Last Tuesday on my live show, I discussed the current Treasury paper on Mandating Cash Acceptance in Australia. But today I want to take this further and I will outline my concern that the Government many well be playing a long con with the community ahead of the upcoming election.
The paper says Cash acceptance refers to the practice of businesses accepting cash as a form of payment for goods and services. Cash acceptance levels must remain sufficient to enable consumers, including those unable to use digital payment methods, to participate in the economy.
my suspicion, is this is more political than anything else. The Government knows cash availability is a BIG issue, and cannot be avoided, so this Treasury paper allows the issue to flow on beyond the next election. Meantime the neo-liberals, in the pockets on the big banks, still want to take our rights to use cash away, so on one hand they can appear to be taking the right for cash seriously, but can also continue to assume the banks they support them. It’s a classic yes Minister long con.
We can break that by making sure we provide responses to Treasury, along the lines, of first, there should be no carve out of essential services – which is difficult to try to define, and all businesses should still be required to accept legal tender in the form of cash. A simple antidote to the long con.
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This is our weekly market update, where we start in the US, cross to Europe and Asia and end in Australia, covering commodities and crypto along the way. This week we saw more volatility, but with the MSCI global index up 2.56%, and up for the year to date, and 18% for the past year. The US dollar continues to hold at high levels, while bond yields eased back from recent highs. The US Volatility index slide to 15.97 ahead of the arrival of Trump 2.0 on Monday.
No doubt, investors will closely monitor stock markets on Tuesday, the day after Donald Trump is inaugurated for his second term in the White House, to see if U.S. equities can continue their recent trend of posting gains after a president is sworn in. While historically, the benchmark S&P 500 stock index has not performed well on average on inauguration day, or the day after if the inauguration falls on a market holiday, the last three inaugurations have all resulted in market gains. Total S&P 500 returns in the first year in office for Barack Obama, Trump and Joe Biden topped 20 per cent. Actually, Trump broke the cycle in 2017, making him the first Republican to take over from a Democrat and not have a recession in the first year of his presidency since Harding in 1921. Let’s see if he can make it two consecutive times.
It’s critical to distinguish market from overall economic impacts; the two shouldn’t be conflated. The U.S. economy is a net importer, as it imports more than it exports (hence the trade deficit). But the S&P 500 is a net exporter. Leading exports from these companies include agricultural products, machinery, finished vehicles, technology, electronic equipment, minerals, fuels and oils around the globe, primarily to Canada, Mexico, China, Japan and the United Kingdom.
European shares ended on a positive note on Friday, benefiting from a broad-based rally which was fuelled by declining government bond yields and encouraging economic data from China, with the STOXX 600 logging its fourth straight weekly rise. The benchmark index, which rose by 0.7%, recorded a more than 2% gain over the week, achieving its fourth consecutive week of advances, its longest winning streak since Aug. 26 last year. Most STOXX sub-sectors were trading higher, with rate-sensitive sectors, like construction and industrials boosting the index, rising 1.6% and 1.5% respectively.
Most Asian stocks rose on Friday, buoyed by gains in Chinese stocks following robust economic data, while Japanese equities declined sharply on expectations of an interest rate hike next week. Gains were limited as regional markets were cautious ahead of the U.S. President-elect Donald Trump’s inauguration due next week.
China’s economy grew more than expected in the fourth quarter of 2024, gross domestic product data showed on Friday, as Beijing doled out a slew of stimulus measures aimed at supporting growth.
Australian shares edged lower on Friday as investors took profits in the banks ahead of US president-elect Donald Trump’s inauguration early next week. Hundreds of billions of dollars in Australian retirement savings are invested in American equities, benefiting from bullish market sentiment as traders hoped Mr Trump’s administration will boost company earnings. The lack of breadth has caused some fund managers to avoid US tech stocks altogether.
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Given the current focus on the rise in the use of cash, it is worth remembering that each year Australian households are collectively charged somewhere between 1 billion dollars and 4 billion dollars in payment surcharges, which is a fee paid by customers, in addition to the price of a good or service, allowing merchants to pass on the cost of the customer’s chosen payment method. These days its mostly debit transactions which might also be triggered by electronic payments from phones and other devices, as well as debit and credit cards.
The RBA accelerated a review into merchant payment costs and surcharging, and has now released the 90 plus submissions received from interested parties and it is clearly creating a storm, with some calling for the banning of said surcharges and others arguing that banning surcharges would result in higher prices to consumers.
When surcharging was introduced 20 years ago, the RBA put Australia out of step with most of the rest of the world, where the practice is illegal. At the time the central bank’s intention was to use them as a price signal to customers that the more expensive payment methods at the time – credit cards – were a burden for the seller. I always believed this is a policy error.
They have been out maneuvered by banks and lately FinTechs who have introduced fixed pricing plans in an attempt to reduce payment fee complexity for business customers. These plans let a merchant pay the same cost irrespective of what card the customer uses. But this has resulted in more surcharging of debit cards, which is the fastest growing segment of the payments market, and which in theory should be the cheapest.
