.
Spooked by
concerns the US Federal Reserve would act aggressively this week to curb
inflation by hiking rates 75 basis points – in turn delivering higher borrowing
costs and added pressures on households – Wall Street began to sell. And sell.
And sell.
-----
https://www.afr.com/politics/federal/marles-has-some-hardware-headaches-left-on-his-desk-20220617-p5aufu
Marles has some hardware headaches left on his desk
Australia’s
huge defence spend will demand yet more difficult decisons for the new defence
minister in coming months.
Andrew Tillett
Political correspondent
Jun 17, 2022
– 1.43pm
When he went
to cast his ballot on election day, Peter Dutton engaged in a bit of blink-
and-you’ll-miss-it trolling of Scott Morrison.
With
Morrison’s support for the Cronulla Sharks well-known, Dutton wore a Dolphins
cap, the National Rugby League’s expansion team based around Redcliffe near
Dutton’s electorate north of Brisbane.
More subtle
was the charcoal jacket Dutton was wearing. The logo was hard to make out but
on closer inspection, the jacket was provided by Rheinmetall, a German defence
company that has set up shop near Ipswich to build vehicles for the army.
Rheinmetall
already is building the Boxer combat vehicle, a contract worth more than $5
billion.
But it is the
running with Korean rival Hanwha for a much bigger prize, a contract worth up
to $27 billion to build hundreds of armoured infantry fighting vehicles, used
to carry troops into battle.
-----
https://www.afr.com/markets/equity-markets/asx-to-plunge-amid-renewed-global-rout-20220617-p5auet
ASX suffers worst week since the pandemic onset
Cecile Lefort Markets
reporter
Jun 17, 2022
– 4.33pm
Australian
shares suffered their worst week since the pandemic-induced meltdown in 2020,
tracking Wall Street on fears that aggressive policy tightening will induce a
recession.
The
S&P/ASX 200 index fell 1.8 per cent to 6474.8 points on Friday, its lowest
in 18 months. It has dropped 6.6 per cent for the week, the biggest such tumble
since March 2020 and follows a steep 4.2 per cent slide last week. the All
Ordinaries lost 1.8 per cent to 6663.3 points.
The mood was
already somber after Wall Street tumbled overnight with the Dow Jones
Industrial Average off 2.5 per cent, the S&P 500 3.3 per cent lower and the
Nasdaq 4.1 per cent down. The rout continued in Asia with MSCI’s broadest index
of Asia-Pacific shares and Japan’s Nikkei also under water.
World stocks
were on course for the steepest weekly percentage drop in more than two years.
Out of the
index’s 11 sectors, consumer staples was the only category in the black with a
gain of 0.6 per cent. Materials was the hardest-hit, dropping 2.8 per cent,
followed by tech stocks, off 2.4 percent.
-----
https://www.smh.com.au/politics/federal/labor-and-the-curse-of-the-global-shocks-can-albanese-defy-history-20220617-p5auif.html
Labor and the curse of the global shocks: Can Albanese defy history?
George Megalogenis
Columnist
June 18, 2022
— 5.00am
Every new
Labor government is accompanied by the drumbeat of global crisis. It is a
one-sided curse in our system which began in 1929, when James Scullin took
Labor to power on the eve of the Great Depression. Every Labor leader since
Scullin who took power from opposition has faced an economic upheaval within 12
months of their election.
This week,
Anthony Albanese had some of his burdens clarified with an energy crisis at
home, and an interest
rate shock from the United States. The combination of the two has revived
fears of the economic condition we thought had been buried by deregulation:
stagflation. For Albanese and his ministers, the word brings back memories of
Gough Whitlam’s doomed government.
But the 1970s
we are reliving now look nothing like the original. This reboot follows the
upside-down script of Stranger Things, where all the key players in the
federation and the wider economy have their positions inverted.
In Whitlam’s
day, the premiers were wreckers, not reformers. And the industrial chaos was
triggered by the trade unions, not big business. The reversal of roles could be
seen in two surprises this week.
------
https://www.theage.com.au/national/perfect-storm-is-the-australian-economy-heading-back-to-the-1970s-20220617-p5aufk.html
‘Perfect storm’: Is the Australian economy heading back to the 1970s?
By Matthew Knott
June 18, 2022
— 6.00am
As a noted
political historian, Paul Strangio is wary of oversimplified comparisons to the
past. But as he surveys the diabolical challenges facing Anthony Albanese at
the start of his prime ministership, he sees unmistakable parallels to Gough
Whitlam and the tumultuous 1970s.
“In both
cases you see a Labor government coming into power with the spectre of
escalating energy prices and the risk of stagflation,” says the Monash
University politics professor.
Recalling the
spirit of the times five decades ago, Strangio says: “When Whitlam came to
power Australia had gone through 1950s and ’60s with a sense of confidence and
even complacency – themes Donald
Horne famously explored in his book The Lucky Country. There was a sense
that prosperity would continue uninterrupted.”
Then came the oil price
shock triggered by an embargo by Arab members of the Organisation of Petroleum
Exporting Countries. The price of oil quadrupled and the confounding new
phenomenon of stagflation emerged. In Australia, inflation jumped from 6.5 per
cent in 1972 to 15.3 per cent in 1975. Unemployment doubled from 2.6 to 4.9 per
cent.
“What was
going on was not supposed to happen – you were not supposed to have rising
-----
https://www.theaustralian.com.au/nation/worst-hit-to-superannuation-since-global-financial-crisis-as-market-losses-mount/news-story/ba33ba4c45a333c3b5aaad9c05265608
Worst hit to superannuation since Global Financial Crisis as market losses
mount
Patrick Commins
6:18AM June
18, 2022
Australian
workers face losses on their superannuation funds this financial year for only
the fifth time in three decades, as fears about rising US interest rates took
losses on the Australian sharemarket to more than $270bn since the Reserve
Bank’s rate hike on June 7.
The All
Ordinaries sharemarket index fell a further 1.8 per cent on Friday, its sixth
consecutive day of losses, as shockwaves from the US Federal Reserve’s decision
to raise rates by 0.75 percentage points on Thursday spooked international
markets.
Global
investors have become increasingly convinced that the US Federal Reserve’s “do
whatever it takes” approach to taming 40-year highs in inflation will drive a
global downturn next year.
NAB chief
economist Alan Oster said the world’s largest economy could plunge into
recession next year.
“Very rarely
does a boom kill itself; nearly always it gets killed by the Fed,” Mr Oster
said.
