Ajay Seth takes over as new Economic Affairs Secretary


Newly appointed economic affairs secretary, Ajay Seth, took charge of the department of economic affairs on Friday, the finance ministry said in a Twitter update.

The Appointments Committee of the Cabinet had approved the appointment of the 1987-batch Karnataka cadre IAS officer earlier this month, replacing Tarun Bajaj.

Prior to this, Seth was posted in his cadre state as the managing director of the Bangalore Metro Rail Corporation Limited since July 2018.

The new position marks Seth’s return to a central posting after a gap of 13 years and will be his second stint in the department of economic affairs, where he previously served as a director.

Apart from heading the Bangalore Metro Rail Corporation, Seth held various positions in the Karnataka government including additional chief secretary of health and family welfare and commissioner of commercial taxes.

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The UK’s economic surge has taken the world by surprise


Europe will rebound too, eventually. There is €500 billion ($771 billion) in pent-up household savings waiting to be spent. But vaccination paralysis in December and January is inflicting its long-tail damage today. April has turned into a lockdown wipe-out. Virologists in Germany, Italy, and France say politicians are fooling themselves in thinking they can reopen fully in May.

The erratic on-again, off-again treatment of the AstraZeneca jab probably delays final reopening by yet another month due to the slower rollout and damage to vaccine confidence. The EU is now trapped by its zero-tolerance policy on rare blood clots, as if it had the luxury of treating vaccines like a routine drug when 3000 Europeans a day are dying from COVID, many from blood clots caused by the disease itself.

The UK economy has roared back to life.Credit:Bloomberg

It has poisoned the well for Johnson and Johnson’s viral vector jab as well. Capital Economics says the 55 million doses of J&J scheduled for the second quarter amount to 25 per cent of the EU capacity to immunise (given the one shot effect).

The promise of 50 per cent adult herd immunity by July is slipping away, and so is the second summer season for Club Med, with all that this means for pent-up insolvencies and sovereign debt ratios already stretched to the limit.

France has nudged down its growth forecast for this year from 6 per cent to 5 per cent. It is still too high. Spain has signalled a coming downgrade as well. The sorpasso moment when eurozone output surpasses pre-COVID levels has probably been pushed into mid-2022.

What we confirmed from UK data this week is that the headline collapse in trade with the EU seen in January was meaningless. The February figures are unrecognisable. They do not yet offer a “steady state” picture of post-Brexit trade as teething problems fade, but they do refute catastrophist claims.

It will take a generation to reach a useful economic verdict on Brexit. What is clear already is that the incessant high-decibel negativism of the London opinion machine has been exposed as ill-informed and hysterical.

Exports worldwide were down just 2.2 per cent from a year earlier. If that trend were to continue it would imply an annual trade loss of £7 billion or around 0.07 per cent of GDP. It is macroeconomic noise.

Details are revealing. Exports to the EU were down 12 per cent (y-on-y) but over two-thirds of this was offset by a rise in exports to the rest of the world. There was a 20 per cent fall in exports to France but a 38 per cent rise in shipments to Belgium, some shipped from the Humber to Antwerp rather than clogging up the M25 en route to Dover.

It is evidence of trade diversion away from French ports that can no longer be entirely trusted, the cost of Emmanuel Macron’s anglophobe antics. It implies a revenue loss for Calais.

On the import side, the UK is buying less from the EU and relatively more from elsewhere. China’s shipments jumped 71 per cent (partly due to PPE). Imports fell 27 per cent from France, 18 per cent from Holland, 14 per cent from Germany, and 13 per cent from Italy. A pattern is emerging: the EU has chosen to make goods trade with the UK needlessly complicated and is now losing market share to global competitors.

There are signs that UK exporters are adapting to Brexit red tape – because they have to – while EU exporters are more dispersed and less focused. This will get worse when the UK waives the current exemptions on customs controls and reciprocates EU curbs. Europe is likely to see a galloping loss of its once captive UK market. Korea, Japan, China, America, and Mexico will snatch it away

It is true that the UK’s fishing industry has suffered a body blow, but this is a political and community issue. The commercial sums are tiny. Live shellfish exports are worth just £15 million a year. Furthermore, the press narrative has degenerated into caricature. “I don’t think there ever really were piles of rotting seafood in the ports,” said Barrie Deas, head of the National Federation of Fishermen’s Organisations.