So, some firms are benefiting from the current system, especially larger firms. Second, there is little transparency and as transaction volumes rise, the costs on households rise too. Third, the original assumptions about unbundling and price signaling has proven incorrect, as technology has evolved faster than regulators ability to keep up. To me the benefits of removing surcharging altogether outweigh other options, but of course the question will be, will households at the end of the day, get the benefit. They certainly should, but big business are often in the way…
Well, we got the December 2024 data on unemployment today, and overall Australia’s unemployment rate remained low in December as the economy extended a streak of hiring gains, underlining the labor market’s unusual resilience to elevated interest rates.
Employment jumped by 56,300 — driven entirely by part-time roles — versus a forecast 15,000 gain. The jobless rate rose to 4% rising by 0.1 percentage points in seasonally adjusted terms.
Now, we should say there were some variation between the outgoing and incoming rotation groups this month, sufficient I think to explain the slight shifts we are seeing. But the headline news is the jobs markets remains pretty strong.
Economists say there is no urgency for the Reserve Bank of Australia to deliver a pre-election cash rate cut in February after a bumper jobs report showed the labour market continued to defy expectations of a looming slowdown.
That would leave the central bank’s April meeting as the only point before an election due by May 17 for the RBA to deliver relief to struggling households, narrowing the chance of the Albanese government getting an electoral boost from lower rates.
Jim Chalmers wrote “We’ve shown you can make substantial & sustained progress on inflation without sacrificing jobs. 1.1 million jobs have been created under the Albanese Labor Govt including an extra 56,000 last month.
No talk there about the massive migration flows which are pumping the economy equivalent, on one calculation to one person arriving every 46 seconds. Or the fact that household disposable income in real terms is crashing, and well below the G7 Countries, the US, or even OECD countries. “This is the soft landing that we are seeking, that we are delivering,” Dr Chalmers told reporters.
The real story is high migration, plus because of the financial pressure on many households, more are picking up two or more jobs, or side hustles with nearly a million Australians in this category.
When you peel back the onion, the bulk of recent employment gains have been in the so-called “non-market sector”, which includes the government-funded industries of education, healthcare and the public service. About half the increase in hours worked across the economy in the 12 months to December were in the non-market sector.
The tight labour market, along with weak productivity growth and elevated government spending, makes it tough for the Reserve Bank to achieve low and stable inflation!
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Last week the ACCC released their Gas Inquiry 2017-2030 interim report, and it makes horrifying reading. It is such a monumental stuff-up over a couple of generations, it’s hard to believe the corporations did not deliberately set up to maximise profit at the expense of ordinary Australians, while successive Governments were complicit, either because they dared not confront big gas, were scared of the consequences via sovereign risks of changing the rules or simply were ignorantly led by the nose.
All this has stoked inflation via higher electricity prices to the point where now the Government is using more taxpayer money to hand support payments to households. You can’t make this stuff up! Mind you the ACCC report which is very detailed manages to skate round the core issue.
Of late the government has made minor changes to overhaul regulations, which in theory allows it to intervene and limit exports of LNG. In practice though little has changed, and unlike in WA where is the a reservation for domestic supply, the east coast is stuffed.
As I discussed with Robbie Barwick yesterday this is one of the greatest scandals Governments have created for ordinary Australians, but yet again, no signs of bold action, in the form of gas reservation, just a muddle in which people are being taken to the cleaners, even as the Government offers more “help” on electricity prices, at the expense of taxpayers.
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This is an edit of a live discussion with Robbie Barwick, Research Director for the Australian Citizens Party as we discuss the real issues to be chased down this year, even as we face into the upcoming election. Given both major parties seem to be dancing to the same old tune, what should be agenda be, and how can we move the dial to the betterment of ordinary Australians?
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Another outing with our property insider Edwin Almeida, as we look at the early trends for 2025, against the political backcloth of the upcoming election.
Whilst promises are cheap to make, we question their effectiveness, and ask how seriously should we take them.
Edwin makes some more predictions, and we look at the latest numbers. Things will get interesting over the next few months!
Today’s post is brought to you by Ribbon Property Consultants.
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Buying property, is both challenging and adversarial. The vendor has a professional on their side.
Emotions run high – price discovery and price transparency are hard to find – then there is the wasted time and financial investment you make.
Edwin understands your needs. So why not engage a licensed professional to stand alongside you. With RPC you know you have: experience, knowledge, and master negotiators, looking after your best interest.
Shoot Ribbon an email on info@ribbonproperty.com.au & use promo code: DFA-WTW/MARTIN to receive your 10% DISCOUNT OFFER.
In this show we look at the latest from our household surveys to end December 2024, and highlight where mortgages stress, rental stress, investor stress and overall financial stress predominates, as housing affordability continues to crash.
