An emerging wage-price spiral

Delivered on By Justin Pyvis

Good morning! After warning for months that unvaccinated Victorians will be “locked out” of society for “for a period of time, well into 2022”, Premier Andrews said that stance could change as soon as “in the next few weeks”, once he receives advice on a vaccine for children and booster shot efficacy.

Is anyone else increasingly frustrated by politicians making hard proclamations based on their secretive “best health advice”, only to backtrack weeks later thereby proving that the evidence for the decision was in fact unclear and should not have been communicated with such certainty?

Even more cynically, could it be that Victoria has a state election in 11 months and Andrews now wants to be known as Freedom Dan, rather than Lockdown Dan? πŸ€·β€β™‚οΈ

Moving on, the WA government will reveal its reopening date later today, expected to be sometime in early February “to give parents of young children enough time to get them vaccinated before school starts on January 31, and WA opens its borders”.

Speaking of reopenings, as of 1:00am this morning Queensland opened to fully vaccinated travellers from anywhere in Australia, with no quarantine requirement provided they produce a negative PCR test from within the previous 72 hours, causing “bumper to bumper” traffic at the state’s border crossings.

Elsewhere Tassie’s government tightened its planned reopening (15 December) by adding in a requirement for fully vaccinated residents travelling interstate to be tested on their return and self-isolate until the results are known.

Phew. Happy Monday, and please note that unless the sky falls in we’ll be taking a few weeks off after Friday’s issue, returning on 10 January 2022.


Fully vaccinated (aged 16+)

ACT
NSW
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WA

Reading the tea leaves

Daily % change

AUD/USD

71.5

-0.3%

AUD/CNY

4.55

+1.1%

AU Bond

1.65

-0.2%

US Bond

1.49

+0.1%

ASX200

7,354

-0.4%

S&P500

4,712

+1.0%

Brent (bbl)

75.4

+0.3%

Gold (oz)

1,783

0.0%

Iron ore (t)

108.3

-0.7%

Bitcoin

50,402

+2.1%

Ethereum

4,159

+1.8%

Note: Brent oil, gold bullion and iron ore prices are the second futures contract. Bond yields are 10-year Treasuries. The S&P500 is a snapshot 30 minutes before close.

TheΒ US S&P500Β added 0.95% on Friday, setting a new record high to conclude what was its best week since February.

The rise came despite fresh data showing that US inflation rose 6.8% in November, the fastest annual pace since 1982, because believe it or not that figure was below the market’s worst-case forecasts so was actually good news.

Locally, theΒ ASX200 fell 0.42% as tech stocks followed a weaker Nasdaq the night before and energy was sold off along with a decline in the overnight oil price.


Food for thought

It's getting harder and harder to pretend inflation isn't an issue.
It's getting harder and harder to pretend inflation isn't an issue. Source

It was all about inflation on Friday, kicked off by the US where consumer prices increased at a near 40-year high 6.8% in November. Suffice to say that Team Transitory has suffered a horrible defeat and the Federal Reserve, which meets next week, will announce some kind of tapering plan in an attempt to assure people that it is still in control.

Inflation is now very much a political issue, too. US President Joe Biden spoke after November’s figures were released, arguing that “Economists think [Biden’s Build Back Better stimulus plan] is going to, in fact, diminish the impact on inflation… because it’s reducing costs for ordinary people”.

We’re not sure what voodoo Biden’s economists conjured to come to that conclusion (we couldn’t find any public statements supporting that view, just the opposite). Perhaps they exchanged notes with Team Transitory? But whatever the reasoning it’s more likely than not to add to inflationary pressures that will eventually force the Fed into a relatively harder tightening pivot.

Inflationary pressures are unlikely to ease in the near-term without a change in policy, at least not if consumer surveys are anything to go by. The latest University of Michigan report, conduced in early December, found that confidence rose especially “among the bottom third”, which improved at a rate not seen since 1981.

That’s good and all, except that according to the report’s authors who have been running this survey for a long time, history “suggests an emerging wage-price spiral that could propel inflation higher in the years ahead”. 😬


Bits and bytes

πŸ”₯ WA’s bushfire and arson unit believe that the bushfire in Margaret River, which has so far burnt around 8,000 hectares, “was deliberately lit, and may have been ignited near Mammoth Cave”.

πŸ’‰ A preliminary study from the UK found that a third ‘booster’ shot gave 70-75% protection against transmission from the Omicron variant.

🦠 ATAGI recommended that Australia’s booster shot programme be pulled forward from 6 months to 5 months, due to “ongoing transmission of both Omicron and Delta variants”.

πŸ‘©β€βš–οΈ Pending an appeal, Julian Assange will be extradited from the UK to the US after judges “were reassured by US promises to reduce the risk of suicide”.

⛏️ Elizabeth Gaines resigned as CEO of iron ore giant Fortescue Metals Group and will move to a non-executive role on the board, as well “as Fortescue’s global green hydrogen ambassador”.

🏝️ The CEO of Better.com, who copped flak last week for calling employees “dumb dolphins” and firing 900 of them over Zoom, “is taking time off effective immediately”.

πŸ“ˆ Wholesale prices in Japan increased by a record 9.0% in November, “a sign upward pressure on prices from supply bottlenecks and rising raw material costs were broadening”.

πŸ“‰ Turkey’s central bank intervened for the third time in 10 days, depleting its foreign currency reserves further to prop up the lira which was near record-lows “on persisting concerns about President Tayyip Erdogan’s low interest rate policy”.

🀑 Elon Musk tweeted “thinking of quitting my jobs & becoming an influencer full-time wdyt”.

πŸ¦— Australia comfortably defeated England by 9 wickets in the first Ashes test. Travis Head was named player of the match for his score of 152 in the first innings (England’s entire team only managed 147).

⚱️ The fifth Ashes test, formerly to be held in Perth from 14 January before it was stripped due to WA’s strict border controls, will instead will be played in Hobart.

🦦 A British man thought he “was going to die” after jogging into a group of otters which promptly attacked, biting him more than 20 times.

🚲 Shares in stationary-bike manufacturer Peloton crashed to a 52-week low on Friday after the airing of a Sex and The City reboot, during which a main character suffered “a heart attack following a Peloton exercise class”.

πŸŒͺ️ Dozens of tornados swept through at least six US states, killing over 70 people “and destroyed homes and businesses”. Check out some before and after pictures here.