Economic Contraction – Julia Vinograd http://juliavinograd.com/ Sat, 18 Sep 2021 22:53:43 +0000 en-US hourly 1 https://wordpress.org/?v=5.8 https://juliavinograd.com/wp-content/uploads/2021/04/cropped-hh-32x32.png Economic Contraction – Julia Vinograd http://juliavinograd.com/ 32 32 Economic prosperity awaits SA on the horizon, adviser says https://juliavinograd.com/economic-prosperity-awaits-sa-on-the-horizon-adviser-says/ Sat, 18 Sep 2021 10:06:48 +0000 https://juliavinograd.com/economic-prosperity-awaits-sa-on-the-horizon-adviser-says/

Botha, who was the guest speaker at a business breakfast presented by Church Unlimited on Friday, September 10, told the Mbombela business community that South Africa is on the cusp of a new era of economic prosperity.

This despite the fact that the country entered what is commonly referred to as a technical recession – two successive quarters of negative GDP growth – after GDP growth declined by 0.7% in the second quarter of the year. year. This follows a restated 2.6% contraction in the first quarter.

Dr Roelof Botha

But Botha is adamant that there is more than one way to define what a recession is.

“Despite various challenges due to an inept government and the Covid-19, GDP at basic prices (GDP at market prices, less taxes and subsidies on products) increased between April and June with 6.6% since the first quarter to reach a new peak of R1. 4t, ”Botha said.

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“In real terms (this neutralizes the effect of inflation) the growth rate is 5.6%. GDP increases to R1.53t after the effect of taxes and subsidies on products has been included in the calculation. This is a new peak and represents a real growth rate (quarter over quarter) of 4.2%, still a very good performance.

Dr Roelof Botha

Botha, who is known to be more optimistic than other economists, is adamant that the statistics are on his side and that he has reason to be optimistic, despite fierce criticism from his peers.

“I predicted the economy would be fully recovered by the fourth quarter of last year. They laughed at me. But look at the latest GDP figures. Eight out of ten sectors performed better than expected. At least some of my detractors have the decency to apologize whenever my point turns out to be correct. Confidence in agriculture is at an all time high. Construction is clearly not on its knees and retail is showing buyers are back; all good news, and SSA should be reprimanded for not painting the full picture
of the South African economy, ”Botha added.

“In general, the economy has grown very well since the outbreak of the pandemic with exceptions like the hotel industry and restaurants, but the characteristic is certainly not bleak.” According to him, the country is on the right track with President Cyril Ramaphosa at the helm. But he needs more time; nothing will happen overnight.

“Zimbabwe and Venezuela have become failed states because of bad policies. We have to get out of ideologies and come back to pragmatism. We can create jobs for every South African if we implement the right economic policies, and I think Mr Ramaphosa is doing the right thing.

“In the fourth quarter of last year, this economy produced exactly as much as it did in the fourth quarter of 2019. Which isn’t to say all sectors have done well, but we are normalizing this economy,” Botha said.

“I have absolutely no doubt in my mind that our economy is in take-off mode,” he concluded.

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Moody’s downgrades Bahamas to Ba3, outlook negative – Eye Witness News https://juliavinograd.com/moodys-downgrades-bahamas-to-ba3-outlook-negative-eye-witness-news/ Sat, 18 Sep 2021 08:01:22 +0000 https://juliavinograd.com/moodys-downgrades-bahamas-to-ba3-outlook-negative-eye-witness-news/

Moody’s plans return to pre-COVID tourism levels “only by 2024 at the earliest”

NASSAU, BAHAMAS – In the wake of Thursday’s general election, global rating agency Moody’s slashed the country’s credit rating yesterday.

The country’s sovereign ratings have been lowered to “Ba3” instead of “Ba2,” underscoring the daunting economic and fiscal realities facing the country and the new administration led by Davis.

Moody’s highlighted a significant erosion in the country’s economic and fiscal strength caused by the COVID-19 pandemic.

“The duration and severity of the coronavirus shock fundamentally weakened the Bahamas’ credit profile with lasting consequences in terms of higher debt burden and lower affordability of debt as well as reduced economic strength,” reads -on in the rating agency report.

