Running hot

Delivered on By Justin Pyvis

Good morning! Mike Burgess, the head of the Australian Security Intelligence Organisation (ASIO) – Australia’s spy bureau – took the very unusual step of weighing in on what has become a political hot potato on the eve of a federal election: China. Speaking to the ABC, Burgess said:

“The foreign interference is against all members of parliament, so it doesn’t go after one particular party or the other… I’ll leave the politics to the politicians, but I’m very clear with everyone that I need to be that that’s not helpful for us.”

His comments came following a couple of days of heated anti-China rhetoric in the media and Parliament, which kicked off after an opinion piece in the Global Times, a well-known Chinese government mouthpiece, that effectively endorsed Labor leader Anthony Albanese as China’s preferred Prime Minister while labelling ScoMo “a clown”.

Seizing the opportunity to control the narrative ahead of the election, ScoMo said Albanese was the “Chinese government’s pick at this election”.

He then followed that up by accusing Labor frontbencher Richard Marles of being a “Manchurian candidate” (i.e. a puppet) in Parliament, citing a 2019 speech by Marles in Beijing calling for stronger ties between Australia and China.

But wait, there’s more!

Less than 24 hours later a 2018 video conveniently emerged of Labor leader Anthony Albanese speaking in Mandarin, stating that “deepening ties with China is in Australia’s national interest”. Not helping Labor’s cause was that the transcript on Albanese’s official website just happened to be missing the statement in question.

The Coalition certainly thinks it’s onto a winner here – ‘don’t vote for the China sympathisers’ will likely resonate with more people than ‘hey we screwed up ordering vaccines, doubled the national debt and didn’t manage to pass any of our election promises but please vote for us again’.

Will it pay off? Time will tell…

Reading the tea leaves

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Note: Brent oil, gold bullion and iron ore prices are the second futures contract. Bond yields are 10-year Treasuries. The S&P500 is a snapshot 30 minutes before close.

At the time of writing the US S&P500 was down -1.97%, having steadily lost ground all session after earlier in the morning US President Joe Biden said the chance of a Russian invasion of Ukraine was “very high”, because:

“They have moved more troops in, number one. Number two, we have reason to believe they are engaged in a false flag operation to have an excuse to go in. Every indication we have is they are prepared to go into Ukraine, attack Ukraine… My sense is it will happen in the next several days.”

Locally, the ASX200 eked out a small +0.16% gain thanks in large part to the healthcare sector (+3.0%), with biotech giant CSL adding another 5.0% to cap off a great couple of days following its 8.5% rise on Wednesday.

At one stage the market was up nearly a full percent but lost ground late in the day after reports started to emerge from Europe that Ukraine government forces were firing mortars on Russian separatists in the east of the country.

A notable mover in the negative direction was conglomerate Wesfarmers, which plunged -7.5% after reporting a -14.2% decline in first-half profit “as a result of ongoing global supply-chain disruptions, elevated team member absenteeism and delays with third-party logistics providers”.

Food for thought

Australia's employment data are actually released in a timely manner.
Australia's employment data are actually released in a timely manner. Source

The Australian unemployment rate remained at 4.2% in January as the number of people participating in the labour market increased sufficiently to offset the 12,900 jobs created in the month.

Females in particular have been rushing back into the workforce, with their participation rising “to a new record high in January, at 62.1 per cent, which was around 0.9 percentage points higher than the start of the pandemic”.

The employment to population ratio – useful as it’s unaffected by seasonality and the short-run labour fluctuations so frequently seen during the pandemic – increased by 0.1 percentage points to 63.4%, or a full 1 percentage point above the pre-pandemic ratio.

The only piece of bad news was hours worked, which plunged 4.9% as more “people than usual taking annual leave and sick leave in the first two weeks of January”, likely due to “high numbers of COVID cases associated with the Omicron variant”. The decline was most prevalent in NSW and VIC (-13.5% and -13.2%), the two states hardest hit by Omicron in early January.