Mr Deas says there are eager buyers of British fish in the vast Asian market, once the logistics are right. “Before COVID, the market for frozen crab was expanding dramatically in China,” he said.

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Nor is it beyond the wit of man to put more of Britain’s catch on British tables. “We’re being inundated with emails from people asking where they can buy fresh fish but the big supermarkets don’t give it prominence the way they do in Spain and France. We’re missing a trick,” he said.

It will take a generation to reach a useful economic verdict on Brexit. What is clear already is that the incessant high-decibel negativism of the London opinion machine has been exposed as ill-informed and hysterical. The British economy is doing just fine. Time to change the stuck record, my friends.

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In Alabama, Black Amazon Workers Vote Their Economic Interest


The political left has a complicated relationship with its black supporters. When blacks vote to help elect Joe Biden, they are celebrated. When they vote to help undermine the progressive agenda, they are in the way.

Smarter Democratic strategists have been warning for some time that the party has been moving steadily to the left of the average black voter on everything from crime and gay rights to school choice and immigration. Progressive politicians and liberal activists may want to ban charter schools, reduce resources for law enforcement and empty out the prisons—“No more policing, incarceration and militarization,” Democratic Rep. Rashida Tlaib tweeted this week—but polling shows that such ideas have little support among the black rank and file.

This growing disconnect between political elites and ordinary blacks was on display again last week when Big Labor’s attempt to organize an Amazon facility in Alabama with a workforce estimated to be 85% black was rebuffed by a vote margin of more than 2 to 1. In what has been described as a major setback for organized labor, 71% of the workers who cast ballots voted against joining the Retail, Wholesale and Department Store Union. The union’s president, Stuart Appelbaum, responded by suggesting the workers had somehow been deceived. “Amazon has left no stone unturned in its efforts to gaslight its own employees,” he told reporters after the vote.

The employees themselves offered a different take. They expressed satisfaction with the pay, benefits and working conditions at Amazon and said that paying dues to a union to address any complaints they did have was unnecessary. For years, organized labor has been working to gain a foothold at Amazon, the nation’s second-largest private employer after Walmart . These efforts have failed repeatedly, and no wonder. Amazon offers relatively high pay and good benefits. Blacks and Hispanics are 49.3% of its hourly workers and 20% of managers. And Walmart, which has also been fighting off unionization for years, offers competitive salaries and benefits while having a similarly diverse workforce.

Nationwide, black unionization rates are slightly higher than those of whites. This is in part because a higher percentage of blacks work in the public sector, where unionization overall is more prevalent than it is in private business. Among private-sector workers, however, black unionization has steadily declined over the decades, just as it has among other groups. And contrary to the suggestion of labor officials like Mr. Applebaum, it’s not because black workers are confused or have been hoodwinked. Rather, they are acting in their own economic interests, and they happen to be in good historical company.

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Delay in vaccine rollout ‘not expected to derail’ economic recovery, Australian treasurer says | Australian economy


The Morrison government looks set to revisit in the looming May budget a key underlying assumption from last year’s mid-year economic forecast that a population-wide Covid-19 vaccination program would be fully in place by late 2021.

But the treasurer, Josh Frydenberg, has declared the delay of the vaccination rollout “is not expected to derail momentum in our economic recovery”.

Scott Morrison late on Sunday admitted that all Australians may not be vaccinated by year’s end. The prime minister said in a statement uploaded to Facebook there would be no new timetable to replace the previous October target.

With the government taking heavy political fire for bungling the critical vaccine rollout, Morrison took to Facebook once again late on Monday to try and reassure the public.

In a Facebook live session, Morrison said frontline health workers and the elderly would be inoculated under current arrangements as winter closed in, and the vaccination program would ramp up for the “balance of the population” later in the year.

“I’ve been asked a bit about what our targets are,” Morrison said.

“One of the things about Covid is it writes its own rules. You don’t get to set the agenda – you have to be able to respond quickly when things change. Rather than set targets that can get knocked about by every to and fro – international supply chains and other disruptions that have occurred – we are just getting on with it.”