“Real GDP contracted 14.5% in 2020, with the tourism industry hardest hit by a shutdown that lasted most of the year. Despite the surge in tourism activity in recent months, the Bahamas faces prospects of a slow economic recovery and remains vulnerable to potential future variants of the coronavirus. Moody’s expects stay-in tourist arrivals to return to 2019 levels only by 2024 at the earliest. “

Moody’s stressed that the country’s economic recovery is highly dependent on a rebound in tourism activity. The sector contributed 19% of GDP in 2019, and this contribution amounted to around 40% including related industries such as transportation and accommodation, and catering.

“The severity of the economic contraction has contributed to a significant increase in the Bahamas’ debt and interest charges, which are now significantly higher than those of their Ba-rated peers,” the degradation report said.

“The Bahamas’ debt burden was already higher than that of its Ba-rated peers before the pandemic, and will remain higher than its similarly-rated peers, as the economy is only slowly recovering from the pandemic. Fiscal consolidation brought about by the removal of COVID-related spending on unemployment benefits and other related items, as well as a recovery in revenue will support fiscal consolidation, which will gradually reduce the debt burden.

“The Bahamas’ debt burden will remain close to 80% of GDP by the end of fiscal year 2022/23 (fiscal year ending June 30, 2023), well above the median rated Ba3 (60%) . Additionally, the Bahamas’ narrow income base means that its debt as measured by debt-to-income ratio, which stood at 509% at the end of fiscal year 2020/21, will also remain significantly above the Ba-rated median of 266%.

The combination of a growing debt burden and declining income has contributed to a further deterioration in affordability of debt, with the interest-to-income ratio falling to 23% in FY 2020/21, compared to 16% during the 2019/20 financial year. Moody’s expects the interest-to-income ratio to peak in FY2021/22, but to remain above 20% over the next three years, and significantly higher than its rated peers.

Moody’s noted that the country’s captive domestic investor base and long maturity profile have provided a favorable debt structure despite recent increases. This has enabled the country to have a relatively solid institutional framework, a stable political system and a fiscal policy framework that is more responsive to economic shocks.

Moody’s noted that the Bahamas stands out from its similarly rated peers because of its comparatively high level of GDP per capita, which supports its debt capacity.

The report continues: “A slower pace of fiscal consolidation which contributes to tighter financing conditions and higher borrowing costs, which would call into question the government’s ability to finance budget deficits and the deadline. debt would probably lead to a further downgrade.

The rating agency said a hike was unlikely given the negative outlook, adding that implementing policies that support a process of fiscal consolidation to sustainably reduce public debt could likely result in a return to an outlook. stable.

He also highlighted improved debt accessibility by relying more on lower-cost official domestic and external sources of financing rather than more expensive issuance in the external market, as another route to greater stability.

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Mozambique must reconcile military power and development initiatives https://juliavinograd.com/mozambique-must-reconcile-military-power-and-development-initiatives/ Fri, 17 Sep 2021 13:38:00 +0000 https://juliavinograd.com/mozambique-must-reconcile-military-power-and-development-initiatives/

Rwandan and Mozambican forces recently recaptured the port city of Mocímboa da Praia in northern Mozambique. The gain is just the latest in a series of victories by military forces to repel an Islamist insurgency in the country that has claimed nearly 3,000 lives and displaced more than 700,000 people since 2017. For many African countries, the resorting to war is a preferred tactic against violent extremism. But this tactic is not as effective as governments would like to believe.

In 2010, when the Nigerian government launched its military offensive against Boko Haram, everyone thought the government would succeed. Ten years and $ 132 billion later, the Nigerian government not only failed to suppress the group, but its influence has grown in many countries in West and Central Africa. Likewise, in Somalia, Al Shabaab, the terrorist group affiliated with Al Qaeda, continued to strengthen its influence by controlling important territories in the country and killing more than 1,000 people and claiming 4,000 victims despite an offensive and a 8-year military assistance. to the Somali army amounting to over $ 1 billion. The same is true outside the continent. More recently in Afghanistan, where after spending 20 years and $ 2 trillion, the US campaign against the Taliban failed within a day of the US evacuation.

From the point of view of the Mozambican government, bringing the fight to the insurgents to reconquer the neighborhoods of Cabo Delgado is a priority, especially if it intends to persuade the French oil giant Total to resume its investment project of 20 billion dollars in gas. liquefied natural gas (LNG), which it had been suspended earlier in April due to growing insecurity in the region. Such an investment could dramatically increase income in a country facing an economic contraction in 2020 for the first time in decades. The problem, however, is that Mozambique, like many other African countries facing insurgency, continues to focus on the wrong tools to tackle violent extremism within its borders.