-----
https://www.afr.com/policy/economy/the-economy-is-too-hot-like-the-1970s-20220616-p5au3u
The economy is too hot like the 1970s
A record
13.5 million people are working, but there is chatter about a global recession and
Australia’s economy is testing the speed limit.
John Kehoe Economics editor
Jun 16, 2022
– 3.57pm
Jobs are
booming, but there is increasing chatter about the Australian economy being dragged
into a possible global recession.
Why the
nervousness, when a record 13.5 million people are working and the 3.9
per cent jobless rate is close to full employment?
The economy
is running hot, probably too hot. The speed limit is being tested.
We are living
through a confluence of historic global disruptions with deep
parallels to the 1970s: an energy price crisis, war, bulging budget
deficits, high inflation, interest rate rises and large wage claims.
The challenge
for governments, central banks, business and trade unions is to avoid repeating
the devastating stagflation bust.
-----
https://www.afr.com/companies/financial-services/is-it-finally-time-to-buy-bonds-20220616-p5au5f
Is it finally time to buy bonds?
An
almighty market crash and a system full of cash may finally mean there’s merit
for everyday investors to tip-toe back to the bond market.
Jonathan Shapiro
Senior reporter
Jun 16, 2022
– 3.26pm
One of the
occupational hazards of being a fixed income reporter over the past decade has
been covering the many doomed attempts to breathe life into the dormant retail
bond market.
The case for
individual investors to own bonds has been well-made by those advocating for
its growth.
Australians’
portfolios are more
overweight stocks than those of any other nation. We are also the second-largest
equity investors in the world when measured by total assets. And, as more of us
approach retirement, it makes sense that we should de-risk and own safer fixed
income investments.
But, the
reality is that for most individual investors, bonds simply haven’t been
compelling at all.
In the years
following the global financial crisis Australia’s banks were under pressure to
boost retail deposits and responded by paying over the odds – and over the bond
rate – to attract savings.
-----
COVID-19 Information.
-----
https://www.smh.com.au/world/north-america/covid-is-making-flu-and-other-common-viruses-act-in-unfamiliar-ways-20220614-p5atgv.html
COVID is making flu and other common viruses act in unfamiliar ways
By Frances
Stead Sellers
June 14, 2022
— 11.26am
Washington:
At one point last month, children were admitted to Yale New Haven Children’s
Hospital with a startling range of seven respiratory viruses.
They had
adenovirus and rhinovirus, respiratory syncytial virus and human
metapneumovirus, influenza and parainfluenza, as well as the coronavirus –
which many specialists say is to blame for the unusual surges.
“That’s not
typical for any time of year and certainly not typical in May and June,” said
Thomas Murray, an infection-control expert and associate professor of
pediatrics at Yale. Some children admitted to the hospital were co-infected
with two viruses and a few with three, he said.
More than two
years into the coronavirus pandemic, familiar viruses are acting in unfamiliar
ways. Respiratory syncytial virus, known as RSV, typically limits its
suffocating assaults to the winter months.
-----
Climate Change.
-----
https://www.afr.com/companies/energy/energy-market-operator-caps-qld-power-price-as-crisis-builds-20220612-p5at5o
Energy market operator caps Qld power price as crisis builds
Angela
Macdonald-Smith Senior resources writer
Jun 12, 2022
– 8.31pm
Australia’s
national energy market operator has intervened to cap electricity wholesale
prices in Queensland for what is thought to be the first time ever after a
sustained period of extreme prices in the east coast’s building energy crisis.
Wholesale
prices in Queensland were controlled at $300 a megawatt-hour at 6.55pm after
the cumulative total of seven days of prices topped the set limit of $1.3591
million, the Australian Energy Market Operator said.
About 30
minutes later, the prices the wholesale prices in all the other main states in
the National Electricity Market were all trading over $1000/MWh, signalling the
tight supply market seeking to meet evening winter demand amid multiple outages
of coal power units along the east coast.
Gas
prices in two states are already being controlled by AEMO at $40 a gigajoule
for similar reasons amid a jump in demand for gas for electricity
generation and for heating during the cold snap, and high international prices
for LNG.
-----
https://www.theaustralian.com.au/breaking-news/shock-report-reveals-957-per-cent-of-australias-gas-profits-are-going-to-foreign-owners/news-story/766335bb203e389e6aab1a39be7afa98
Shock report reveals 95.7 per cent of Australia’s gas profits are going to
foreign owners
Lauren Ferri
NCA NewsWire
6:00AM June
13, 2022
While most
Australians are preparing to be hit with skyrocketing gas prices, a shocking
report has revealed most of the profits will be going to foreign owners.
Researchers
have conducted a deep-dive analysis of companies on the Australian Stock
Exchange and found 95.7 per cent are foreign owned.
With 80 per
cent of Australia’s gas being exported out of the country, households and
businesses are experiencing price shock with “apocalyptic” rises in energy
prices nationwide.
The
Australian Energy Market Operator (AEMO) has been forced to step in and cap gas
prices in Sydney, Melbourne and Brisbane to $40 per gigajoule, but it is still
five times higher than last year’s prices.
-----
https://www.afr.com/companies/energy/aemo-calls-for-more-supply-to-avoid-blackouts-20220615-p5atrt
AEMO suspends electricity market
Mark Ludlow Queensland
bureau chief
Updated Jun
15, 2022 – 2.59pm, first published at 9.33am
The
Australian Energy Market Operator has taken the unprecedented step of closing
down the spot electricity market to deal with the national energy crisis.
After days of
asking and then directing energy companies to put in more supply, AEMO had
obviously had enough.
Just after
2pm, AEMO issued a notification saying it had suspended the spot market in NSW,
Victoria, Queensland, South Australia and Tasmania.
“AEMO has
determined that it is necessary to suspend the spot market in all regions under
NER clause 3.14.3(s)3) because it has become impossible to operate the spot
market in accordance with the provisions of the rules,” it said in a statement.
-----
https://www.afr.com/companies/energy/the-electricity-market-failed-so-the-operator-suspended-it-20220615-p5au12
The electricity market failed, so the operator suspended it
If LNG
exporters refuse to make enough gas at available domestically at a fair price,
the government should introduce a windfall profits tax.
Tony Wood Contributor
Jun 16, 2022
– 5.20pm
Australia’s
east coast energy market operator (AEMO) has made the right decision in the
circumstances to
suspend the market – but the path to recovery will be rocky.
The wholesale
electricity market is the financial engine of the National Electricity Market,
designed by governments in the late 1990s to match power generation with demand
at lowest cost. It has been largely a success since then.
