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Australian Weekly Report

CMAX Advisory closely follows political developments internationally and analyses implications for businesses operating in Australia.

We develop a weekly report of the most important political and economic news in Australia, utilising our understanding of complex political issues and processes to inform companies of relevant developments and forecast likely outcomes.

This week's top story

RBA governor says rates will stay low

Reserve Bank of Australia Governor Philip Lowe has reiterated his stance that interest rates are unlikely to rise before 2024, putting him at odds with Prime Minister Scott Morrison and Finance Minister Simon Birmingham.

Speaking to economists in Sydney, Dr Lowe said the country’s interest rates would stay at their record low of 0.1 per cent until there was solid growth in wages, which would also see a rise in inflation.

While the latest data from the Australian Bureau of Statistics (ABS) shows wages were up 2.2 per cent over the year to 30 September, that is still below the RBA’s view that more than 3 per cent wages growth is needed.

“If you think wages are going to go from 2 per cent to 3.5 or something in six months, well, maybe the market’s right, and we’re wrong,” Dr Lowe said.

The governor’s assertion that interest rates will remain where they are for the next year undermined warnings from Mr Morrison and Senator Birmingham that interest rates would rise if a Labor government were elected.

Mr Morrison is keen to fight the upcoming election — due in the first half of next year — on economic management, an area where voters consistently rate the Coalition as being better than the Labor Party. He said inflation in the US highlights “Australia’s economic recovery has to be secured by people who have a track record in economic management”.

“And that’s why economic management is so important now, as we come out of Covid, having secured our health through the pandemic, we now must secure the economic recovery,” Mr Morrison said.

Senator Birmingham backed the claim, saying that interest rates were always higher under a Labor government. “They’ve seen the history of Labor governments where interest rates have been higher, where electricity prices have been higher, where economic outcomes have been weaker,” Senator Birmingham said.

However, Shadow Treasurer Jim Chalmers dismissed the claims, saying that wages had gone backwards and other costs, such as petrol, had risen under the Coalition. “Is he seriously claiming interest rates will not rise if he is re-elected? Let’s hear about how he intends to do that and how he intends to promise that,” Dr Chalmers said.

Political commentators have pointed out that the risk for the Mr Morrison is if the global spike in inflation is sustained and the RBA is forced to raise interest rates in the New Year. That would echo the 2007 campaign where then-Prime Minister John Howard made the same claim that interest rates would be lower under a Coalition, only to have the RBA raise interest rates during the campaign. The Coalition went on to lose the election to Labor.

Other news

Government expects post-Covid job boom

The federal government is hoping that the end of lockdowns in the country’s two largest state economies will lead to a boom in jobs and rising wages before Christmas, with Prime Minister Scott Morrison suggesting the government is in no hurry to restart migration to ease labour shortages.

“We’ve seen what jobs growth can be achieved after lockdowns before, and with even fewer restrictions and the threat of lockdown fading, there’s never been a better time for businesses to hire as more people get out and about shopping, travelling, eating and enjoying themselves this festive season,” Mr Morrison said.

The government expects the reopening of the New South Wales and Victorian economies could result in the creation of 280,000 jobs between now and Christmas. “Australia is reopening safely and to secure our economic recovery we want to see more Australians in jobs this Christmas and summer,” Mr Morrison said.

While the prime minister has said skilled migrants and foreign students would begin returning later this year, the government is reportedly unwilling to restart migration in a significant manner ahead of the election.

The cost of living and economic management are expected to be major themes of the election campaign, and analysts suggest a tight labour market, and subsequent rising wages, would benefit the government’s argument that it was helping put more money in people’s pockets.

Critical tech identified to aid investment

The federal government has developed the country’s first list of critical technologies that is says will drive government and private sector investment, as well as protect them from being shared with other countries.

The list of 63 critical technologies goes beyond the “dual-use” technologies Australian universities and businesses have been told to protect from foreign governments and could be used to stop China collaborating with Australian universities on some research, as well as block exports.

The list includes advanced explosives, next-generation networks such as 5G and 6G, cybersecurity technologies, genomics and additive manufacturing, including 3D printing.

In announcing the list, Prime Minister Scott Morrison said it aims to balance the economic opportunities of critical technologies with their national security risks.

