Today is I-day, which is a new name I’ve created to underline the importance of what happens in Australia for a lot of people who are suffering and in great need for overdue relief. “I” stands for inflation, and right now it’s imposing pressure on those with home loans, those who invest in stocks and the 13 million plus Aussies who have a super fund.

However, most of these people mightn’t know their fund has been hurt by the failure of inflation to fall sufficiently for the Reserve Bank of Australia to start cutting rates. In simple terms, if inflation falls more than expected today, it puts us closer to the day when the RBA cuts. The consensus thinks it should be September. However, it will be earlier, if inflation drops quicker than expected and the economy slows quicker than economists ‘guess’ it will right now.

By the way, the recent sell-off of stocks last week was related to three I’s: Inflation, Israel, and Iran. Stock prices have risen two out of two days this week because Iran’s foreign minister scoffed at Israel’s attack on Isfahan as akin to being bombed by a child’s toy!

The market took that as maybe Iran has flexed its muscle, but it doesn’t want a war and stocks went up on Monday. They’ve gone up again overnight on Wall Street but this time there were other pluses for stocks.

On top of less geopolitical concerns out of the Middle East, the US stock market liked news that manufacturing data hit a four-month low, with the S&P Global Flash U.S. manufacturing PMI reading going to 49.9, down from 51.9 in March. That implied the US economy might be slowing and that will help lower inflation. As a response, the benchmark 10-year Treasury yield went lower.

This is another good omen for US inflation. Remember, right now, the Yanks are worried they mightn’t see a rate cut this year after starting the 2024 thinking at least five cuts were coming. So, any data that says the economy is slowing helps the Federal Reserve in the States and our RBA get closer to a rate cut.

That’s why I-days are important here and in the US. While we get our March quarter Consumer Price Index today, on Friday in the US, the Fed gets to see what it thinks is the best gauge of American inflation — and that’s a statistic called the Personal Consumption Expenditure (PCE) index.

If both inflation readings come in on the downside, it will be good for bringing rate cuts closer and also good for stock markets, provided things don’t hot up in the Middle East.

In regard to our CPI, this is the important information to remember:

1. The SMH’s Shayne Wright says “… inflation is expected to fall to its lowest levels since the third wave of COVID-19 swept through the country.”
2. Economists’ best guess is inflation will hit a 2½-year low of about 3.5%
3. The CPI in the December quarter was 4.1%, so 3.5% would be progress.
4. Rents, education, health, and insurance are tipped to be the problem for the CPI’s reduction.
5. The RBA wants inflation in the 2-3% band or close to it and that’s when rate cuts will happen.
6. On the other hand, if economic slowdown numbers look more worrying to the RBA, it could move earlier on rate cuts, so data drops will be crucial in coming weeks and months.

While inflation is a killer for the cost of living experience for households, Shayne Wright tells us tax increases have added to our hip pocket hit.

Over 2022-23, the ABS says the tax take per person for the Federal Government rose 10% or $2,100!

And Shayne says we lost $2,600 in the year before!

Also, state governments have had their hands in your hip pocket, with Victoria taking the most from business and residents to the tune of $5,795. Victorians can thank Dan Andrews for that milestone.

The combined wack of 13 rate rises, the inflation hit on our real wages and what those pay packets can buy, along with this tax take, has to slow our economy down. And if that slowdown happens faster than the RBA and economists expect, then they will cut interest rate earlier than they all expect.

Today’s I-day could bring us closer or push us further away from our first rate cut.

To quote Frontline (arguably one of the greatest TV satires this country has ever produced, which was created by my old Degeneration colleagues from the Triple M breakfast show in Melbourne decades ago) “this is a great story”.

To reveal all journalists, this is a “gotcha” story, where Treasurer Jim Chalmers and his boss PM Anthony Albanese look like they’ve misrepresented the truth over the Stage 3 tax cuts.

The problem with this story is that it does suggest that the Government’s likely ‘lie’ has only hurt richer Australians. Since the days of the revered-by-many John Howard, we were taught that there are “core promises” that have to be kept but there are also “non-core promises” that were breakable!

Howard actually said it but past politicians have thought it, acted on it and got away with it. But break a core promise and you’re cooked at the next election.

Julia Gillard found that out with her “…there will be no 'carbon tax' under the government I lead”.

So, what is a core promises?

While you can come up with many definitions, the critical point is that if a politician breaks a big promise that hurts lots of voters, then it’s a core promise.