From today,
the focus of AEMO, the power industry and governments will be to address the
immediate issues with offline generators and restore the normal operations of
the NEM. David Rowe
The wholesale
spot price varies to reflect the lowest cost supply combination of coal, gas,
hydro, and renewables. Various contracts outside the spot market enable
generators and customers – retailers and large users – to manage their
financial risks.
Several
physical problems emerged over the past six to nine months that led to more
than a quarter of the coal-fired plants in the NEM being offline. Some of these
problems were technical or mechanical, and some related to external factors
such as coal mines being flooded.
-----
https://www.afr.com/companies/energy/impossible-to-operate-the-week-that-broke-the-energy-market-20220617-p5aug3
‘Impossible to operate’: How the energy crisis unfolded
The
collapse of the 33-year-old National Electricity Market this week has raised
big questions around the management of the energy transition.
Angela
Macdonald-Smith Senior resources writer
Jun 17, 2022
– 3.58pm
The dramatic
breakdown of the National Electricity Market this week has inevitably raised
big questions about the future of the country’s transition to low-carbon
energy.
By the time Australian
Energy Market Operator chief executive Daniel Westerman took the unprecedented
step on Wednesday afternoon of suspending the NEM in favour of directly
controlling the output of power plants, the job of keeping electricity supplies
secure had become just too tricky.
With as much
as 30 per cent of coal generators offline for one reason or another, runaway
prices for natural gas and coal, low renewables generation, and plenty of
demand during an early winter cold snap, Australia’s power grid was in trouble.
“These are
just incredibly challenging and unprecedented times, with the combination of
significant plant outages, getting fuel supply to key plants, but also with the
backdrop of the higher commodity prices,” Origin Energy chief executive Frank
Calabria told AFR Weekend. ”So they’ve all come together, and it’s clearly been
very challenging.”
-----
https://www.smh.com.au/politics/federal/how-to-rouse-a-sleeping-giant-the-burning-question-for-energy-rich-australia-20220617-p5auhx.html
How to rouse a sleeping giant? The burning question for energy-rich
Australia
Peter Hartcher
Political and
international editor
June 18, 2022
— 5.00am
Australia is
a global energy giant. It ships to the world such vast tonnages of coal and LNG
that it’s the third-biggest energy exporter on the planet, after Russia and
Saudi Arabia. Yet the giant has been brought to its knees. This week millions
of Australians living in NSW, Victoria, Queensland and South Australia were
urged to turn off their electric appliances during times of peak demand to
avoid blackouts.
Even as the
coal and gas companies loaded record volumes of energy onto ships to be sold
abroad. Two-thirds of Australia’s energy production goes overseas, according to
the federal government’s Australian Energy Statistics.
“It’s not the
energy that’s short,” observes the former chair of the Energy Security Board,
Kerry Schott, an authority on the industry.
Yet this week
the government entity that co-ordinates the national energy market, the
Australian Energy Market Operator (AMEO), had to suspend the market
for the first time since its creation in 1998. It ran the system by direct
fiat.
-----
Royal Commissions And The Like.
-----
https://www.afr.com/wealth/personal-finance/how-to-avoid-shocking-elder-abuse-in-your-family-20220610-p5aswm
How to avoid ‘shocking’ elder abuse in your family
Inheritance
impatience, rising costs of living and COVID-19 are contributing to an increase
in violent attempts to extort cash, shares and property from elders.
Duncan Hughes Reporter
Jun 15, 2022
– 5.00am
Older
Australians are being threatened with guns, cheated, having essential medicine
withheld and even physically harmed in desperate attempts to force them to hand
over their assets, usually to family members, say lawyers.
Darryl
Browne, a specialist in elder legal issues and principal of Browne Linkenbagh
Legal Services, warns the “shocking litany of abuse is just the tip of the
iceberg” and likely to worsen as the financial impact of COVID-19 and tighter
economic conditions force inheritance impatience.
Kay
Patterson, Age Discrimination commissioner and a former federal government
minister, warns abuse ranges from violent extortion through to “benevolent
ageism”, where family members effectively mothball elders by reducing their
autonomy in the guise of protection.
-----
National Budget Issues.
-----
https://www.afr.com/policy/economy/philip-lowe-says-higher-rates-necessary-to-slay-7pc-inflation-20220614-p5atq6
Philip Lowe says higher rates ‘necessary’ to slay 7pc inflation
John Kehoe Economics editor
Jun 14, 2022
– 9.00pm
Reserve Bank
of Australia governor Philip Lowe says inflation will peak at a “very high” 7
per cent late this year, but an extra $250 billion of savings will help households
contend with cost
of living pressures and falling
house prices.
Dr Lowe said
it was “reasonable” to expect the cash rate to eventually reach 2.5 per cent,
in line with the midpoint of the inflation target, but he admitted it was
“unclear” how high rates would go and how quickly.
He said
higher interest rates were required because there was too much “spending
pressure” and the time for emergency pandemic settings was over.
“When there’s
a lot of pressure on capacity, prices go up and higher interest rates will
establish a better balance between spending and the ability of the economy to
produce goods and services,” Dr Lowe said in an interview on Tuesday night with
the ABC’s 7.30 television program.
-----
https://www.afr.com/work-and-careers/workplace/minimum-wage-for-lowest-paid-increased-by-5-2pc-20220615-p5atsw
Minimum wage for lowest paid increased by 5.2pc
David Marin-Guzman
Workplace correspondent
Jun 15, 2022
– 10.28am
The Fair Work
Commission has increased the national minimum wage for more than 180,000 workers
by more than a dollar an hour or 5.2 per cent but awarded a lower increase to
millions of workers on higher-award rates.
The wage
panel’s decision handed on Wednesday will mean the lowest paid workers’ hourly
rates will increase from $20.33 an hour to $21.38 from July 1 and their weekly
rates will rise by $40 a week to $812.60.
The increases
will also be delayed for the industries hardest hit by the pandemic - aviation,
tourism and hospitality - until October 1.
However, the
more than 2 million workers on higher award rates will get a lower 4.6 per cent
increase as long as it equates to at least a $40 a week increase for a
full-time employee.
-----
https://www.theaustralian.com.au/nation/jobless-rate-steady-at-39pc/news-story/595c907b2fee5b2f0630d39c34ec849d
Jobless rate steady at 3.9pc
Patrick Commins
June 16, 2022
Unemployment
was steady at 3.9 per cent in May, despite the economy adding 61,000 jobs in
the month amid climbing fears the Reserve Bank will be forced to slow the
economy to tame runaway inflation.
