Australia’s new Prime Minister Anthony Albanese has been sworn in this morning just before he jets off to Tokyo for a meeting with Quad leaders from the US, India and Japan.
The sense of urgency befits the political and economic climate he has inherited, with heightened concerns about inflation, interest rates, climate change, regional security and an eyewatering national debt all competing for his attention.
ASX futures were down 15 points this morning to 7,129, with the local bourse expected to fall today following seven weeks of falls on Wall Street, and more pain expected to come on that front.
Over the week the Dow fell 2.9% – the eighth straight week of decline and the index's longest losing streak since 1932.
Climate and integrity win the day
The PM elect’s ALP expects to be able to form government in its own right – it needs 76 seats to do so, with 72 confirmed and five more within its grasp.
The party moves into government on a historically low primary vote (only around a third of voters put either of the two major parties first), and, should it fail to pass that 76-seat majority, will need to negotiate with a large cross bench made up primarily of ‘teal’ Climate 200-funded independents and Greens.
One thing is clear – the climate elephant in the room made its presence felt, as did the growing push for a Federal Commission on integrity in government, and these twin policy issues will be championed by a groundswell of new women MPs who felt unheard on these and a range of issues by the last iteration of government.
Billionaire wins and losses
Simon Holmes à Court, son of Australia’s first billionaire, the late Robert Holmes à Court, is the principal backer of the climate candidates through his Climate 200 movement, which has spearheaded a push for government to take climate action seriously.
Just like fellow Australian Mike Cannon-Brookes, Holmes à Court is in the process of proving not only that the business community does care about climate, but that it is well placed to lead on this issue.
The Climate 200 successes stand in stark contrast to the story of Clive Palmer, who gave new meaning to the words ‘sunk costs’ by dropping 100 million into a campaign that failed to achieve any of his political objectives, such as they were.
The challenge for the new government is to reconcile an ambitious reform agenda – the Indigenous Voice to Parliament, the Federal integrity commission and wage increases – with the enormous economic and geopolitical headwinds it faces, including the ticking time bomb of continued inflation.
Chinese property market slumps
Last week, China’s third-largest developer, Sunac China, run by one of its richest men, billionaire Sun Hongbin, defaulted on coupon payments towards a $1.1 billion offshore bond.
Unlike Evergrande, which defaulted in December last year, Sunac appeared to be in good shape.
The default is seen by some as signposting further fragility in the Chinese economy – particularly the property sector, which has for a long time been viewed as a bubble.
ANZ Research estimates that $20.3 billion of offshore bond debt, or 25% for the year, is due in the next two months. It will be interesting to see how this is navigated by the sector.
The strict lockdowns in the country’s largest cities have had an impact on the housing market, with sales dropping 32.2% year-on-year since January, according to ANZ Research. Some analysts say the property sector contributes around 20% of output, and this will compound the country’s economic woes.
In other news
The S&P 500 index and the Dow rose by less than 0.1% overnight, while the Nasdaq shed 34 points or 0.3%.
Over the week, the S&P 400 fell 3.0% and the Nasdaq fell 3.8% - the seventh straight declines and the longest losing streak for either index since 2001.
The Aussie dollar was sitting at 70.40 US cents, Bitcoin fell 2.4% to hover around US$29,242 last night, while gold, oil and iron ore were all up – iron ore by 6.1% to US$134.25 per tonne.