The insurgency in Cabo Delgado has its roots in grievances exacerbated by the loss of economic livelihoods and exclusion after the discovery of natural gas in the region. According to the International Crisis Group, the majority of Al Shabab soldiers are poor fishermen, frustrated small traders, former farmers and unemployed young people whose main motivations are economic. The group relies on these grievances to recruit soldiers to its cause. This model of exploiting the grievances of local populations is similar to the growth of other insurgent groups in Africa. For example, in Kenya and Somalia, Al Shabaab has deployed this tactic by exploiting local grievances exacerbated by poverty and unemployment to expand its operations. A similar tactic was adopted by Boko Harm in northern Nigeria, where many of its recruits came from largely economically marginalized populations. All these elements suggest a link between structural violence, poverty and susceptibility to radicalization of insurgent groups. These are factors that cannot change through the barrel of a gun.

It is important that Mozambique takes a more cautious approach in its fight against Al Shabab. He cannot bear to repeat the mistakes made elsewhere in Africa in the fight against the insurgency. A brutal military response would cause significant hardship for the civilian population, lead to more casualties, intensify economic hardship and, therefore, delegitimize the government of the region and increase the vulnerability of the young population to recruitment by Al Shabab. This could lead to a prolongation of insurgency activities as has happened elsewhere in Africa.

While a military solution is important in driving insurgents away from civilian populations and recapturing insurgent-held towns, it is equally important in the long term for the government to focus on the development of the largely troubled and exploited region by providing health care. and improving education and employment, especially for young people.

Africa has long favored a military approach to resolving conflicts like this, especially with the international community willing to fund military and peacekeeping missions to stem violent conflicts on the continent. Currently, just under 50,000 people are deployed in six United Nations peacekeeping missions in Africa to enforce peace agreements, prevent atrocities and protect civilians. Unfortunately, despite all these efforts, the conflict continues. Even with increased spending [PDF] on security by African governments, poor governance, poverty and economic hardship continue to increase grievances and make the young population increasingly vulnerable to radicalization by insurgent groups.

In the words of Ellen Johnson Sirleaf, former President of Liberia, “It is clear that the root causes of civil conflicts in Africa are poor governance, disrespect for human rights, socio-economic inequalities and policies and crushing poverty. The Mozambican government can learn from the mistakes of other African countries in handling the insurgency by embracing a fair military effort and combining it with development incentives such as providing jobs to address the economic grievances fueling the insurgency. .

Wodu, a New Voices Fellow at the Aspen Institute, is a lawyer, peacebuilding practitioner, and doctoral student in global governance and human security at the University of Massachusetts, Boston.

]]> This is not the way to handle the recession https://juliavinograd.com/this-is-not-the-way-to-handle-the-recession/ Fri, 17 Sep 2021 02:53:52 +0000 https://juliavinograd.com/this-is-not-the-way-to-handle-the-recession/ Union Finance Minister Nirmala Sitharaman, while announcing the National Monetization Pipeline (NMP), said that asset monetization is based on the philosophy of creation through monetization and aims to “leverage industry investments private sector for the creation of new infrastructures ”. If we look at the two volumes of details provided by NITI Aayog – and the economic policy of this government – it will be clear that NPM has nothing to do with infrastructure development. Rather, it is a cover-up of the massive scarcity of resources the country envisions.

The Center faces a severe financial crisis due to the demands created by the pandemic and its own policies designed to help large corporations. The cess crore lakhs and surcharges it collected have not helped the government weather the crisis. NMP will worsen this crisis. The divestment of profitable businesses from Navratna will result in a loss of dividend, a major source of income for the Center. Tax exemptions granted to so-called investors will take another significant chunk of income. The central funds will be reduced and this, in turn, will affect the finances of the state.

The Center is now advising panchayats to find ways to monetize their properties. Panchayats are asked to sell their fixed assets and use the money for income expenses.

NPM will seriously damage the interests of the country. The government must rethink this policy in the interest of the people, the country’s political and economic sovereignty and the federal character of the regime. These policies poorly reflect the government’s economic management and speak of the lack of planning at a time when the economy is going through a depression.

In the case of Kerala, the policies of the Center will lead to a sharp drop in income. From next July, the compensation allowance for the deficit of the GST compared to the 14 percent forecast will be stopped. This year, Kerala got about 13,000 crore rupees in compensation for the GST.