The number of
full-time jobs jumped by 69,400, while part-time jobs fell by 8700, according
to the seasonally adjusted figures from the Australian Bureau of Statistics.
ABS head of
labour statistics Bjorn Jarvis said the average pace of employment growth of
30,000 people over the past three months remained above the pre-Covid monthly
trend of 20,000.
“The increase
in May 2022 was the seventh consecutive increase in employment, following the
easing of lockdown restrictions in late 2021,” Mr Jarvis said.
-----
https://www.afr.com/politics/federal/chalmers-signals-tougher-budget-cuts-ahead-20220617-p5augu
Chalmers signals tougher budget cuts ahead
Phillip Coorey and John Kehoe
Jun 18, 2022
– 5.00am
The Albanese
government will cut harder than first flagged when it hands down a budget in
October, and then build public support for a second-term agenda of tough
revenue and spending measures needed to repair the nation’s finances.
In an
exclusive interview with AFR Weekend, Treasurer Jim Chalmers said that in the
short term, there was a “case for a more substantial look at trimming and cutting
back some of this wasteful spending that we’ve inherited”.
In the longer
term, the current fiscal settings were not adequate to deal with the structural
challenges in a budget riven by debt and deficit, he said. On the path to the
next election, the Labor government needed to make the case for hard decisions.
As inflation
smashes global markets and talk of recession emerges, Dr Chalmers warned the
states and anyone else coming cap in hand to the Commonwealth to look elsewhere
because the $1 trillion federal debt was worse than that of the states, and the
federal budget was “not a bottomless pit”.
-----
Health Issues.
-----
https://www.afr.com/policy/health-and-education/monkeypox-outbreak-poses-real-risk-who-warns-20220616-p5au2a
Monkeypox outbreak ‘poses real risk’, WHO warns
Hans van Leeuwen
Europe correspondent
Jun 16, 2022
– 3.56am
Geneva | The
worldwide monkeypox outbreak “poses a real risk”, the World Health Organisation
has warned, after flagging an emergency meeting next week to decide whether to
put the virus on a par with COVID-19.
A special WHO
committee will assess whether to declare monkeypox a “public health emergency
of international concern”, the label given to COVID-19 in January 2020, as the
number of cases outside west Africa reaches 1900, spread across 30-plus
countries.
“The
magnitude of the outbreak poses a real risk,” said Hans Kluge, WHO’s regional
director for Europe, where almost nine in 10 of the cases have been detected.
“The longer
the virus circulates, the more it will extend its reach, and the stronger the
disease’s foothold will get in non-endemic countries.”
-----
https://www.smh.com.au/politics/federal/760m-extra-for-hospitals-while-health-system-fixes-are-found-20220617-p5auk2.html
$760m extra for hospitals while health system fixes are found
By Katina Curtis
June 17, 2022
— 3.54pm
The states
will keep pandemic-era funding levels for their hospitals for an extra three
months, costing the Commonwealth another $760 million, while they look at ways
to improve the overall health system.
Priority will
be given to getting aged care residents and National Disability Insurance
Scheme participants out of hospital beds and into more appropriate facilities.
The federal
government is paying half of COVID-19 state health costs under a temporary
arrangement that was due to end on September 30.
Prime
Minister Anthony Albanese said the new arrangement was not just about more
money but looking more broadly at pressures on the system.
“What it’s
about is a recognition that our hospital system at the moment has people who
should be being looked after by their local GP, but GPs just aren’t available;
that the lack of nurses and health professionals in the aged care system means
that many people who should be either looked after at home or looked after as
aged care residents end up in the hospital system as well, putting further
pressure on the system,” he said.
-----
International Issues.
-----
https://www.afr.com/world/europe/momentum-in-ukraine-is-shifting-in-russia-s-favour-20220612-p5at3i
Momentum in Ukraine is shifting in Russia’s favour
Marc Santora
and Roger Cohen
Jun 12, 2022
– 10.55am
A war in
Ukraine that began with a Russian debacle as its forces tried and failed to
take Kyiv, Ukraine’s capital, has seemingly begun to turn, with Russia now
picking off regional targets, Ukraine lacking the weaponry it needs, and
Western support for the war effort fraying in the face of rising gas prices and
galloping inflation.
On the 108th
day of Russian President Vladimir Putin’s unprovoked war, driven by his
conviction that Ukraine is territory unjustly taken from the Russian Empire,
Russia appeared no closer to victory. But its forces did appear to be making
slow, methodical and bloody progress toward control of eastern Ukraine.
On Saturday,
Ukraine’s president, Volodymyr Zelensky, once again promised victory. “We are
definitely going to prevail in this war that Russia has started,” he told a
conference in Singapore in a video appearance. “It is on the battlefields in
Ukraine that the future rules of this world are being decided.”
Yet, the
heady early days of the war — when the Ukrainian underdog held off a deluded
and inept aggressor and Putin’s indiscriminate bombardment united the West in
outrage — have begun to fade. In their place is a war that is evolving into
what analysts increasingly say will be a long slog, placing growing pressure on
the governments and economies of Western countries and others throughout the
world.
-----
This
article originally appeared in The New York Times.
https://www.smh.com.au/world/europe/russia-bombing-indiscriminately-with-massive-anti-ship-missiles-20220612-p5at53.html
Russia ‘bombing indiscriminately’ with massive anti-ship missiles
By James
Kilner
June 12, 2022
— 5.00pm
London:
Russia is firing huge Cold War-era missiles designed to destroy aircraft
carriers at Ukraine’s military in Donbas because it has run out of precision
rockets, according to the UK’s Ministry of Defence.
The
five-and-a-half-tonne missiles were designed to carry a nuclear warhead, so
using them as conventional missiles is causing vast collateral damage.
“When
employed in a ground attack role with a conventional warhead they are highly
inaccurate and can therefore cause significant collateral damage and civilian
casualties,” the Ministry of Defence said.
Since
withdrawing from around Kyiv in March, the Russian army has concentrated its
main efforts on capturing the Donbas region of eastern Ukraine. Severodonetsk
is the largest city that it does not currently hold in Luhansk, which makes up
half of Donbas, and is the focus of the fiercest fighting.
-----
https://www.theaustralian.com.au/business/inflation-as-bad-as-the-1970s-at-least-some-think-it-is/news-story/3c7ab5885b0256169b26d3a86e13bcfc
Inflation: as bad as the 1970s? At least some think it is
ADAM CREIGHTON
1:55PM June
12, 2022
At least it’s
not as bad as in the 1970s.
