El Nino is back. The federal budget last night was mostly silent on climate change and weather events. In fact, spending in these areas was slashed. But on the eve of Joe Hockey’s proforma release of his second budget, the Bureau of Meteorology declared that El Nino was back, and it could be a nasty one. That means a big dry in NSW, Queensland and parts of Victoria. Wide areas of Queensland, NSW, Victoria and South Australia are already in severe drought going back more than two years, so El Nino will worsen what is already a tough situation.
For farmers and communities in the face of the looming drought, there’s no hyperbole. If past El Nino events are any guide, it will be very tough. So watch companies like Elders, Aust Ag, Nufarm and Incitec Pivot, plus Orica, the banks (which are already copping some stick in drought-hit areas), the big retailers, which will have to cope with volatile prices for rural commodities and, of course, the trade account, which could take several hits from weaker grain and meat prices. And companies like Webster Ltd, which is expanding deeper into rural commodities, especially cotton, Qube which is expanding into grain, GrainCorp, of course, which reports its latest profit tomorrow and will have something to say about the impact of the drought already. Bega Cheese, Warrnambool Cheese and the about-to-list Goulburn Valley could also find their milk businesses under pressure if the drought reaches their dairying zones. It has in the past. Media companies operating in rural areas such as Southern Cross and APN will be hurt if there’s a serious drought and already weak levels of advertising and sales are hit. And the chances of the Abbott government being re-elected next year could also be hurt if the drought triggers an upsurge in voter concerns about climate change. What will Tony Abbott’s favourite business adviser, Maurice Newman, say? That El Nino is also part of the United Nations plot to takeover the world? He, in fact, said late last year he doesn’t trust BOM and wants an investigation. Tinfoil hats anyone? — Glenn Dyer
Whose budget was that? Joe Hockey has been let off Tony Abbott’s leash by Scott Morrison and is fronting the National Press Club (as you read) in Canberra today to talk about someone’s budget. In fact, it will be a bit like that old US TV game show What’s My Line? (or here, Blankety Blanks) in that Joe Hockey will tell us something about the budget, and the assembled journalists and few thousand viewers in TV land will have to work out if the line/policy is from our Joe, the PM or the man who would be treasurer/leader. Alternatively, there’s the other new game called “Pin The Tail on The Budget” where questioners have to assign policies to various budget authors. One of those will be from UBS Man (AKA Treasury secretary John Fraser) who seems to have been infected by the same virus as the Abbottistas — an unerring ability to do something to offend a group of people who will end up being vital to the success of the budget.
In the case of UBS Man, he has jilted the annual business economists’ lunch in Sydney (where the head of Treasury explained the nuts and bolts of the budget to fellow wonks) and he took questions as well from his peers. But the UBS Man is heading for Melbourne and a Grattan Institute early-evening function at 6.30pm. He will speak and will take questions, but they won’t be tricky or sneaky. The 6.30pm timing is another example of the stupidities of the Abbottistas and their mad desire to control the message. The 6.30pm speech is right on the deadlines for the weekend editions of The Age, The Sydney Morning Herald, The Australian and The Australian Financial Review (the Herald Sun and Daily Tele, those traditional homes of considered economic thought and debate, have later deadlines). So whatever UBS Man says on Friday night won’t make it into the serious papers until Monday morning, which by then will be overtaken by the appearances over the weekend of the PM, Hockey and Morrison. What’s the betting the PM fronts up on Sky News (AKA News Corp) and/or The Bolt Report (AKA News Corp), but not Insiders on ABC TV where the questions might be too acute for our Tone’s liking, or ability to answer without stuffing up. Tone will leave it to Joe to be skewered by Bazz Cassidy. — Glenn Dyer
Keruunch! That’s the sound of the door shutting on one of the federal government’s big trade initiatives — the TPP or Trans-Pacific Partnership, looks like being stillborn in the US with 42 Senators in President Obama’s own Democratic Party voting against a move overnight, which would have started the process to give the President special powers to husband the trade pact through the US Congress. Unless there’s a significant change of heart among Democrats, the trade deal won’t be put to the vote later this year because it will be delayed and diverted in the Senate by opponents. The fast track authority Obama had sought would have allowed him to override the delaying moves. Republican senators voted for the fast track move, but as well as the Democrats, the two independents in the Senate voted against the move. The TPP would create a free trade zone covering 40% of the world economy — making it the biggest trade deal since the North American Free Trade Agreement freed up trade between the United States, Canada and Mexico. That is blamed by unions and many in business for US factory closures and job losses. The President will no doubt try to change minds in the Senate, but America is heading towards an election year, he is a lame duck, and slowly losing clout. For the Abbott government, which has invested a lot of time and effort in the TPP, it’s not good news and all that boasting about “investing” in trade agreements in last night’s budget will end up as more hot air from the Treasurer and the government. Trade Minister Andrew Robb will be an especially big loser if the Americans abandon the TPP. — Glenn Dyer