Kerala also suffered a considerable drop in the income it derived from the divisible pool. The state got about 3.92% of the divisible pool in the 1970s and 1980s. It went down to 2.66% and 2.34% in the rewards of the 12th and 13th Finance Commissions. The 14th Finance Committee award brought it to 2.45 (2.50) percent. Today, the 15th Finance Committee reduced it to 1.92 percent. This arbitrary cut is the result of the adoption of certain new criteria by the commission without taking into account the views of the state government.

In 2019-2020, the state obtained approximately Rs 17,000 crore from the divisible pool as recommended by the 14th Finance Committee. We lost approximately Rs 6,400 crore in 2020-2021 after the implementation of the new criteria given by the 15th Finance Committee. The 15th Finance Commission special grant (RD grant) of Rs 19,800 crore for this year will no longer be available in the coming years. Karnataka and many other states have also suffered from the policy of reducing the share of the divisible pool.

Kerala’s annual expenditure is around Rs 110,000 crore. The state will face a deficit of Rs 32,000 crore in its revenues. This decrease is the result of the reduction of the State’s share in the divisible pool by Rs 7,000 crore, the cessation of the GST compensation of Rs 13,000 crore due to the State and the abolition grants amounting to Rs 12,000 crore. Many other states face a similar shortage of resources as a result of the Centre’s policies.

Huge tax exemptions for large corporations have made matters worse. Exemptions amounting to Rs 99,842.06 crore were extended to corporate companies in 2019-2020. Many taxes on goods have been reduced due to electoral constraints. This reduced central revenue. Along with these tax exemptions, the increased use of taxes and surcharges is responsible for reducing the shareable pool. Shareable resources with the Center were around Rs 6.8 lakh crore in 2019-2020, which came down to Rs 5.5 lakh crore in 2020-21.

During the discussion of the GST bill in the select committee of the Rajya Sabha, of which I was a member, the left-wing parties issued a dissenting note which stressed that such a tax would put an end to fiscal federalism. Indeed, BR Ambedkar, while justifying the decision of the Constituent Assembly to leave the sales tax to the States, had declared that this tax would be the only source of revenue for the States. Now, it’s been taken away.

Begging by states does not bode well for cooperative federalism. Instead of helping states cope with this economic depression, the Center is busy reducing its resources. All taxes and surcharges that are not shared with the states represent approximately 20 percent of the Centre’s total revenues. States have demanded that this money be shared with them, especially when fighting a pandemic. Kerala, for example, is spending a lot to help people cope with this crisis.

The development of basic infrastructure and the production sector is the only way to cope with an economic crisis. The Center is responsible for assisting States in this regard. This should not be done by selling or ceding public property to individuals and corporations.

This is not how the world faced the last two depressions. We need massive public investments that will help people form cooperatives and collectives in agriculture and industrial production. Parliament, National Development Council and GST Council are expected to discuss this unprecedented situation. We must find a way out collectively. The surrender of rights on public property to individuals will take the country back to colonial times. It should not be allowed.

This column first appeared in the paper edition on September 17, 2021 under the title “How to avoid a slowdown”. The writer is Minister of Finance in the Government of Kerala.

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India’s economy is firmly on track for long-term recovery and renewal, says Vice President Naidu https://juliavinograd.com/indias-economy-is-firmly-on-track-for-long-term-recovery-and-renewal-says-vice-president-naidu/ Sat, 11 Sep 2021 16:35:00 +0000 https://juliavinograd.com/indias-economy-is-firmly-on-track-for-long-term-recovery-and-renewal-says-vice-president-naidu/ The vice president also echoed comments by Chief Minister MK Stalin that the history of the Indian subcontinent needs to be “rewritten”. (To file)

India’s economy is firmly on the path to long-term recovery and renewal, despite the slowdown in the second wave of COVID-19, aided by a series of timely measures and policy reforms taken by the Center, the Center said. vice-president Mr. Venkaiah Naidu. here Saturday.

He said the economy grew at a record pace of 20.1% in the first quarter of fiscal 2022, unlike the 24.4% contraction in the same quarter of the previous fiscal year. Various reports have indicated a strong rebound in the manufacturing and construction sectors, he said.

Naidu noted that the agricultural sector has been a “consistent performer” registering a growth of 4.5% in the first quarter compared to 3.5% during the same period last year, once again showing its ” resilience ”.

