Health News at Your Fingertips

Just as the RBA board sits down this morning to weigh up raising rates, the ANZ- Roy Morgan weekly gauge of consumer sentiment has landed, and it’s not pretty:

The 6% drop is the most since mid-January’s 7.6% slump when Omicron was busy snarling supplies and ruining more than a few Christmas-January holidays. (And worse. The 23 Covid-related deaths alone in NSW overnight tells us the problem hasn’t disappeared.)

The RBA board members will already have a lot of data, but this isn’t a sign that the government will be happy to see, given a grumpy electorate is not what they want just now.

David Plank, the head of ANZ’s Australian economics team, said the surprise consumer price index number was to blame for sentiment sinking as people brace for rising interest rates.

Indeed, “confidence dropped 9.6% amongst people ‘paying off their home loan’, while for people who already own their home or are renting confidence dropped by 4.7% and 4.2% respectively,” Plank laid out.

The RBA, though, is also watching out for people expecting inflation to rise because that’s the thing they would rather stamp hardest on.

On that score, the arrow has tilted up again, the survey found. The weekly gauge is up 0.2 percentage points to 5.3%. The rolling four-week average is slightly down because of that 22.1-cent cut in the excise for fuel that happened just over four weeks ago.

The fuel price meanwhile has been quietly creeping up, and is hovering around $1.81 in NSW today at least.

There are much better people to explain this than me (taps the *I am not an expert* sign) but they are very busy, so you are stuck with me.

There have been a few questions about what is going on with inflation and how it is different if its driven by supply pressures (rather than demand, which is what we are used to).

When demand outstrips supply (which is what we are seeing happening) people want to buy, but can’t. So the cost of the available goods goes up (which has been compounded by transport costs)

And central banks can’t really do a lot about that, because it’s not a spending issue, it’s a supply issue.

Now, raising rates could cut spending so that demand *matches* the supply, which can slow it down, but that won’t help the long-term goal of getting unemployment down (now that borders are open, the labour force will change again) and wages up.

In that sense, this isn’t something the government can control either.

But – the lack of real wage growth over the last decade has compounded the issue. Because costs have gone up, but in a real sense, wages have not. The cost of living has outstripped your pay. And that is something the government has *some* influence over – there are levers it can pull to encourage wage growth (increase public sector wages, supporting wage increases with the Fair Work commission, supporting minimum wage increase).

The reserve bank could wait until the wages data comes out before making a decision because it would want to see how much people are earning. If a decision to raise rates doesn’t come today, it would be hard to see how it couldn’t come next month. Either way, it is coming.

(Apologies to Ms Driver, my high school economics teacher, for the whoosh- whoosh explanation.)

Simon Birmingham responded to some of those claims from Labor on Sky News this morning:

I don’t accept that thesis when, in the last budget, we made the biggest improvement in a budget bottom line in some 70 years.

The vast majority of the improvements we put towards reducing deficits, as I said before, by $103bn, compared with what they’d been projected to be.

Our policies have got Australia to have the lowest unemployment rate in around 50 years. They’ve got us to a point where we’re in a position of economic strength relative to other countries. But that doesn’t mean we’re immune from global shocks.

And when you’ve got a war in Ukraine, oil price spikes, energy crises in parts of Europe, continued after-shocks from Covid-19, closure of large parts of China’s economy at present due to Covid, all of those pressures are going to put shocks right around the world. Thankfully, here in Australia, we’ve been withstanding them better than most other countries, and our inflation rate remains lower than the US, or UK, Germany or Italy, Canada or New Zealand.

But we’re not completely immune, and the choice at the next election is one very much between a Coalition government that’s driven people into jobs and created that strong economic environment better able to withstand these positions, and a Labor government with risky policies and big spending ideals, all of which would create the risk of even more pressure on inflation and interest rates than we’re getting from overseas.

Katy Gallager was asked about the possibility of an interest rate rise this morning on ABC radio RN and who was to blame for Australia’s situation:

Q: Now the prime minister is essentially saying that an interest rate hike has nothing to do with him. Is he right about that? Or will you be blaming Scott Morrison if the official cash rate goes up today?

