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The blame game

Good morning! WA was plunged into a lockdown over the long weekend after a returned traveller contracted COVID-19 while in hotel quarantine. There has since been a bit of a finger-pointing exercise between the WA and Commonwealth governments as to who's to blame (spoiler: all of them). Plenty more in the Corona Wrap below. 👇

Market Wrap

Spring in the USA

Daily % change

AUD/USD

78.0

0.7%

10Y Bond

1.69

0.6%

ASX200

7,046

-0.2%

Brent (bbl)

65.7

-0.6%

Gold (oz)

1,782

0.2%

Iron ore (t)

187.4

3.5%

Bitcoin

53,320

5.5%

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

Both the US S&P500 (+0.18%) and Nasdaq (+0.87%) finished at fresh record highs on Monday. The bulk of the remaining earnings reports are due out in the next fortnight (including Tesla, Microsoft, Apple, Alphabet, Facebook and Amazon) but so far results have exceeded people's expectations.

Spring in the USA: New home sales in the US increased in March to their highest since 2006. According to real estate brokerage Redfin, US homes sold at their fastest pace on record during the four-week period ending 18 April. More positive news came from the US IHS Markit Purchasing Managers' Index composite index (manufacturers and service providers), which increased to 62.2, the highest since 2009 (a reading above 50 indicates expansion). When's the next trillion-dollar infrastructure-in-name-only Biden stimulus due again?

China booming: According to an aggregate index of eight leading indicators compiled by Bloomberg, China's economy remained strongly in expansion in April. When China's boom goes, so do Australian iron ore prices, which are close to an all-time high (see The Wrap Up below for why Kevin Rudd's super profits tax is a bad idea).

Inflation watch: The price of lumber in the US is up 325% over the past year, leading to an estimated $US24,000 increase in new single-family home construction costs since April 2020.


Corona Wrap

The blame game

The situation in India is out of control.
The situation in India is out of control. BBC

It has been finger pointing all around following the outbreak of COVID-19 in WA. The Commonwealth reckons it's WA Premier Mark McGowan's fault, with Defence Minister Peter Dutton saying McGowan had "made a mistake with the Mercure Hotel". Meanwhile, McGowan says the Commonwealth's to blame for allowing travel to India and for refusing to fulfil its quarantine responsibility under the Australian Constitution.

Dutton has a point: The WA government finalised an audit of its quarantine hotels on 8 April (why it took over a year to conduct an audit is separate question), then one week later WA's Chief Health Officer advised the government to close the Mercure to returning travellers and replace it with another hotel in early May. Only two days after that advice was given, a mother and child from the UK tested positive to the same strain brought back by a man from India, who was staying across the hallway with his wife.

McGowan has a point: 'Patient zero' of the latest outbreak was a man who returned from India after being given an exemption by the Commonwealth to travel there to attend a wedding. This happened at a time when many Australians are not allowed back into the country and plenty of non-citizen spouses, children and close family members can't get back. Yet at the same time, a person received an exemption from the Commonwealth to visit the world's biggest hotspot to attend a potential super-spreader event, eventually (due to a subsequent quarantine bungle) forcing an entire state into a lockdown.

Two wrongs don't make a right: Both levels of government failed and will continue to fail while the game is to avoid responsibility at all costs rather than stepping up and actually doing something. Yes, the Commonwealth is responsible for quarantine under the constitution and really needs to do a better job at adapting to the situation overseas (e.g. if COVID-19 cases are surging in a particular country, reduce its intake and increase capacity elsewhere – there's no shortage of demand). But if McGowan isn't happy with their job (clearly), he should invest in some more appropriate facilities himself (perhaps repurposing some disused mining camps).


The Wrap Up

  • Former Prime Minister Kevin Rudd has revived his "super profits levy" on iron ore mining companies. If you're after a way to kill the golden goose and expose taxpayers to "a sharing of the risks" – noting that Australia already shares the upside via taxes and fees on mining companies at every stage, including GST, state payroll and federal income tax, state royalties, corporate tax, environmental licencing, vehicle licencing, stamp duty on land, vehicles and insurance – then this is it. 👏
  • India in crisis – the government ordered Facebook and Twitter to remove around 100 posts, some of which were critical of the government. The tech companies complied with the request.
  • Some well-known Australian cricketers including Andrew Tye, Adam Zampa and Kane Richardson, recently fled India during the Indian Premier League season due to the coronavirus crisis ravaging the country.
  • Australia's National Cabinet will meet later today to discuss temporarily halting all flights out of India. Australia may also send oxygen, ventilators and personal protective equipment.
  • The US government resumed its Johnson & Johnson vaccine rollout. It had previously 'paused' the jab for 11 days over rare blood clot concerns. The CDC estimated that resuming the vaccine rollout for everyone would reduce COVID-19 deaths by 600 to 1,400 while causing 26 to 45 blood clot cases.
  • Less than half of people aged over 50 in Australia are willing to get the AstraZeneca vaccine, according to a poll conducted by the Guardian.

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