Do it again 🎢

Delivered on By Justin Pyvis

Good morning! Yesterday’s political hot potato was once again the controversial Solomon Islands deal with China, after the latter’s foreign ministry released the following statement:

“The cooperation is open, transparent, legitimate, lawful and irreproachable. The speculation that China will build a military base in Solomon Islands is pure disinformation fabricated by a handful of people who harbor ulterior motives.

However, it is the AUKUS security partnership that is neither open nor transparent. When will the US and Australia invite South Pacific island countries and other regional countries to review AUKUS cooperation?”

China’s government was responding to ScoMo’s “red line” comment, in which he warned that “We won’t be having Chinese military naval bases in our region on our doorstep,” along with a statement from defence minister Peter Dutton who went full Orwellian:

“The only way you can preserve peace is to prepare for war, and be strong as a country. Not to cower, not to be on bended knee and be weak. That’s the reality.”

Neither Dutton nor ScoMo elaborated, with the latter stating that “It would not be responsible for me to speculate in public”, but that he “will continue to work closely with our allies and partners, ensuring that the South China Sea is free and open”.

For its part, Labor’s shadow foreign minister Penny Wong said “We will always work with the United States to secure our region”, although like ScoMo she did not elaborate on what that might entail if push came to shove, pledging only to “spend $525 million on development assistance for the Pacific over the next four years”.

Reading the tea leaves

Daily % change







AU Bond



US Bond









Brent (bbl)



Gold (oz)



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Note: Brent oil, gold bullion and iron ore prices are the second futures contract. Bond yields are 10-year Treasuries.

TheΒ US S&P500Β fell -2.81% overnight with only energy (+0.04%) eking out a tiny gain on a day when tech (-3.71%) was absolutely smashed. The tech-heavy Nasdaq fell -3.95%, its largest intraday decline since 3 February in what has so far been the worst month for the index since 2008.

A notable mover was Tesla (-12.18%), which plunged on concerns about Elon Musk’s Twitter takeover given that he pledged a large portion of his Tesla stock as collateral.

Locally, theΒ ASX200 fell -2.08% after the materials sector (-5.1%) cratered following the large decline in commodity prices on Monday, although there wasn’t much love anywhere else either – all 11 sectors finished in the red.

Elsewhere in the region China’s central bank, the People’s Bank of China, pledged to “step up the prudent monetary policy’s support to the real economy, especially for industries and small businesses hit hard by the pandemic”.

That helped the CSI300 (-0.81%) to pull back some of its heavy losses from Monday, although the recovery only lasted until the lunch break, after which the index again plunged into the red as fears of a mass lockdown in Beijing intensified, with the government to mass-test 20 million people three times from Tuesday to Saturday.

Food for thought

Japan's government is the world's most indebted.
Japan's government is the world's most indebted. Source

As the rest of the world starts to tighten their fiscal and monetary belts, Japan’s government decided to go the other way and unleash yet another stimulus package:

“Japan plans to spend 6.2 trillion yen ($US48.2 billion) on additional gasoline subsidies, low-interest loans and cash assistance to alleviate the pain of consumers and small businesses facing rising prices, Nikkei has learned.

The largest portion of the government’s spending - 1.5 trillion yen - will fund the response to surging crude oil prices. To limit the increase in gasoline prices, the government will raise its maximum subsidy to oil distributors to 35 yen per liter from 25 yen and extend the program until the end of September.”

You can’t fight inflation by stimulating demand, which in this case is the cause of said inflation. Higher prices work to reduce demand and incentivise new supply; dull them with additional spending and they don’t work as well as a rationing tool.

Japan appears to be stuck in a weird version of The Kinks' Do it again, with Japan’s government just endlessly circling back to the start, piling on more debt every time to no avail:

Then it’s back where you started
Here we go ‘round again (Here we go ‘round again)
Back where you started
Come on, do it again, do it again

Japan’s public debt is at a record high and the yen has fallen to its lowest level against the US dollar since 2002, while former Prime Minister’s Shinzo Abe’s ‘third arrow’ of structural economic reform remains firmly stuck in the quiver (the first two arrows were fiscal and monetary expansion).

Perhaps it’s time to try something else?

Chewing the fat

Bits and bytes

😷 The WA government is dropping its indoor mask mandate (excl. public transport and other “high risk” venues), vaccination requirements and capacity limits at venues from Friday. It will also remove the requirement for close contacts to isolate for 7 days, moving in-line with the rest of Australia.

πŸ“£ Following Elon Musk’s purchase of Twitter, founder Jack Dorsey said “I don’t believe anyone should own or run Twitter… however, Elon is the singular solution I trust.

❌ Even better: Donald Trump said even if Elon Musk unbans his account he won’t return, preferring his own platform, Truth Social, the share price of which tanked over 10% after Twitter’s announcement.

πŸ€” Speaking of Trump, he “blamed a ‘rigged election’ in the US for the war in Ukraine”, saying “if our election wasn’t rigged, you would’ve had nobody dead”.

πŸ“ˆ Betashares chief economist David Bassanese said “I now think the RBA should, and likely will, raise interest rates next week by 15 basis points – the case to hike is so obvious it need not feel bound by next month’s wage report.”

πŸ‘©β€πŸ« NSW teachers will strike on Wednesday, 4 May over what they called “uncompetitive salaries and unsustainable workloads”.

πŸ¦₯ Economic growth in Korea nearly halved to 0.7% in the March quarter, due to “Covid-19 curbs and surging inflation, while a slowing Chinese economy clouded the outlook for the coming months”.

πŸš– Uber could be fined up to $26 million by the Australian Competition and Consumer Commission after it “admitted that it engaged in misleading or deceptive conduct in regards to the trip cancellation warnings”.

πŸ›‚ Hong Kong’s chief executive, Carrie Lam, said “she did not have any plans to further relax border controls and the flight suspension mechanism”.

πŸ₯ France’s government spends 18% of GDP on welfare programmes, “nearly double the average for developed economies. France is stuck in a welfare trap, spending generously on income transfers but pushed by voters to spend even more.”