Gallagher:

We’ve been responsible and reasonable about this and always accepted that there are a number of causes, you know, factors at play here. But I think what we saw from the prime minister yesterday is an attempt to shift responsibility elsewhere, which we’ve seen him do in a number of areas. Where things are going good he’s – you know, you can’t get between him and a camera, frankly, but when things are not going so good, it’s always someone else’s issue. I think the point we’ve been making is the triple whammy people are facing now. So wages are going backwards, things’ prices are going up and now, you know, we’re getting the potential for interest rates to rise and that affects this cost of living crisis that is front and centre of this election campaign.

Q: So you will hold him responsible?

Gallagher:

Well, that is the prime minister’s responsibility. The cost of living crisis, frankly, is something that the prime minister should have a plan to deal with and should have had a plan to deal with not just in the last month, but over the last few years. And that is the critical point and a point of criticism that we’ve been making about him.

Q: And the interest rate rise, if it does occur, certainly [it] will imminently whether it’s today or soon. That’s his responsibility too?

Gallagher:

Well, I think I said at the beginning, you know, we have always accepted that interest rates are at record lows, that the Reserve Bank is the institution that makes the decision about that. The point we’re making is the prime minister doesn’t have a plan to deal with his own cost of living crisis that has occurred on his watch. And when we have interest rates rising and that will affect household budgets, without a doubt, the prime minister can’t just walk away and say this isn’t my fault. He’s been in charge of this economy for nine years. You know, this is the reality for people, it’s front and centre in this election campaign. And I don’t think anyone thinks that it’s reasonable for the prime minister to put his hands up and say, ‘well, this is not my problem, sorry, everybody. Hope you’ve saved some money. You know, because that’s all I’m going to do about it.’

There was also a lot in that interview about Labor’s shared home equity scheme (Labor calls it Help to Buy). Richard Marles did an interview on Sky News which has led to a lot of these criticisms today (Marles is not the best person to have communicating policy, outside of his specialties at the best of times, but he is also the deputy leader, so here we are)

Scott Morrison is very critical of the policy, claiming you’d have to ‘check with Canberra’ before going to Bunnings for home improvements as well as:

If you’re one of the lucky ones who get some of these 10,000 places where the Labor government can own 40% of your house, if your wage goes above your household income goes above $120,000 a year, Anthony Albanese will put a for sale sign on your lawn.

You actually have to dispose of the asset and pay back the government.

I mean, this is insane. I mean on top of that, if something terrible happens, and your property is passed to your children, and children have to sell the house if their income is not eligible for the scheme, and then on top of that, you’ve got the situation that you know, where do you sit in the conga line? When it comes to owning your own house? Firstly, the bank. Then there’s the Labour government. And then there’s you.

There is a lot there from someone who was in support of these schemes until he wasn’t.

According to Labor’s policy which is based on schemes already running ion Australia in some states, any renovations will benefit the homeowner if the property is sold.

An independent evaluation will be carried out and value of the renovations goes to the home owner.

On the children point, Labor says the scheme ‘works like a mortgage, people will keep the share of the home they own.

If your kids earn more than the eligibility of the scheme, they can buy out the share held in equity by the government if they wish, just like a reverse mortgage (which some people use to fund their retirement)

Labor expects, as ha happened overseas, that older people who used the scheme while younger would have bought their equity back, as has happened in other markets such as the UK.

Neil Mitchell asks Scott Morrison why he takes credit when things go well, but is not to blame when things go badly. He also asks about whether the RBA should have been more prepared, given it said it wasn’t planning on raising rates until 2023.

Well, let me tell you what’s happened the last 12 months. The IMF, the International Monetary Fund a year ago, was predicting inflation globally would be 3.2%.

The most recent estimate is 7.4%. And that’s happened in the last 12 months.

Now the reason for that is, of course, the global energy price shock that we’ve seen coming out of Europe, with the war in Europe. And in addition to that, there are other factors such as the Covid situation in China, which has severely constrained in supply chains, and then you’ve got the broader hangover of the pandemic affecting transport costs and supply chains all around the world.