As a result, the dream of home ownership is becoming a nightmare for many.
We also examine the latest price scenarios across the states, and spot those likely to fall and those more likely to rise.
Today’s post is brought to you by Ribbon Property Consultants.
If you are buying your home in Sydney’s contentious market, you do not need to stand alone. This is the time you need to have Edwin from Ribbon Property Consultants standing along side you.
Buying property, is both challenging and adversarial. The vendor has a professional on their side.
Emotions run high – price discovery and price transparency are hard to find – then there is the wasted time and financial investment you make.
Edwin understands your needs. So why not engage a licensed professional to stand alongside you. With RPC you know you have: experience, knowledge, and master negotiators, looking after your best interest.
Shoot Ribbon an email on info@ribbonproperty.com.au & use promo code: DFA-WTW/MARTIN to receive your 10% DISCOUNT OFFER.
This is our weekly market update, where we start in the US, cross to Europe and Asia, and end in Australia, covering commodities and crypto along the way.
And this past week saw markets lower, with the MSCI global index down another 1.58% and down nearly 4% for the past month. Wall Street’s main indexes closed their second consecutive week in the red even as the US Dollar was stronger with the US Dollar Index Futures up 0.44% at 109.67, which will put further pressure on other economies around the world in including Australia.
Unexpected strong December payrolls data, with the US economy adding far more than expected jobs last month, hammered hopes for lower interest rates though US stocks closed off their session. Bond yields continued to climb, with the haunting risk of higher rates for longer putting more pressure of some stocks, ahead of the Trump 2.0 agenda turning from speculation to reality in the next couple of weeks. Longer-dated U.S. Treasury yields, which move inversely to prices, jumped to their highest levels since November 2023, with the 10-year hitting a high of 4.79%.
Yields have gained 20 basis points since the beginning of the year amid a global government bonds selloff that has hit UK government bonds particularly hard, pushing 30-year gilt yields to their highest since 1998.
Outside of bonds, rising U.S. Treasury yields could dampen investor interest in stocks and other high-risk assets by tightening financial conditions and increasing borrowing costs for businesses and individuals.
Traders now see the FED lowering borrowing costs for the first time in June and then staying steady for the rest of the year although BofA Global Research is forecasting a potential rate hike saying the Federal Reserve’s rate-cutting cycle “is over”.
Traders’ confidence in the pound has taken its biggest dive this week for a third straight session of declines since the 2022 UK budget crisis ending at 1.2208 against the USD as a global bond selloff added to growing unease over Britain’s finances with Britain’s government bond market in the crosshairs as 30-year gilt yields there hit 27-year highs and 10-year benchmarks reaching levels not seen since 2008. This puts Britain’s finance minister under pressure as concerns over Trump’s policies have pushed the British government’s borrowing costs higher. Even though those gilt yield rises are largely just in line with what’s happened in U.S. Treasuries a worrying development in the UK is that sterling has turned tail too and stopped following domestic yields higher.
The ASX fell on the final trading day of the week, as a gloomy outlook for Wall Street trading ahead of a key jobs report pushed the bourse lower. The S&P/ASX 200 Index reversed modest gains earlier in the session to close at 8294.1 points, down 0.4 per cent.
The Australian dollar’s slump against the US greenback to around levels last recorded in the 2020 pandemic and 2008 global financial crisis has a lot of people talking. The Australian dollar ended the week 0.4 per cent lower against the greenback, touching a new two-year low of US61.47. There are consequences. A weaker currency is stimulatory for the economy and inflation, while a stronger exchange rate slows the economy and helps cool inflation.
So, standing back, we are right in the zone of uncertainty, with expectations of higher for longer rates back on the table with a strong US dollar likely to break things elsewhere. All up, we continue to expect periods of severe volatility, and lower growth trajectory, so no surprise to see more holding cash and waiting to see what plays out.
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Yesterday I went through the latest ABS data on retail and highlighted that the Black Friday sales supported household spending growth through November. This is an important indicator on the state of the economy and is a factor which will influence the RBA’s February rate cut call.
But just like the proverbial Schrodinger’s cat – a famous thought experiment that demonstrates the idea in quantum physics that tiny particles can be in two states at once until they’re observed. It asks you to imagine a cat in a box with a mechanism that might kill it. Until you look inside, the cat is both alive and dead at the same time, its hard to tell what is really going on.
Actually, analysts are all over the place on these numbers, and the household spending indicators we got today from the ABS continued the confusion.
So it remains to be seen whether this uplift will be carried into 2025 or if it is a result of price-sensitive consumers capitalising on bargains and the typical festive season spending surge.
Let me know in the comments below, did you spend big over the holiday period, or hunkered down seeking bargains through the sales, along with many I see in my surveys?
I suspect both is true, which will make the RBA’s job hard next month. Though the simple truth I come back to is more are being sucked into the negative cash flow vortex thanks to the higher for longer interest rates. Which is not good news for the cat in the box!
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