Working more for less

Delivered on By Justin Pyvis

Good morning! It’s now just one day until the federal election and a potential change of government, but much more importantly it means an end to the relentless bombardment of advertising and empty slogans for at least another three years – unless, of course, there’s a hung parliament.

Given the large errors involved that outcome remains a very distinct possibility, potentially forcing everyone back to the polls after both leaders previously ruled out striking deals with independents to form government.

As it stands, all of the latest polls and betting odds have Labor ahead of the Coalition, although the gap has narrowed slightly in recent weeks (probably when Albo came out of quarantine!).

Two party preferred voting trends across time.
Two party preferred voting trends across time. Source

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 US S&P500 fell -0.58% overnight, swinging between gains and losses throughout the session after an unexpected rise in initial jobless claims, which “increased 21,000 to a seasonally adjusted 218,000 for the week ended May 14, the highest level since January”.

Also unsettling investors was a poor earnings outlook from networking giant Cisco (-13.7%) and a disappointing Philadelphia Fed manufacturing reading, with its gauge of regional activity falling sharply to just 2.6 in May, “the lowest level of activity since the recession in early 2020”.

Locally, the ASX200 opened sharply lower following the bloodbath on Wall Street the night before and remained that way all day, closing down -1.65%. As in the US, consumer staples (-3.71%) and discretionary (-3.10%) were the hardest hit following dismal quarterly earnings reports from the likes of Walmart, Target and Lowe’s.

Food for thought

Australia's 50-year low unemployment rate is likely below sustainable levels.
Australia's 50-year low unemployment rate is likely below sustainable levels. Source

A week chock-full of economic data wrapped up yesterday with the release of Australia’s employment data for April, a rare monthly series provided by the local stats bureau that we only hope is soon extended to the horribly lagged CPI and WPI, bringing them in-line with global standards.

But back to the data. Australia’s unemployment “remained steady” at 3.9% in April but actually represented a slight fall to 3.85% from last month’s revised 3.93% rate (from 3.95%), with the two only matching because of rounding. It’s officially the lowest rate of unemployment since August 1974.

Perhaps most importantly, monthly hours worked increased by 23 million hours (+1.3%), bringing the total back above pre-pandemic levels:

“[A]fter the rise in April 2022, hours worked was 0.8% above the previous high in December 2021 and 0.9% above the pre-Delta COVID variant high of May 2021.”

The ABS reported that while flooding on the east coast is no long affecting people’s ability to work as much as last month, COVID-19 continues to cause a reduction in people’s working hours, suggesting further upside in the coming months (barring another shock!):

“Around 740,000 people worked reduced hours in April because of illness, almost double what we usually saw in April before the pandemic. Of these people, around 340,000 worked no hours, which was around triple what we would usually see.”

Those hours are going to be needed, too – Australians are now having to work more for less (inflation adjusted) pay than before the pandemic, thanks to the central bank’s mistakes (overheating the economy) and ongoing declines in productivity growth associated with the pandemic and absence of a reform agenda from successive governments (federally and in many states).

Chewing the fat

Bits and bytes

💸 Labor finally released its internal costings, revealing $18.9 billion in new spending on top of the Coalition’s, although claims the budget impact will be reduced to $7.4 billion after implementing 13 cost reduction measures such as ending “rorts, waste and mismanagement”.

🕵️‍♀️ According to The Australian, officials from the Australian Prudential Regulation Authority (APRA) “asked industry superannuation funds to explain the nature of some of the millions of dollars in payments made annually to trade unions”.

🙊 Albo made yet another major gaffe yesterday, claiming that the unemployment rate was at record lows because “Our borders are closed… That’s having an impact on employment figures”.

🗳️ 31.2% of the electoral roll had already voted as of Wednesday, with “an additional 1.23 million people (7.1% of the roll) who have applied for a postal vote but haven’t returned it yet”.

📔 New Zealand’s government released its 2022 Budget an hour after key details were leaked online (again!), forecasting inflation to remain above target at 4.5% in 2023 and 3.1% in 2024. Net core Crown debt is expected to continue growing until the end of 2024, peaking at 41.2% of GDP.

🍾 Biniam Girmay became the first black African to win a stage at the Giro d’Italia, only to cop a champagne cork in the eye forcing him to withdraw from the next stage.

😬 US Treasury Secretary Janet Yellen said in terms of the Fed bringing down inflation: “It’s conceivable there could be a soft landing… [but] it requires both skill and luck.”

🍻 Germany could face a beer shortage this summer, with the price of new glass bottles up 80% from last year, beer prices rising up to 30% and a shortage of drivers creating an “extremely tense” situation.

🤦‍♂️ Police in Pakistan arrested a TikTok ‘influencer’ who was caught setting the woods on fire to add “dramatic effects” to her video.

🐶 A new study from the Royal Veterinary College found that Pugs should “no longer be considered a typical dog from a health perspective… their brains are squished into a box that is too small”.

🚀 Definitely worth a watch: “A used SpaceX rocket launched a new fleet of Starlink internet satellites into orbit and returned to Earth for a stunning landing at sea early Wednesday.”

🍼 US President Joe Biden invoked the 1950s-era Defense Production Act in an attempt to boost the supply of baby formula “amid the worsening shortage”.

⚡ “A vast swath of North America from the Great Lakes to the West Coast is at risk of blackouts this summer as heat, drought, shuttered power plants and supply-chain woes strain the electric grid.”

🔨 China’s Tencent Holdings warned that it “will take time for Beijing to act on promises to prop up the Chinese tech sector, suggesting the embattled industry may struggle to grow in the short term”.

🐒 Just what the world needed: “Health authorities are on alert for the spread of monkeypox, a rare viral disease first reported in the Democratic Republic of Congo in the 1970s, after new cases emerged in Europe, and the United States confirmed its first infection.”

⚔️ “The number of troops under NATO command stationed across the alliance’s eastern flank has reached 40,000, nearly 10 times what it was last year.”

📉 “Sri Lanka defaulted on its debt for the first time in its history as the country struggles with its worst financial crisis in more than 70 years.”

👩‍🌾 Indonesia’s government will lift its ban on palm oil exports next week, “a move that could ease a tight global market”.