Labor said on Monday the government would need to revisit the Myefo assumption on 11 May. The shadow treasurer, Jim Chalmers, declared it would stretch credibility for the government “to now pretend their vaccine debacle won’t impact the budget or the economy”.

The mid-year economic forecast last December assumed that a Covid-19 vaccine would be available in Australia by March 2021, with a population-wide vaccination program fully in place by late 2021.

That forecast assumed there would be no state border restrictions in place throughout 2021, and that temporary and permanent migration would return gradually from late 2021.

Morrison said on Monday evening the international border would remain closed because “around the world Covid-19 is still rife”.

“We will keep moving quickly to vaccinate our most vulnerable population and we’ll keep those borders closed for as long as we have to, but only as long as we have to,” the prime minister said.

The government will update its economic forecasts on 11 May, when it hands down the budget. As well as attempting to reassure the public on Monday night, Morrison flagged more stimulatory measures in the budget “that build on the work that was done by jobkeeper and jobseeker to ensure the Australian economy keeps leading the world out of the recession that was caused by Covid-19”.

Morrison reconfigured the vaccination timetable due to blood clot warnings applied to the AstraZeneca vaccination. With concerns rising about vaccine hesitancy in the wake of the revised timetable, the prime minister said on Monday night the vaccine was safe for people over 50 according to the “very strong” medical advice.

In terms of the impact of the delay on the economy and the budget, it is possible the current strength of the economic recovery will ultimately net out the impact of a delayed vaccination rollout, assuming that Australia can get through another winter without sustained lockdowns.

Frydenberg said in a statement to Guardian Australia on Monday the Australian economy outperformed every major advanced economy in 2020 and “with the successful suppression of the virus and substantial reopening of the economy, both household and business confidence are now higher than before the pandemic”.

“While the continued vaccine rollout is an important step in protecting Australians against the threat of the virus, the timing of the rollout is not expected to derail momentum in our economic recovery,” the treasurer said.

The latest Deloitte Access Economics business outlook, released on Monday, found that living standards in Australia increased during 2020 at a faster rate than the average over the past decade despite the country enduring the first recession in three decades because of the shock caused by the pandemic.

The fillip was attributable to surging commodity prices and rock-bottom interest rates.

But the Deloitte assessment assumed virus numbers would stay suppressed in Australia, with herd immunity achieved by late 2021 or early 2022 – a timetable now in doubt due to the revamp of the vaccine rollout.

Labor says the botched vaccination rollout is a public policy debacle that imperils Australia’s continuing economic recovery.

“We can’t have a first-rate economic recovery with Scott Morrison’s third-rate vaccine rollout,” Chalmers said on Monday.

“It stretches credibility for the government to now pretend their vaccine debacle won’t impact the budget or the economy. The government’s failures on jabs will have consequences for jobs because delay after delay risks more lockdowns.”

Figures released on Sunday show 1.16m vaccinations have now been dispensed, with about half delivered by the commonwealth through the GP network and in aged and disability care, and the other half delivered through state vaccination hubs.

The New South Wales premier, Gladys Berejiklian, said the Morrison government needed to maintain a sense of urgency with the program and the public should not be lulled by any false sense of security.

“I know that some people don’t think there is a sense of urgency because we’re doing so well, but things can change very quickly and I don’t want to see our citizens left behind because the rest of the world starts trading with each other, starts travelling,” the premier said.

“I do have a sense of urgency about it”.

Epidemiologist Prof Mary-Louise McLaws, who advises the World Health Organization, said on Monday it would take “a couple of years” to fully vaccinate the Australian population if the rollout continued at the current rate. She told the ABC ramping up the number of vaccinations to between 100,000 and 120,000 per day would require “a lot of logistics” and for state governments to create mass vaccination sites.

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Classic cars and big crowds roar in for first Rockynats, packing a $20m economic fuel injection


With exhaust fumes and cheers in the air, the first-ever Rockynats Car Festival roared, revved and ripped into the Beef Capital.

The three-day event started with a bang on Good Friday with what organisers claimed as the biggest car parade in Australian history.

More than 1,000 cars and motorbikes crowded the Rockhampton CBD in a display of the classic old and the shiny new.