But that’s almost certainly a temporary blip – it’s safe to say that Australia’s labour market is running hot and next Wednesday’s December quarter wage price index will be keenly watched, although as with much of Australia’s data it will already be horribly out of date by the time it’s released.

We’re not sure why Australia’s government struggles to produce timely, policy-critical data – countries such as Canada have already released inflation and wages data for January. Yet here we are, holding our breath for the October - December figures.

It’s certainly not due to a lack of funding: Statistics Canada has about the same annual budget as the ABS, yet Canada’s population is nearly 50% larger.

But we digress.

A hot labour market along with accelerating consumer price inflation (at least anecdotally) should mean that wages are set to follow. However, there’s a good chance they’ll be negative in real terms – that’s what we’re seeing in many other advanced economies that are also ‘running hot’, as indicated by tight labour markets and nominal GDP growing in the double-digits.

There’s a good chance that the Reserve Bank of Australia (RBA) will be in for quite a shock later this year when its data-driven models eventually catch up to what’s happening in the real world. While Governor Lowe has spent the better part of two years claiming the opposite, markets are pricing in a rate rise as soon as June 2022.

Bits and bytes

🕺 From 6pm tonight in Victoria density limits in hospitality venues will be gone, check-ins at supermarkets and other retail stores will no longer be required and best of all, dancing will be permitted!

😷 NSW will also remove its restrictions early, abolishing capacity limits and only requiring check-ins at nightclubs or festivals with over 1,000 people. Masks will also be gone except for on public transport, hospitals, aged care, air travel, prisons and indoor festivals with more than 1,000 people.

🏭 Australia’s largest coal-fired power plant, the Eraring Power Station, will close in August 2025 – seven years earlier than originally planned.

🧁 Global food and drink company Nestlé warned that inflation “is of course something we have to reflect in our pricing, and that’s across the board, in all geographies and categories. There’s almost no place in the company that’s exempt from inflation now”.

🙃 Facebook owner Meta’s CEO Mark Zuckerberg said employees should call each other “Metamates”.

🤥 The US government alleged that Russia in fact added 7,000 troops to its contingent on the Ukrainian border, despite claims from Moscow it was pulling back.

👁️ The US National Highway Traffic Safety Administration only just approved “adaptive driving beam headlights” on new vehicles, a feature that has been available in Australia and Europe for at least a decade.

👿 At the inaugural SatanCon in Scottsdale, Arizona “police had to intervene because the Protestant and Catholic protesters began fighting with each other over their own theological differences”.

🍁 Ottawa police handed out leaflets to anti-vaccine mandate protesters, telling them to leave or be charged, with the Mayor warning “The window of opportunity for you to leave our city is closing.”

✡️️ Canadian Prime Minister Justin Trudeau “told Conservative MP Melissa Lantsman, who is Jewish, that her party stands with ‘people who wave swastikas’”, after she had earlier said Trudeau “fans the flames of an unjustified national emergency”.

💉 Former Wallaby and Western Force lock Sitaleki Timani left the club after he was unable to qualify for a medical exemption and remains unvaccinated against COVID-19.

🦗 The Kiwis bowled out South Africa’s test side for just 95 runs, the first time the Proteas have scored below 100 in their first innings since 1932.

🛂 Portugal’s government will remove almost all of its pandemic restrictions, including the use of a vaccine passport for major events, sports venues, bars and nightclubs, “in the coming days”.

🏥 Only 27% of over-80s and 56% of over-70s are double-dose vaccinated: Hong Kong’s hospitals are now at 90% capacity “as the city struggles to snuff out a record number of new COVID-19 cases [6,116 yesterday] by adhering to China’s ‘zero tolerance’ strategy”.

🏉 New Zealand Rugby sold “a significant stake [~6-9%] in its future to American private-equity business Silver Lake, raising $200 million”.