That’s one
glass half full approach to assessing the inflationary burst spreading
painfully throughout the world, foreshadowing potentially economy-crushing
rates of interest.
governments,
central banks and an army of experts caught embarrassingly off-guard by rising
inflation over the last 12 months – which they said would be transitory – could
reassure themselves at least that the challenge of reducing inflation wouldn’t
be as great as in the wake of the two 1970s oil shocks.
But is that
even true?
One of the
world’s best-known economists, Larry Summers, former president of Harvard
University and US Treasury secretary under Bill Clinton, thinks not.
-----
https://www.afr.com/world/north-america/us-set-for-recession-next-year-economists-predict-20220613-p5atah
US set for recession next year, economists predict
Colby Smith
and Caitlin Gilbert
Jun 13, 2022
– 12.21pm
Washington/New
York | The US economy will tip into a recession next year, according to nearly
70 per cent of leading academic economists polled by the Financial Times.
The latest
survey, conducted in partnership with the Initiative on Global Markets at the
University of Chicago’s Booth School of Business, suggests mounting
headwinds for the world’s largest economy after one of the most rapid
rebounds in history, as the Federal Reserve ramps up efforts to contain the
highest inflation in about 40 years.
The US
central bank has already embarked on what will be one of the fastest tightening
cycles in decades. Since March, it has raised its benchmark
policy rate by 0.75 percentage points from near-zero levels.
The Federal
Open Market Committee gathers once again on Tuesday for a two-day policy
meeting, at which officials are expected to implement the first back-to-back
half-point rate rise since 1994 and signal the continuation of that pace until
at least September.
-----
https://www.afr.com/world/europe/us-china-decoupling-would-be-a-bigger-economic-hit-than-the-gfc-20220613-p5at6r
Why global economies fear a US-China decoupling
Hans van Leeuwen
Europe correspondent
Jun 13, 2022
– 8.55am
Geneva | A
decoupling of the US
and Chinese economies would batter the world’s GDP by more than the global
financial crisis of 2008-09, World Trade Organisation director general Ngozi
Okonjo-Iweala has warned.
In a punchy
opening address to a summit of trade ministers from the WTO’s 164 member
countries – the first time they have met since a failed conference in Buenos
Aires five years ago – Dr Ngozi said another failure in Geneva this week would
fan geopolitical tensions, fuel illegal migration and ramp up the world’s debt
burden.
But speaking
separately to journalists, she also hosed down expectations: she said nailing
down even one or two of the WTO’s stalled trade deals would amount to progress
for the world’s beleaguered trade umpire and rule-setter.
“If we do not
deliver – if we allow or even embrace economic and regulatory fragmentation –
the costs to your domestic constituencies will be substantial,” she told the
120 ministers at the summit’s opening session late on Sunday (AEST).
-----
https://www.smh.com.au/business/markets/shock-us-inflation-a-rude-reality-check-for-already-shaken-markets-20220613-p5at78.html
Shock US inflation a rude reality check for already shaken markets
Stephen Bartholomeusz
Senior
business columnist
June 13, 2022
— 11.30am
After
Friday’s shock inflation readings, the US Federal Reserve Board meeting that
starts on Tuesday is predestined to produce an outcome that will further
destabilise shaken markets and add more pessimism to an already-gloomy global
economic outlook.
The 8.6 per
cent headline US inflation rate for May – another 40-year record – dashed hopes
that had been raised by an April reading of 8.3 per cent that seemed to suggest
the rate had peaked.
Inflation in
the US and elsewhere now appears entrenched and spreading beyond the impact of
dysfunctional supply chains and soaring energy prices. The May increase is
disconcerting, given that the US is cycling inflation numbers that were already
surging at this time last year.
The US data
came a day after the European Central Bank foreshadowed its first rate rise in
more than a decade at next month’s meeting and announced it would end its
eight-year-old program of massive bond purchases on July 1.
-----
https://www.smh.com.au/business/the-economy/party-like-a-russian-turns-toxic-at-putin-s-economic-forum-20220613-p5at68.html
‘Party like a Russian’ turns toxic at Putin’s economic forum
June 13, 2022
— 7.30pm
Vladimir
Putin’s annual economic forum in St. Petersburg was always a hot ticket for
Russian and foreign business tycoons eager to curry favour with the Kremlin by
hosting glitzy parties or announcing major investments. His invasion of Ukraine
has made it a radioactive one.
Many business
leaders are concerned about even being seen at this year’s St. Petersburg
International Economic Forum, fearful it may make them targets for sanctions,
three people familiar with the situation said, declining to be identified
because the issue is sensitive. At least two executives said they plan to leave
early to avoid attending Putin’s speech at the event, which in past years was
the highlight for the well-connected.
Some have
asked the organisers, Roscongress, not to identify them on their badges at the
June 15-18 SPIEF forum, the people said. Roscongress didn’t respond to requests
to comment.
Even as
Russia contends with unprecedented international sanctions that threaten its
deepest economic recession in decades, officials are projecting a
business-as-usual approach for the 25th anniversary event under the slogan of
“new opportunities in a new world.”
-----
https://www.theaustralian.com.au/world/brexit-boris-johnson-rips-up-northern-ireland-protocol/news-story/a4dbae2072d7871ab1d387de70de8317
Brexit: Boris Johnson rips up Northern Ireland Protocol
Jacquelin
Magnay
5:43AM June
14, 2022
The United
Kingdom government has introduced new legislation to rip up the Northern
Ireland protocol, angering the European Union and Irish politicians who have
threatened a fresh trade war and a reopening of Brexit divisions within the
Conservative party.
For 18 months
post-Brexit difficulties for Northern Ireland, including a refusal by the
Democratic Unionist Party to form a government at Stormont has caused such
“exceptional and long term” political concern, the Boris Johnson government has
now tested international law to do away with the protocol and introduce a new
one.
Under the new
legislation, introduced on Tuesday morning Australian time to Westminster, the
British government can make changes to restore stability and ensure the
delicate balance of the Good Friday agreement is protected.
The
government said the latest Northern Ireland Protocol Bill will address the
practical problems the existing protocol – the Brexit deal negotiated between
the EU and the UK which included an effective trade border down the Irish Sea –
had presented.
