Trend Unemployment Rate Ends 2019 At 5.1%

Australia’s trend unemployment rate decreased to 5.1 per cent in December 2019, according to the latest information released by the Australian Bureau of Statistics (ABS) today.

This may be enough to stay the RBA’s hand in February, as the headline rate fell, and the jobs hours worked rose, though there was a disproportionate shift towards part-time work, and the underutilisation rate is also higher. In fact, the fall can be best linked to a falling participation rate as more chose not to work over the summer. So nothing here to really support signs of a stronger economy. Underutilisation among the 15-25’s is above 25%.

Employment and hours

In December 2019, trend monthly employment increased by around 18,000 people. Both full-time and part-time employment increased by around 9,000 people.

Over the past year, trend employment increased by around 261,000 people (2.1 per cent), which continued to be above the average annual growth over the past 20 years (2.0 per cent).

Full-time employment growth (1.5 per cent) was below the average annual growth over the past 20 years (1.6 per cent) and part-time employment growth (3.2 per cent) was above the average annual growth over the past 20 years (3.0 per cent).

“While there has been stronger growth in part-time employment over the past year, the underemployment rate is still where it was last December, at 8.3 per cent,” said Mr Hockman.

The trend monthly hours worked increased by 0.2 per cent in December 2019 and by 1.7 per cent over the past year. This was in line with the 20 year average annual growth of 1.7 per cent.

Underemployment and underutilisation

The trend monthly underemployment rate remained steady at 8.3 per cent in December 2019, unchanged over the past year. The trend monthly underutilisation rate also remained steady at 13.5 per cent in December 2019, an increase of 0.2 percentage points over the past year.

States and territories trend unemployment rate

The monthly trend unemployment rate increased in the Northern Territory, and decreased in Queensland and Tasmania in December 2019. The unemployment rate remained steady in all other states and the Australian Capital Territory.

Over the year, unemployment rates fell in Queensland, Western Australia, Tasmania and the Australian Capital Territory. Unemployment rates increased in all other states and the Northern Territory.

Seasonally adjusted data

The seasonally adjusted unemployment rate decreased by 0.1 percentage points to 5.1 per cent in December 2019, while the underemployment rate remained steady at 8.3 per cent. The seasonally adjusted participation rate remained steady at 66.0 per cent, and the number of people employed increased by around 29,000.

The net movement of employed in both trend and seasonally adjusted terms is underpinned by around 300,000 people entering and leaving employment in the month.

Westpac Names New Chair

Westpac has announced the appointment of its new non-executive director and chairman-elect, who will play an integral role in the appointment of a permanent CEO following the resignation of Brian Hartzer. Via Australian Broker.

John McFarlane, scheduled to assume the role in February subject to regulatory approvals, will succeed Lindsay Maxsted and work closely with Peter King, current acting CEO.

McFarlane has more than 44 years’ experience in financial services, across retail and wholesale banking and markets, as well as in life and general insurance.

“This experience, coupled with his strong customer and employee focus, will be invaluable to Westpac as the organisation executes its strategy and implements its Response Plan for the AUSTRAC Statement of Claim,” said Maxsted.

“As chairman-elect, McFarlane will be responsible for appointing a permanent CEO, with an internal and external search process currently underway. In the interim, he will work closely with the acting CEO, Peter King and the board, to effect needed change.”

Most recently, McFarlane was chairman at Barclays in London over “the decade of challenge” following the global financial crisis.

“During his four years as chairman, the company was streamlined, repositioned and has sustainably returned to profit,” Maxsted said.

“Prior to this, he delivered a successful turnaround program at UK insure,r Aviva, a company similar in scale to Westpac.”

McFarlane also possesses a “deep understanding” of Australia’s banking sector, given his previous 10-year tenure as CEO of ANZ from 1997 to 2007, as well as 10 years passed as director of the Australian Bankers’ Association.

The newly named chairman has returned to live in Australia permanently and has dubbed the appointment “an honour”.

“People close to me know that on my return to Australia, I hadn’t intended to take another major leadership role. However, I’m passionate about the Australian banking sector, and I’m excited by the challenge of returning Westpac to its place as a leading global bank, following recent events,” McFarlane said.