And that’s the trouble with this great story that shows the Labor team have told ‘pork pies’ on their intentions with the Stage 3 tax cuts.

A news.com.au story by Jack Quail reveals the following: “Amendments to the later overhauled stage 3 tax cuts were examined by the federal government as early as June 2022, correspondence between Treasury and Treasurer Jim Chalmers’ office has revealed. A two-page ministerial submission, released under freedom of information laws, shows Treasury officials presented three separate options to amend the tax package in July 2022 following a request from the Treasurer’s office weeks after Labor won the 2022 election”.

Be clear on this: none of the options put forward were used in the ultimate changes to the tax cuts, which the PM promised not to tinker with, but under the new tax cuts he has.

While the government ultimately didn’t pursue any of three options, it had staunchly denied claims that it was seeking to alter the tax package until it finally amended them earlier this year.

That looks like a lie but I’m sure a good lawyer could convince a jury in a court of law that it’s not really a lie as Seinfeld’s George Costanza character once said, “if you believe it!”

Politicians actually have a right to break core promises if they prove to be bad promises economically, but when it’s politically driven, that’s when purists might be very critical of a PM and a broken core promise.

The trouble is that while this broken promise is economically questionable, it’s socially and politically a vote winner for the promise-breakers!

As Quail reported: “…despite receiving the costings in July 2022, it wasn’t until 18 months later that Labor proceeded with the tax shake-up, providing additional relief to low and middle-income earners while slashing the benefits for approximately one million taxpayers that earnt more than $150,000.”

And a big chunk of those losers under the new tax cuts are likely to be non-Labor voters, given their income.

Treasurer Jim Chalmers can use economic reasons for these changes, but others would say it’s pro-inflationary because lower income people will spend their tax cuts while richer people will save or invest the tax cuts. However, the many beneficiaries of these bigger tax cuts will say “you little beauty” and not care that Shadow Treasurer Angus Taylor has branded the act as an “egregious breach of trust”.

By the way, most of those people wouldn’t understand the word “egregious”, just like they wouldn’t understand the economic consequences of these changes. They could care a little bit about the changes that will come at a cost of $8.4 billion in the four years to mid 2026, but they probably won’t care that much because most voters glaze over when they hear billions and budgets.

By the way, Quail reports 51% supported the changes, 32% opposed them, 17% were undecided but 84% will be better off.

Case closed!

A listener to Ben Fordham’s breakfast show on 2GB asked why petrol prices are so high after being forced to pay $2.46 a litre. So Ben asked me to explain why this is happening and the implications on inflation and rate cuts.

Let’s kick off with the reasons why your petrol prices are spiking, so here goes:

1. OPEC+ regulates supply to keep oil prices elevated. This stands for the Organisation of Petroleum Exporting Countries (OPEC+) and is made up of Saudi Arabia, Kuwait, Venezuela, and Indonesia, plus others, importantly, the Islamic Republic of Iran.
2. The Israel-Iran hostilities.
3. The Israel-Hamas war.
4. The Russia-Ukraine war.
5. The associated fear for global trade if a Middle East war escalates.
6. The above related fall in the Aussie dollar makes oil bought from overseas more expensive.
7. You don’t shop around for a discount petrol station.
8. The type of petrol you buy.

Because of all these factors, petrol prices are in an upward phase and will remain so until Middle East troubles subside and the Russian-Ukraine war ends.

Interestingly, on April 9, writing for drive.com.au Susannah Guthrie told us that “…at the time of publishing, the RACV had Melbourne's average unleaded price at 191.2 cents per litre – 10 cents per litre less than Sydney's average price.”

Different capital cities can be at different points in the pricing cycle, which is something I can’t explain.

“Motorists in Adelaide and Canberra were actually feeling the pinch more than those in Sydney – with Informed Sources data showing Adelaide’s average price at the start of the week as 216.4 cents per litre, while Canberra's was 212 cents per litre,” Guthrie added.

This chart from the website Informed Sources shows the different price movements city to city.

 

In early April, Drive talked to my mate Craig James, chief economist at CommSec, who explained the basics of what we pay at the bowser. “Usually, you add a gross margin of around 15 cents per litre to the wholesale price, and the wholesale price is sitting around $1.88, so that suggests a fair price is around $2.03 a litre" James said.

I checked this morning and MyNRMA.com.au says the current wholesale price for regular unleaded petrol is 187.3 cents a litre, while diesel is 188.4 cents a litre.

