Common prosperity
By Justin Pyvis โ€“ Delivered on 09 Sep 2021

Good morning! NSW deputy Premier John Barilaro dropped a bit of a truth bomb yesterday, revealing that while no decision has been made [public], the government is considering releasing "the areas with no cases" from lockdown before the state's road map out of lockdown is released. That's great but it's what came after that might concern some:

"The vaccination rates in regional and rural New South Wales have to continue to rise on par with metro Sydney and the state average and therefore the pressure point must apply that for some people in the regions, if we get to that point, if they come out of lockdowns now, could go backwards and could lose freedoms if they're unvaccinated and I make no apology for that."

There you have it. Once COVID-19 is officially declared endemic in NSW and the state begins to reopen, regions could still find themselves locked down if their vaccination rates lag the rest of the state. If you still want be able to hit the pub in a month or two, better get jabbed. ๐Ÿ’‰

Speaking of reopening, last night news broke that the NSW government had decided on its roadmap out of lockdown, with the details to be announced at 11am (Eastern) today. The reopening date is 18 October for retail and hospitality and will include regional travel at a 70% vaccination rate, along with a "vaccine passport" linked to the Service NSW app.

Moving south, some good news in Victoria โ€“ from 11:59pm tonight, the majority of regional Victoria will be released from lockdown. However, according to Premier Andrews "it's not a snapback, it's not Freedom Day, it's not 100% of capacity down at the pub". The state government will also reintroduce the dreaded "ring of steel", with police guarding the border between Melbourne and the rest of Victoria.

Well, we're getting there. Baby steps...

Markets

Daily % change

 

AUD/USD

73.7

-0.3%

 

 

10Y Bond

1.28

-2.3%

 

 

ASX200

7,512

-0.2%

 

 

Brent (bbl)

72.7

+1.5%

 

 

Gold (oz)

1,791

-0.3%

 

 

Iron ore (t)

132.0

-3.5%

 

 

Bitcoin

45,974

-0.9%

 

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

The US S&P500 fell 0.13% overnight following the weaker-than-expected jobs report on Friday and a downbeat Fed Beige Book, which found that growth had "downshifted slightly to a moderate pace", as concerns grew about rising Delta variant case numbers and escalating inflation.

Locally, the ASX200 fell 0.24% as 15 companies went ex-dividend and softer commodity prices dragged the mining sector down, especially gold (Northern Star -5.3%, Westgold -4.9%, Silver Lake -4.7%).

A notable winner was Macquarie Group (+4.7%), which announced that its first-half profit will only be "slightly down" on the record $A2.03 billion is reported in the second half of 2020-21, despite the outbreak of COVID-19 on Australia's east coast. 72% of Macquarie's earnings are from outside Australia and the bank warned that it's subject to "significant volatility events and the impact of geopolitical events".

Economy

Getting frothy: The global Buffett indicator โ€“ the total market cap of global stocks divided by worldwide GDP, named after billionaire investor Warren Buffett โ€“ has reached a record high of 142%. Buffett once called it "the best single measure of where valuations stand at any given moment", although he has since walked back those comments.

Old reliable soars: Fitch ratings upgraded its coal price forecast "due to thermal coal supply constraints in China", as strong demand, tighter mine safety requirements and a ban on Australian imports have seen prices hit record highs in recent days.

Debt clock ticking: US Treasury Secretary Janet Yellen warned that the US "would be unable to meet its obligations for the first time in our history", if Congress does not raise or suspend the debt limit. Yellen is trying to spook Congress into ending the political cycle of "waiting until the last minute to suspend or increase the debt limit", which she says "can cause serious harm to business and consumer confidence".

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Feature
Common prosperity

China's households consume an unusually low amount of the country's national output โ€“ over twenty percentage points less than the OECD average in 2019.

This 'feature' of the Chinese economy โ€“ caused in part by its state-driven investment model โ€“ is one reason for President Xi Jinping's revival of "common prosperity", a phrase first introduced by his idol Mao Zedong three years before the disastrous Great Leap Forward.

Why this matters: According to Pete Sweeney, President Xi Jinping's push to enlarge its middle class and spur consumption in the name of common prosperity is actually "muffling China's consumer boom":

"Rising household debt, for example, may have caused officials to turn against spending on condos, pricey booze, video games and more, plus harshly pull back fintech giants like Ant for issuing easy consumer loans. In July the government shut down the for-profit tutoring industry, wrecking a swathe of listed companies on the theory that excessive education fees are deterring couples from reproducing. For similar reasons officials plan to reduce 'unreasonable incomes' and reduce tax evasion by the wealthy. They are forcibly holding down home values in some cities via raw price controls.

On paper these are quick ways to increase disposable incomes without forcing employers to hike wages. But the initial effect is negative for consumption and also employment; the private education sector employed millions. Jittery investors are therefore reconsidering once-hot consumer plays. China's benchmark CSI300 index is the world's worst performing by far this year, down 5%. The Fidelity China Consumer Fund has shed 30% since February, per Refinitiv data."

Looking forward: At least 73 of China's listed firms announced they have or will be making contributions in the name of "common prosperity". Tech giants Alibaba and Tencent alone have each pledged 100 billion yuan (~$A21 billion).

Those state-influenced 'contributions' are unlikely to be productive, and if you combine them with Xi Jinping's decrees for spending to be reduced on things he doesn't like, China looks set to improve its "common prosperity" only by making the country as a whole worse off.

The Wrap Up
  • ๐Ÿ† The NRL Grand Final will be held at Brisbane's Suncorp Stadium, the first time it has been outside of Sydney in its 114-year history.
  • ๐Ÿ—๏ธ ACT Chief Minister Andrew Barr announced that the territory's construction sector will be allowed to reopen with restrictions on Friday.
  • ๐Ÿ‘ถ A new report by the University of Sydney's National Centre for Immunisation Research and Surveillance found that "most children who caught the infection had mild or no symptoms, despite Delta being more transmissible".
  • ๐Ÿ’‰ Pfizer unsuccessfully approached the Australian government in mid-2020 requesting a formal meeting with Health Minister Greg Hunt to discuss a coronavirus vaccine order.
  • ๐Ÿ”ฌ The author of a 2015 paper cited by podcaster Joe Rogan to conclude that COVID-19 vaccines increase the chances of a hyper-virulent mutation said he "is getting this completely wrong... He's taking very careful work about evolutionary scenarios of the future, and from that, erroneously concluding that people should not be vaccinated now."
  • ๐Ÿš€ NASA's Perseverance rover managed to secure a sample of Mars rock, having failed in its first attempt back in August.
  • ๐Ÿคจ A 58-year old Irishman was charged with theft after falsely claiming pensions for his dead mother and father over a 33-year period.
  • โ›“๏ธ A Vietnamese man was sentenced to five years in jail "for flouting COVID-19 rules and spreading the virus... to eight people, one of whom eventually died".
  • ๐Ÿ—ณ๏ธ A man named after Adolf Hitler was elected as a councillor in Namibia, claiming "he has no plans for world domination".
  • โ›ณ Only in Florida โ€“ A naked woman in a golf cart drove past several marked sheriff patrol units during a standoff with an armed man.
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