“Key sectors like fertilizers, cement, steel, coal and refined products also showed positive growth,” he said, speaking at the House’s Platinum Jubilee celebrations. of Hindustan trade here.

“We are now on the cusp of economic transition and all indicators point to a phase of long-term growth and recovery in the coming months. The RBI has retained the growth projection of 9.5% for fiscal years 21-22, ”he said.

“A series of timely measures and political reforms taken by the Center, the economic situation has gradually improved,” Naidu said.

With the easing of restrictions in various states, consumer confidence has returned and market sentiment has shown a positive trend, he said.

Driven by the Centre’s strong macroeconomic fundamentals and forward-looking reforms, including the GST, opening up of foreign direct investment, strengthening infrastructure, the economy has the potential to reach the $ 5,000 billion mark. in the years to come, he said.

The Center and the States should work in a “Team India” spirit for the long-term recovery of the economy and steer India to greater heights in all fields, he said.

Stating that the country is fortunate to have a huge population of educated young people and scientific workforce, the vice president said technological and scientific innovations play a key role in driving the economy.

“There needs to be more emphasis on creating the right ecosystem for innovation to thrive by improving investment in research and development. In this context, public and private sector entities must join hands and (commercial) bodies like the Hindustan Chamber of Commerce must play a proactive role, ”he said.

Naidu said Tamil Nadu is an attractive place for investment with a stable government that is investor friendly.

“Tamil Nadu has a rich cultural heritage with an ancient past. Carbon dating of some of the excavations has shed new light on the antiquity of the Thamirabharani civilization, revealing it to be 3,200 years old. We can also see the influence of Tamil Indian culture at Angkor Wat temple in Cambodia, which was built in the early 12th century, ”he said.

The vice president also echoed comments by Chief Minister MK Stalin that the history of the Indian subcontinent needs to be “rewritten”.

“I share Stalin’s view that the history of the Indian subcontinent must be rewritten. It needs to be rewritten with an Indian perspective and not through a colonial lens, ”Naidu said.

On Thursday, the chief minister, while revealing to the assembly the conclusions of a study which indicated a 3,200-year-old civilization in Tamil Nadu, declared that the archaeological department of the state, in order to trace the Tamil cultural roots, would undertake excavations. in countries, including Indonesia and states like Andhra Pradesh, after obtaining the required clearance.

The CM said it was the government’s primary duty to establish by evidence, and on the basis of science, that the history of the Indian subcontinent should be written, from the Tamil landscape.

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Fact Check: Have GHG Emissions Increased Under Trudeau? https://juliavinograd.com/fact-check-have-ghg-emissions-increased-under-trudeau/ Wed, 08 Sep 2021 15:22:06 +0000 https://juliavinograd.com/fact-check-have-ghg-emissions-increased-under-trudeau/

The NDP attacked Justin Trudeau and the Liberals’ climate change record on Tuesday, saying that despite big promises, the Grits have failed to reduce greenhouse gas (GHG) emissions in Canada.

Trudeau and Singh traded pikes on Tuesday during the election campaign over plans to tackle climate change and reduce emissions.

“In 2016, Justin Trudeau ratified the Paris Agreement by pledging to reduce emissions to 30% below 2005 levels by 2030. He pledged ‘an ambitious plan to reduce emissions’,” said the NDP in a press release.

“Since then, Canada’s emissions have only grown – faster than those of any other G7 country. “

By signing the Paris Climate Agreement, the government initially pledged to reduce emissions by 30% from 2005 levels by 2030. The Liberal government has since adopted a more ambitious 40 to 45 target. % by 2030.

But have emissions increased since that deal was signed in 2016, which was also the first full year of Justin Trudeau’s Liberal government?

With climate change being a major issue for many voters this election, CBC decided to verify this accusation.

What goes up can come down

Strictly speaking, the NDP’s statement is true when you look at the official data currently available.

In 2016, Canada’s GHG emissions were 707 megatonnes (Mt) of carbon dioxide equivalent, according to government data. In 2019, the most recent year data is available, this number was 730. Emissions increased slightly from 2018 to 2019, from 728 to 730.

But there are a few important nuances to the question, experts say. Lack of data for 2020, for example, can help the NDP.

“It’s good that they didn’t include 2020, because with COVID, of course, there have been a lot of dramatic changes in activity and therefore also in emissions,” said Felix Pretis, assistant professor of economics at the University of Victoria and co-director of the Climate Econometrics Research Project.