“To some extent, the internal and external challenges ahead for Westpac are not dissimilar to those in my last five financial institutions, and I have therefore grown comfortable about my capacity to work with the board and management to effect the necessary change.

“Nevertheless, I’m sufficiently battle-hardened to realise things can be tougher than you think and that in banking, nothing is ever certain.”

McFarlane has communicated that the appointment of a “world-class” CEO can take time. 

“In the interim, momentum is important. I will work closely with Peter King and the board to continue to make any changes necessary. People should expect to see positive change during this period,” he said.

“My focus initially will naturally be on resolving the company’s current issues but equally important, to position it as quickly as possible for long-term success. Fortunately, Westpac has wonderful core customer franchises, each with significant opportunity.”

How Bushfires May Impact Tourism

We look at the tourism data to assess the impact on GDP, regional visits and the education sector. How much of the $60 billion contribution to GDP (fourth largest) could be impacted, and will a marketing campaign make any difference?

This week, the Australian Tourism Export Council told the Australian Financial Review that cancellations by tourists from large markets such as the US, UK and China was hurting the industry and could cost the country at least $4.5 billion by the end of the year.  There have been mass cancellations, and bookings in some areas are down by half. And this may not be just a short-term blip, with pictures of the smoke last week in Melbourne, Canberra and Sydney all adding to the concerns potential tourists may have.

The hazardous ratings were worse than in many industrial cities around the world. And whilst Australia is a large country (it takes 5 hours or so to fly from Sydney to Perth) the bushfire impact is bigger than just the areas where bushfires are still burning.  And the lasting damage to Australia as an environmentally sensitive country and worth a visit might be shot. In addition, it is estimated more than 1 million wild animals and birds may have perished and in some area’s species – like Koalas and Platypus are threatened with extinction.

The Government announced that they would spend $76 million dollars on marketing campaigns to underscore to international and interstate visitors that Australia is open for tourists to visit. The bulk of the money to be spent on overseas advertising. Prime Minister Scott Morrison said Australian tourism is facing “its biggest challenge in living memory”. And described the funding — drawn from the Government’s national bushfire recovery fund — as an “urgent injection” of funds for businesses impacted by the bushfire crisis.

The Government’s package includes $20 million for marketing to domestic travellers and $25 million for a global tourism campaign to advise international visitors that Australia is “safe and open for business”, as well as $10 million towards creating new attractions in bushfire affected regions of the country.

So today I wanted to look at the tourist data for Australia to see how important it is and to examine where the tourist dollar comes from, and where it goes to.  And we need to look at both international visitors, and separately local visitors, including those from other states.  Some of the reporting in the mainstream media have only told part of the story.  Then I will try to estimate the potential impact.

According to data from Austrade, total tourism generated $149.6 billion dollars to the year to 30th September 2019.  Within that, domestic overnight travel had 115.7 million visitors spending a record $79.1 billion, while foreign visitors generated $45.2 billion in income to the economy, up 4.7% on the previous year. This was generated from 8.7 million international visitors, up 2.5%, with an average spend per trip of $5,219.

Data published by TOURISM RESEARCH AUSTRALIA using ABS data shows that in 2018-19, total tourist consumption was $152.0 billion, which resulted in $60.8 billion in GDP to the economy which is 3.1% of the national total and employed 666,000 persons or 5.2% of the Australian workforce.  Note though that this is a derived estimate, according to the ABS as we do not measure tourism directly.

In fact tourism is our largest service export, contributing $39.1 billion to Australia’s economy in 2018–19. This represents 8.2% of all goods and services exports – and places the industry fourth overall behind iron ore, coal and natural gas.  But we actually have a tourist trade deficit, with visitors coming here – Exports of $39.1 billion from international visitors to Australia while Australian travelling overseas – Imports were $58.3 billion.

The tourist GDP contribution has been growing by between 5% and 6% for some years, and is up from around $38 billion in 2010-11 to $60 billion last year.  This has seen tourism grow from a 2.9% share of national GDP to a 3.1% share.

So now let’s look in more detail at the tourist sector, and at international trade first.

Within the $45.7 billion, $17.1 million came from holidays, $13.2 billion from education, $7.5 billion from visiting family and relatives, $4.1 billion on business, $2.2 billion on business and $1.2 billion for other reasons.