-----
https://www.afr.com/world/europe/divisions-in-the-west-threaten-ukraine-20220614-p5atml
Divisions in the West threaten Ukraine
Gideon Rachman
Columnist
Updated Jun
14, 2022 – 2.39pm, first published at 2.17pm
Early in the
Vietnam war, US President Lyndon Johnson asked one of his top generals what it
would take “to do the job”. The unhelpful reply was to ask for a definition of
the job.
A later White
House study defined winning in Vietnam as “demonstrating to the Vietcong that
they cannot win”.
Now, as the
US supports Ukraine in its war with Russia, Western powers are once again tempted
to define winning as not losing.
The
Ukrainians worry that they will be given just enough to keep fighting – but not
enough to defeat Russia. This is an agonising prospect at a time when their
cities are being devastated and the Ukrainian army is losing hundreds of men a
day as it fights to stem a Russian advance.
-----
https://www.afr.com/markets/equity-markets/echos-of-lehman-bros-blowup-as-markets-plunge-20220614-p5atk2
Echos of Lehman Bros blowup as markets plunge
Ye Xie,
Isabelle Lee, Amelia Pollard and Peyton Forte
Jun 14, 2022
– 11.41am
Quincy Krosby
could not wait for Monday’s trading session to be over.
“I was glued
to the screen,” LPL Financial’s chief equity strategist said in an interview.
It was just
one of those days with losses
so gigantic that solely looking at stocks was not enough. Her eyes strayed
to bonds, to credit default swaps and elsewhere as she tried to figure out how
bad things were and might get.
What she saw
was ugly. Even by the standards of this volatile year, Monday’s wild ride
throughout financial markets stands out. Two-year US Treasury yields surged 29
basis points as bond prices tanked. The yield jumped 54 basis points since
Thursday night, the biggest two-day increase since 2008, a sign of just how
rapidly traders are adjusting where they think the Federal Reserve will take
interest rates.
All but five
stocks in the S&P 500 tumbled, and the benchmark posted a more than 20 per
cent loss since its January peak, thus crossing into a bear market.
-----
https://www.afr.com/policy/economy/policy-errors-of-the-1970s-echo-in-our-times-20220615-p5atv3
Policy errors of the 1970s echo in our times
The echoes
of the 1970s are loud: higher than expected inflation, big shocks and weakening
growth. But the differences are also encouraging.
Martin Wolf Columnist
Jun 15, 2022
– 12.04pm
Unexpectedly
high inflation, wars in key commodity-producing regions, declining real wages,
slowing economic growth, fears of tightening monetary policy and turbulence in
sharemarkets – we see all of these things in today’s world economy.
These were
also the dominant features of the world economy in the 1970s. That period ended
in the early 1980s, with a brutal monetary tightening in the US, a sharp
reduction in inflation and a wave of debt crises in developing countries,
especially in those of Latin America.
It was also
followed by huge changes in economic policy: conventional Keynesian economics
was buried, labour markets were liberalised, state-owned enterprises were
privatised and economies were opened up to trade.
How close are
the parallels, especially to the 1970s? What are the differences? And what can
we learn from those mistakes? The World Bank’s Global
Economic Prospects report, out last week, addresses these questions. The
parallels are clear, as are differences. Not least, there are mistakes to be
avoided: do not be over-optimistic; do not take high inflation lightly; and do
not leave vulnerable people and economies unprotected against the shocks
themselves and their painful legacies.
-----
https://www.afr.com/policy/economy/fed-lifts-key-rate-by-75-basis-points-20220616-p5au2f
Fed’s jumbo rate rise to cool ‘very hot’ economy
Matthew Cranston
United States correspondent
Updated Jun
16, 2022 – 9.14am, first published at 4.05am
Washington |
The Federal Reserve lifted the official interest rate by 0.75 percentage point,
the biggest increase in 28 years, as it intensifies efforts to combat the
highest US
inflation in four decades.
After the
Fed’s two-day policy meeting on Wednesday (Thursday AEST), chairman Jerome
Powell said it would continue raising rates at a more aggressive pace, with
another 0.50 to 0.75 percentage point increase at its next meeting in July.
“I do not
expect moves of this size to be common,” Mr Powell said at a press conference.
The increases would likely lead to a benchmark rate of 3.4 per cent by the end
of this year, up from its new range of 1.5 to 1.75 per cent.
Mr Powell
played down fears of a recession from the rapid pace of tightening, saying the
US economy was still “very hot” and could withstand higher rates even in an
“extraordinarily uncertain environment”.
-----
https://www.afr.com/policy/economy/interpreting-the-federal-reserve-s-latest-move-and-outlook-20220616-p5au2m
Interpreting the Federal Reserve’s latest move and outlook
Timothy Moore Before the
Bell editor
Jun 16, 2022
– 5.26am
Here are how
some economists and strategists are assessing the latest Federal Reserve policy
decision and chairman Jerome Powell’s comments:
LPL Financial
asset allocation strategist Barry Gilbert: “The more aggressive stance can
still be consistent with a softish landing for the economy, but the path is
getting narrower. We still think the Fed may be able to back off from its new
forecast of a 3.4 per cent benchmark rate at the end of the year, but for now
the priority is showing resolve.”
Pantheon
Macroeconomics’ Ian Shepherdson: “We think a further 75bp hike in July is less
than a 50/50, given our macro forecasts, and we’d be amazed to see 75bp in
September. The incoming data are going to make it clear that such aggressive
action is unnecessary. We hope the Fed takes the opportunity to pull back from
overkill.”
Morgan
Stanley on the revised US economic projections: “The Fed’s projections revealed
higher forecasts for headline inflation, but little change to core inflation
(just marking to market, for example), and the large drop in core inflation in
2023 still underscores they see the surge as largely temporary.
-----
https://www.afr.com/policy/foreign-affairs/five-hard-truths-about-the-war-in-ukraine-20220615-p5atvy
Five hard truths about the war in Ukraine
The Russians
and Ukrainians are running out of weapons and the rest of the world is running
out of patience and ideas.
Bret Stephens
Jun 16, 2022
– 8.00am
Five
sentences sum up the war in Ukraine as it stands now.
The Russians
are running out of precision-guided weapons. The Ukrainians are running out of
Soviet-era munitions. The world is running out of patience for the war. The
Biden administration is running out of ideas for how to wage it. And the
Chinese are watching.
Moscow’s shortfalls
with its arsenal, which have been obvious on the battlefield for weeks, are
cause for long-term relief and short-term horror. Relief, because the Russian
war machine, on whose modernisation Vladimir Putin spent heavily, has been
exposed as a paper tiger that could not seriously challenge NATO in a
conventional conflict.
