Stuck in the past. Don’t you just love the plucky editors of The Australian and The Australian Financial Review presenting a “United front to face digital future” as the page 2 puff piece in the Weekend Oz was headlined, while the digital future is rushing past them at a rate of knots (once again)? Our dynamic duo, Michael Stutchbury of the AFR and Chris Mitchell of the Oz, are combining in a National Reform Summit on August 26. Now both papers are going to combine to warn us about any number of pet issues, including productivity, wages, tax, industrial relations, jobs and of course the rapid change being wrought by the digital world. But as they posed for handshakes at the Oz’s Sydney HQ, Netflix’s shares soared to record highs and past the value of General Motors, and then on Friday night, shares in Google (News Corp’s hated adversary) jumped 16.3%, or US$65 billion, to almost US$470 billion, second only to that other tech giant, Apple (over US$750 billion). In fact that US$65 billion rise in Google’s market value was around eight times the value of News Corp, and nearly 30 times the market value of Fairfax. Both papers spent years resisting the digital future as promised by the likes of Google, Facebook and Apple (they have done their best to shut it out so far as their readers are concerned). –– Glenn Dyer
Tax reform just talk. There was the AFR and the Oz reporting that Joe Hockey had found another magic pudding and wanted to offer tax cuts at the 2016 federal election (and both papers showed no interest in wondering what the economy might be like next year). And then there was the 15% GST rate competition between Mike Baird, the NSW Premier who gave the News Corp-owned Oz another “scoop” in an article. Perhaps he had a talk to all those actor/voters on the Sydney train he was on in a News Corp ad for the Sydney Daily Telegraph last year? But over at Fairfax Media’s The Sydney Morning Herald there was a rival 15% GST bid — from the accountants who presented a far better structured argument for a 50% rise in the tax than did Baird and the Oz.
Baird wrote in the Oz he wants the present exemptions to remain, so no real courage in his call. But don’t you also just love the irony of the accountants (the very people who help us negotiate the GST tax minefield, and other tax blackholes), proposing an increase in the GST (and its expansion to food, etc). In other words, they are drumming up more business with this submission. It’s the sort of wishlist that John Howard promised before the GST’s birth before 2000, and failed to deliver over the next 11 years (such as cutting out useless state taxes such as stamp duty. Howard and Peter Costello did nothing to protect the GST in their time in power). Given their lack of fortitude, you can be sure Tony Abbott and Joe Hockey won’t have the courage to tackle tax reform — just talk about it in a cloud of hot air. — Glenn Dyer
China’s QE boom. The first estimate of the cost so far of China’s bailout of its sharemarket, brokers and investors, emerged at the weekend and it is a rather substantial figure — US$209 billion, or A$282 billion, according to Caijing magazine, an independent Chinese business magazine. But there are also higher estimates — AMP chief economist Dr Shane Oliver wrote in his weekly note at the weekend that there are “rumours that the China Securities Finance Corp (CSF) has up to 3 trillion Renminbi (or $A652bn) with which to buy shares if needed. The proportion of Chinese shares in trading halts has now fallen to 23%, from a high of around 40%.”
Caijing reported that the country’s state-owned banks lent a total of 1.3 trillion renminbi ($209 billion) to the country’s margin finance agency in recent weeks “to staunch a free-fall in the stock market, casting doubt on whether the recent equities rebound is sustainable without government support,” as the Financial Times reported at the weekend. “CSF has lent to brokerages to finance their investment in shares and has also purchased mutual funds directly. But the latest revelations indicate that state support for the stock market is much larger than previously disclosed.” It certainly is, and the money came from the People’s Bank of China via five state-owned banks and then to the CSF to support share prices and stop margin selling from overwhelming the market (which was, in turn, aided by the self suspensions of more than half the listed companies on the country’s sharemarkets in Shanghai and Shenzhen). Caijing says the CSF has also raised more money from Chinese bond markets, so with the central bank money and the loans from the banks, it has close to A$400 billion lent or in reserve to help smother any more sell offs. — Glenn Dyer