Visitors from China accounted for $12.3 billion of spend, of which $3.2 billion was holidays and $7.1 billion on education. This came from 1.3 million visitors, with an average spend per trip of $9,235.

 The United States was second, with $4.0 billion spent, of which $2.0 billion was for holidays and $300 million on education.  This came from 771,000 visitors with an average spend per trip of $5,200.

Next was the United Kingdom with $3.3 billion spent, with $1.4 billion on holidays. And $1.3 billion on visiting family and friends, and just $68 million on education. We had 669,000 visitors from the UK and their average spend was $4,959.

New Zealand accounted for $2.6 billion in spend, of which $1.1 billion was holidays, 0.7 billion on families and friends and just $76 million on education. Interestingly they accounted for $1.3 million visits and their average spend was $2,032. That may tell you something about our Kiwi cousins!

Across the states and territories, NSW received $11.5 billion, of which $3.6 billion was for holidays, $4.7 billion for education and $1.4 billion for visiting relatives. The average spend per trip was $2,610.  Of this around $1 billion was from regional NSW, mainly holidays at $381 million and education $362 million.

Victoria accounted to $8.8 billion, of which $2.3 billion was holidays, $4.0 billion education and $1.5 billion was visiting relatives and friends. The average trip was worth $2,810. Regional Victoria earned $594 million from international tourism, of which $249 million was holiday related from international visitors.

In Queensland, international tourism was worth $6 billion, including $2.8 billion for holidays, $1.7 billion for education and $830 million for visiting families and friends. 

Within that Gold Coast generated $1.3 billion, including holidays at $755 million and education at $335 million, Brisbane was $2.8 billion comprising holidays $644 million and education $1.3 billion, and regional QLD generated $1.8 billion, of which holidays was $1.4 billion.

Turning to local tourism, that generated $79.1 billion, with an average spend of $684 a trip, and over an average 4-night stay. Of that $35.2 billion was holidays, $13.9 billion visiting relatives and friends, $17.8 billion business related and $12 billion other reasons.

Across the states, $23.2 billion was spent in NSW, with regional NSW collecting $13.9 billion, $16.5 billion in VIC, with regional VIC earning $7.1 billion, $19 billion in QLD with the Gold Coast generating $3.7 billion and Regional QLD $10.2 billion, $5 billion in SA, $8.5 billion in WA, $2.3 billion in NT, $2 billion in the ACT and $2.7 billion in Tasmania.

So a couple of observations, international revenue from education is more significant than from overseas people visiting, so it will be important to reassure potential students that Australia is safe and open for education services – to that end, the pictures of smoke in Sydney and Melbourne are extremely damaging when it comes to selecting a country in which to study, and as degrees in particular can take three of four years, this could create a long term hole in GDP.

Local travel by Australians can generate significant income, so focus on reassuming locals it is safe to travel to fire effected areas will be important, but many will likely stay away until the fires are out. As at today there are still more than 80 burning in NSW alone.

In fact, my read of Morrison’s announcement is its more to do with public perceptions of how he is handling that bushfires (after earlier bloomers), than really making a difference. For that we need to have the fires extinguished, and we need strategies to mitigate future risks.  So, to me, $76 million is a pimple on the elephant and will make very little difference indeed.

But we can estimate the potential loss, bearing in mind more than half of tourists come over the summer period. So, apply this to the proportion of areas directly impacted overall, I get around $4 billion dollars in income lost. If you add in a broader swathe of cancellations to Melbourne, Canberra, Adelaide and Sydney, and assume a 5% reduction in education spend, I get an additional $8 billion in this financial year. Thus, if I put all the known data together, that $60 billion GDP could easily drop by $12 billion over the next year, and the impacts could run over 2021 and beyond. But to reemphasise the point there are indeed many areas of Australia still open for business and it’s a big country, but its going to be a hard message to communicate while the fires are still running.

https://www.tra.gov.au/domestic/domestic-tourism-results

https://www.austrade.gov.au/Australian/Tourism/News-Research-and-Publications/research

https://www.abs.gov.au/ausstats/abs@.nsf/mf/5249.0

https://www.adnews.com.au/news/where-the-76-million-tourism-marketing-bushfire-recovery-package-will-be-spent

Climate-related Risks Are A Source of Financial Risk – BIS

The BIS – The Central Bankers’ Banker, has released a report “The Green Swan“, in which they discuss the issue of ” Central banking and financial stability in the age of climate change”. Specifically they warn that expecting Central Banks to do “Green QE” to mitigate financial risks relating to climate variation is unrealistic, saying that while banks in financial distress in an ordinary crisis can be resolved, this will be far more difficult in the case of economies that are no longer viable because of climate change. Intervening as climate rescuers of last resort could therefore affect central bank’s credibility and crudely expose the limited substitutability between financial and natural capital. This is more evidence of the pressures building to react to climate variability. Hence, climate-related risks are a source of financial risk.

