Category: Politics

Watch Where The Money Goes: Especially At Election Time!

Before each federal election, the heads of the Commonwealth departments of treasury and finance release a report on the state of the government’s budget, together with updated economic forecasts. It is known as the pre-election fiscal and economic update, or PEFO.

Before PEFO was introduced in 1998, when a government changed hands it was routine for the newly-elected government to renege on its promises by saying something along the lines of: …we are shocked, just shocked! We had no idea how bad the country’s finances were!

PEFO has done away with that excuse forever. It means both sides of politics know the state of the books going into the election.

Parties’ promises are made with that full knowledge. Incoming governments no longer have a budgetary policy excuse for dropping their promises.

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The Inflation Noose Drives Policy Reversal!

Let’s face it, the rampant rise in oil prices, is a big headache for politicians around the world, as the lift in prices is driving inflation. Just remember oil was already on the up BEFORE Ukraine kicked off.

And if you are going to make an unpopular policy change, when better than later Friday before a holiday weekend – the good ol’ putting the trash out.

Certainly the price of oil is a problem and it seems that any selloff in oil is only proving to be a buy-back opportunity amid one highly volatile energy market. Perhaps the most volatile ever.

Crude prices jumped almost 3% on the day and nearly 9% on the week as the market was hijacked once again by a supply scare on news that the European Union might phase in a ban on Russian oil imports.

Gains in oil were limited earlier in the day as Chinese refiners appeared set to cut crude throughput this month by about 6%. The reduction would be a scale last seen in the early days of the COVID-19 pandemic two years ago, industry sources and analysts said.

But news of the proposed EU ban on Russian oil prompted buyers to swoop in on more lots of crude futures and convinced some shorts to cover their positions as well ahead of the Good Friday holiday, which meant a longer weekend for U.S. markets.

“Heading into the long weekend, oil was vulnerable to some profit-taking, but a major pullback is still unwarranted given the supply situation and as economic slowdown concerns are still far from happening”.

Now the inflation problem is creating a series of back-flips including one relating to plans for oil and gas development on federal lands as now the Biden administration has said it has resumed plans for oil and gas development on federal lands. Granted the plan calls for the government to lease fewer acres for drilling than initially proposed, charge steeper royalties to oil and gas companies, and assess the climate impact of developing the acreage.

Go to the Walk The World Universe at https://walktheworld.com.au/

The Social Housing Crocodile Tears…

The Guardian highlights the problems with NSW Public Housing policy. We discuss the reasons why this is happening.

https://www.theguardian.com/australia-news/2022/apr/16/more-than-3bn-of-social-housing-sold-by-nsw-government-since-coalition-took-power

The New South Wales government has sold off $3bn worth of social housing during its decade in power, while failing to meet its own targets for new properties.

New figures released through parliament this week show that since it was first elected in 2011, the Coalition has sold off 4,205 social housing properties across the state.

The sales have added about $3.5bn to the government’s coffers over the same period.

But while the government said all of those funds were used to prove “more, and better” social housing stock, data for new social housing constructions reveal the government has fallen well behind its own targets for new dwellings.

In 2016, the Coalition pledged to build 23,000 new social housing dwellings in the next decade as part of its Future Directions housing strategy. It committed to funding new social housing construction through the $22bn Communities Plus program.

But eight years on, with more than 50,000 people on the social housing wait list in the state, the Communities Plus program has achieved only 10% of that goal.

The Bank Of Mum And Dad Is Getting Strangled!

We examine the role of the Bank of Mum and Dad, in the light of the latest data. As well as highlighting inter-generational issues, there are pressures on both parents and their kids. And if you do not have “wealthy” parents the chances of getting into the property market is diminished significantly.

Go to the Walk The World Universe at https://walktheworld.com.au/

The Next Crisis Has Arrived! With Tarric Brooker

In my latest Friday afternoon chat with Journalist and Chart hoarder extraordinaire Tarric Brooker we parse the latest data and conclude that the next crisis has already started.

We question the quality of the current political dialogue, the role of Central Banks, the relationship between interest rates and inflation, and so much more…

We had to make do with 15 out of a potential 50+ slides, but the story is crystal clear. Be prepared!!

Tarric is @AvidCommentator on Twitter, and the slides can be viewed at https://avidcom.substack.com/p/charts-that-matter-15th-april-2022

Here is his article on the warning lights: https://avidcom.substack.com/p/recession-warning-lights-are-flashing

Go to the Walk The World Universe at https://walktheworld.com.au/

In The Shadow Of Inversion…

Welcome to our latest weekly market update, as we survey the action in the US, Europe Asia and Australia, and touching on Oil, Gold and Crypto as we progress.

Investors begin a new quarter wondering if the fighting in Ukraine, the isolation of Russia and the Fed’s increasingly hawkish turn will engender still more volatility and losses for stocks and bonds.

As the bets of aggressive Fed action continue to be priced into markets, fears are growing that the Fed may slow growth by too much and tip the economy into recession. The U.S. yield curve extended its recent flattening as Treasury yields, which retreated earlier in the week as portfolio adjustments boosted demand for bonds, spiked again on Friday, causing a closely watched part of the yield curve to invert for the third time this week. The yield on the 2-year Treasury bond (2.4625%) jumped above the yield on the 10-year Treasury note (2.389%).

An inversion of the yield curve, when shorter-dated yields rise above longer-dated ones, is seen as a harbinger of a recession in the next one or two years.

Go to the Walk The World Universe at https://walktheworld.com.au/

Yield Curve, Recession And The Housing Market: With Tarric Brooker

My latest Friday afternoon chat with Journalist Tarric Brooker, as we discuss the housing market, the impact of rate hikes, and the broader geopolitical issues which are in play.

You can view Tarric’s slides at Avidcom.substack.com. https://avidcom.substack.com/p/charts-that-matter-1st-april-2022?s=w

Tarric is @Avidcommentator in Twitter.

Go to the Walk The World Universe at https://walktheworld.com.au/

My Two Cents Worth On The Upcoming Budget!

Josh Frydenberg’s March 29 budget — his fourth as Treasurer — is expected to reveal a big deficit for 2022-23. In December, it was estimated it would be just under $99 billion, but the updated figure is expected to have tumbled by tens of billions of dollars. That said, we still have a structural deficit of close to $1 trillion dollars, and the costs of that debt will rise, as interest rates rise, so that’s a problem. And the structural deficit will continue, that’s to large spending on programmes like NDIS, Centrelink Payments, Medicare, and Defence.

And although the current year deficit will fall from $99 billion as predicted, it is worth remembering that to date the Government has promised to spend some additional $70 billion over a number of years on a range of programmes, some with frankly dodgy motivations (some might think pork-barrelling was a better term).

There will be some short-term relief, to assist with the cost-of living pressures, which according to recent surveys are driving household confidence lower. But the whole exercise is political.

The Government will of course go on talking about the $250 billion savings households are sitting on, thanks to COVID and Government payments over the past couple of years, but as I have shown before this is not equally spread across the population and taking in general terms about “household balance sheets are in good shape” belays the truth that averages mask, and many households are really up against it as costs of living rise, and with the prospect of higher interest rates ahead.

Go to the Walk The World Universe at https://walktheworld.com.au/