So the issue in terms of – what Australia has been able to achieve over the last few years, is we put up a very strong economic shield and protecting the Australian economy from the worst of the impacts of these pandemics.

That’s why inflation is higher in Europe, New Zealand, North America, Canada and United States and UK.

It’s why we’ve been able to get employment up and unemployment down and as we go into this election, this is – this is a reminder, I think [of] the pressure that’s on interest rates right now. It is a reminder of why the economy is so important, and it was only three weeks ago, the bloke who wants to be prime minister didn’t even know the cash rate.

Q: Yeah, but again, you’re telling me that the the interest rates have been low because of you and now they’re going up? It’s not because of you.

Morrison:

I didn’t say that. What I said was, was we have been in a rather extraordinary global environment.

Natasha May

If you’re interested in finding out what rural voters want and how are they changing this election, be sure to catch Guardian’s rural editor Gabrielle Chan’s Q&A with former Nationals leader Michael McCormack this lunch time.

The event will be hosted live at 1pm today on the Rural Network Facebook group. If you are not a member, search Guardian Australia Rural Network on Facebook and ask to join. Then you can send Gabi a question and watch the event live. NB: sharp questions welcome, but no abuse tolerated

You can find that link here.

A bracing figure from NSW Health today.

Victoria has also reported 12 deaths.

Scott Morrison doesn’t get sick of the “silly” photo ops [silly photo opportunities being how the question was framed], he tells Melbourne radio’s Neil Mitchell, because he “doesn’t see them that way”.

He then gives a hero-gram to tradies.

I don’t fit in those ways, what I see is [being] out and about and doing what Australians do every day.

… What I enjoy doing is standing there with an apprentice who shows me what they’re learning, and then I’d have a go at it.

That’s really what I’m saying. They’re learning. I’m trying to understand what they’re learning, and I’m really proud of what they’re doing because you’re getting a trade in this country, you’re setting yourselves up for a strong future in our country with a strong future.

So all those young people and not just young people, all those middle aged apprentices and later in life transition apprentices, thank you for doing what you’re doing. You’e making Australia’s stronger and we’re very proud of you.

It’s been a long time since the Reserve Bank of Australia changed its cash rate target. Its most recent move was to lower it from 0.25% to its record low 0.1% in November 2020. And it’s more than a decade – November 2010 – since the central bank raised the cash rate.

Back then, it went up 25 basis points (another way of saying 0.25 percentage points) to 4.75%. That’s partly why today feels a bit novel.

The other, more pressing drama, of course, is that there’s an election campaign underway and a rate rise today would be more than a bit embarrassing for the government.

The last time we had such an RBA “intervention” was in November 2007, and the rate lift from 6.25% to 6.75% did no favours for John Howard, who went on to lose both his seat and the election.

We look here at how the board decision is made and why we should not be entirely surprised if the RBA did NOT raise the cash rate today.

Warwick McKibbin, an Australian National University professor and former RBA board member, tells us this morning a few extra interesting details. In his time, members would get the RBA’s briefing on the Friday, giving them the whole weekend to mull their move.

Assuming the same practice applies today, the nine board members would have had days of media hype more or less demanding a rate rise after the March quarter CPI shock (5.1% for the headline, 3.7% for underlying inflation, both the highest in two decades-plus.) Like a jury, could they have shut it out?

McKibbin, unlike any of the current board members other than the two from the RBA, was a macroeconomic expert, and brought his own model to the meetings. (He also used to chat to the RBA staff on the sly before meetings until that bit of enterprising research was shut down.)

Anyway, McKibbin reckons that even though the RBA has not signalled any change of direction – which they normally would have, had they not been in some sort of witness protection since 22 March – they should move today.

He notes the US is about six months ahead of the RBA in terms of countering inflationary pressure. Now the US Federal Reserve (effectively their central bank) has been apologising for acting too late as inflation has soared.