They conclude: while climate change risk management policy could drag central banks into uncharted waters: on the one hand, they cannot simply sit still until other branches of government jump into action; on the other, the precedent of unconventional monetary policies of the past decade (following the 2007–08 Great Financial Crisis), may put strong sociopolitical pressure on central banks to take on new roles like addressing climate change. Such calls are excessive and unfair to the extent that the instruments that central banks and supervisors have at their disposal cannot substitute for the many areas of interventions that are necessary to achieve a global low-carbon transition. But these calls might be voiced regardless, precisely because of the procrastination that has been the dominant modus operandi of many governments for quite a while. The prime responsibility for ensuring a successful low-carbon transition rests with other branches of government, and insufficient action on their part puts central banks at risk of no longer being able to deliver on their mandates of financial (and price) stability”.

Now, let me add that I have read widely on this issue, and have looked at the data – I find the evidence for greater energy in the climate system convincing. In terms of the underlying causes, my view is some can be traced to natural variation, but this does not explain the correlations we are seeing, thus I have concluded that human activity is also adding to the problem. While we cannot control the natural variations, we can and should tackle that which we can address. Hence my stance. This is the biggest challenge we face, frankly.  But the polarisation between “deniers and believers” is a false politically led dichotomy. This is not a religion!

David Wallace-Wells recently observed in The Uninhabitable Earth (2019), “We have done as much damage to the fate of the planet and its ability to sustain human life and civilization since Al Gore published his first book on the climate than in all the centuries – all the millenniums – that came before.”

The BIS says that climate change poses an unprecedented challenge to the governance of global socioeconomic and financial systems. Our current production and consumption patterns cause unsustainable emissions of greenhouse gases (GHGs), especially carbon dioxide (CO2): their accumulated concentration in the atmosphere above critical thresholds is increasingly recognised as being beyond our ecosystem’s absorptive and recycling capabilities. The continued increase in temperatures has already started affecting ecosystems and socioeconomic systems across the world but, alarmingly, climate science indicates that the worst impacts are yet to come. These include sea level rise, increases in weather extremes, droughts and floods, and soil erosion. Associated impacts could include a massive extinction of wildlife, as well as sharp increases in human migration, conflicts, poverty and inequality.

Scientists today recommend reducing GHG emissions, starting immediately. In this regard, the 2015 United Nations Climate Change Conference and resulting Paris Agreement among 196 countries to reduce GHG emissions on a global scale was a major political achievement. Under the Paris Agreement signatories agree to reduce greenhouse gas emissions “as soon as possible” and to do their best to keep global warming “to well below 2 degrees” Celsius (2°C), with the aim of limiting the increase to 1.5°C. Yet global emissions have kept rising since then and nothing indicates that this trend is reverting. Countries’ already planned production of coal, oil and gas is inconsistent with limiting warming to 1.5°C or 2°C, thus creating a “production gap”, a discrepancy between government plans and coherent decarbonisation pathways.

Changing our production and consumption patterns and our lifestyles to transition to a low-carbon economy is a tough collective action problem. There is still considerable uncertainty on the effects of climate change and on the most urgent priorities. There will be winners and losers from climate change mitigation, exacerbating free rider problems. And, perhaps even more problematically, there are large time lags before climate damages become apparent and irreversible (especially to climate change sceptics): the most damaging effects will be felt beyond the traditional time horizons of policymakers and other economic and financial decision-makers. This is what Mark Carney referred to as “the tragedy of the horizon”: while the physical impacts of climate change will be felt over a long-term horizon, with massive costs and possible civilisational impacts on future generations, the time horizon in which financial, economic and political players plan and act is much shorter. For instance, the time horizon of rating

Ominously, David Wallace-Wells recently observed in The Uninhabitable Earth (2019), “We have done as much damage to the fate of the planet and its ability to sustain human life and civilization since Al Gore published his first book on the climate than in all the centuries – all the millenniums – that came before.”

