Through the roof
By Justin Pyvis – Delivered on 15 Sep 2021

Good morning! Bad news for those in the ACT yesterday, with Chief Minister Andrew Barr extending the territory's lockdown by a massive four weeks. Several financial support measures were announced but that will be cold comfort for those who will now be locked down until at least Friday 15 October.

Moving on, NSW Premier Gladys Berejiklian did indeed skip the daily presser but it was all good because we still got some reopening news from Tasmania of all places.

Secretary of Health Katherine Morgan-Wicks popped onto ABC radio and revealed that she will advise the Premier to wait until the state's 16+ fully vaccinated rate gets "above 90%" before Tasmania considers relaxing its border restrictions. Assuming her advice is accepted and the current rate of vaccination doesn't slow too much, it could be another 100 days before Tassie opens up again (Christmas Eve).

So much for the National Plan!

In other news, US President Joe Biden announced that the "Quad" – comprised of the leaders of Australia, India, Japan and the US – will get together for a soiree at the White House a week on Friday. That means ScoMo will once again be taking a cheeky trip out of the country while the rest of us plebs are trapped until at least 17 December. ðŸ˜Ģ

But what we really want to know is which pubs ScoMo plans to hit up this time around – surely Washington DC has some quality watering holes? Or perhaps he discovered some empathy and will just have to settle for one of DC's famous half-smokes on his way to the White House?

If anyone knows what's on the menu, do let us know.

Markets

Daily % change

 

AUD/USD

73.2

-0.7%

 

 

10Y Bond

1.23

-1.6%

 

 

ASX200

7,437

+0.2%

 

 

Brent (bbl)

73.7

0.0%

 

 

Gold (oz)

1,807

+0.7%

 

 

Iron ore (t)

120.3

-1.4%

 

 

Bitcoin

46,754

+4.0%

 

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

The US S&P500 fell 0.57% overnight despite US consumer price inflation data showing no acceleration in price rises, falling to 5.3% in August from 5.4% in July. While still red-hot, no increase from the prior month means there will probably be less urgency inside the Fed, which meets next week, to tighten policy.

Locally, the ASX200 finished in the black despite being down for most of the day, thanks to dovish comments from RBA governor Philip Lowe (we have lots more on the RBA below!). Notable winners were in the energy sector, with Woodside (+6.23%) and Beach Energy (+7.21%) gaining on the back of oil prices rises the day before.

Elsewhere in the region, Japan's Nikkei 225 added 0.73% to hit its level since August 1990.

Economy

Light on the horizon: The monthly NAB Australia Business Survey found that while confidence remains heavily negative there was a small improvement in August. Business conditions also improved and are still "well above average in all states", reflecting "the healthy momentum in the economy before the lockdowns, ongoing fiscal and monetary support as well as greater certainty that the lockdowns will end as vaccines roll out".

Crypto crackdown: China continued its assault on cryptocurrencies (i.e. whacking the competition for its forthcoming e-yuan), after the Chinese cyberspace commission "agreed to work with other officials to break any cryptocurrency mines still operating in the [Hebei] region... which is against China's 'carbon-neutral' goal". Hebei is also China's #1 steel producing province (~25% of the total), which as everyone knows is suuuupper clean. 🙄

Lower for longer: RBA governor Philip Lowe said he "will not increase the cash rate until actual inflation is sustainably within the 2–3 per cent target range", explicitly stating that "It won't be enough for inflation to just sneak across the 2 per cent line for a quarter or two."

Consumer price inflation in the June quarter was 3.8% but the quarter before was just 1.1%, meaning we'll have to wait until at least the February board meeting before Lowe even considers raising rates.

Crowding out: It's all going into housing – a survey by business bank Judo found that small businesses are "finding it difficult to get access to credit when they go to speak to their bank", with many considering "quitting altogether".

Feature
Through the roof

The ABS released residential property price data for Australia's 8 capital cities yesterday and phew, it sure confirmed what everyone already suspected – prices have gone through the roof!

Breaking it down: The average price of a residential dwelling in Australia is now $A835,700, up from $A678,500 a year ago. In the June quarter alone, the weighted average price increased 6.7% from the prior quarter.

Asset prices, particularly housing, are extremely sensitive to interest rate movements. Throw in some stimulus and prevent people from spending their savings on consumption and before you know it, house prices have risen 20%.

Why this matters: A recent paper (2020) by the Bank for International Settlements found that rising real estate prices reallocate "resources towards inefficient firms during the housing boom", depressing "industry productivity, despite rising overall economic output".

In other words, stimulating the housing sector can give you a short-term economic kick up the backside but it comes at the price of longer-term growth, which is all about productivity.

Looking forward: RBA governor Philip Lowe released a speech at the same time as the house price data were released. In it, he said that raising interest rates "to cool the property market... is not on our agenda". Lowe said he would rather keep the party going, because cooling the housing market "would also mean fewer jobs and lower wages growth... a poor trade-off in the current circumstances".

At least he acknowledged the trade-off. But the decision to keep his foot on the monetary gas means productivity is going to be negatively impacted. We had better open the borders soon, because the only way we're going to pay off this lockdown debt is with more people!

The Wrap Up
  • 🍎 Apple unveiled its new iPhone 13 line-up, following the same model plan as last year with the iPhone 13, Mini, Pro and Pro Max. The phones will be available in Australia next week, starting at $A$1,199 for the mini version. ðŸ˜ē
  • ðŸ”Ē A new Guardian Essential poll found that Australia is divided, with 53% expressing concern about Scott Morrison's advocacy for easing restrictions and just 26% understanding and approving the four-phase reopening plan.
  • ðŸĪ­ Victoria – which had seemingly achieved an Australia-high indigenous vaccination rate – actually mistakenly classified 26,000 people as indigenous, inflating the numbers.
  • 🎰 Casino operator Crown "is considering a 'no jab, no entry' policy for patrons", joining the likes of Qantas, Virgin, Telstra and SPC in making vaccination mandatory.
  • 🏉 Following his heroics against South Africa, Quade Cooper's citizenship application – which has been rejected four times – is set to be approved by the federal government as early as this week.
  • ðŸĪ’ Sometimes you just reeaalllly don't want to work. But never do this: "A young tradesman has faced court accused of faking a positive COVID-19 test to avoid work."
  • âš― According to Manchester United's goalkeeper, since the notoriously clean-eating Ronaldo arrived at the club "not one single player dared get up and have that junk food that was laid out".
  • ðŸĶī This is what the world needs right now. A genetics company called Colossal raised $A20 million to bring back the woolly mammoth from extinction.
  • 👊 Roughly 100 disgruntled investors stormed the offices of the embattled China Evergrande, demanding repayment of loans and financial products.
  • 💉 Western Australia will make the Pfizer vaccine available to any resident aged over 12 from Monday.
  • 💰 Amazon raised its average starting wage in the US to over $US18 an hour (~$A25) as it struggles to expand in the midst of a tight labour market.
  • ðŸąâ€ðŸ’ŧ Buy now, pay later firm Zip Co will "add cryptocurrency trading functionality and... accept bitcoin as a form of payment", sometime over the next 12-18 months.
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