Wry & Dry: a cynical and irreverent review of the week in politics, economics and life. For intelligent Readers who disdain the trivial.
But first, a snapshot of this week’s Investment Matters…
We wrap up profit reporting season with our views on:
- Bapcor Group
- Healius (new position)
- Australian Clinical Labs (new position)
- Steadfast Group
And then move to reviewing the GPD data that was released this week.
To read Investment Matters, just click on the link at the bottom of this week’s Wry & Dry.
Stagflation
Rather like a nervous gambler who bet the house and is waiting for the Tattslotto numbers to drop on a Saturday night, Treasurer Grim Jim waited at his open office window for Wendy-the-carrier-pigeon to bring the GDP news from the Bureau of Statistics.
Grim Jim was relieved as he unfurled the paper from Wendy’s leg, and read a barely positive figure of 0.2% for the June quarter. “Still, better than a negative,” he muttered. Now, the task was to claim credit. Which, as a politician, he did.
But nothing in Grim Jim’s presser explained the mystery. How can the economy be both (a) so hot that the RBA Chief Teller wants to keep interest rates high; and (b) “especially weak” as Grim Jim announced?
It’s complicated, to a point. But essentially, it’s got to do with ‘supply’. State and federal governments have pumped dosh into the economy (up a massive 4.7% in the year), so ‘demand’ is high. But the economy doesn’t have the capacity to meet the demand. This is because of poor productivity. Australia’s productivity has flatlined since about 2016.
In the year to June, the number of people employed grew by 2.8%. But the significantly larger workforce was only able to add 1% more goods and services.
Sadly, productivity is not going to leap overnight, so inflation will not rapidly fall, nor will interest rates. In fact, yesterday afternoon, Michelle Bullock, the Chief Teller of the RBA, warned that interest rates may have to increase if inflation fails to return to the RBA’s 2 to 3 per cent target band.
Older Readers may remember ‘stagflation’, a stagnant economy and inflation, of the 1970s. That was driven by a profligate government unable to adjust its spending to meet the problems of time. Deja vu all over again?
Grim Jim hasn’t yet worked out that it’s not “the RBA that has smashed the economy,” but high inflation. Still, he doesn’t like people to disagree with him. She should expect a summons to the Principal’s study Grim Jim’s office to receive a dressing down.
Glasgow shows Chairman Dan how it’s done
Readers will recall that then Chairman Dan got himself and all of Victoria excited by promising an amazing Commonwealth Games just prior to an election. And then cancelling them after the election because it was too expensive ($6-7bn). And then giving himself the DCM so that he would not have to face the election music. Masterful.
And now Glasgow, Scotland’s largest city, will run the 2026 Games for about $222m, all of which is to be paid by Victoria. How can they do this?
Firstly, the Scots are canny folk. Aside from the profligate Scottish National Party, the tribes north of Hadrian’s Wall are very careful with money.
Secondly, they are hosting just 10 sports at four venues, compared to the 19 sports and plenty of far-flung venues for which Chairman Dan signed up.
Which drives Wry & Dry to ask the question: when Melbourne’s Games’ costs resembled an international telephone number, why didn’t Chairman Dan go parsimonious, and undertake a version similar to that which the Scots are now doing?
Who left their brains in a jar by the door?
Meanwhile in Canada…
Readers might think that Australia relies too much on immigration for population growth. Well Australia does. Well, hold the phone, there’s another example: immigration accounted for 96% of Canada’s population growth in 2023.1
Which has led to a Damascene conversion2 by woke PM of Canada, Justin Trudeau. And so he turned around what has been described as one of the world’s most progressive immigration policies.
Or was the conversion because of the opinion polls? These show that Trudeau’s party (Liberal – in Canada a centre-left party) would be decimated in next year’s election, winning less than 23% of the seats in the federal parliament.
Either way, Canada has followed the UK, Germany and now Australia in reducing immigration. Trudeau’s measure is to halve the share of ‘temporary’ low-wage workers that Canadian employers hire. And he has hinted at further reforms before Christmas.
Readers may also have missed Trudeau’s announcement in January, capping the number of international students for the year at 360,000. Sound familiar?
And Trudeau’s immigration policy on Gazan refugees is also unpopular. Notwithstanding that the scheme is open only to relatives of Canadian citizens, it is now apparent the up-to-5,000-refugees policy is compromised. This is because only those Gazans who are approved by Hamas can leave Gaza. Thus, giving rise to security concerns. And the concerns of 64% of Canadians in a poll last week.
Trudeau’s journey to Damascus is not yet complete. But he may not have the chance to make the city gates. Y’see, he leads a minority government. On Wednesday, his parliamentary alliance partner, the left-leaning New Democratic party, said that it would no longer guarantee supply or confidence.
1 Source: Financial times 2 September 2024.
2 A Damascene conversion is a euphemism for a radical change of mind, prompted by seeing a matter with fresh eyes. Its source is from when St Paul (then just plain Saul and a persecutor of Christ) was on the road to Damascus and was blinded. Three days later disciple Ananias lay his hands on Saul and “scales fell from Saul’s eyes.” Saul was converted “by the Holy Spirit” and became Paul.