Our framing of the problem is that climate change represents a green swan – it is a new type of systemic risk that involves interacting, nonlinear, fundamentally unpredictable, environmental, social, economic and geopolitical dynamics, which are irreversibly transformed by the growing concentration of greenhouse gases in the atmosphere. Climate-related risks are not simply black swans, ie tail risk events. With the complex chain reactions between degraded ecological conditions and unpredictable social, economic and political responses, with the risk of triggering tipping points, climate change represents a colossal and potentially irreversible risk of staggering complexity.

Revisiting financial stability in the age of climate change

The reflections on the relationship between climate change and the financial system are still in their early stages: despite rare warnings on the significant risks that climate change could pose to the financial system, the subject was mostly seen as a fringe topic until a few years ago. But the situation has changed radically in recent times, as climate change’s potentially disruptive impacts on the financial system have started to become more apparent, and the role of the financial system in mitigating climate change has been recognised.

This growing awareness of the financial risks posed by climate change can be related to three main developments. First, the Paris Agreement’s Article 2.1(c) explicitly recognised the need to “mak[e] finance flows compatible with a pathway toward low greenhouse gas emissions and climate-resilient development”, thereby paving the way to a radical reorientation of capital allocation. Second, the Governor of the Bank of England, Mark Carney suggested the possibility of a systemic financial crisis caused by climate-related events. Third, in December 2017 the Central Banks and Supervisors Network for Greening the Financial System (NGFS) was created by a group of central banks and supervisors willing to contribute to the development of environment and climate risk management in the financial sector, and to mobilise mainstream finance to support the transition toward a sustainable economy.

The NGFS quickly acknowledged that “climate-related risks are a source of financial risk. It is therefore within the mandates of central banks and supervisors to ensure the financial system is resilient to these risks”. The NGFS also acknowledged that these risks are tied to complex layers of interactions between the macroeconomic, financial and climate systems (NGFS.

As this book will extensively discuss, assessing climate-related risks involves dealing with multiple forces that interact with one another, causing dynamic, nonlinear and disruptive dynamics that can affect the solvency of financial and non-financial firms, as well as households’ and sovereigns’ creditworthiness.

In the worst case scenario, central banks may have to confront a situation where they are called upon by their local constituencies to intervene as climate rescuers of last resort For example, a new financial crisis caused by green swan events severely affecting the financial health of the banking and insurance sectors could force central banks to intervene and buy a large set of carbon-intensive assets and/or assets stricken by physical impacts.

But there is a key difference between green swan and black swan events: since the accumulation of atmospheric CO2 beyond certain thresholds can lead to irreversible impacts, the biophysical causes of the crisis will be difficult, if not impossible, to undo at a later stage. Similarly, in the case of a crisis triggered by a rapid transition to a low-carbon economy, there would be little ground for central banks to rescue the holders of assets in carbon-intensive companies. While banks in financial distress in an ordinary crisis can be resolved, this will be far more difficult in the case of economies that are no longer viable because of climate change. Intervening as climate rescuers of last resort could therefore affect central bank’s credibility and crudely expose the limited substitutability between financial and natural capital.

Given the severity of these risks, the uncertainty involved and the awareness of the interventions of central banks following the 2007–08 Great Financial Crisis, the sociopolitical pressure is already mounting to make central banks (perhaps again) the “only game in town” and to substitute for other if not all government interventions, this time to fight climate change. For instance, it has been suggested that central banks could engage in “green quantitative easing”10 in order to solve the complex socioeconomic problems related to a low-carbon transition.

Relying too much on central banks would be misguided for many reasons. First, it may distort markets further and create disincentives: the instruments that central banks and supervisors have at their disposal cannot substitute for the many areas of interventions that are needed to transition to a global low-carbon economy. That includes fiscal, regulatory and standard-setting authorities in the real and financial world whose actions should reinforce each other. Second, and perhaps most importantly, it risks overburdening central banks’ existing mandates. True, mandates can evolve, but these changes and institutional arrangements are very complex issues because they require building new sociopolitical equilibria, reputation and credibility. Although central banks’ mandates have evolved from time to time, these changes have taken place along with broader sociopolitical adjustments, not to replace them.

