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Democracies slapped with Covid-19 debt bills

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New Zealand is officially in a recession, while Australia is teetering on the brink

 
Some of the world’s island nations, which shut themselves off from the rest of the world during the global health emergency are paying a high price.

Economic data from New Zealand shows the country of five million recently entered aa recession—two consecutive quarters of negative growth.

Democratic nations were among those to implement strong health measures aimed to containing the spread of Covid-19.

However, funding the extra spending led to extra debt, which has been carried through the post-Covid environment.

Greg Jericho is the Policy Director at the Centre for Future Work at The Australia Institute, who said the pandemic was uncharted waters for many decision-makers.

“It’s always a little bit difficult to cast around blame for how governments and even central banks acted during the pandemic.”

The International Monetary Fund recently published data examining gross and net debt for 2022.

It showed G20 nations are bearing the brunt when it comes to post-Covid recovery.

“There was this sense that essentially the pandemic is gone.

“There was this since that we’re out of lockdowns and things will go back to normal. We have not grasped that it wasn’t a once in 100 year medical shock, it was a once in 100 year economic shock,” Jericho said.

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Central bank expected to ease interest rates as election nears

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The Federal Reserve is expected to cut interest rates again this week, a move aimed at cooling inflation.

This quarter-point rate cut would bring the benchmark rate to about 4.6%, the second reduction this year.

Analysts expect that additional cuts could come in December, which would benefit borrowers by reducing loan costs.

If Trump were to win the election, economists say his proposals on trade and immigration could reignite inflation.

The Fed is balancing a strong economy and low unemployment with its inflation-calibrated rate cuts.

As Election Day approaches, all eyes are on both the Fed and the presidential race.

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Big Tech pushes AI investments

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Tech giants like Microsoft and Meta are accelerating AI data center spending, with massive capital pouring into these projects.

Microsoft and Meta reported on Wednesday that AI investments are spiking their expenses, while Alphabet announced similar trends.

Amazon, due to report earnings shortly, is expected to mirror these projections, foreseeing further pressure on profit margins.

Wall Street is getting wary of the financial strain, as each company’s stock took a hit this week despite strong quarterly numbers.

Shares of Meta fell over 3%, and Microsoft saw a 6% drop, underscoring Wall Street’s jitters.

“It’s expensive to keep up with AI technology demands,” says GlobalData’s Beatriz Valle, emphasising a competitive race in AI capacity.

The high-stakes investments are starting to test investor patience in Big Tech’s ambitious AI journey.

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Meta expects strong holiday ad revenue boost

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Meta’s holiday-quarter forecast beats expectations as AI tools drive growth

Meta Platforms, parent company of Facebook, has forecast holiday-quarter revenue that surpasses market expectations, anticipating a surge in ad spending as the year ends.

The projection comes as Meta’s AI-driven advertising tools and short-form video feature Reels have spurred revenue growth this year.

Meta’s shares dipped 2.5% in after-hours trading, despite a third-quarter profit of $6.03 per share—well above analysts’ forecast of $5.25.

Analysts expect digital ads to have a “blockbuster” year in 2024, helped by improved economic forecasts and steady consumer spending.

Meta, heavily reliant on advertising revenue, stands to benefit from increased holiday marketing as it eyes revenues of $45 to $48 billion this quarter.

The company’s third-quarter revenue reached $40.59 billion, narrowly topping analysts’ estimates.

With interest rates easing, analysts suggest Meta’s ad revenue could continue to thrive into the new year.

As holiday spending ramps up, Meta’s AI investments are paying off.

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