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Workers wanted

Good morning! National cabinet meets later today for the second time this week, with Victoria's Premier Daniel Andrews already claiming that he will ask for a 75-80% reduction in the number of overseas arrivals "until we get a critical mass of people with a jab", as "it is better to lock some people out than to lock everyone down".

It's believed that Queensland's Premier Annastacia Palaszczuk will also push for a discussion about hotel quarantine, having previously suggested she would like an overseas arrival cut of 50-75%.

In response, Minister for Home Affairs Karen Andrews said "the first response should not be to close down our borders".

Something's gotta give. Who will flinch first? 🍿

Markets

Daily % change

AUD/USD

74.7

-0.4%

10Y Bond

1.44

-4.0%

ASX200

7,266

-0.6%

Brent (bbl)

75.6

+0.7%

Gold (oz)

1,777

+0.4%

Iron ore (t)

204.8

-2.7%

Bitcoin

33,397

-4.3%

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

The US S&P500 (+0.52%) set a fresh record high after the Labor Department reported that weekly jobless claims dropped by 51,000 to 364,000, a positive result that built on yesterday's ADP private payrolls figures showing 692,000 new jobs in June, the sixth straight monthly rise. Locally investors were not so fortunate, with the ASX200 falling 0.6% to kick off the new financial year.

Best year since 2004: The latest data from CoreLogic showed that over the 2020-21 financial year Australian dwelling values increased by 13.5%, with housing up 15.6%.

Iron ore windfall: The gains from China's pandemic stimulus continued to flow in May, with Australia's trade balance adding $1.5 billion to $9.7 billion in May, only just below the record surplus of $9.9 billion set in January.

China slowing: The Caixin Manufacturing Purchasing Managers’ Index (PMI) fell to 51.3 in June from 52 the previous month. Anything over 50 indicates growth but it was the weakest reading for three months, "as growth in both production and new orders softened".


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Feature

Workers wanted

The Australian Bureau of Statistics (ABS) released the results of its quarterly Job Vacancies Survey yesterday, showing a whopping 23.4% increase in the number of jobs available since February of this year. Job vacancies are now up 57% compared to February 2020, i.e. prior to the impact of the global pandemic.

Chart showing the number of job vacancies in Australia.
Workers are wanted but there are far fewer people around. ABS

Stepping back: Every policy has consequences and the same is true for Australia's relatively hard border controls. Labour demand is strong – in part because of all the stimulus – but supply has evaporated as temporary workers (e.g. backpackers) have gradually departed with no one to replace them. According to the Department of Home Affairs, as of 30 May there were 29.2% – or over 700,000 – fewer temporary visa holders in Australia than there were in December 2019.

Chart showing the decline of temporary visa holders in Australia.
Since December 2019 the number of backpackers in the country has declined by 73.4%. Department of Home Affairs

Why this matters: Other than fixing the supply shock (removing the border restrictions), the easiest way for a labour shortage to resolve itself in the short run is for the price of labour to rise, i.e. higher wages. However, many firms may be reluctant to do that, rightfully fearing that wage increases can be difficult to unwind (if required) and may even leave them vulnerable to a labour supply shock in the other direction when the borders eventually do reopen.

In such an environment, output gets rationed – firms produce less than they would otherwise, some may even cease to exist entirely, and as a nation we'll all be slightly less well off because of it.


The Wrap Up

  • The Australian Technical Advisory Group on Immunisation co-chair Christopher Blyth said while AstraZeneca was not banned for young people, "I do not believe at this stage that young people should be receiving AstraZeneca".
  • Remember when the government boasted that we were at the "front of the queue"? Yeah, nah. Finance Minister Simon Birmingham confirmed Australia is "at the back of the queue" for Pfizer doses.
  • One in five vaccine doses in Australia are not being used, according to the latest COVID-19 vaccine rollout update. Usage was lowest in general practice (74%), the federal government's preferred distribution channel, with state mass vaccination centres proving to be far more efficient.
  • The government for the first time published data showing the percentage of Australians that are fully vaccinated: 7.92%.
  • "Protect the freedom": The UK is planning to give people a booster shot of a COVID-19 vaccine before winter, meaning they could be rolling out a third dose before Australia has even finished its initial rollout.
  • "A steel wall forged by 1.4 billion people": During his speech commemorating the 100th founding anniversary of the Communist Party of China, Xi Jinping said that anyone trying "to bully, oppress, or subjugate" will find themselves "on a collision course" with China.
  • Samoa's government withdrew its athletes from the Tokyo Olympics "due to worries over the rising COVID-19 infections in host nation Japan".
  • The financial services sector will be exempt from the OECD's proposed 15% minimum global corporate tax rate. The plan has been backed by 130 nations including Switzerland, China and India.
  • A Florida law that would have prevented social media platforms from banning political candidates was ruled unconstitutional by a judge, describing it as "an instance of burning the house to roast a pig".
  • The Tour de France dropped its lawsuit against the fan who caused a massive pile-up on the first day.

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