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Cashed up

Good morning! The Bondi coronavirus cluster has grown to 9, with the NSW government putting fresh restrictions in place including mandatory masks indoors for seven local government areas.

Thankfully NSW has proven itself to be pretty good at contact tracing, so with any luck this localised cluster won't morph into something far worse. Unfortunately the same cannot be said for the state's COVID-19 prevention standards, which appear to be dismal: this outbreak started with an unvaccinated international flight crew driver who wasn't required to have a daily COVID-19 saliva test.

It's now 450 days since Australia required all returning travellers to undertake hotel quarantine and 119 days since the first vaccine dose was administered. Yet for some reason we still have unvaccinated staff working in close proximity to international arrivals without mandatory testing? You really can't make this up.


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

US markets tanked on Friday (S&P500 -1.31%) after St. Louis Federal Reserve President James Bullard said he thinks the Fed should raise interest rates as soon as the end of next year. The Dow Jones index – which tracks the stock prices of 30 of the biggest American companies – fell every day last week for its worst weekly loss since late January.

Cash rate pressures: Following last week's buoyant Australian employment data, Westpac's Chief Economist Bill Evans said he now expects the cash rate to rise in early 2023, well ahead of the RBA's current prediction of "2024 at the earliest". Bank bill futures currently imply a cash rate increase in late 2022.

NSW Budget: Due out on Tuesday, a couple of spending items were strategically leaked over the weekend, including:

  • $A3.5 billion in pandemic stimulus measures;
  • the removal of a 1.5% per annum cap on public sector wage increases; and
  • a stamp duty waiver on electric vehicle purchases, rebates for the first 25,000 electric vehicle purchases and $A171 million on new charging infrastructure.

China hits crypto (again): China's government "ordered state electricity companies in Sichuan... to immediately stop supplying electricity to crypto-mining projects". Sichuan is China's second-biggest bitcoin mining province and uses hydropower to verify transactions.


Cashed up

A decent number of households managed to increase their savings through the pandemic.
A decent number of households managed to increase their savings through the pandemic. Bloomberg/YouGov

A YouGov survey conducted in 17 nations between 14-28 May showed that many households, particularly in developed economies, are cashed up. In countries such as the UK, about a third of people increased their savings from March 2020. Australia ranks somewhere in the middle, with just under a fifth of households increasing their savings relative to last year.

Why this matters: Spending declined during the pandemic, with many households either unable (locked down) or unwilling to spend given the economic uncertainty and risk of contracting COVID-19.

Even in Australia where the pandemic has been largely contained, the savings rate remains high by historical standards. Central bankers are watching this space closely, as if "households were to run down their additional savings quickly... a stronger economic path than the one we [the RBA] have envisaged could eventuate".

Still cautious: Only 3.5% of households surveyed said they would spend all of their extra savings by the end of 2021, with the majority (68.7%) opting to spend less than half. That suggests the 'pent up' demand represented by elevated savings is unlikely to be released until 2022 at the earliest, when vaccines are more widespread and government policy concerning lockdowns and borders becomes clearer.

The Wrap Up

  • Queensland recorded one new locally acquired COVID-19 case yesterday, a woman who had recently finished her 14 days of hotel quarantine. In Victoria, two returned international travellers recorded positive COVID-19 test results after leaving hotel quarantine, although authorities suspect they might be historical infections.
  • "China's vice-minister of State Security, Dong Jingwei, has reportedly defected to the US and given information about the Wuhan Institute of Virology which is at the centre of the COVID-19 lab leak theory."
  • Australia lodged a formal complaint with the World Trade Organisation over China's anti-dumping duties on Australian wine. Wine exports to China fell from $A1.1 billion to $A20 million when tariffs were imposed.
  • COVID-19 and brain damage: "We identified significant effects of COVID-19 in the brain with a loss of grey matter in the left parahippocampal gyrus, the left lateral orbitofrontal cortex and the left insula."
  • Experts say the AstraZeneca vaccine's reputation in Australia has been "tarnished beyond repair", following the latest decision by the Australian Technical Advisory Group to raise the recommended age to over-60s.
  • Johnson & Johnson's vaccine has gone the way of AstraZeneca in the US, "after it was linked to a rare but serious blood-clotting disorder and injections were paused for 10 days in April".
  • The world is reopening: The European Council added the United States to its list of countries allowed to travel freely to the bloc's 27 member nations (although each EU government makes its own border decisions).
  • Thailand's "Phuket Sandbox" initiative will launch from 1 July, allowing free movement on the island for tourists fully vaccinated against COVID-19.
  • For global elites, the pandemic is over: "The UK government is in talks with Uefa and Fifa to exempt 2500 VIPs and officials from the need to quarantine when they travel to Britain for the final of the Euros on 11 July."
  • For Australian elites, the pandemic is over: Victoria's chief health officer Brett Sutton "flew to Canberra for a meeting at a time when Melbourne's 25km travel ban remained in place on his advice". The so-called 'work-related' meeting was "to honour medical researchers". 🤔
  • Unicorns (valuations >$US1 billion) are going extinct in China – and look very bubbly in the US. Friendly reminder: a Chinese billionaire dies an "unnatural death" every 40 days.
  • 80% of organisations that paid hackers' ransom demands were attacked again, often by the same group.