Organisers and local officials said they were expecting 35,000 visitors for the weekend, injecting $20 million into the local economy.   

For Robert Berry it’s a chance to show off his prized 1934 five-door Ford Coupe.

The car connoisseur drove the bright yellow hot road in a three-car convoy from the Northern Territory’s Humpty Doo, just for the three-day Rockynats event.

“We all went together and tried to do 1,000 Ks a day,” he said.

“Slept on the side of the road. We just took our time and went across to Townsville to see what COVID was going to do and then got the all-clear.”

Mr Berry built and re-built the car after importing the antique vehicle from America eight years ago.

Working on the car with his sons, Mr Berry said he would never stop fiddling with the showstopper.

“Both of my sons are into cars,” he said.

“To keep them interested in it, I let them have a bit of input … that’s the reason it ended up with a couple of turbos.

“It was already running when I bought it but you never stop changing it.

“You’re always playing with it and doing different things. 

“I’ll never stop to be honest.”

Mr Berry is one of thousands of visitors who scrambled to secure tickets to the historic Rockynats.

The event was originally set for a jump start in June but was postponed due to the pandemic.

And it was a close call this year, too, with an outbreak of COVID-19 in the greater Brisbane area the week before Easter.

“We’ve worked very closely with Queensland Health throughout this process,” said organiser Annette Pearce from Advance Rockhampton.

The economic boost for the region was great news for newly elected mayor Tony Williams.

“That money coming into the region is really because of stays in beds, in the local hotels and motels, where traditionally people would be leaving to go to other places during the Easter break,” he said.

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Vaccine Tourism Is an Economic Boon for Some Towns


For Quincy, Illinois, hosting a mass-vaccination site is helping revive what had been, pre-pandemic, a strong tourism industry. The city of 40,000, about five hours from Chicago, typically hosts all sorts of visitors in a normal year: road-trippers following the national scenic byway along the Mississippi River, Abraham Lincoln enthusiasts mapping the 16th president’s travels (he and Stephen Douglas held a debate in the city in 1858), and Mormons tracing their faith’s westward migration. When the virus hit, many of these guests stopped coming to town, causing hotel tax revenues to plunge by more than 30 percent and dealing a blow to the city’s restaurant scene. But since the Quincy mass-vaccination site opened to all of Illinois in March, the city has drawn more than 2,000 tourists each week from outside the region, many from the Chicago area. “It’s definitely something that we’re encouraged by,” Holly Cain, the director of the Quincy Area Convention & Visitors Bureau, told me.

The tourists seem to be helping reverse some of the city’s economic losses. Teri Zanger, the general manager of the local Quality Inn, told me the hotel had laid off employees at the beginning of the pandemic, but now vaccine tourists have increased bookings by roughly 25 percent, filling every available room. The hotel is now in the process of hiring again. Lindsey Schmidt, a staffer at Winkings Market, said that the restaurant and grocery store was also seeing a surge in out-of-town customers. The boost has been so significant that the store seems to be doing better business now than it was before the pandemic. “If you know the restaurant industry, you know the winters are tough. Everything drops down,” Schmidt told me. “But we’ve been having a summer in the winter.”

These places can all use the additional dollars. Over the past four decades, wealth in America has flowed to a handful of already-rich metropolitan areas, leaving other parts of the country behind. Quincy’s population has declined since 1970, and, as in Plattsburgh and Habersham, its median income is below the national average. In some cities hosting mass-vaccination sites, such as Kennewick, Washington, business leaders told me they aren’t aware of any economic benefits. Regardless, economics isn’t everything: If the boost in commerce was coming at the expense of locals getting their shots, that would be a bad trade-off.

But while lots of rural Americans, particularly in areas without pharmacies, are genuinely struggling to get jabbed, there haven’t been any clear downsides to vaccine tourism for some communities. The share of vaccinated residents in the counties including and surrounding Plattsburgh exceeds the statewide average. Adams County, home to Quincy, has the highest percentage of fully inoculated residents of any county in Illinois. Three of the four neighboring counties also have an above-average share. “It’s been a win-win for us,” Kyle Moore, Quincy’s mayor, told me. “We know that the state can get back on its feet quicker the more people who are vaccinated, and if we can play a part in that, we’re happy to do it.”

