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Politics

First Xi, now Trump: tariff impacts on the Australian economy

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First, the tariffs from China hit Australian exporters now it’s the Trump tariffs on steel and aluminium – and as we have just learnt there will be no exemption.

How will these measures affect the USA, but also China, Australia and the rest of the global economy?

Like the China COVID tariffs, the Trump tariffs will hurt Australian workers. 

After all, 1 in 5 Australian workers depend on exporters and exporters pay 60 per cent higher wages on average than non-exporters in union jobs with EBAs. This will be bad for the steel workers of the Illawarra and the aluminium workers of Portland, and will also be inflationary, and put upward pressure on interest rates. That’s why we have seen the impact of tariff decisions (and tariff uncertainty) hitting the Australian share market and superannuation balances.

As a former Australian Prime Minister, could Ambassador Kevin Rudd got an exemption? I am sure he’s trying. But his pre-election comments disparaging Trump have not helped Australia’s interests not have the recent comments of another former Prime Minister Malcolm Turnbull. But to be fair, both Rudd and Turnbull have also been critical of Beijing. 

Of course, Australia is not alone. The USA’s North America closet trading partner, Canada is in the same boat, as is Mexico. Canada has just had a leadership election with former Bank of Canada Governor Mark Carney (who was also Bank of England Governor) taking over as Prime Minister of Canada from Justin Trudeau. The Canadian Tories led by Pierre Poilievre are going to paint Carney as a Globalist, more comfortable in Switzerland than Saskatoon, but the tariffs on Canada give the new Prime Minister a chance to wrap himself in the Maple Leaf and fight the Trump tariffs. Carney can also paint Poilievre as Trump lite, and improve the Liberals chances in a contest suffering from the unpopularity of Trudeau. When a central banker can replaced a charismatic second-generation politician as Prime Minister and have a better chance we know we are living in interesting times. 

With China and the USA unreliable trade partners, what options does Australia have? The Albanese Labor Government, to their credit have improved relations with our North East Asian trading partners like Japan and South Korea, Taiwan, ASEAN (with the special Australia ASEAN summit in Melbourne last year) as well as Europe and the emerging markets of the Middle East and North Africa (MENA) and Latin America.

We could actually get closer to Canada under their new Prime Minister, given our similar economic and political backgrounds (if not geography) and current situation on steel and aluminium tariffs. Canada has also had its issues with Beijing as well as Washington.

So forget the tyranny of distance, and May the Moose be with you.

Professor Tim Harcourt is the Chief Economist of IPPG at University of Technology Sydney (UTS) and host of The Airport Economist on Ticker.

Tim is also former chief economist of the Australian Trade Commission (AUSTRADE), the Australian Council of Trade Unions (ACTU) and the Reserve Bank of Australia (RBA).

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Macron’s Prime Minister resigns after just one month

Macron’s latest prime minister resigns after just a month amid growing fiscal challenges and government instability in France

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Macron’s latest prime minister resigns after just a month amid growing fiscal challenges and government instability in France

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In Short:
– Sébastien Lecornu resigned as Prime Minister after less than a month, the shortest tenure in Fifth Republic history.
– His departure reflects Macron’s ongoing challenges in securing a stable government amid economic difficulties and political division.
Sébastien Lecornu has resigned as France’s Prime Minister after less than a month, marking the briefest tenure in the country’s Fifth Republic.His departure highlights President Emmanuel Macron’s ongoing difficulties in establishing a stable government amid worsening fiscal conditions.

Lecornu, the fourth prime minister to resign under Macron, faced the challenge of addressing a significant budget deficit while managing a divided National Assembly.

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France’s rising borrowing costs reflect its economic troubles. The CAC 40 index dropped by 2%, and the yield on 10-year bonds climbed to 3.6%. Critics, including Jordan Bardella of the National Rally, are calling for the dissolution of the National Assembly, arguing that such action is necessary for stability.