Taxing unrealised capital gains goes global
Ah, the certainty of life, death and taxes. And in Australia, there is almost certainty of taxation on unrealised investment gains for those with large superannuation balances. This nefarious practice has now gone global. Well, at least to America; it is now a possibility for wealthy Americans.
Kamala Kamala has announced one of her policies:3 slug the unrealised capital gains of wealthy Americans with a tax of at least 25%. But only those with more than US$100m. Whew!
As one might expect, more than a few of America’s finest billionaires are forwarding their donations to the Trumpster.
They need not bother. Kamala Kamala can put her unrealised gains tax in her budget to Congress as much as she likes. But there’s no way that the Democrats will control the Senate. And the Senate and the House must agree on budget changes that would then go back to Kamala Kamala for approval or veto.4
Australia’s proposed tax on unrealised capital gains has a much higher chance of success than Kamala Kamala’s moonshot. The common factor is that both proponents are wanting to be seen to ‘tax-the-rich’. And thereby win fringe votes.
In each case, there are better ways to skin the tax cat. But they are not so obvious as ‘tax-the-rich’ policies. There’s votes in them thar tax bills.
3 Actually it was Sleepy Joe’s.
4 If vetoed, the bill returns to Congress; if both houses by a two-thirds majority over-ride her veto, their bill becomes law. If they don’t, it’s back to square one.
Germany: enter stage far right
Wry & Dry did warn Readers. The very far-right party Alternative for Germany (AdF) has won the state election in the eastern state of Thuringia. It won 33% of the vote, well ahead of the Christian Democratic Union (24%).
The only good news is that none of the other parties will govern with the AdF. But it will have a ‘blocking minority’ of more than a third of the seats, meaning it has an effective veto on matters such as judicial appointments or constitutional change.
The AdF also came a close second in Sunday’s other state election, in the neighbouring state of Saxony.
The other problem is the rise of a far-left populist party, led by Sahra Wagenknecht, a former communist and an apologist for Tsar Vlad. Her party is the eponymous Sahra Wagenknecht Alliance (BSW). She is a member of the federal parliament (Bundestag) and formed her own party earlier this year.
It remains to be seen if the rise of the far-right and of the far-left will be confined to state elections. With both fringes supporting Tsar Vlad, Ukraine’s president will be worried.
A word of caution, Thuringia has a population of just two million, and Saxony four million. Indeed, small states in a country of 84 million. The AfD and BSW are, for now, just pests in state elections.
But next year there will be a federal election. One matter is clear, federal chancellor Olaf Scholz’s three-way coalition of social democrats, liberals and greens will be hollowed-out.
Unless Olaf of Bread muscles-up, and takes significant steps to manage illegal immigration, he will get the DCM.
Uncle Fester’s challenge – build a house
Conservative Australian media were as excited as children on Christmas Eve when Albo’s disapproval rating rose three points to 54%, the worst since the 2022 election.5
The increased voter discombobulation is understandable, given Albo’s vapidity over the past few weeks.
But those to the right of the soup spoon shouldn’t be crowing. Uncle Fester Dutton’s rating hasn’t changed. All the offensive work that he had done against Albo hasn’t improved his own approval ratings (Albo’s are now the same as his).
This reflects Wry & Dry’s comments some weeks ago that Uncle Fester tossing stones at Albo’s house was working, but he has neglected to build his own.
Three weeks have passed since Wry & Dry’s observations. And he has not listened: his only policy remains…a nuclear power station near you.
5 Source: Newspoll, Monday 2 September 2024.
Speaking of nuclear power…
It will not have passed unnoticed by Uncle Fester Dutton that France is about to start-up another new nuclear reactor, its 57th.6
The first chain reaction commenced on Monday, and it should be feeding electricity into the grid before Christmas. It’s a big unit, at 1.65 gigawatts, larger than Victoria’s Loy Yang B.
It’s only 12 years behind schedule and cost €13.2bn, over thrice its original estimate. Both the delay and being over budget were blamed on design issues with the new prototype; as well as regulatory interference.
Wry & Dry was wondering: if Uncle Fester wins an election and gets the opportunity to buy one or more of these devices, would he order from France?
And, more to the point, would France accept the order? The last Coalition government shredded a large government order with France.7
6 Flamanville Unit 3, a next-generation ‘European Pressurised Reactor.’
7The order was for a fleet of conventional submarines, ordered by Croesus Turnbull and cancelled by Miracle Morrison. The order was replaced with blend of nuclear-powered submarines from the US and UK. M Macron spat a dummy that landed on the moon.
Middle East
Readers know that Wry & Dry has little time for Benjamin Netanyahu, Israel’s PM.8
However, he has made a heart-wrenching decision with which Wry & Dry reluctantly concurs. But that decision has brought a whirlwind of scorn and derision. And this at the time when Hamas has executed six hostages but before so doing filmed each making their last message to their families. And sadistically and grotesquely broadcast those messages.