Kathryn Harrison, a political science professor at the University of British Columbia who studies climate policy, agrees.

“It’s very likely that they fell from 2019 to 2020, due to the economic contraction during the pandemic – but we don’t have that data yet.”

It is important to note that GHG emissions have mostly stabilized since the turn of the millennium after increasing steadily throughout the 1990s.

One could conclude, based on the veracity of the NDP’s claim, that the Trudeau government’s climate change policies are not effective in reducing emissions. But Pretis and Harrison say that’s not necessarily the case.

Pretis cites the introduction of carbon pricing, which came into effect in 2019, as an example.

“We wouldn’t expect to see a change in programming in the same year,” he said. “When you put that kind of mechanism in place, a pricing mechanism, it takes a few years before we really see a change.”

“These past performances from 2016 to 2019 are not necessarily indicative of future performances.”

He adds that as the price of carbon rises – the party plans to raise it to $ 170 a tonne by 2030 – the policy will have even more impact.

UBC political scientist Kathryn Harrison said the policies introduced by the Liberal government to tackle climate change may not show their effects immediately. (SRC)

Harrison says this is a political “delay” that the NDP might expect to see with many of its own climate change commitments.

She also points out that the Liberals never promised that the GHG emission reductions would be linear – that a decline would start in 2016 and continue until the Paris Agreement target was reached in 2030. In d ‘d’ In other words, the Liberals could still say their plan to cut emissions and fight climate change is ambitious and on track.

“When you’re on an upward trajectory, policies that work initially may only stabilize emissions,” Harrison said.

“It would be interesting to see how Mr Singh’s government offered immediate cuts.”

Pretis adds that although Canada saw a slight increase in absolute emissions from 2016 to 2019, per capita emissions have remained roughly stable.

Most of the growth, according to the two experts, is due to changes in transportation and oil and gas extraction.

Compare Canada

The NDP may have good reason to distinguish Canada from the G7.

Many European countries have seen their emissions drop in recent years, an achievement that Canada cannot claim. The UK saw its GHG emissions fall by 2.8% in 2019 compared to the previous year.

“They introduced climate legislation much earlier,” Pretis said. “So we have the UK climate change law, which came into effect in the late 2000s, which really started to bite a few years later.”

The European Union, says Harrison, deserves special praise in this area. It recorded a 3.7% drop in GHG emissions from 2018 to 2019.

“The EU has really had ambitious climate policies,” she said.

The United States has seen a drop in emissions since 2005, but not because of a determined government plan – this is largely because coal has become less economical as an energy source.

Harrison notes that Canada’s population growth may contribute to its comparatively poor performance in reducing emissions. Canada’s population has grown faster than that of Germany over the past two decades, for example.

While both pundits say there are caveats against criticism from the NDP, they still say it’s important for Canada to cut emissions and not just keep them stable.

“It is important to be looking to the future,” said Pretis.

“We’re going to need high levels of carbon pricing to see a substantial change in emissions, and that’s ultimately where we need to go if we are to achieve net zero, which we should all be doing.”

Checking the facts: True.

]]> Recession averted, risk again this year | County Chief of St George and Sutherland https://juliavinograd.com/recession-averted-risk-again-this-year-county-chief-of-st-george-and-sutherland/ Wed, 01 Sep 2021 17:30:28 +0000 https://juliavinograd.com/recession-averted-risk-again-this-year-county-chief-of-st-george-and-sutherland/

Australia’s economy may have avoided the immediate threat of a second recession in as many years, but there is still a risk of a slowdown until the end of the year.

Wednesday’s national accounts showed the economy grew 0.7% in the June quarter, slower than the revised 1.9% expansion in the March quarter, but stronger than expected.

“We had solid growth in the June quarter. Our economy is strong, our economy is resilient and our economy will rebound strongly once restrictions begin to ease,” Treasurer Josh Frydenberg told Parliament.

However, the September quarter is expected to be weak due to extended coronavirus lockdowns in NSW and Victoria.

The Treasury expects a contraction of at least two percent and private economists are predicting a slowdown of perhaps more than four percent.

“A technical recession has been averted,” KPMG chief economist Brendan Rynne said of June quarter results.

“The next quarter is shaping up to be bleak, and the recovery expected in the December quarter depends a lot on how quickly the lockdowns come to an end.”

Two straight quarters of contraction would put Australia in what economists are calling a technical recession.

