Saturday, September 17, 2022

Australia Seen Dodging Recession Even as China Slows, US Teeters

Inflation occurs when monetary growth outpaces productivity growth. Australia is fortunate that high prices for its commodities tend to converge on monetary growth, meaning inflation will be lower than for elsewhere

Australia’s economy is expected to avoid recession in the coming year even as its top trading partner China slows sharply on Covid restrictions and rapid US policy tightening raises risks of a downturn there.

Soaring export prices and a weaker currency are bringing a cash windfall Down Under at a time when other developed economies are flashing warning signs. A very tight labor market and still-elevated savings are also helping Australian households cope with rapidly increasing borrowing costs.

“We expect a soft landing, not a recession,” said Jo Masters, chief economist at Barrenjoey Markets Pty Ltd. “Australia is both an energy and food exporter, and the Australian dollar is -- and expected to remain -- below fair value.”

Bloomberg surveys back her view: the chance of recession in the next year in Australia is 25%, versus 60% in the UK, 50% in the US and 35% in New Zealand.

The charts below outline Australia’s advantages in a darkening global outlook.

Expectations that Australia will avoid two straight quarters of contraction are reflected in a bond market where the yield curve has steepened. That contrasts with US yield curves that have inverted, a sign recession may be coming.

The chart above uses Australian three-year bonds and US two-years as these are the respective short-term benchmarks.

The Reserve Bank of Australia is in the midst of its sharpest tightening cycle in a generation, having raised rates by 2.25 percentage points since May. But it’s now approaching a neutral rate, potentially allowing it to return to smaller, quarter percentage-point moves. That compares with a Federal Reserve that may deliver a third straight three-quarter-point increase later this month.


Desperate electric car charging set-up in Sydney

Images have emerged of the lengths a Sydneysider has gone to to charge their electric car in the city’s northern beaches.

Photos and vision shared by 2GB showed a long orange power cable snaking its way all the way down from a home to the car parked out on the street.

The surprising scene was spotted on a suburban Manly street on Friday morning.

A cable protector was placed on the footpath to shield the cord, while it appears it is looped around the fence when it is not in use. Powerpoints were also hidden underneath the car, presumably to protect them from rain.

2GB breakfast show host Ben Fordham called the set-up “bizarre” and “strange”. “In order to charge it, the owner has to run an enormous power cord from their property all the way out onto the road,” he said.

“It's one of the longest extension cords I’ve ever seen and that’s when the person is lucky enough to have found a park right outside their home.

Local man Mark said the cables were a “hazard” risk. “This is going to be a big problem as a trip hazard as well as an electrical hazard to any children,” he told 2GB.

Fordham said it showed the issues Australians could encounter as electric cars become more prominent. “We just need to work out in Australia how we are going to charge all of these vehicles,” he said. “I reckon that only 30 per cent of people in my street have a garage, I’d say 70 per cent do not.

“If we're reducing the driveways and reducing the garages, there are going to be fewer points to charge your electric vehicle, which pushes them out on the street.”

Transport for NSW advises electric vehicles can be charged at home, work or in different public locations like highways and supermarkets. Generally, level 1 electric vehicle supply equipment is used at a home and can take anywhere between five to 16 hours to charge.

A range of public charging stations are littered across NSW that drivers generally use if they do not have off-street parking.

Beyond using long extension cords, electric car owners have also been known to attach chargers to nearby street light poles that have spots for them.


Fears public holiday will spark health service chaos

Doctors are encouraging Premier Annastacia Palaszczuk to stand by her statement that elective surgery will not be postponed due to the last-minute National Day of Mourning public holiday.

“We wrote to the government on Monday asking for clarification for the many patients who are booked in for surgeries or important outpatient tests and appointments on September 22,” the Australian Medical Association Queensland chief Maria Boulton told The Courier-Mail.