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After 10 years governing NSW, a tick for the Coalition as economic managers


For an outfit criticised as having too many bankers and not enough economists in its ranks, the NSW Coalition government has presided over an economy that has done remarkably well over the past decade. And as for the limitations of state economic management, I’ll say this about the state economy: you’ll know it when it’s handled badly.

Most striking about the NSW economy is that it has held its share of the national economic cake, or GDP, at almost 32 per cent over the past 10 years while in the previous decade it had dropped from over 36 per cent. Also, it increased its output per person relative to that for all of Australia by 3 per cent whereas previously it had fallen by 9 per cent.

The Coalition Decade of premiers: Barry O’Farrell, Mike Baird and Gladys Berejiklian. Credit:Michael Howard

So, at the macro-level, the NSW economy matched Western Australia and outpaced all other states. Only the smaller territories of the NT and ACT did relatively better. NSW gained a competitive edge on several fronts.

The most important was the scale of social and economic infrastructure construction which helped Sydney and regional cities catch up with their strong population growth. Proceeds from selling government businesses (tagged “asset recycling”) and heavy borrowing in the past three years tripled capital spending on works from $7 billion in 2010/11 to more than $22 billion this year. Some projects, such as stadium demolitions, Randwick light rail and the Powerhouse museum relocation, were dubious, but the vast majority withstood cost-benefit analysis.

The outcome of this construction drive is everywhere to be seen – a vast metro rail system, new tollways interconnecting Sydney plus the renewal and addition of hospitals, schools and other public buildings.

Construction of Victoria Cross Station, 31 metres below ground level, in the heart of the North Sydney business district, part of stage 2 of Sydney’ Metro’s plan to build 66km of metro rail across Sydney by 2024. It is the biggest urban rail project in Australian history.

Construction of Victoria Cross Station, 31 metres below ground level, in the heart of the North Sydney business district, part of stage 2 of Sydney’ Metro’s plan to build 66km of metro rail across Sydney by 2024. It is the biggest urban rail project in Australian history.

Former Labor roads and transport minister Carl Scully fretted in his autobiography: “The current Liberal National Party state government is now getting on and building the major rail and road infrastructure across Sydney and fully exploiting the fact that three post-Carr premiers were simply asleep at the infrastructure wheel.”

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There has also been an improvement in citizen and business interaction with government agencies through establishing Service NSW offices in most localities, and the digitisation of the whole public sector to an extent not tried by other governments. That has given NSW Health the upper hand in rapid COVID-19 testing and tracing, which helped avoid prolonged and disruptive lockdowns. It’s now widely recognised that NSW is the “gold standard” for managing the pandemic. Hence the popularity of the Premier, who first showed her mettle in a crisis with the black summer bushfires.

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For many tourism sector workers, Australia’s economic recovery has not even begun | Greg Jericho | Business


The latest unemployment figures suggest the Covid recession is almost over, but a focus on the industry hit hardest by the pandemic, the tourism sector, shows there is still a long way to go.

The February unemployment figure of 5.8% was a very nice surprise. The drop from 6.3% was the third biggest one-month fall on record.

And while there is still a fair bit of messiness going on with the data because the snap shutdown in Victoria last month was mostly missed by this survey (which covers the first two weeks of each month), it’s still a great result.

Using the unemployment recession measure devised by American economist Claudia Sahm, which looks at the change in the unemployment rate within a 12-month period, all states are still on the edge of recession, but very much trending in the right direction:


Graph not displaying? Click here

So all good?

Alas, not for all workers, and especially not for those in the tourism sector. The reason of course is that because of the shutdowns and border restrictions, people have been unable to travel – and for international tourists this is likely to remain the case for many months yet.

Measuring the tourism sector is quite challenging because it traverses a number of industries from the obvious ones of accommodation and food services, to areas like travel, retail and even education.

The Australian Bureau of Statistics overcomes this by applying a “tourism value-added industry ratios to employment estimates for each industry”. It does this by assuming that to be a tourism job it must be one that provides goods and services to both visitors and non-visitors.