Jim Chalmers of Labor has called for a federal stimulus now because the economy “is bleeding billions of dollars a week”.

“For a lot of Australians, we already feel like we are in a recession,” he told ABC.

Standard & Poor’s Global Ratings is hosting an online seminar with economists on Thursday morning to discuss their views on the Australian and global economic outlook for the next 12 months.

The Australian Bureau of Statistics will also release monthly international trade figures for July on Thursday.

The trade balance in goods and services hit a record surplus of $ 10.5 billion in June.

But while high commodity prices, especially for iron ore, boosted the value of exports, weather-related disruptions in the June quarter saw exports hurt the growth outcome for the quarter. June.

Iron ore prices have declined rapidly in recent weeks, falling to around US $ 150 per tonne from a record high of around US $ 230 per tonne earlier this year.

A bright spot in the economy amid sluggish closures, at least for homeowners, has been the sharp rise in house prices.

The CoreLogic National Home Value Index released Wednesday in August showed an increase of 1.5% to an annual rate of 18.4%, the fastest rate since 1989.

However, there are other signs of easing the property price boom, which CoreLogic attributes to affordability constraints.

Financial regulators will be watching whether this translates into some easing of recent strong demand for mortgages as homebuyers sought to enter an endemic housing market, raising concerns that this could lead to a deterioration in standards. loan.

The ABS will release its loan figures for July on Thursday.

Associated Australian Press

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Frydenberg warns states to stick to roadmap amid recession fears https://juliavinograd.com/frydenberg-warns-states-to-stick-to-roadmap-amid-recession-fears/ Sat, 28 Aug 2021 19:00:00 +0000 https://juliavinograd.com/frydenberg-warns-states-to-stick-to-roadmap-amid-recession-fears/

“The world will open, Australia will open … Opening up as a single country and according to plan will not only give people hope, but will provide a springboard for our economic recovery.”

But in the clearest signal yet that Western Australia was ready to step away from the roadmap, Prime Minister Mark McGowan said on Saturday his state needed higher levels of vaccination to reopen and reported waiting “a few more months” to reach them.

Last week The Sun-Herald and Sunday age revealed that updated modeling from the Doherty Institute showed that NSW would still be able to start opening up once vaccination targets were met – even if there were hundreds of new cases in the community every day, rather than the 30 that the original modeling was based on.

This prompted some states, including Western Australia and Queensland, to voice concern over the openness and authorization of COVID in the community.

Mr McGowan said on Saturday that Western Australia wanted to stay COVID-free “for as long as possible”.

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“Our immunization levels at 70 percent, for example, still mean that 30 percent of the adult population is unvaccinated, and then when you add the children, that’s about 20 percent more,” he said. -he declares.

“So if we deliberately imported the virus at that time hundreds of people would die, it would lead to huge economic dislocation and for what?” If we wait a few more months, we raise our immunization levels to a higher level, we can avoid all of that. “

Each week of lockdowns in New South Wales and Victoria costs the economy around $ 2 billion, while the federal government spends hundreds of millions more on financial support each week. Mr Frydenberg has previously said the federal government may withdraw that support from states that refuse to open up.

Mr Oliver said that “in a purely economic sense, a recession doesn’t mean much”, but it could impact confidence, which in turn impacts the speed of the recovery.

“The concept of ‘recession’ is less meaningful than usual because it is not a normal cyclical recession and the economy is expected to recover faster than after a normal recession, as reopening will release pent-up demand – although this is a bit limited compared to last year as we have to learn to “live with COVID”.

Mr Aird said that regardless of whether Australia has officially entered a recession or not, “a lot of people quit, the economy is going through a huge shock.”

War of words: Daniel Andrews and Josh Frydenberg quarreled over financial aid.Credit:

“Try telling someone in Victoria or New South Wales that we’re not in a recession… however, we’re pretty sure we’ll bounce back in Q4 as things open up.”

Mr Frydenberg, a native of Melbourne who criticized Victorian Prime Minister Daniel Andrews’ prolonged second wave lockdown last year, defended himself against public criticism that he had not spoken out against the lockdown from NSW Premier Gladys Berejiklian this year in the same way.

“My concern has always been first and foremost for the Victorian people, which is why I stood up for them vigorously last year and this is why, from the first day of this pandemic, I assured that Victoria has received unprecedented economic support, ”he said.