“We have been told that the state and federal governments are working together on a decision about elective surgeries but patients need to know. Some have been waiting for months for operations, they have taken time off work, sorted out childcare and been prepared for the day. What will happen if the surgeries are cancelled? Where will these patients be on the waiting list?” Dr Boulton said.

The AMAQ president said that private hospitals would be making their own decisions but holiday penalty rates and staff off due to childcare centres being closed can make it difficult to operate as normal.

“Many GPs will close on the day due to high penalty rates for staff. It’s not ideal with some clinics due to see hundreds of patients on that day,” she said.

When asked about the September 22 public holiday at a press conference on Tuesday morning, Premier Annastacia Palaszczuk said elective surgery would still be conducted.

“My understanding is that elective surgeries will not be postponed,” she said.

Australian Medical Association president Steve Robson has also highlighted his concern that elective surgery would be cancelled and said that there had been a lack of understanding of the level of shuffling of schedules and staffing rosters that would be required across the health sector.

“I have spoken to Dr Robson and we realise that each state will have different attitudes to this,” Dr Boulton said.

“We understand the holiday was called at the last minute but patients and doctors need to know what is happening and a decision needs to come,” she said.

A Queensland Health spokesman told The Courier-Mail that discussions were taking place.

“The Queensland Government is working through any impacts the public holiday will have on health service delivery,” he said.


New regulations put aged-care homes at risk of ‘ruin’

Hundreds of residential aged-care homes could collapse after new reforms aimed at improving residents’ care punched a half- billion-dollar hole in the sector’s budget, the industry’s peak body has warned.

Aged and Community Care Providers Association chief executive Paul Sadler said one third of homes in Australia faced closure, leaving thousands of residents “homeless”, because the government’s new funding model would fail to cover the cost of additional requirements for residential homes.

Legislation passed in July increased funding from an average of $195 to $225 per resident per day. The cash boost, to start next month, was designed to help providers hire and train more staff, produce quarterly financial reports (rather than annual) and meet new quality standards.

Providers are racing to expand their workforces before they are required to meet a mandated 200 care minutes per resident each day, including 40 minutes with a registered nurse, commencing in October 2023.

A financial analysis has found the funding is insufficient. ­StewartBrown, an accountancy firm that specialises in aged-care research, has forecast an estimated funding gap of nearly $499m by next year. It said ­annual wage increases, rising ­inflation and mandated care minutes would increase the cost of resident care to $231.81 per person per day, leaving a $6.89 shortfall of funding per day per person.

In a survey of 55 per cent of all residential aged care homes during the past financial year, the firm found nearly one third of homes were already operating in a cash deficit, sparking warnings from Mr Sadler that the new reforms would push indebted providers over the brink.

“We are hearing from metro and regional providers that they will struggle to cover the full cost of care minutes and added ­administration costs even with the additional funding, and again this becomes even more acute in ­regional settings,” Mr Sadler said.

“The second concern is … whether there will be enough staff there in the first place. The whole sector is likely to experience ­underfunding.”

The government will introduce a mandate of 24/7 nurses in aged-care homes from October next year, exacerbating the strain on the sector’s overstretched workforce.

Mr Sadler estimated hundreds of providers would seek exemptions to the push for a 24/7 nurse mandate and about one in five providers, or 500 homes, would be unable to put a registered nurse on overnight.

The government disputed the findings of the analysis by StewartBrown, with the Department of Aged Care saying its own analysis found the new funding arrangements would be sufficient for ­facilities to deliver the increased minutes of care.

“StewartBrown’s analysis ­assumes that only 65 to 70 per cent of care funding should be spent on direct care, taking into account a gap between funding and care expenditure. This is much lower than the current ­average, and is unlikely to be ­acceptable to the community,” it said. “The new aged-care reforms will not put residential aged-care homes at risk of closure.”