“The simple fact is that nations at the leading edge of technology have greater economic, political and military power,” he said. Mr Morrison added that Australian officials will report back within a month on how to develop new capabilities in AI, quantum technologies and undersea drones under the AUKUS agreement.

While the government has identified 63 technologies, it will initially focus on supporting nine, the first of which is quantum technology, with Mr Morrison announcing A$100 million will be allocated to commercialising quantum research and develop links with global markets and supply chains.

The release of the list follows growing concerns that Beijing is developing a lead in critical technologies such as AI and quantum, which could have military applications.

NSW defends keeping density limits

New South Wales Premier Dominic Perrottet has defended the government’s decision to continue enforcing density limits, despite 91.5 per cent of the state’s population aged over 16 being fully vaccinated.

NSW will next ease restrictions when the state reaches 95 per cent fully vaccinated, or on 15 December, whichever comes first. At that point, unvaccinated people will enjoy the same freedoms as the rest of society, including attending non-essential retail and hospitality venues.

However, Mr Perrottet said density limits of one person per two square metres would remain in place. While Victoria has scrapped almost all of its remaining Covid-19 rules, including capacity and density limits in a variety of venues, Mr Perrottet rejected any comparisons.

“I’m not going to get compared to Victoria when they’ve had probably more days in lockdown than anywhere else in the world,” he said.

Prime Minister Scott Morrison welcomed the lifting of restrictions in Victoria, adding that “Australians have done their part. It’s now time for them to be able to step forward with their lives and for governments to step back out of their lives”.

It follows earlier comments from the prime minister that it was time for governments to step back from restrictions now that the country was reaching its vaccination targets. Political commentators see the argument as something the prime minister is likely to campaign on in the upcoming election as he tries to contrast the Coalition with the Labor Party and Labor-led states such as Queensland and Western Australia.

Mandates should be up to business, says PM

Prime Minister Scott Morrison has it should be up to individual businesses, not governments, to decide if vaccinations against Covid-19 are mandatory.

Speaking to reporters in Sydney, Mr Morrison said vaccine mandates were appropriate for the health sector to protect the most vulnerable members of the community, such as those in aged care, disability care and in emergency wards.

“We said in the rest of the economy, that should be up for businesses to decide. It’s their business and they can decide these issues. We don’t think that government should be telling them who should come in and out of their business,” he said.

His comments came as South Australian authorities introduced a mandatory vaccination policy for the state’s schools, with all staff and volunteers at schools, preschools and early childhood facilities needing to be fully vaccinated before the start of the next school year.

Meanwhile, 10,000 people have registered their interest in a federal government compensation scheme for adverse reactions to a Covid-19 vaccination. In order to claim, a patient needs to have spent at least one night in hospital and be able to show medical evidence of the injury and its link to a Covid-19 vaccine.

Out of almost 37 million vaccine doses across Australia, 0.21 per cent have reported adverse side effects, and according to infectious diseases experts, an even smaller fraction of those were severe.

Vaccine donation to focus on Indo-Pacific

The federal government will expand its vaccine donation program from AstraZeneca to include Pfizer and Moderna doses, with a focus on the Indo-Pacific.

Australia currently sends AstraZeneca doses overseas, while Pfizer and Moderna vaccines are reserved as the primary vaccine for domestic rollout. However, the head of the government’s Covid-19 taskforce, Lieutenant General John Frewen, said there is now enough mRNA vaccines to spare.

Lieutenant General Frewen said that with more than 80 per cent of the nation now fully vaccinated, and a surplus of Pfizer vaccines, the government believes it can begin exporting Pfizer in the coming months.

“We’ve had good opportunity for a while with AstraZeneca and we think that increasingly, we will have good opportunities with mRNA vaccines as well. We have been working very closely with the Department of Foreign Affairs and Trade for some months now moving surplus AstraZeneca vaccines out into the Indo-Pacific region,” Lieutenant General Frewen said.

He said the government would look to deliver any surplus mRNA via the same channels used to get AstraZeneca doses to countries in the region. Australia is expected to donate 20 million vaccines by mid-2022, increasing to up to 40 million by the start of 2023.

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