Upcoming elections could further weaken Macron’s legislative power. His earlier decision to dissolve parliament led to fragmentation, with left-wing and far-right parties gaining strength at the expense of Macron’s centrist coalition.

Government Instability

Lecornu was appointed after François Bayrou’s government collapsed. Bayrou faced backlash for proposing cuts to public spending, intensifying fiscal issues. Lecornu aimed to reform the approach of previous administrations but faced opposition from both ends of the political spectrum.

Rather than seeking cooperation, he appointed familiar figures from previous governments, drawing criticism from conservatives and leftists alike. Macron has been hesitant to engage with the leftist coalition that won the most votes in recent elections, complicating efforts to establish a governing majority.


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Newspoll shows divided opinions on rising house prices

Newspoll shows divided opinions on Australian house prices as government support raises expectations for market increase

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Newspoll shows divided opinions on Australian house prices as government support raises expectations for market increase

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In Short:
– Newspoll reveals a divide among Australians on house prices, with 34% wanting increases and 30% preferring stability.
– The Albanese government plans to build 1.2 million homes by 2029 to address housing supply issues.
Newspoll indicates a split among Australians regarding house prices over the next three years. More voters support an increase in home values than those who prefer stability or a decrease.
This comes as expectations rise due to government support aimed at aiding first-home buyers.The survey, conducted for The Australian, shows that 34% of respondents want prices to rise, while 30% want them to stay the same and another 30% wish for a decrease. A notable 6% had no preference.

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Divisions among the population are evident, especially between those with mortgages and renters. The Albanese government aims to address housing by pledging to build 1.2 million homes by 2029, but opinions on property prices are divided.

Most respondents aged 18-34 are in favour of dropping house prices, contrasting with older demographics more supportive of value increases. Rental households predominantly desire lower prices, in stark contrast to homeowners. Support for rising prices is stronger among Coalition voters and those who support independents.

Government Response

Prime Minister Albanese noted the government’s expansion of the Home Guarantee Scheme aims to ease access for first-home buyers. He highlighted the scheme’s minimal impact on price increases, despite a slight projected rise.

Albanese addressed housing supply challenges mentioned by Reserve Bank governor Michele Bullock, stating that building takes time. He underscored ongoing efforts to boost housing stock through initiatives, including the Build to Rent scheme and renovation of unoccupied homes.


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Takaichi aims for Japan’s first female prime minister

Sanae Takaichi breaks barriers to lead Japan’s ruling party, poised to become the first female prime minister

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Sanae Takaichi breaks barriers to lead Japan’s ruling party, poised to become the first female prime minister

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In Short:
– Sanae Takaichi aims to become Japan’s first female prime minister, leading the ruling party amidst conservative policies.
– Her nationalistic views and opposition to same-sex marriage could alienate voters and challenge her leadership.
Sanae Takaichi emerged victorious in the male-dominated race to lead Japan’s ruling party, positioning herself to potentially become the country’s first female prime minister.
Takaichi’s conservative stance and fiscal policies have raised concerns among investors regarding her plans for an expansionist fiscal agenda.
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With previous leadership attempts, Takaichi intends to gain parliamentary approval to replace Shigeru Ishiba. Although she belongs to the largest ruling party, the coalition currently lacks a clear majority following recent election losses.

Hosting a meeting with former President Donald Trump is anticipated as one of her early initiatives.

Takaichi is known for her admiration of Margaret Thatcher, discussing their meeting shortly before Thatcher’s passing in 2013. As a drummer, Takaichi’s personality may resonate with voters, though her nationalistic policies, including potential alterations to Japan’s constitution, could alienate some.

Potential Challenges

While Takaichi advocates for increased gender diversity in her cabinet, her conservative policies may alienate female voters.

She stands against same-sex marriage and the option for separate surnames for married couples, stances not widely supported by the public. Economically, Takaichi promotes ‘Abenomics’, pushing for increased spending amid rising living costs and opposing the Bank of Japan’s interest rate adjustments.


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