Continued to deteriorate
By Justin Pyvis – Delivered on 30 Nov 2021

Good morning! At an emergency National Security Committee meeting last night, the Australian government decided to make the "necessary and temporary decision to pause the next step to safely reopen Australia".

Skilled workers, students and backpackers, along with tourists from Korea and Japan, will now have to wait until at least 15 December to grace Australia's shores. According to ScoMo, the extra couple of weeks will provide the time needed to "gather the information we need to better understand the Omicron variant, including the efficacy of the vaccine, the range of illness, including if it may generate more mild symptoms, and the level of transmission".

National cabinet was due to meet on Friday but it was also pulled forward to this afternoon so that ScoMo can no doubt discuss Omicron and quarantine-related issues with state Premiers.

Speaking of Premiers, most of them were out yesterday holding the line in terms of their respective reopening plans. QLD Premier Annastacia Palaszczuk said "at this stage the plan is still to proceed" with a reopening at 80% fully vaxxed, while out west WA Premier Mark McGowan said:

"I don't know what's going to happen with Omicron. Omicron didn't exist until three days ago. So let's just watch and see what the World Health Organisation, what our health advisers say nationally.
...
It may well be that Omicron spreads more rapidly but is not more lethal and therefore we can proceed as planned."

McGowan was also asked about whether he might relax his vaccine mandate if the WA vaccination rate improves, to which he replied it would be around for "at least" a couple of years "while I'm the Premier".

Fully vaccinated population (aged 16+)

ACT
NSW
VIC
TAS
SA
NT
QLD
WA
Markets

Daily % change

AUD/USD

71.3

-0.6%

AUD/CNY

4.55

-1.1%

AU Yield (%)

1.73

+3.7%

US Yield (%)

1.53

+3.4%

ASX200

7,240

-0.5%

S&P500

4,664

+1.5%

Brent (bbl)

72.8

+0.1%

Gold (oz)

1,784

-0.4%

Iron ore (t)

102.8

+7.6%

Bitcoin

58,069

+1.4%

Ethereum

4,420

+2.9%

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.

At the time of writing the US S&P500 was 1.51% stronger as everything from oil to bond yields rallied. Fresh data from the US helped improve sentiment, as pending home sales (sales that will close in one to two months) rebounded a sharp +7.5% in October despite rising mortgage rates.

Locally, the ASX200 bounced back from being down over 1% at the open to finish 0.54% lower as US futures turned positive and no further bad news about Omicron emerged. It was still a seven-week low for the index with most sectors punished except for materials (+0.74% on positive iron ore futures prices during the day) and tech (+0.59% on lower bond yields).

Economy

Lucky for some: Company Gross Operating Profits in Australia rose 4.0% in the September quarter from the prior period, or 5.4% compared to a year ago, despite NSW and VIC being in lockdown. The ABS noted that "Company Gross Operating Profits have once again included the receipt of COVID-19 related government subsidies as income", meaning they're still being propped up by taxpayers. Meanwhile, wages and salaries fell 0.8%...

Billion dollar blunders: According to data from Dealogic, "49% of the 43 IPOs that raised $US1 billion or more this year in London, Hong Kong, India and New York are trading below their issuance prices", up from 33% in 2019 and 27% in 2020. The fall came despite a rising tide, with the S&P500 index returning around 25% this year.

Just don't print as much: Lebanon's central bank blamed currency trading apps shared on Google and Facebook for driving down the black market value of its currency, which it officially pegs at a rate nearly 17 times higher than the market rate.

Vale disappoints: Brazilian iron ore miner Vale cut its production guidance for this year and issued a lower-than-expected projection for next year, which will no doubt cause a few smiles across the boardrooms of Aussie iron ore companies today.

The devil is six: Germany consumer prices rose 6.0% in November, the most since 1992 and exceeding market forecasts. The main driver was energy (+22%) although the price of everything was higher, even services (+2.8%). That's consistent with a story of general inflation, where all prices go up at the same time, rather than "transitory" inflation where prices of some goods change relative to others and it's just because of how the consumer price index is measured that it appears as inflation.

The outcome was similar in Spain (+5.6%) and Belgium (+5.6%), where inflation data were also released.

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Feature
Continued to deteriorate

A new report published by ANZ and CoreLogic found that the "initial 12 months of the current [property] cycle is showing the fastest growth trajectory on record".

Breaking it down: The annual Housing Affordability Report found that the ability of Australians to buy property has "continued to deteriorate" in capital cities and especially in the regions, due to:

a record low cash rate setting;
unprecedented government and institutional support for households; and
additional savings accumulated during the pandemic.

Those demand-side stimulants combined with tight housing supply levels and a preference for lower-density housing "as Australians found themselves spending more time at home" to send property prices, especially detached housing, to record highs.

Why this matters: The report notes that it has long been a stated policy of governments to encourage "home ownership as a path to reduced housing costs by the time incomes fall in retirement". Without an increase in "the stock of affordable and social housing", many Australians may find themselves at the mercy of the rental market their for entire lives.

Those that do crack the property ladder may be forced "to make compromises on the type or quality of property purchased, and distance to major employment and entertainment hubs".

Looking forward: While the report only looks at affordability, the huge run-up in property prices in absolute and relative terms – in Sydney, the cost of servicing a new mortgage on the median dwelling value is 49.1% of the median income – has created both economic (e.g. financial crisis, lower future productivity) and social (e.g. urban sprawl, family postponement) costs that could be with us for some time.

The Wrap Up
    🌋A massive magnitude 7.5 earthquake struck in northern Peru at 5:52am local time on Sunday. Thankfully it was deep, "which usually reduces damage and casualties".
    A New York art dealer unknowingly used an ancient Roman mosaic belonging to emperor Caligula as a coffee table in her apartment.
    🍦An Ontario ice cream manufacturer targeted by anti-vaxxers because it rewarded vaccinated employees with a $C1-an-hour pay raise said it backfired, leading to "renewed interest and support for the brand".
    🐊A man in the Philippines jumped into a crocodile enclosure "to take a selfie with what he thought was [a] plastic crocodile prop", before the 12-metre reptile "sank its teeth into his left arm".
    🎾Asked whether his son would attend the Australian Open, Novak Djokovic's father said "Under these blackmails and conditions [the vaccine mandate], he probably won't."
    🗾The emergence of the Omicron variant caused Japan's government to close its borders to foreign businesspeople and students, effectively banning all foreigners from arriving (tourists were already barred).
    💉The arrival of the Omicron variant led the government to ask ATAGI to review whether COVID-19 booster shots should be administered earlier than 6 months after a second dose.
    🗳️Australia's next federal election looks set for May 2022, after the government set 29 March as the date for the next federal budget, "signalling its plan to outline spending and tax measures to woo voters".
    🛂62% of Swiss voters supported vaccine passport legislation in a referendum held on the weekend, meaning its government will continue to enforce a certificate system restricting public events and gatherings to the vaccinated.
    🐥Jack Dorsey stepped down as Twitter CEO, "because I believe the company is ready to move on from its founders".
    🕵️‍♀️According to a new book published by the CIA, "the Trump transition was far and away the most difficult in its historical experience with briefing new presidents".
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