DFA Live Q&A Replay 21 Jan 2020

Here is the edited version of our live stream event for January. In the show we update our property and finance scenarios, and answer a range of questions from viewers. We ran out of time, so I plan to make a future show covering those I missed. Here are our current scenarios:

The original live recording, with the embedded live chat is also available. You will need to watch on YouTube to follow the interactions:

Our next live show will be at 20:00 Tuesday 18th February.

Australia, You Were Warned Says Scientists!

Those who say “I told you so” are rarely welcomed, yet I am going to say it here. Australian scientists warned the country could face a climate change-driven bushfire crisis by 2020. It arrived on schedule. Via The Conversation.

For several decades, the world’s scientific community has periodically assessed climate science, including the risks of a rapidly changing climate. Australian scientists have made, and continue to make, significant contributions to this global effort.

I am an Earth System scientist, and for 30 years have studied how humans are changing the way our planet functions.

Scientists have, clearly and respectfully, warned about the risks to Australia of a rapidly heating climate – more extreme heat, changes to rainfall patterns, rising seas, increased coastal flooding and more dangerous bushfire conditions. We have also warned about the consequences of these changes for our health and well-being, our society and economy, our natural ecosystems and our unique wildlife.

Today, I will join Dr Tom Beer and Professor David Bowman to warn that Australia’s bushfire conditions will become more severe. We call on Australians, particularly our leaders, to heed the science.

The more we learn, the worse it gets

Many of our scientific warnings over the decades have, regrettably, become reality. About half of the corals on the Great Barrier Reef have been killed by underwater heatwaves. Townsville was last year decimated by massive floods. The southeast agricultural zone has been crippled by intense drought. The residents of western Sydney have sweltered through record-breaking heat. The list could go on.

All these impacts have occurred under a rise of about 1℃ in global average temperature. Yet the world is on a pathway towards 3℃ of heating, bringing a future that is almost unimaginable.

How serious might future risks actually be? Two critical developments are emerging from the most recent science.

First, we have previously underestimated the immediacy and seriousness of many risks. The most recent assessments of the Intergovernmental Panel on Climate Change show that as science progresses, more damaging impacts are projected to occur at lower increases in temperature. That is, the more we learn about climate change, the riskier it looks.

For Australia, a 3℃ world would likely lead to much harsher fire weather than today, more severe droughts and more intense rainfall events, more prolonged and intense heatwaves, accelerating sea-level rise and coastal flooding, the destruction of the Great Barrier Reef and a large increase in species extinctions and ecosystem degradation. This would be a tough continent to survive on, let alone thrive on.

The city I live in, Canberra, experienced an average seven days per year over 35℃ through the 1981-2010 period. Climate models projected that this extreme heat would more than double to 15 days per year by 2030. Yet in 2019 Canberra experienced 33 days of temperatures over 35℃.

Second, we are learning more about ‘tipping points’, features of the climate system that appear stable but could fundamentally change, often irreversibly, with just a little further human pressure. Think of a kayak: tip it a little bit and it is still stable and remains upright. But tip it just a little more, past a threshold, and you end up underwater.

Features of the climate system likely to have tipping points include Arctic sea ice, the Greenland ice sheet, coral reefs, the Amazon rainforest, Siberian permafrost and Atlantic Ocean circulation.

Heading towards ‘Hothouse Earth’?

These tipping points do not act independently of one another. Like a row of dominoes, tipping one could help trigger another, and so on to form a tipping cascade. The ultimate risk is that such a cascade could take the climate system out of human control. The system could move to a “Hothouse Earth” state, irrespective of human actions to stop it.

Hothouse Earth temperatures would be much higher than in the pre-industrial era – perhaps 5–6℃ higher. A Hothouse Earth climate is likely to be uncontrollable and very dangerous, posing severe risks to human health, economies and political stability, especially for the most vulnerable countries. Indeed, Hothouse Earth could threaten the habitability of much of the planet for humans.

Tipping cascades have happened in Earth’s history. And the risk that we could trigger a new cascade is increasing: a recent assessment showed many tipping elements, including the ones listed above, are now moving towards their thresholds.