And the results reveal just how much carnage there has been over the past year. It also reveals how the impact has been much more directed at women and those working full-time.

More women work in the tourism sector than men. Prior to the pandemic, women made up around 55% of all jobs and the same amount of full-time positions in the sector:


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By the end of last year that had fallen to 53% and women now occupy just 51% of all full-time jobs.

It’s not surprising when you look at the parts of the tourism sector that were hardest hit:


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The ABS estimates that 23,700 jobs in cafes, restaurants and other food services were lost in 2020 and 21,100 in accommodation.

Women make up the majority of workers in both sectors. Prior to the pandemic, women accounted for 60% of jobs in accommodation and 55% of the 832,000 jobs in food and beverage service.

And when we break down the jobs by full-time and part-time we see just how drastic has been the hit to full-time workers:


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And the loss of full-time work has been felt most acutely by women.

In the first half of 2020, when the pandemic took the biggest toll on jobs, some 36,900 full-time jobs held by women were lost. In the same period, 54,200 part-time jobs held by women were cut.

But in the second half of last year, 35,800 part-time jobs returned – not enough to make up the total loss, but at least something to suggest things were recovering. And yet far from recovering full-time jobs, another 2,000 full-time jobs held by women were lost:


Graph not displaying? Click here

Men were also losing their full-time jobs through the second half of 2020, but the initial loss was not as great as it had been for women.

Indeed, when we look at the annual loss of jobs, while for part-time workers of both genders things are getting better, the loss of full-time jobs for women in the tourism sector is getting worse:


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The national and state unemployment rates show that as restrictions ease and worries about outbreaks subside, the jobs do come back.

The worry, however, remains whether the same jobs at the same hours will come back. In the tourism sector, which still awaits the reopening of international borders, the path back to pre-pandemic levels remains to be traversed.

For full-time workers in the tourism sector though, and especially for women, the recovery has not even begun.

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Europe’s ‘Club Med’ countries driven deeper into economic crisis by vaccine shambles


Loss of confidence in the vaccination process due to the EU’s erratic lurches back and forth over the AstraZeneca jab has only made matters worse.

EU ‘vaccine certificates’ may help to soften the blow for the tourism industry, although US and Canadian tour operators – big spenders when they come – are close to writing off Europe for a second year running.

The fresh COVID breakout has dealt a political body blow to French President Emmanuel Macron, who defied his scientific advisers and prime minister in January and insisted on keeping France largely open.Credit:AP

The Chinese and Japanese will not be coming.

The long-term danger is a K-shaped recovery that leaves southern Europe languishing. Club Med economies have already seen public debt ratios explode. The Commission has forecast debt ratios next year of 119 per cent of GDP in France, 122 per cent in Spain, 127 per cent in Portugal, 159 per cent in Italy, and 194 per cent in Greece. It had expected ratios to stabilise and to start falling in some countries this year but these calculations were made before the third wave struck.

The tourist sector makes up 13.7 per cent of output in Greece and 12.4 per cent in Spain. It is roughly half that size in Italy and France, which have bigger, diversified economies. Marchel Alexandrovich from Jefferies says that part of this is protected even if foreign travellers stay away. Some of it is domestic tourism so there is an offsetting ‘staycation’ effect.

However, it could be extremely serious for Spain. The economy contracted 11 per cent last year when foreign visitors collapsed from 84 million to 19 million, costing €106 billion ($163 billion) in lost revenues, according to Exceltur data.

The Spanish government is rushing through an extra €11 billion package to rescue firms and prevent a cascade of insolvencies. But overall fiscal policy is tight, bordering on contractionary.

The political and economic stakes of vaccine strategy are rising exponentially.

The EU Stability Pact hangs like the Sword of Damocles over the high-debt states. It has been suspended for now but will snap back after the pandemic.

The Bank of Spain had been counting on 6.8 per cent growth this year yet is starting to warn of a darker scenario. Spain will be a major beneficiary of the EU’s €750 billion Recovery Fund but half of this is loans rather than grants and it trickles through slowly over six years.