Over the weekend, I paid 203 cents a litre to fill up my diesel car. That means Craig’s figuring was on the money, as 188 cents wholesale plus 15 cents mark-up equals 203 cents.

I could’ve paid 199 cents on the highway beyond Penrith, but the queue was too long. And I could’ve paid 210 cents in the Eastern Suburbs as I drove to the Blue Mountains for the weekend, but I’m an economist and I knew prices would fall as I went West.

What about the impact of these price hikes on inflation? Well, it would be better if petrol prices were falling. War isn’t helping the RBA’s fight against inflation. However, the squeeze on household budgets from the elevated prices actually acts like a rate hike and therefore hits demand and helps reduce inflation.

Given that prices have been elevated since the Ukraine war, when prices were around 240 cents a litre, the recent rises aren’t big from the average prices we’ve endured over the past two years. It means the inflation effect from rising prices is less impactful, as they have risen from a higher price starting point.

That said, the Middle East conflict isn’t a plus for fighting inflation and rate reductions.

After decades of teaching and media commentary on economics, I can’t believe I’m saying that when unemployment went up in March, it was a relief! You see, if you want to know why economics has been tagged the “dismal science”, understand that the history of the subject has shown that for inflation and interest rates to fall, unemployment must rise.

Some economists call it a ‘zero sum’ game, meaning for someone to win, someone has to lose. But I think that’s too simple and ignores what good economic policies and outcomes can achieve. The better the Reserve Bank’s monetary policy and the Treasurer’s budgetary policy, as well as the Industrial Relations Minister’s wages policy, on top of the Government’s overall industry policies, the better the economic outcomes.

The best of policy mix creates better productivity, lower costs of production, less inflation, higher real incomes, and more job opportunities. What I’m saying is that better policies can result in a lot less losers compared to winners and therefore there’s a lot more win-win results.

But right now, given where this economy is, we need unemployment to rise noticeably to get inflation down well and truly in the 2%-3% band, where the RBA wants it. I said earlier this week that Morgan’s economist Michael Knox (in an interview for our subscriber newsletter The Switzer Report) explained how here and in the US, history shows unemployment has to rise to get inflation down.

If inflation persists, it kills consumers’ purchasing power and the economy slows and can end up in a recession, where unemployment can go really high.

In the 1990 recession, the jobless rate was around 10.4%. Today it’s 3.8%. The RBA expects it will get around 4.5%, and that should coincide with inflation in the 2%-3% band.

So, what did yesterday’s ABS report on jobs and other recent economic readings tell us about the economy and, potentially, when interest rates might fall? Here goes:

1. Employment fell by 6,600 in March following a big lift of 117,600 in February.
2. The unemployment rate increased from 3.7% to 3.8%.
3. The participation rate edged lower by 0.1% to 66.6%. When it falls, it suggests workers are finding it hard to find a job.
4. The job market is loosening but the overall unemployment rate is still near a 40-year low.
5. In trend terms, unemployment has remained at 3.9% since November last year.
6. The CBA economics team reported: “Investors certainly believe that nothing in the data stands in the way of rate cuts in the second half of the year…” and stock prices rose after the number.
7. If unemployment had fallen, the fear of a long delay for a rate cut or even a rate rise would have hurt stocks yesterday.

The SMH’s Rachel Clun and Shayne Wright talked to

EY senior economist Paula Gadsby, who said “… the unemployment rate was moving in line with the central bank’s expectations, and it will rise to 4.2 per cent by June, but a tight labour market risked inflation staying higher for longer by placing ongoing upward pressure on wages.”

So, watching the economic readings for wages growth and the Consumer Price Index in coming months will be crucial to the timing of when the RBA cuts rates.

But importantly, unemployment has to keep on increasing and statistics such as retail sales (which increased by 0.3% month-over-month in February 2024, while slowing sharply from a 1.1% growth in the prior month) have to keep looking weak.

We know consumer and business confidence are both weak and building activity is slowing.

What the RBA wants to see is an economic picture of a slowing economy. If that slowing becomes faster than expected, then it will cut rates sooner than the September cut, which most economists are tipping to be the date for the first rate reduction.

Sure, I know I’m painting a dismal picture of people losing jobs so interest rate worriers can get some rate relief. But if these people are hit with high rates for too long, we might end up in a recession, with a whole lot more people on the dole queue.

These are worrying times for investors. Russia has invaded Ukraine. Israel is fighting Hamas. And Iran and China can’t stop eyeing off Taiwan, with the US warning them to forget the idea of an invasion.