As Scott Morrison has been happy to highlight, the US CPI has soared to 8.5%, much higher than Australia’s. (The underlying rate is at about 5%, or 2.5 times the Fed’s 2% target.)

In other words, McKibbin says the RBA should raise rates today: better to be safe than sorry.

Scott Morrison, speaking to Melbourne radio 3AW is now saying on Labor’s home equity scheme:

Every time you go to Bunnings and you want to do an improvement on your house, you have to check with Canberra.

This, it should not have to be said, is not true.

Speaking of Scott Morrison, yesterday, he had this to say about Labor’s shared equity scheme:

Labor has a plan where they want the government to own your home, and not only that, you’re last in line when it comes to your home. The bank has the first call over it, the government has the second call over it, and you come last when it comes to your own home.

So when you design these policies, you need to understand the housing market and you need to understand the economy and you need to understand the banking and financial system. And that is how you can run plans and programs, as we have had that has seen over 300,000 Australians get into their own home.

Not one that the government owns.

Reminded he did once support these schemes, Morrison said:

Well, I had no plan for a government owning people’s homes. Shared equity schemes have been around a long time, they’ve been around a long time, and some people choose to do them in the private sector. And during the course of the global financial crisis, there was a credit squeeze and there was a real problem being faced, particularly by regional banks, Bendigo Bank being one in particular because of the the lack of liquidity in the the debt market that was enabling them to provide the products that they wanted to provide and that people were providing and seeking. So that was a very different set of issues.

But then there was this in 2008:

Labor is trying to walk the line between acknowledging that there are a variety of factors at play for the hits to Australia’s economy, as well as trying to make sure that part of the blame sits at Scott Morrison’s feet.

That’s easiest when they can use his own words

Here is that “keep it together” campaign Peter Hannam reported on:

Qantas CEO Alan Joyce has *kinda* apologised for the baggage issues passengers are experiencing in an interview with ABC News Breakfast:

Q: You talked about the Qantas turnaround yesterday. Expected to reach profitability again in the 2023 financial year. Lots of demand for people to travel after the worst part of the pandemic, hopefully. But again we’re seeing these long queues and issues at airports. When will there will be the appropriate Qantas staff levels to match this customer demand?

Joyce:

Well, Michael, this is not just a Qantas issue. The queues at our airports. This over Easter was an issue that was created by long queues at security, which are run by the airports. It was an issue for Virgin, for Rex, for Qantas. It’s an issue for airlines around the world.

It was caused by a Covid issue with people being absent from work because of close contacts, because of catching Covid. It’s dramatically improved, even as we speak. We’re gearing up for a big expansion of our international operation. We’re recruiting 2,500 people at the moment. We have over 20,000 applicants for those jobs. And while we get into the school holidays in July we should be back to normal for those big peak requirements. But who knows what happens with Covid. This time last year we never knew there would be a Delta strain, an Omicron strain, we’re putting the resources in to manage a big expansion of our operation going forward.

Q: To be fair, it’s not just the airports. There’s still issues faced by Qantas passengers … that’s not good enough, is it? We’re out of school holidays. We’re out of peak – supposed peak periods.

Joyce:

Yeah, we do apologise when these things go wrong. This happened before Covid as well as after Covid. It happens to every airline around the globe. The statistics show that over 99.5% of people’s bags are going with the customers. There were similar stats to what we had before Covid. There is some mishandling of bags that take place again on ever airline on the globe. We apologise when that happens. It’s the nature of the industry. It’s a huge complex industry. And things can go wrong at times. We aim to be perfect. We aim to get every customer’s bag with them. We aim for every flight to be on time. But the nature of the industry … Sometimes there’s things outside the airline’s control – any airline – and the airline has to do its best.

Q: Qantas sacked 2,000 ground staff, including baggage handlers. Have you given any thought to rehiring some of these full time baggage handlers to prevent some of the issues we’re seeing?

Joyce:

We’re using specialist baggage handling companies.

Q: I’m asking about the staff you got rid of.

