A seven-year first
By Justin Pyvis – Delivered on 07 Oct 2021

Good morning! There was some positive news out of the ACT yesterday after the territory became the first jurisdiction in Australia to pass 95% first dose COVID-19 vaccinations (people aged 12+). By our count it's 93.7% but we'll give it to them – it's really quite an incredible take-up and probably puts it right near the top of the global rankings. 👏

Elsewhere, New South Wales' new Premier Dom Perrottet announced that his state had hit 70% fully vaccinated (people aged 16+), meaning "some restrictions will ease from Monday October 11".

Here's how they stack up in terms of the rest of Australia:

Vaccinations (people aged 12+)

1st dose

2nd dose

ACT

93.7%

65.3%

NSW

87.4%

65.7%

VIC

82.1%

51.8%

TAS

75.3%

58.8%

SA

67.7%

49.6%

QLD

65.9%

46.7%

NT

65.1%

52.0%

WA

65.0%

46.7%

Australia

78.5%

55.3%

Markets

Daily % change

AUD/USD

72.8

-0.1%

10Y Bond

1.56

+1.3%

ASX200

7,207

-0.6%

Brent (bbl)

80.8

-2.4%

Gold (oz)

1,765

+0.2%

Iron ore (t)

118.0

+0.9%

Bitcoin

55,213

+7.0%

Note: Brent oil, gold bullion and iron ore prices are the second futures contract.

The US S&P500 added 0.41% overnight following a positive private sector jobs report by ADP, which showed a 568,000 increase for the month of September ahead of a Dow Jones estimate of 425,000.

Locally, despite a strong start to the day the ASX200 dropped 0.58% following a rate hike by the Reserve Bank of New Zealand (for more on why that matters for Australian stocks, check out the Feature below).

Economy

Housing risks: Australia's banking regulator, APRA, raised the "serviceability buffer" that banks use to assess loans by 0.5 percentage points. New borrowers' ability to repay their home loans will now be assessed at the loan interest rate plus 3 percentage points, up from 2.5.

Announcing the decision, APRA chairman Wayne Byres said "increases in the share of heavily indebted borrowers, and leverage in the household sector more broadly, mean that medium-term risks to financial stability are building. More than one in five new loans approved in the June quarter were at more than six times the borrowers' income".

Energy panic: Five European countries, including France and Spain, issued a joint statement on surging energy prices asking for a probe into the gas market. The letter came as inflation expectations in Europe hit their highest level since the global financial crisis, raising fears of stagflation (high inflation, low growth).

Eurosclerosis: Retail sales in the eurozone inched up 0.3% in August and were unchanged from a year ago, below expectations for a 0.5% increase. According to Capital Economics, "Total sales have now been more or less unchanged since May, suggesting that the period of rapid growth in goods spending is behind us."

Another one bites the dust: Fantasia Holdings Group, another indebted Chinese property developer, was downgraded by ratings agencies Fitch, S&P Global and Moody's to "likely in or very near default", after the company failed to repay $US205.7 million it owed on a note it took out in September 2016.

Correct: US Treasury Secretary Janet Yellen said the idea of minting a $US1 trillion coin to 'solve' the debt ceiling issue was a "gimmick", as "It compromises the independence of the Fed conflating monetary and fiscal policy, and instead of showing that Congress and the administration can be trusted to pay the country's bills, you're really going to do the opposite."

Feature
A seven-year first

The Reserve Bank of New Zealand (RBNZ) raised its cash rate by 25 basis points to 0.5%, the first increase since 2014 when it reached a post-financial crisis peak of 3.5%.

Breaking it down: The decision to tighten monetary policy did not come as a surprise – in fact, it was expected in August until the Delta outbreak forced the entire country into a lockdown. By raising rates, New Zealand becomes the third developed country after Korea (August) and Norway (September) to do so. Debt levels and house prices in all three nations have been rising in the double-digits over the past year, with the REINZ House Price Index for New Zealand up over 30%.

Why this matters: Australian shares dropped sharply on the announcement, despite being in a different country. Even though the decision was largely expected, it was a reality check that the era of easy money might be coming to an end. It might also bring into question the forecast of Australia's central bank, the RBA, that it won't raise its cash rate until 2024 (if you believe that forecast, we have some magic beans to sell you).

In addition, the summary of the RBNZ's meeting indicated "that further removal of monetary policy stimulus is expected over time", meaning this won't be the only hike. Back in August the bank forecast its cash rate reaching 1.6% by the end of 2022 and 2.0% in the second half of 2023.

Looking forward: Consumer price inflation is running well ahead of just about every global central bank's target. While they claim it's due to "transitory" pressures, the RBNZ notes that "there is a risk that these become more persistent", effectively firing a shot across the bow of markets that are trading on valuations that will implode if persistent inflation eventually forces more than just New Zealand's interest rates higher.

The Wrap Up
📫Swiss Post is launching the Swiss Crypto Stamp, a physical stamp worth 8.9 francs and a crypto component featuring a related digital image stored on the blockchain.
🏥Eight Australian state and territory leaders wrote to Health Minister Greg Hunt to request "immediate additional Commonwealth funding" for hospitals, as even in jurisdictions with low or no COVID-19 cases, many "hospitals are already at capacity".
💻Facebook's global outage – the largest it had ever seen – was caused by engineers issuing "a command that unintentionally disconnected Facebook data centres from the rest of the world".
🗣️US President Joe Biden revealed that he spoke to China's President Xi Jinping, discussing Taiwan and that both nations agreed to "abide by the Taiwan agreement".
Australia will close its offshore asylum seeker processing facility in Papua New Guinea (PNG) on 31 December, with those there offered a transfer to Nauru or provided a pathway to citizenship in PNG.
🗳️Paul Toole became Deputy Premier of NSW following the resignation of John Barilaro as NSW Nationals leader.
🔗Australia's armed forced linked up with those in Singapore, Malaysia, New Zealand and Britain for exercises in the region as part of the Five Power Defence Arrangements (established in 1971).
🚀Actor William Shatner, 90, who played Captain Kirk on the hit 1960s TV series Star Trek, will be on the next Blue Origin flight into space.
🎮The entire source code for video game streaming website Twitch was leaked online, along with information including "payouts, encrypted passwords, that kinda thing".
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