As I said, these are scary times for nervous investors. When this happens, some cash up and take 5% in term deposits, while others run to the apparent safety of gold.

Right now, the Aussie and US dollar price of gold is at record high levels, which reflects the concerns of some investors. It also can be linked to interest rates. When rates fall, gold has historically become more attractive.

Reuters reported the views of Phillip Streible, chief market strategist at Blue Line Futures in Chicago and this is what he said: “Geopolitical uncertainty continues to support gold and if there is any escalation in the situation, then prices could move towards the $US2,500 range. Gold prices will only come lower if central banks stop buying or if investors go back to a risk-on phase."

In market talk, “risk on” is when stocks are really popular and there are no threats like war to make investors nervous. As the nervousness grows, so does “risk off” situations, and then gold and term deposits look more attractive.

But this current love affair with gold isn’t just short term. It has been on a rise for nearly 20 years but there have been ups and downs as the chart below shows.

While the price rise since 2004 has been great (gold has gone from around US$520 an ounce to US$2,372), if you’d bought in 2012 at US$1,900 an ounce, it would have taken eight years (2020) to get your money back and over that time, you earnt nothing! And you missed out on what you could have made if you were invested in stocks.

Since 2012, the stock market is up around 80% in capital gain and about 60% in terms of dividends (even more if we add in franking credits).

So, stocks would’ve returned around 140%. If you bought gold in 2012, the gain would’ve been about 30% at best and you had a long wait — 12 years to get that return.

The simple lesson is that buying gold when it has been in the doldrums for a long time can pay dividends but there’s often a long waiting time and there’s no payment while you wait. On the other hand, stocks pay dividends and term deposits pay interest. I suspect gold will go higher and US$2,500 is a forecast that analysts see happening. Some real gold bulls see US$3000.

But this is guesswork dependent on war and the course of interest rates. As a financial adviser, I can support a small exposure to gold when prices are low, but I prefer stocks and great quality properties, especially when you buy them in a down market.

This is what Warren Buffett, the world’s greatest investor, says about gold: “Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”

I agree with Buffett that there are better assets, such as stocks, to hold that pay you income while you’re waiting for their value to grow. If you’re a scaredy cat, you buy quality stocks when stock markets crash.

If you’d bought CBA some 25 years ago, your $23 stock is now worth $111. That’s a gain of 382%. Over that time, you would’ve gained about 100% in dividends, which adds up to about 482%. And with franking credits, it would be over 500%!

I rest my case.

 

Brad Banducci, the outgoing boss of Woolworths (WOW) was threatened with a spell in gaol by grandstanding Greens Senator Nick McKim, which was way over the top, given he could easily have been more insulting towards Banducci for being allegedly deceptive over his company’s profitability and its screwing of its customers.

The battle between the two men was in a Senate hearing into the big supermarkets and it was over a measure used for assessing a company.

Senator McKim said WOW’s return on equity was 26%, which was on par with the big miners like BHP and Rio but half that of the banks.

The AFR team watching the battle made the point that “…the retailers, like the big miners, argue that other metrics such as return on capital [note: which means return on investment or ROI] are a better indicator of how profitable the business is”.

So, on one hand, big profit-makers like ROI (return on investment) but the Senator and I have to say investors often look for a company with a big return on equity (ROE). ROE compares the profits to the value of shares of a company.

An objective source such as Investopedia says a number between 15% and 20% is the type of company we should look for.

That means WOW with 26% isn’t letting down its shareholders, which of course would include the country’s big super funds and the million or so Aussies with self-managed super funds (SMSFs). That said, since the Government and the Greens have been looking at smacking the supermarkets for over-charging and helping inflation stay high, the share prices of WOW and Coles (COL) have tumbled. Not helping has been the Greens talking about breaking up the companies!

Have a look at WOW’s share price fall over the past year:

Woolworths (WOW) one year

That’s an 18.8% slump!

After a lot of arguing, Banducci admitted to not knowing WOW’s return on equity (ROE), saying his company focuses on return on investment (ROI). It was around this lack of information from Banducci that had Senator McKim talking about gaol time for the supermarket boss.

By the way, ROI is also used by businesses to measure the success of their investments and to identify areas where they can improve their returns.

The AFR says his rival Coles CEO Leah Weckert had no trouble with her figures. She “…came out quickly revealing that the company made just over $1 billion net profit last financial year and achieved 31 per cent return on equity. Coles had a 15 per cent return on capital last year, noting the metric is used for executive remuneration.”