It’s time to listen

Now is the perfect time to reflect on what science-based risk assessments and warnings such as these really mean.

Two or three decades ago, the spectre of massive, violent bushfires burning uncontrollably along thousands of kilometres of eastern Australia seemed like the stuff of science fiction.

Now we are faced with more than 10 million hectares of bush burnt (and still burning), 29 people killed, more than 2,000 properties and several villages destroyed, and more than one billion animals sent to a screaming, painful death.

Scientists are warning that the world could face far worse conditions in the coming decades and beyond, if greenhouse gas emissions don’t start a sharp downward trend now.

Perhaps, Australia, it’s time to listen.

Author: Will Steffen, Emeritus Professor, Australian National University

5 Minutes Your MP MUST Watch!

The Senate hearing on the 12th December 2019 relating to the Restriction of Cash Transactions Bill revealed the lack of facts, data and rationale for the proposed legislation. This is a 5 minute highlights package underscoring this – and something which your Senators and MP’s must see before its too late.

It is not too late to take action to help drive home that point that this Bill should not be passed.

What I Said To The Senate On The Restrictions On The Use Of Cash Bill

https://www.aph.gov.au/Parliamentary_Business/Bills_LEGislation/Bills_Search_Results/Result?bId=r6418

https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Economics/CurrencyCashBill2019

https://www.aph.gov.au/Senators_and_Members

Risks To Growth Abound: WEF

The latest WEF reports make salutatory reading. While there are some tentative signs of growth, the risks, from trade through to weather related, abound.

Trade policy uncertainty, geopolitical tensions, and idiosyncratic stress in key emerging market economies continued to weigh on global economic activity—especially manufacturing and trade—in the second half of 2019. Intensifying social unrest in several countries posed new challenges, as did weather-related disasters—from hurricanes in the Caribbean, to drought and bushfires in Australia, floods in eastern Africa, and drought in southern Africa.

In this update to the World Economic Outlook, we project global growth to increase modestly from 2.9 percent in 2019 to 3.3 percent in 2020 and 3.4 percent in 2021. The slight downward revision of 0.1 percent for 2019 and 2020, and 0.2 percent for 2021, is owed largely to downward revisions for India. The projected recovery for global growth remains uncertain. It continues to rely on recoveries in stressed and underperforming emerging market economies, as growth in advanced economies stabilizes at close to current levels.

There are preliminary signs that the decline in manufacturing and trade may be bottoming out. This is partly from an improvement in the auto sector as disruptions from new emission standards start to fade. A US-China Phase I deal, if durable, is expected to reduce the cumulative negative impact of trade tensions on global GDP by end 2020—from 0.8 percent to 0.5 percent.

The projected recovery for global growth remains uncertain.

The service sector remains in expansionary territory, with resilient consumer spending supported by sustained wage growth. The almost synchronized monetary easing across major economies has supported demand and contributed an estimated 0.5 percentage point to global growth in both 2019 and 2020.

In advanced economies, growth is projected to slow slightly from 1.7 percent in 2019 to 1.6 percent in 2020 and 2021. Export dependent economies like Germany should benefit from improvements in external demand, while US growth is forecast to slow as fiscal stimulus fades.

For emerging market and developing economies, we forecast a pickup in growth from 3.7 percent in 2019 to 4.4 percent in 2020 and 4.6 percent in 2021, a downward revision of 0.2 percent for all years. The biggest contributor to the revision is India, where growth slowed sharply owing to stress in the nonbank financial sector and weak rural income growth. China’s growth has been revised upward by 0.2 percent to 6 percent for 2020, reflecting the trade deal with the United States.

The pickup in global growth for 2020 remains highly uncertain as it relies on improved growth outcomes for stressed economies like Argentina, Iran, and Turkey and for underperforming emerging and developing economies such as Brazil, India, and Mexico.

Risks retreating but still prominent

Overall, the risks to the global economy remain on the downside, despite positive news on trade and diminishing concerns of a no-deal Brexit. New trade tensions could emerge between the United States and the European Union, and US-China trade tensions could return. Such events alongside rising geopolitical risks and intensifying social unrest could reverse easy financing conditions, expose financial vulnerabilities, and severely disrupt growth.

Importantly, even if downside risks appear to be somewhat less salient than in 2019, policy space to respond to them is also more limited. It is therefore essential that policymakers do no harm and further reduce policy uncertainty, both domestic and international. This will help to revive investment, which remains weak.