“I have a good working relationship with my Victorian counterpart Tim Pallas and in the last Victorian lockdown alone we came together to provide over $ 2 billion in economic support.”

Relations between the federal Liberal government and the state Labor government have eased somewhat since then, with Mr Andrews and Mr Pallas and other top state ministers noting a change.

Mr. Andrews recently noted that “the Federal Treasurer has taken a different tone and a different approach this year and I think the Victorians are grateful for that”.

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AMP economist Shane Oliver warns of 45% risk of double-dip recession https://juliavinograd.com/amp-economist-shane-oliver-warns-of-45-risk-of-double-dip-recession/ Wed, 25 Aug 2021 08:18:00 +0000 https://juliavinograd.com/amp-economist-shane-oliver-warns-of-45-risk-of-double-dip-recession/

The AMP and NAB expect net exports to drop at least 1 percentage point from next week’s GDP figures, which must be offset elsewhere. The softer construction figure also reduced NAB’s forecast by 0.5 percentage points.

“Weaker than expected result poses a downside risk to our second quarter GDP forecast of 0.2% [quarter over quarter], increasing the risk of a flat or even negative second quarter impression, ”NAB economist Taylor Nugent said.

The optimist in me tells me that we can still have a good rebound in the December quarter or more significantly through 2022.

Shane Oliver, Chief Economist of AMP Capital

Residential construction stagnated in the three months to the end of June, falling 0.1% despite an increase in housing permits. Private work on homes edged up 0.1 percent, following a massive jump of 12.3 percent in the first quarter, while work on other housing fell 0.5 percent.

“In itself, this suggests a downside risk to the forecast in next week’s second quarter GDP report,” said Catherine Birch, senior economist at ANZ.

Mr Oliver said a moderate result would raise questions about the strength of the economy beyond lockdown rebounds, although he noted there was still a slew of economic data to come next week .

“The optimism in me tells me that we can still have a good rebound in the December quarter or more significantly through 2022,” he said.

Despite weak construction figures, credit growth is accelerating at a rate that ANZ says will force the prudential regulator to intervene in the housing market later this year or early next year.

Annualized monthly credit growth has exceeded 10% and is expected to accelerate further, according to ANZ. By comparison, the wage price index rose only 1.7 percent in the year up to June 30.

“Housing finance commitments have almost doubled since May of last year, investor funding is increasing and credit growth far outstrips income growth,” said Felicity Emmett, senior economist at ANZ.

“With credit growth expected to accelerate in the coming months, we continue to expect APRA to announce tight macroprudential controls. “

Ms Emmett said affordability had deteriorated across all parameters and in all states, and ANZ forecast house price growth of more than 20% for the year, beating Westpac’s estimate of 18%. end of July.

Regulatory interventions in the market could target higher loan-to-value ratios, higher household debt-to-income ratios, or potentially the issuance of interest-only loans, similar to the ceilings last seen in 2017.

If the gains are driven by a more general increase in credit growth, the regulator could instead impose a limit on global lending for investors (as in 2015).

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Stocks open higher ahead of economic data https://juliavinograd.com/stocks-open-higher-ahead-of-economic-data/ Mon, 23 Aug 2021 14:43:00 +0000 https://juliavinograd.com/stocks-open-higher-ahead-of-economic-data/

US stocks rose slightly on Monday, boosted by technology stocks, as investors waited for more signals from the Federal Reserve.

The S&P 500 rose 0.8%, pointing to the broad market index extending Friday’s 0.8% gain. The Nasdaq climbed 1.2%, indicating a larger rise in tech stocks. Meanwhile, the Dow Jones Industrial Average also rose 0.7%.

Investors are largely focused on the Federal Reserve’s annual economic policy symposium later this week, awaiting further clues as to when policymakers may slow down bond buying. At the same time, growing concerns that high levels of Covid-19 infection could slow the global economic recovery pushed stocks down last week. Dallas Fed Chairman Rob Kaplan said on Friday he might rethink his call to start cutting asset purchases soon if the Delta variant weighs on growth.

“If there is any sign that the US economy is slowing, the Fed will not shrink,” said Michael Hewson, chief market analyst at CMC Markets. “There’s a long way to go between blazing a trail to narrow down and actually doing it. “

Shares of ridesharing companies declined after a California judge said a move to continue to treat their drivers as independent contractors rather than employees is unconstitutional. Uber Technologies recently rose 0.2% and Lyft fell almost 1%.

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