These are impressive numbers. You can see how the ROI is less than the ROE, which is why the supermarkets and miners focus on the lower number.

The bottom line is that both supermarkets are very good companies for shareholders, or at least until they went under the political microscope because of the cost of living spike after the pandemic. And that pandemic, being so weird and out of character might have justified governments introducing prices surveillance regulation to prevent the price gouging that went on with many businesses, not just supermarkets.

This would be over-the-top ordinarily but after the pandemic, these were special circumstances where an active government body might have contained inflation by putting pressure on big price-makers to show restraint.

That could be a way to check the checkout exploitation by supermarkets but the area where the big retailers take their pound of flesh is with small suppliers. Their behaviour is sometime ruthless. It can be akin to that of a mafia boss who has the power to make or break a supplier. On one hand, the supplier gets excited to be accepted by the big supermarkets but is then screwed on price and other demands, which makes the experience and relationship a nightmare.

Who can forget how terribly the dairy farmers were treated by the big supermarkets? This from the AFR in 2019 reminded me of what the dairy farmers copped: “Coles and Aldi have followed Woolworths in raising the price of milk, ending an eight-year supermarket price war in the name of helping farmers through the drought”.

As you can see, political pressure works with these big companies. We need more of it, but it needs to be of a wise and timely kind. These kinds of actions seem beyond many of our less-than-impressive politicians.

Senator McKim is grandstanding when talking about breaking up Coles and Woolworths, but he’s not wrong in demanding that they be better corporate citizens.

And better regulation and public exposure of all our big companies that have excessive market power, and who wield it against the public interest, should be named and shamed. In that way, McKim is contributing. But gaol? Give me a break!

Imagine you’re an employee who’d love to double your annual holiday leave. How good would that be if you had caring responsibilities and needed the time? And then imagine you were told the ACTU and employer groups were close to agreeing to the proposition.

All this would be employee heaven, except for one thing, if you double your holidays, you’ll have to take it at half-pay.

The AFR’s David Marin-Guzman says many employers agree to the concept in principal but want to be able to refuse the option, but unions say that a “no” has to be based on “reasonableness criteria”.

The unions back the move for caring responsibilities for workers and to add work-life balance options into employees’ lives.

Right now, few awards permit this holiday-pay innovation, despite the pandemic bringing in temporary changes that allowed half-pay options.

Employer groups, such as the Australian Industry Group, back the idea. But Innes Willox, CEO of AIG says “it is essential that it is only able to be used if an individual employer and employee agree to it”.

Willox points to the problems for a business to accommodate long-term absences and he (and other employer groups) argue that employees can’t have a unilateral right to double their leave whenever they like, as it could undermine a business.

Right now, along with other award changes, the Fair Work Commission is considering this option to help workers cover their caring responsibilities and is looking at a potential right for an employee to request to work from home!

The FWC is also looking at changing ordinary time hours for remote workers beyond the usual 9-5 time period.

These changes are expected by mid-year and given the employer support for many of these reforms, workers look set to have more flexibility in the workplace, but it’s likely to be based on mutual agreement between boss and employee.

At a time when the Albanese Government is facing criticism about its ‘Future Made in Australia’ policy and Treasurer Jim Chalmers is being called a poor man’s Paul Keating,

Labor has come up with a surprise by offering tax concessions for investors who put their money into targeted industries where we need growth.

The Budget will outline the industries that will be assisted but they’re bound to be linked to clean energy and strategic manufacturing that needs to happen here.

Recently, Dr Chalmers tried to throw off the comparisons he faces with Labor legend Paul Keating,

In the SMH, Peter Hartcher suggested if Paul Keating was Placido Domingo, then Dr Jim is Michael Bublé! And while the latter sings nicely, he doesn’t have the gravitas of the former.

The Treasurer has returned fire by arguing: “I’m not trying to own the past; I want us to own the future”.

So, how does he plan to do that? This is what the SMH’s David Crowe tells us:

1. Tax concessions for special growth industries.
2. Related job opportunities.
3. “Rigorous and robust tests” to prevent money being wasted.
4. No change to the company tax.
5. Changes to foreign investment laws to encourage overseas money into these growth industries
6. A smaller budget surplus as a consequence of these concessions, but the Treasurer insists a surplus will result.

The recent fall in the price of iron ore could hit the budget’s bottom line by $9 billion but the last budget figuring was based on an iron ore price of US$60 a tonne and it’s still US$90.

The Opposition argues this could be inflationary and instead would prefer the Government opted for affordable reliable energy, quick approvals for projects/investments and a competitive industrial relations system.