The Europe Central Bank’s Schnabel caused minor tremors in EU policy circles this week by stating what everybody knows – but few dare utter – that the fund is too small. A bigger package will be needed. This is to break the code of Omerta. Europe’s leaders oversold the Recovery Fund last year as a dramatic game-changer and a great leap forward in fiscal federalism, Europe’s ‘Hamilton moment’ no less.

The vaccine mishaps will make international tour operators hesitant to send clients to Europe..

The vaccine mishaps will make international tour operators hesitant to send clients to Europe..Credit:AP

To admit now that it was inadequate is a daunting political prospect. The push for a second bailout package will be a very hard sell in the frugal bloc of Germany, the Netherlands and Baltics.

Stimulus from the Recovery Fund is tiny compared to Joe Biden’s mega-packages in Washington. Furthermore, pent-up household savings in Europe are less potent than in the US.

TS Lombard says most of the money has accrued to older people with a low propensity to spend, while the young have seen a drastic worsening in their personal finances. It is the opposite story in the US where the young enjoyed a windfall from the weekly support cheques, often exceeding their previous pay. This cohort spends almost all its cash and will give an extra lift to America’s economic recovery.

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In Europe, the ECB will try to hold the fort by ‘front-loading’ bond purchases and by backing Club Med debt markets indirectly by extending a further €330 billion of ultra-cheap credit to banks (TLTROs). But the ECB is currently fighting an imported monetary shock from the US as surging bond yields tighten financial conditions. Its bazooka is muzzled.

The danger is that Club Med will again be left behind when recovery comes, repeating the pattern seen after the Lehman crisis. The scarring from another lost tourist season could lead to a ‘bad equilibrium’ that does not self-correct, ultimately causing a second lost decade.

That would be untenable. The political and economic stakes of vaccine strategy are rising exponentially.

Telegraph, London

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The Morrison government would like to declare the economic battle is won | Australian economy


More than usual, right now economic data is a Rorschach test wherein different people will see different things, and mostly what they want to see. Are we out of a recession? How badly or how well are we performing? There is multiple data around to make the case for whatever argument you wish.

And it will continue to be so for a while.

The latest GDP figures released this week from the bureau of statistics revealed that in the December quarter our economy grew 3.1%.

That’s good, very good in fact.

But it also showed that our economy in that quarter was 1.1% smaller than it was in the December quarter of 2019.

That’s bad, very bad … but not as bad as in June 2020 when the economy was 6.3% smaller than it had been in June 2019.

The problem is quarterly and annual changes are going to be pretty wild for a while.

Changes from one period to the next are not just about how good things are now, but how bad they were beforehand. Given the first six months of last year were historically bad, anything relatively decent now will look brilliant by comparison.

This is important because the Morrison government desperately wishes to roll back any stimulus and so a positive reading of the economy is one that adds weights to their argument.

But it is difficult because while the initial impact of the pandemic that wrecked the economy is behind us, the impact remains – including in the data.

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Normally quarterly changes are much more erratic than annual changes, but we already know that the June quarter of this year is going to show a record annual growth – probably over 8%.

Why so? Not because I know that April, May and June are going to be the greatest three months Australia economy has ever had, but because April, May and June last year were the worst three month we’d ever had.

The problem is the way we frame things.

Yes, the economy is better and will be better than it was last year when things were awful. But a better economy is not a strong economy. Nor does the growth of the economy now tell us anything about the fall of growth previously.

Had we not had the pandemic it’s a good bet that the size of Australia’s economy in real terms would now be above $2tn – that is where it was headed based on the decade before the pandemic hit.

Instead, it is 3.5% below that level.

Rather than growing in 2020, as economies are meant to do, it fell back to the size it was mid-way through 2018 – essentially 18 months lost.

How long does that take to recover?

The Reserve Bank last month estimated our economy would grow by 3.5% till 2023 whereupon it would slow to 3%.

If that were to occur (and that would be very strong growth), the economy by the middle of 2023 would still be more than 1% smaller than we would have expected it to be prior to the pandemic.

Some of that is due to smaller population growth; much of it is because it takes time to recover.

The question is when a government should declare the battle has been won and thus it was time to ease support.

The Morrison government would like to do this sooner rather than later – and focusing purely on growth compared to the worst of times will make that sound logical. But it will likely hide just how much has been lost and how far we have to go to get it back.

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