Policy priorities

Monetary policy should remain accommodative where inflation is still muted. With interest rates expected to stay low for long, macroprudential tools should be proactively used to prevent the build-up of financial risks.

Given historically low interest rates alongside weak productivity growth, countries with fiscal space should invest in human capital and climate-friendly infrastructure to raise potential output. Economies with unsustainable debt levels will need to consolidate, including through effective revenue mobilization. To ensure a timely fiscal response if growth were to slow sharply, countries should prepare contingent measures in advance and enhance automatic stabilizers. A coordinated fiscal response may be needed to improve the effectiveness of individual measures. Across all economies, a key imperative is to undertake structural reforms, enhance inclusiveness, and ensure that safety nets protect the vulnerable.

Countries need to cooperate on multiple fronts to lift growth and spread prosperity. They need to reverse protectionist trade barriers and resolve the impasse over the World Trade Organization’s appellate court. They must adopt strategies to limit the rise in global temperatures and the severe consequences of weather-related natural disasters. A new international taxation regime is needed to adapt to the growing digital economy and to curtail tax avoidance and evasion, while ensuring that all countries receive their fair share of tax revenues.

To conclude, while there are signs of stabilization, the global outlook remains sluggish and there are no clear signs of a turning point. There is simply no room for complacency, and the world needs stronger multilateral cooperation and national-level policies to support a sustained recovery that benefits all.

Can You Trust Comparison Sites?

I have warned before of the hidden algorithms which means that some comparison site results may not be providing what you expect. Not impartial, objective and transparent price comparisons. Hence the release from the ACCC should be of no surprise! Trivago misled consumers about hotel room rates.

The Federal Court has found Trivago breached the Australian Consumer Law when it made misleading representations about hotel room rates both on its website and television advertising.

An example of Trivago’s online price display taken on 1 April, 2018. For example, the $299 deal is highlighted below, when a cheaper deal was available if a consumer clicked “More deals” (underneath the offers from other booking sites in the middle panel).

The Court ruled that from at least December 2016, Trivago misled consumers by representing its website would quickly and easily help users identify the cheapest rates available for a given hotel.

In fact, Trivago used an algorithm which placed significant weight on which online hotel booking site paid Trivago the highest cost-per-click fee in determining its website rankings and often did not highlight the cheapest rates for consumers.

“Trivago’s hotel room rate rankings were based primarily on which online hotel booking sites were willing to pay Trivago the most,” ACCC Chair Rod Sims said.

“By prominently displaying a hotel offer in ‘top position’ on its website, Trivago represented that the offer was either the cheapest available offer or had some other extra feature that made it the best offer when this was often not the case,” Mr Sims said.

The Court also found Trivago’s hotel room rate comparisons that used strike-through prices or text in different colours gave consumers a false impression of savings because they often compared an offer for a standard room with an offer for a luxury room at the same hotel.

“We brought this case because we consider that Trivago’s conduct was particularly egregious. Many consumers may have been tricked by these price displays into thinking they were getting great discounts. In fact, Trivago wasn’t comparing apples with apples when it came to room type for these room rate comparisons,” Mr Sims said.

The Court also found that, until at least 2 July 2018, Trivago misled consumers to believe that the Trivago website provided an impartial, objective and transparent price comparison for hotel room rates.

“This decision sends a strong message to comparison websites and search engines that if ranking or ordering of results is based or influenced by advertising, they should be upfront and clear with consumers about this so that consumers are not misled,” Mr Sims said.

A hearing on relief, including penalties, will be held at a later date.

Background

Trivago’s website aggregates deals offered by online hotel booking sites (like Expedia, Hotels.com and Booking.com) and hotel proprietors’ own websites for available rooms at a hotel and highlights one offer out of all online hotel booking sites (referred to as the ‘Top Position Offer’). However, Trivago’s own data showed that higher-priced room rates were selected as the Top Position Offer over alternative lower-priced offers in 66.8% of listings.

Trivago’s revenue was primarily obtained from cost-per-click (CPC) payments from online hotel booking sites, which significantly affected that booking site’s appearance and prominence in search results.

The ACCC has sought orders for penalties, declarations, injunctions and costs.