Netanyahu’s decision is to retain Israel’s condition for a cease fire that the strip of land between Egypt and Gaza (the Philadelphi Corridor) remain in Israel’s control.
This has caused massive demonstrations in Israel, a rebuke from Sleepy Joe and the UK cutting off some military aid (no more Sopwith Camels).
Netanyahu is right. The highest justification for fighting a war, besides survival, is to prevent its repetition. Hamas was able to initiate and fight this war only because of a secure line of logistical supply under its border with Egypt.
It is a sad truth that the appealing imperative to save the hostages does not supersede every other consideration. And the loss of control of that strip of land will embolden Hamas, which will ensure that any attempt to retake it will involve a massive loss of more lives.
The agony of the families of the remaining 95 hostages (of whom only 60 are believed alive) must be immense. One would not be human to not acutely feel for them.
The weight of outrage should not fall on Netanyahu, but on Hamas. This is not a noble group fighting a worthy cause.
8 There is a sad irony to this story. In 2006, an Israeli soldier named Gilad Shalit was captured by Hamas and held in Gaza. He was released five years later in exchange for more than 1,000 Palestinian security prisoners — a euphemism, in many cases, for terrorists. The deal included the release of Yahya Sinwar, the mastermind of the 7 October massacre. The person who approved the deal was Benjamin Netanyahu, the prime minister of Israel.
Musings
This year is the 75th anniversary of that magnificent film, The Third Man9. Wry & Dry is pleased to this week insert a delightful phrase spoken by Harry Lime, played by Orson Welles. Welles also wrote it:
“… in Italy, for thirty years under the Borgias, they had warfare, terror, murder and bloodshed, but they produced Michelangelo, Leonardo da Vinci and the Renaissance. In Switzerland, they had brotherly love, they had five hundred years of democracy and peace – and what did that produce? The cuckoo clock.”
9 Not to be confused with the 1970’s Australian satirical take on Channel Nine’s sporting commentators, especially of Richie Benaud.
Dynasty
Tsar Vlad’s newest family has been outed. A Russian investigative website has revealed that he has two sons, Ivan (aged nine) and Vladimir Jnr (five). Their mother is Alina Kabaeva, the former Olympic rhythmic gymnast.
He has three daughters from a previous marriage and an affair. Doubtless the media will be full of speculation of the future roles the sons will play in Russian government.
Did someone mention Tsasarevich Ivan?
Wry & Dry’s failed prediction
Astute Readers will recall Wry & Dry suggesting that former leader of the Opposition and wannabe PM William Shorten was still angling for the top gig. This in view of Albo’s flailing performance.
Not even close. Yesterday William gave up trying to manage the NDIS and gave himself the DCM. And will become the new Vice Chancellor of Canberra University.
Snippets from all over
1. Trumpster’s social media company falls
Shares of former President Donald J. Trump’s social media company have fallen so much that his one-time $6 billion stake is now worth about $2 billion. (New York Times)
Wry & Dry comments: It’s complicated. He holds about 60% of the company. But the expiration of a contractual lockup on 19 September means that he can start selling shares, if he needs the cash.
2. Grenfell Tower fire tragedy
Police and prosecutors have been facing calls to bring criminal charges over the Grenfell Tower tragedy after a devastating inquiry uncovered a litany of failings and concluded all of the 72 deaths were avoidable. (The Times)
Wry & Dry comments: This is the end of the beginning. Now the prosecutors will get to work. It will be a feast for lawyers. And more pain for the survivors.
3. Hong Kong’s property demise
One of Hong Kong’s biggest property developers is bracing for its first loss in two decades, as President Xi Jinping’s crackdown on China’s property market and an exodus of Western businesses batter the sector. (UK Telegraph)
Wry & Dry comments: Its share price fell to a 21-year low. Clearly Emperor Eleven is not a shareholder.
4. Trumpster taps Musker
Donald Trump has unveiled a sweeping plan to lower prices and cut red tape and said he would appoint the world’s richest man Elon Musk to help him. (Financial Times)
Wry & Dry comments: Of course, Mr. Musk has plenty of time on his hands. Each day, after he has run Tesla, SpaceX, Twitter, xAI, Neuralink, etc, he will get to the Trumpster’s workload by about 11.30pm.
5. Trumpster’s Capitol rioters golf event ‘postponed’
A gala event to raise money for some of the rioters who attacked the Capitol on Jan. 6, 2021, set to take place on Thursday at former President Donald J. Trump’s golf club in New Jersey, has been postponed. (New York Times)
Wry & Dry comments: His first sensible campaign move.
Data
- Australia: GDP grew at 0.2% for the June quarter, 1.0% for the year to June.
And to soothe your troubled mind…
“I’m disappointed.”
Michele O’Neil, President of the Australian Council of Trade Unions, on the news that the rogue union, the CFMEU, will vote to disaffiliate from it.
Wry & Dry comments: You betcha she’s disappointed. Think of all those lost affiliation fees.
Disclaimer
The comments in Wry & Dry do not necessarily reflect those of First Samuel, its Directors or Associates.
Cheers!