Australia divided
By Justin Pyvis โ€“ Delivered on 01 Sep 2021

Good morning! If you haven't been vaccinated, go and do it: Victoria's Premier Daniel Andrews yesterday all but confirmed that vaccine passports will soon be used for "booking a restaurant, booking a seat at the footy, the cricket. Going to the theatre, doing all sorts of things".

The comments came after Andrews confirmed his chief health officer Brett Sutton would meet with the state government to discuss a "modest easing" of restrictions last night, although the state is still aiming for "zero or keeping the numbers incredibly low as possible". Those discussions were quickly 'leaked' to the media, with the government reportedly considering lifting the playground ban as early as Friday in local government areas with low or no case numbers.

Moving north, the ACT extended its lockdown to 11:59pm on 17 September as cases remain stubbornly in the low double digits โ€“ 13 yesterday, with just four of them isolating while infectious.

In terms of NSW... well, there's not much that can be said anymore. At this stage (1,164 new cases yesterday) the only way it will emerge from lockdown is when enough people are vaccinated (see the Feature below for more on that).

Markets

Daily % change

 

AUD/USD

73.2

+0.3%

 

 

10Y Bond

1.20

+4.3%

 

 

ASX200

7,535

+0.4%

 

 

Brent (bbl)

72.9

-0.5%

 

 

Gold (oz)

1,818

+0.3%

 

 

Iron ore (t)

149.6

-4.3%

 

 

Bitcoin

47,273

-2.7%

 

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

Overnight the US S&P500 fell 0.13% after a survey from the Conference Board revealed that US consumer confidence had fallen to a six-month low in August, with people concerned about inflation and soaring coronavirus infections.

Locally, the ASX200 added 0.41% thanks to strong gains in technology and healthcare stocks, finishing in the black for the eleventh consecutive month. A notable loser was Harvey Norman, which fell 3.24% after revealing that sales had been negatively affected by rolling lockdowns in July and August. It had earlier reported a 75% increase in net profit to $A841.4 million in 2020-21 and finally agreed to repay more than $A6 million in JobKeeper subsidies it didn't need.

Economy

Momentum easing: Korea's industrial production in July grew 0.4% from the prior month, down from 2.3% in June. Retail sales were also weak, falling 0.6% from June as yet another wave of coronavirus infections takes hold.

Industrial output was similarly weak in Japan, falling 1.5% from June and is once again below pre-coronavirus pandemic levels.

Stimmy fadeout: Building approvals in Australia continued to plunge back to more normal levels in July, falling a seasonally adjusted 8.6%. According to the ABS, "Since the unwinding of stimulus measures and the return of lockdowns across parts of New South Wales and Victoria, approvals for private houses have fallen 24.4% from the record high in April."

China's slowing: The official manufacturing purchasing managers' index fell to 50.1 in August from 50.4 in July and is now precariously close to dipping into contractionary territory (a reading over 50 indicates expansion). Services did contract, slumping to 47.5 as China's COVID-zero strategy and the rolling lockdowns that entails likely sapped consumer confidence.

Inflation watch: Eurozone consumer price inflation hit 3% in August, a full 50% higher than the European Central Bank's (ECB) target of 2%. The ECB next meets on 9 September.

Canada shrinking: June quarter GDP in Canada showed the economy contracted by an annualised 1.1%, well below analyst expectations of a 2.5% gain. Soaring inflation, unaffordable housing, slowing economic growth and just 19 days until the election. Has Justin Trudeau made a horrible miscalculation?

What inflation: The S&P CoreLogic Case-Shiller national home price index showed that US house prices rose a record 18.6% annually in June, up from the 16.8% record increase in May. Prices are now 41% above where they were during the 2006 housing boom peak that famously went bust.

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Feature
Australia divided

It's clear that the Delta variant cannot be kept out of a country forever, let alone potentially more infectious new variants (no, probably not South Africa's C.1.2., which despite having mutations "associated with increased transmissibility... [and] has all of the signatures of immune escape", has only been reported around 100 times since May and "does not appear to be rising in circulation").

That means at some point even currently COVID-free states in Australia will have to live with the virus, whether they like it or not. However, despite the creation of a "National Plan" debate still rages about when that might be. Take WA Premier Mark McGowan, who earlier this week said:

"I think [the Commonwealth] need to get with the program, and the program is states like Western Australia are COVID-free. We want to keep it that way for a long period of time and we want to continue to have a strong, free society."

Of course no definition was offered for what a "long period of time" might be, but given McGowan's recent statements it will be sometime after the state reaches an 80% eligible adult vaccination rate. From McGowan's point of view, why would you increase restrictions on activity in exchange for domestic travel?

The calculus is a lot different in NSW, where Premier Gladys Berejiklian yesterday repeated her claim that "No matter what the case numbers are doing... double-dose 70% in NSW means freedom for those who are [fully] vaccinated".

But whatever that freedom is, it will still be less than Western Australians are currently enjoying.

Believe it or not, it's actually Gladys Berejiklian who is at odds with the "National Plan", not Mark McGowan (at least not yet). Australia's "National Plan" makes it clear that a state can only move between phases when the fully vaccinated eligible population in a specific state and the national average reach the 70% and 80% milestones:

"Each phase will be triggered by the achievement of vaccination thresholds of both the nation, and the individual state or territory expressed as a percentage of the eligible population."

Berejiklian intends to move to the next phase and relax restrictions in NSW before the nation as a whole reaches 70%, which would be going against the "National Plan". While McGowan's comments are clearly frustrating for federal politicians who will soon face an election, WA has the lowest vaccination rate in the country and may not even have to even make a call on reopening for months after the national average reaches 80% โ€“ completely in-line with the "National Plan".

We certainly wouldn't recommend McGowan's strategy โ€“ he should spend less energy arguing with ScoMo and Berejiklian and more time getting needles into people's arms. After all, no one enjoys living in a Hermit Kingdom and WA is only one quarantine failure away from ending up in exactly the same boat as NSW and VIC, but with a more vulnerable population.

The Wrap Up
  • โœŠ The iron fist tightens its grip. At a high-level meeting on Monday, Xi Jinping "approved action on everything from monopolies to pollution".
  • โœˆ๏ธ NSW will halve the number of overseas arrivals it receives from next week, capping arrivals at 750 per week until its vaccination rate improves.
  • ๐Ÿฆนโ€โ™‚๏ธ Billionaire hedge fund manager John Paulson said cryptocurrencies are a bubble and will eventually prove to be "worthless".
  • ๐Ÿ’‰ Singapore agreed to provide Australia immediate access to 500,000 Pfizer doses in exchange for the same amount in December.
  • ๐Ÿณ๏ธ The United States completed its withdrawal from Afghanistan, with the last plane departing at 11:59pm on 30 August โ€“ one minute ahead of Biden's 31 August deadline.
  • โŒ GWS Giants star Toby Greene was found guilty of making contact with an umpire and was banned for three weeks, ending his season.
  • ๐Ÿ›‚ The European Union recommended that its 27 member countries reinstate restrictions on American travellers.
  • ๐Ÿ’จ In the US in 2020, more wind power was installed than any other type of energy source.
  • ๐Ÿ‰ The 2021 AFL Grand Final will officially be played at Perth's Optus Stadium on Saturday 25 September.
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