The department said that from October 1, a “substantial funding uplift” would commence to help providers meet the 200 care minutes requirement. “The uplift is equivalent to around $5.4bn in funding for the sector over the four financial years from 2023-24,” it said. “At a per resident level, funding is ­expected to increase from an average of $192 per resident per day … to $225 per resident per day.”

It said that 2022-23 residential care funding would increase by 13 per cent to $17bn and the average government funding per resident would be more than $85,000.

Provider Whiddon’s chief executive, Chris Marmarelis, said the majority of homes would be “net worse off” in 2023.

He ­acknowledged the laws were an improvement on the previous model after the royal commission into aged care found it had rewarded homes with the highest proportion of sick residents. However, Mr Marmarelis ­expressed concern the projected funding was not sufficient to cover the new requirements.

Eldercare chief executive Jane Pickering said the provider had forecast a $3m funding gap by ­October next year.

Ms Pickering said it would be able to meet the 200 minutes but had “no idea” how it would fund or comply with a 40-minute nursing care mandate as it grappled with a shortage of 30 nurses.


"Green" subsidies in Australia

Simply to list the subsidies available for green purchases (think here solar panels, small batteries, LED lighting, shower heads, home insulation, electric vehicles, etc,) would require the space of several columns. So let me pick out just a few examples. In Victoria, you can get $1,400 plus an interest free loan if you want to install solar panels on your roof. There is also a thousand dollars available for solar hot water. Even better, there is nearly $3,000 for a solar battery. If you want to upgrade your heating or cooling, there’s another grand available.

For those homes that generate excess electricity that is fed back to the grid, there are ‘feed-in tariffs’. Initially, the size of these tariffs was obscene. In Queensland, for instance, households were paid 44 cents per kilowatt hour and those who signed up early will enjoy this rate until 2028. More recently, feed-in tariffs have crashed and are generally well below 10 cents per KWh.

When it comes to buying an electric vehicle – they are now called zero emissions vehicles (ZEVs) to emphasise their worthiness – there’s an upfront grant of $3,000 in Victoria but the car has to be worth less than $69,000. No top-of-the-line Tesla for you. You may have to pay a small road user charge in the future but the overall amount in dollar terms will be small compared with the excise on petrol and diesel paid by less well-heeled motorists.

One of the first actions of our new federal treasurer, Jim, was to remove the fringe benefits tax from the purchase of electric vehicles. In this instance, the maximum value of the car is $85,000. Treasury calculates that the owners can save between 5 and 9 grand per year – not bad if you can afford the purchase price in the first place.

Getting back to Bloomberg’s Greener Living, one interesting fact contained in the document is that Norway, the nirvana of EV enthusiasts, taxes the living daylights out of petrol/diesel cars, thereby propelling the shift to EVs – sorry ZEVs. The average tax imposed on normal vehicles is $US15,000 – which is 22,500 big ones here.

It’s actually surprising that anyone at all in Norway, which by the way is the size of a handkerchief, would even contemplate buying an internal combustion engine vehicle with that sort of impost. The Sheriff would be extremely proud of the politicians who dreamt up this grand theft.

And don’t forget the absence of road tolls, free parking and the use of bus lanes that further entice the Norwegian public to do the ‘right thing’. You wonder whether it might be cheaper for the government to simply give EVs – OK, let’s just forget ZEVs – to every citizen with a driving licence.

But don’t think it’s just the Europeans who are into these reverse Robin Hood subsidies. The US government under great uncle Joe is really ramping them up. And this is on top of the raft of subsidies that exist at the state level, particularly in California.

Under the laughably titled Inflation Reduction Act, there are new point-of-sale tax credits for all electric vehicles although there are some price and income caps. It turns out that unless subsidies take the form of an immediate reduction in the sale price, they don’t work very well and the Biden administration has acted on this advice.

The IRA (funny that) also restored a 30 per cent tax credit for both home solar and home battery storage systems, extended out to 2034. There are also subsidies for heat pumps and electric induction stoves.




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