Horror,
because an army that cannot wage a high-tech war, relatively low on collateral
damage, will wage a low-tech war, appallingly high on such damage. Ukraine, by
its own estimates, is suffering 20,000 casualties a month. By contrast, the US
suffered about 36,000 casualties in Iraq over seven years of war. For all its
bravery and resolve, Kyiv can hold off – but not defeat – a neighbour more than
three times its size in a war of attrition.
That means
Ukraine needs to do more than slow down the Russian army. It needs to break its
spine as quickly as possible.
-----
https://www.afr.com/chanticleer/masochist-markets-should-be-careful-what-they-wish-for-20220616-p5au56
Joy over big
rate jump misses the point
The risk of
lifting rates faster so markets can take their medicine now and then get relief
from future cuts ignores the implied threat to company earnings.
Jun 16, 2022
– 10.16am
At first
glance, the 1.5 per
cent rally on Wall Street on Wednesday night is difficult to understand.
After
expressly ruling out a 0.75 percentage point rate increase last month, Federal Reserve chairman
Jerome Powell went ahead and delivered it anyway. He cited Friday’s ugly US
inflation data and worrying signs inflation expectations are becoming embedded
in the minds of consumers.
It was the
biggest single rate rise since 1994 and as clear as a sign as we’ve had that
the Fed recognises it will need to move rates up much faster and far higher
than it thought possible just months ago,
The famous
“dot plot” that sets out the rate expectations of Fed committee members now
says rates will sit at about 3.4 per cent by the end of the calendar year. That
implies another 1.75 percentage points of jumps, with another 0.75 percentage
point hike widely tipped for July. Just two months ago, the dot plot said rates
would top out in 2022 at 2 per cent, which underscores just how rapidly the
Fed’s thinking is changing.
-----
https://www.smh.com.au/world/europe/xi-tells-putin-s-ukraine-invasion-legitimate-20220616-p5au2o.html
Xi tells Putin his Ukraine invasion is ‘legitimate’
Updated June
16, 2022 — 9.26amfirst published at 6.03am
Beijing:
Chinese President Xi Jinping has told Vladimir Putin that his actions on
Ukraine were legitimate, reasserting China’s support for the Russian president
on issues of sovereignty and security, according to Moscow’s official readout
of their phone call.
Xi told Putin
that he “noted the legitimacy of the actions taken by Russia to protect the
fundamental national interests in the face of challenges to its security
created by external forces”.
China has
refused to criticise Russia’s invasion of Ukraine or even to refer to it in
such terms, while accusing NATO and the West of provoking Moscow into
attacking.
Xi said “all
parties should responsibly push for a proper settlement of the Ukraine crisis,”
according to Beijing’s readout of the call. He has sought to avoid
repercussions from supporting the Russian economy amid international sanctions.
-----
https://www.smh.com.au/business/the-economy/world-s-central-banks-got-it-wrong-and-economies-pay-the-price-20220615-p5au13.html
World’s central banks got it wrong, and economies pay the price
By Enda
Curran
June 16, 2022
— 9.52am
Even after
central banks recognised they got their inflation calls wrong last year,
they’ve continued to flub their policy guidance, threatening greater damage to
their credibility, roiling markets and undermining the pandemic recovery.
The Federal
Reserve now hiked
interest rates by 75 basis points overnight, just weeks after Chair Jerome
Powell and his team repeatedly advertised a half percentage point move. It’s
the latest in a series of misfires, from deeming high inflation “transitory”
last year to speeding up the end of its bond-purchase program to accelerating
the runoff of its bond portfolio.
European
Central Bank President Christine Lagarde
has lately also turned more hawkish than she previously indicated, and the Reserve Bank of
Australia is among those raising rates faster than its policy makers had
signalled.
Investors are
casting judgement as they fret that the race to make up for past forecasting
errors raises the risk of recessions. Global stocks have entered a bear market,
US Treasury yields on Monday posted their biggest two-day jump since the 1980s
and credit markets are showing signs of increasing stress.
-----
https://www.theaustralian.com.au/world/the-times/operation-attic-inside-the-race-to-rearm-ukraine/news-story/c473d31d50539ecc4133dff914251426
Operation Attic: inside the race to re-arm Ukraine
By Larisa
Brown
The Times
June 16, 2022
Inside the
dusted-off attic of an old Second World War building in southern Germany is the
nerve centre for western weapons shipments to Ukraine.
More than 100
troops based at Patch Barracks in Stuttgart have the job of finding and sending
arms across the border in the first mission of its kind.
For Brigadier
Chris King, the most senior British officer in charge of the highly sensitive
operation, the stakes could not be higher. “I feel if we don’t do enough, we
will sow the seeds of future conflict,” the father of two told The Times.
“This is a
generational moment and we either help Ukraine to fight or we accept that maybe
not straight away, but in the next few years, we’re going to be fighting
somewhere else.”
-----
https://www.theaustralian.com.au/world/the-times/panther-tank-will-easily-outgun-pride-of-the-kremlin/news-story/474c0b9575a79c757a17ba4e69fccfe7
Panther tank ‘will easily outgun’ pride of the Kremlin
By Oliver
Moody
The Times
4:26PM June
15, 2022
Germany’s
biggest arms company has unexpectedly unveiled the first prototypes of an
advanced battle tank said to be capable of easily outgunning the T-14, the
pride of the Russian army.
The Panther
KF-51, whose main gun is thought to have a range of up to 6km, was developed in
secret for two years but rushed to completion after the invasion of Ukraine in
anticipation of a global surge in military spending. It is also equipped with
four loitering munitions: anti-tank suicide drones with a 4.5kg explosive
payload that can circle in the skies for an hour before dive-bombing enemy
armour.
The Panther
is pitched as the successor to the Leopard 2, which has been Germany’s primary
battle tank for more than four decades and which has been sold to more than a
dozen countries.
Yet it also
appears to be a response to the T-14 Armata, a Russian tank whose capabilities
have unnerved NATO strategists, although so far only a couple of dozen have
been produced and the model has seen little action in Ukraine.
-----
https://www.afr.com/world/europe/ukraine-tells-the-west-talk-is-cheap-give-us-the-weapons-20220616-p5au3h
Ukraine tells the West: talk is cheap, give us the weapons
Hans van Leeuwen and Andrew Tillett
Jun 17, 2022
– 10.17am
For Ukrainian
President Volodymyr Zelensky, visits from his fellow world leaders are like
buses. You don’t get any for ages, then three come along at once.