Joyce:

Maybe I can answer your question, you’re giving the impression that staff are missing. They’re not. There’s people doing those jobs from the specialised baggage handling companies. All the airlines around Australia have recruited staff, they have staff, there’s people there doing these jobs.

Peter Hannam has the latest on Mike Cannon-Brookes and AGL:

AGL Energy, Australia’s biggest electricity generator, says it remains determined to pursue its plan to split despite a bid for a blocking stake by technology billionaire Mike Cannon-Brookes.

In a second tilt at the company in three months, Cannon-Brookes bought 11.28% of the AGL shares through his family’s Grok Ventures firm, making him the largest single shareholder.

“We have purchased this substantial interest in the company because we fundamentally believe there can be a better future for AGL,” Cannon-Brookes said in a letter to AGL.

“A future that delivers cheap, clean and reliable energy for customers. A future that accelerates the transition to net-zero, and a future that creates opportunities for AGL and value for its shareholders along the way,” he said.

“We firmly believe the proposed demerger is a flawed plan that will fail to achieve these goals. As a result, we intend to vote every AGL share we control at the relevant time against the demerger, and will actively encourage all AGL shareholders to do the same,” Cannon-Brookes said.

There is polling today, released by the Australia Institute, showing Liberal MP Tim Wilson is in danger of losing his seat to independent challenger Zoe Daniels.

Wilson has been running very hard on the “fake independent” line.

Today he has had an op-ed in the Australian where he claims independent candidates (he uses scare quotes around independent) are trying to override democracy.

Yup.

Happy 23 day – number of choice for Michael Jordan, Shane Warne and any sporting wonder who thinks they have a shot.

It’s RBA meeting day where the reserve bank will decide whether the underlying rate of inflation (inflation when you take out the stuff that fluctuates in price) of 3.7% is enough to force it to move the cash rate target.

The RBA has previously said it wants inflation to be between 2% and 3%. So it’s above that. But it also doesn’t want to cause inflation in Australia to become a self-fulfilling prophecy. Economists who know a lot more than me about this say Australia is facing a supply-side inflation issue. Not demand side, which is what we usually think of when we think inflation. So you don’t want to panic people into thinking their money will be worth less, because then they go out and spend while they can, buying what they believe which in turn, increases inflation. It’s a delicate balance for the RBA and one that has probably given governor Phil Lowe a couple of sleepless nights. If interest rates move, it’ll be the first time since 2007 that there has been an interest rate increase in the middle of an election campaign.

The RBA could signal it’s about to move rates. Or it could move them a smidge to show it’s willing to move rates. Either way it’s a pretty big stress for people who are already on the bubble.

It’s also of concern to Scott Morrison who has tried to build his re-election campaign around being a better manager of the economy. He wanted to talk about cost of living but now it’s an election issue because it’s an issue for millions of people, and that makes the narrative much harder to control. Morrison has started the rebrand – telling reporters he doesn’t see these things “through a political lens”. It’s all about people, you see. And the choice they have about who is better to manage the coming economic changes (which of course makes it about him, but that’s just details).

Sarah Martin has the latest Essential poll which shows that choice is not quite as cut and dried as Morrison would like it:

At the mid-point of the six-week election campaign, the Guardian Essential poll of 1,500 respondents finds the primary vote for both Labor and the Coalition largely unmoved, despite billions of dollars in election promises being made as voters tune into the contest.

But while primary support is flatlining, Labor retains a lead over the Coalition of 49% to 45% on a two-party preferred “plus” measure.

The challenge to connect with disengaged voters is also highlighted by the fact that 17% of people say they have not been paying any attention to the news, advertising or updates from the federal election campaign, and 33% saying they have only been paying little attention.

… On the cost of living, 40% of voters judged that Labor was best placed to manage the issue, compared to 30% who trust the Coalition on the issue, and 30% who deemed both parties to be no different.

We’ll bring you the blow by blow of the day. As usual you have the Guardian Canberra crew of Katharine Murphy, Sarah Martin, Paul Karp, Josh Butler and Daniel Hurst with Amy Remeikis on the blog.

It’s a mint slice for breakfast kinda morning.

Ready?