Russian roulette
By Justin Pyvis – Delivered on 06 Oct 2021

Good morning! We'll start in Victoria where daily cases hit an Australian-record high of 1,763 yesterday. The number of active infections (14,368) in the state are now more than double last year's peak and while Premier Daniel Andrews said "I don't have any advice that sees us having to alter that [the reopening roadmap] now", that could quickly change if hospitalisations start to creep up.

Elsewhere, newly appointed NSW Premier Dominic Perrottet confirmed that his state's 'freedom day' will still go ahead as planned on 11 October, the Monday after they reach their 70% double vaccination target (people aged 16+). Daily new cases (608 yesterday, the lowest since August) have now been below 1,000 for ten straight days, although are expected to rise again later this month as the state reopens.

Finally, ScoMo elaborated on the border situation by confirming that "The first cab off the rank is Australians. Australian citizens and residents who were vaccinated, they will be able to travel overseas and return... We'll get to international visitors I believe next year."

Fully vaccinated population (aged over 12)


Daily % change




10Y Bond






Brent (bbl)



Gold (oz)



Iron ore (t)






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

The US S&P500 gained 1.05% overnight with financials the best performing sector, as banks stand to gain from rising yields (US 10-year Treasuries remain around 1.5%).

Locally, the ASX200 (-0.41%) staged a late rally following positive comments on the economic recovery from RBA governor Philip Lowe (see below) but still finished in the red, with tech smashed (-2.97%) following a weak US lead. A notable loser was Afterpay (-5.18%), closing at its lowest level since Square's takeover bid was revealed a couple of months ago.


Thanks, China: Australia's trade surplus hit $A15 billion in August, a record high that surpassed July's record by $A2.4 billion. The surplus came from both rising exports (+4.1% from July) thanks to coal and LNG more than offsetting iron ore falls, along with declining imports (-1.5% from July), mostly capital goods. Exports to China alone were worth A$18.6 billion, 55% higher than a year ago.

Getting back to normal: According to ANZ job adverts fell 2.8% in September, the third consecutive monthly decline. Adverts are still 22% above pre-pandemic levels, so declines are to be expected as people are gradually find new jobs in the post-pandemic world.

Reopening boost: The ANZ-Roy Morgan Consumer Confidence survey showed an improvement for the fourth straight week as "Sydney and Melbourne [are] headed towards re-opening in the next few weeks", leading to rise in both cities. However, confidence fell in Adelaide, Brisbane and Perth and people's inflation expectations "remained elevated at its recent pandemic-high".

Cost pressures: Consumer price inflation in the Philippines eased slightly in September to 4.8%, down from 4.9% in August. However, "the primary factor that influenced the slight easing was slower transport inflation", with price rises in food and non-alcoholic beverages increasing to 6.2%. The Philippines' central bank targets inflation of 2–4%, a range it has been above for 8/9 months this year.

Growing in December: The RBA left rates on hold and maintained its $A4 billion/week bond buying scheme ('quantitative easing') at its meeting yesterday, although it did update its central scenario to one where "the economy will be growing again in the December quarter and is expected to be back around its pre-Delta path in the second half of next year".

Russian roulette

US President Joe Biden unleashed an "unusually fiery speech at the White House", accusing Republicans of playing "Russian roulette with the US economy". He was, of course, referring to the ongoing drama of the US debt ceiling, which was only temporarily delayed to 18 October.

Stepping back: The US government spends more than it receives. A lot more – its budget deficit is forecast to be 13.4% of GDP this year, after setting a post-war record 15% last year. In the US the legislative and executive branches are separate entities, and the latter can only borrow if the former authorises it (Article I Section 8 of the US Constitution). When Congress (the legislative branch) authorises borrowing, it doesn't give the executive (Treasury) a blank cheque – hence the debt ceiling.

Why this matters: In just under two weeks, the US government will run out of money and will be unable to borrow more unless approved by Congress. Outside of the 2-year election cycle, this is essentially silly season in US politics. Whomever has the deciding votes in Congress (currently Republicans via filibuster rules) will drag their feet, play political games and flex against the administration.

But Democrats aren't immune, either – talk of Treasury minting a trillion dollar coin is back in vogue, even though doing so would essentially mark the demise of the three-branch system of government, signalling a failure of the US political system and destroying the US dollar's status as reserve currency.

Even politicians are smarter than to attempt that.

Looking forward: Republicans will eventually fold like a cheap suit and raise the debt ceiling. But the next couple of weeks will see all kinds of stupid in the media and could create some market volatility as the deadline looms.

The Wrap Up
    🗳️Dominic Perrottet became New South Wales' 46th Premier following the resignation of Gladys Berejiklian last Friday.
    🗾Japan's 100th Prime Minister, Fumio Kishida, took office yesterday and immediately called a parliamentary election for 31 October.
    🦗The England and Wales Cricket Board will make a call this week on whether the Ashes series in Australia, scheduled to start on 8 December, will go ahead.
    💉A new study published in medical journal the Lancet found that the effectiveness of the Pfizer vaccine at preventing infection drops to 47% from 88% six months after the second dose. However, it remained effective (90%) at preventing hospitalisation and death.
    ✈️Only one US airline, Delta, is letting unvaccinated employees continue to work and travel. 84% of Delta's staff is vaccinated.
    🤔Lars Vilks, the Swedish cartoonist who depicted the Prophet Muhammad as a dog in 2007, was killed after a truck smashed into the police car carrying him.
    🛂WA Premier Mark McGowan made the COVID-19 vaccine mandatory by 1 December (first dose) for up to 100,000 FIFO workers who "work at or travel through regional mine sites, transport hubs and Aboriginal communities".
    "Save Australia" protests erupted on the streets of... New York, during an anti vaccine mandate march that ended at the Australian consulate in Midtown.
    👩‍💻Microsoft's Windows 11 operating system started to roll out today, available as a free download for existing Windows users provided their hardware supports it.
    🥝A kiwi grandmother and her friend got pissed, snuck into a water park at 2am and subsequently got stuck in a water slide flume with multiple broken bones before they were eventually rescued. They're now suing the park.
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