German
Chancellor Olaf Scholz, French President Emmanuel Macron and Italian Prime
Minister Mario Draghi boarded a night train in Poland on Wednesday, for a
highly consequential visit to Kyiv on Thursday.
These are the
leaders of the European Union’s three biggest economies. And they are three men
who have each, in their own way, seemed reticent to back Zelensky to the hilt
in his David-and-Goliath struggle against the forces of Russian President
Vladimir Putin.
Scholz has
been sluggish with the weapon supplies, and wary of causing Germans political
and economic pain. Macron has been talking about not hurting Putin’s feelings.
And Draghi proposed a ceasefire plan even as Russian troops remain ensconced on
Ukrainian territory.
But Zelensky
needs them: he is on the back foot. After visiting his troops on the front line
last week, his rhetoric has changed. He now talks often of “painful losses” and
“a terrifying toll”; he speaks less of winning, more of “holding on”.
-----
https://www.afr.com/companies/energy/as-european-leaders-visit-kyiv-putin-cuts-their-gas-supply-20220617-p5auh0
As European leaders visit Kyiv, Putin cuts their gas supply
Katrin
Bennhold and Melissa Eddy
Jun 17, 2022
– 10.17am
Berlin | As
the leaders of Europe’s three biggest economies appeared in Kyiv on Thursday
(Friday AEST) to send a message of support to Ukraine, Russian President
Vladimir Putin had his own message for them: Don’t forget, your industries are
at my mercy.
With
inflation already near a 40-year high, gas prices surged further as Russia cut
flows to Europe’s most important natural gas pipeline for the second day in a
row on Thursday. Germany, Italy, Austria and the Czech Republic all reported
shortfalls.
Gazprom,
Russia’s state-controlled gas giant, said repairs were to blame for the
squeeze. But European officials openly accused Mr Putin of using energy
supplies as a weapon, burying any last shred of the notion that Moscow was, on
energy at least, a reliable partner.
Gas exports
have given Moscow a potent diplomatic tool on the continent, where large swaths
of industry depend on Russian energy. As German Chancellor Olaf Scholz, French
President Emmanuel Macron and Italian Prime Minister Mario Draghi met with Ukrainian
President Volodymyr Zelenskyy in Kyiv, the capital, Mr Putin reminded them he
has his finger on the gas tab - and the fate of European economies in his hand.
-----
https://www.afr.com/world/asia/china-launches-new-aircraft-carrier-in-military-build-up-20220617-p5aulg
China launches new aircraft carrier in military build-up
Michael Smith North Asia
correspondent
Jun 17, 2022
– 4.08pm
Tokyo | China
launched its third aircraft carrier on Friday in a move that will significantly
bolster its military presence in the East and South China seas.
The Type 003
carrier, named Fujian, was launched from a shipyard in Shanghai. State
television broadcast footage of the vessel decked out with ribbons and Chinese
flags at a launch ceremony attended by thousands of military officers and local
officials.
The vessel
will now undergo mooring and sailing tests, China’s
Defence Ministry said in a report on its website. It is not expected to
enter military service until 2024.
China now has
the world’s largest fleet of carriers after the United States which defence
analysts said would play a crucial role if Beijing took military action to
seize control of Taiwan.
-----
https://www.news.com.au/world/europe/russian-president-vladimir-putin-looks-sick-at-st-petersburg-economic-forum/news-story/d697f4b08c82904d618b13f784f531c4
Russian President Vladimir Putin looks sick at St Petersburg Economic
Forum
Vladimir
Putin appeared fidgety and grimacing as he looked sweaty and bloated during a
lengthy speech on stage.
Henry
Holloway and The Sun
June 18, 2022
- 10:48AM
Vladimir
Putin appeared fidgety and grimacing as he looked sweaty and bloated during a
lengthy speech on stage.
Russia’s
tyrannical ruler was appearing at the St Petersburg Economic Forum as he
delivered a speech and then took part in a long discussion.
Putin
appeared to be uncomfortable, constantly shifting in his seat and fidgeting
with his hands.
He was sat
slumped into his chair, often resting at strange angles and curling into hands
into claw-like positions.
-----
https://www.theaustralian.com.au/world/beijing-digs-in-behind-russia-over-ukraine-invasion/news-story/1718aadbef5ddeefc4c0f60b288ed32d
Beijing digs in behind Russia over Ukraine invasion
By Afp
10:53AM June
16, 2022
President Xi
Jinping has assured Vladimir Putin of China’s support on Russian “sovereignty
and security”, leading Washington to warn Beijing it risked ending up “on the
wrong side of history”.
China is
“willing to continue to offer mutual support (to Russia) on issues concerning core
interests and major concerns such as sovereignty and security,” state
broadcaster CCTV reported Mr Xi telling the Russian President during a phone
call on Wednesday.
The backing
comes as the three leaders of France, Germany and Italy arrived in Kyiv to
“send clear political signals to Ukraine and the Ukrainian people, who have
been resisting heroically for several months”.
US President
Joe Biden also announced $US1bn worth of new arms for Ukraine as Pentagon
officials defended the pace and quality of supplies as meeting Kyiv’s
battlefield needs.
China has
refused to condemn Moscow’s massive military assault on Ukraine and has been
accused of providing diplomatic cover for Russia by blasting Western sanctions
and arms sales to Kyiv.
Wednesday’s
call was the second reported between the two leaders since Mr Putin launched
his invasion of Ukraine on February 24.
-----
https://www.theaustralian.com.au/business/the-wall-street-journal/losing-troops-in-ukraine-russia-grapples-with-its-manpower-problem/news-story/9e6107b411bad8f77ce67ce341a5c385
Losing troops in Ukraine, Russia grapples with its manpower problem
By Thomas
Grove
The Wall
Street Journal
7:54PM June
18, 2022
As Russia
tries to take the initiative in eastern Ukraine, Moscow has had to find fresh
manpower from some unlikely places for what is shaping up to be a crucial phase
of the war.
Since the
beginning of what the Kremlin calls its special military operation, it has
tried to pursue its campaign with an army at peacetime strength. The results
have been mixed.
Though
Russian forces have made gains in the east and south of the country, they
sustained crushing losses in Moscow’s initial attempt to seize Kyiv, by some
counts losing as many soldiers as the old Soviet Union did in Afghanistan.
Yet Russia’s
leadership has been reluctant to take the step of declaring war, which would
allow it to order a full mobilisation of fighting-age men. That, analysts say,
would tie Russian President Vladimir Putin’s own fate too closely to the
outcome.
-----
I look
forward to comments on all this!
-----
David.