Undoubtedly, all these are ideal for business, but a Labor Government has realistic and political barriers to achieving them to the satisfaction of the Coalition and business.

This is how the Treasurer sees the future under his proposed changes: “It will be broad; it will be comprehensive. The tax system may play a part, public investment will play a part, but overwhelmingly what we’re trying to do here is incentivise private investment, not replace it.”

There will be a lot of debate about encouragements to business with the Productivity Commission chief Danielle Wood concerned we could be in a “subsidies forever” trap. But others from the Commission see what’s happening overseas and there’s a lot of government assistance to industries with potential and related to alternative energy.

David Crowe gave an example of how the Government has already got involved in assisting business growth. “In one example of industry support, the government has pledged $840 million in recent weeks to Arafura Rare Earths to develop a lithium mine and refinery in the Northern Territory,” he revealed. “The federal support came after years of Chinese interest in Arafura, although the Chinese investors have sold down their stake and the government last year blocked a Chinese investment in another rare earth company, Northern Minerals.”

What’s my view? Targeted assistance makes sense but as the Treasurer promised, there has to be rigorous and robust tests to prevent money being wasted. If Dr Jim can pull this off, he might get out of the shadow of his hero Paul Keating!

The fear of losing a job has seen a reversal of both the trend of employees wanting to work from home and also workers wanting to go bush! And while the last reading of the unemployed saw a drop from 4.1% to 3.7%, which surprised economists, this return-to-the-office trend is seen as an anecdotal sign that the economy’s slowing down.

So, in turn, it’s a good omen that inflation should keep falling and then interest rate cuts should follow. Morgan’s economist, Michael Knox, this week wrote a pretty blunt assessment of what the Reserve Bank needs to see before they’ll cut rates.

To some, Knoxy is seen as a too smart, not-so-interesting economist but they’re philistines! To me, he is a guy I’ve always listened to. When he recounts about going to San Francisco to listen to one of the world’s famous economists, Stan Fischer, to understand what’s important to central banks and what they do with interest rates, he got me in.

“Back in the day” as he puts it, Knoxy learnt that rising unemployment was the most important driver of lower inflation, especially in service economies such as the US (when Stan served as the Vice Chairman of the Federal Reserve) and in Australia.

So, one day this week, my ‘buddy’ economist put out his regular note that revealed the following: “When I got home, I added unemployment to my model of the Australian cash rate. What surprised me was that when I did so, unemployment was much more powerful in explaining the cash rate than inflation.

“Our model of the Australian cash rate explains 89.5% of monthly variation since the cash rate began back in 1990. A short period of our model’s performance since 2015, is shown in Figure 1. A remarkable picture of the model in the recent period is how rapidly the model moved up ahead of the up-move in the cash rate. Our model seems to lead by a touch over six months on average.”

In case, Knoxy’s eco-speak is doing your head in, let me sum up in my Switzer-style: Unemployment needs to rise more significantly to see inflation fall enough for the RBA to start cutting.

Right now, Knoxy’s view is that “the next cut in cash rate will be in November 2024. That cut will be only 25 basis points. This means that the cash rate at the end of December 2024 will be 4.1%.” The odds are he will be right unless the jobless rate surges over the next six months.

This is why these revelations from the AFR on the movement of workers back to the office is important. What did this exclusive research show?

“Average workplace utilisation rose from 31 per cent in the final quarter of 2023 to a post-pandemic high of 40 per cent in the first three months of this year, workplace sensor data provided exclusively to The Australian Financial Review shows,” the newspaper’s team reported. “The figure is the highest since the 63.2 per cent recorded in February 2020.”

Workers in the office at 40% compared to the pre-pandemic readings of 63.2% is still low but a 9% jump in one quarter is significant.

The research was conducted by XY Sense and Alex Birch told the AFR that “The pendulum has moved towards the employer, and therefore people feel more obliged to go back into work”.

Another interesting revelation was that workers think working in a hybrid way — in the office and at home over a week — is equal to a 7% pay rise!

Meanwhile, the rental benefit/saving of going bush compared to city rents went from 15% to 5% in 2021 when lockdowns changed our lives. However, by the end of 2023, the discount had gone out to 10% reflecting less demand from city workers going bush to work from home.

“Aaron Wong, senior research economist at e61, said the data suggested the 2020-22 trend of people moving into the regions was ending,” the AFR reported, “because people are finding they cannot work permanently remotely and they’re having to commute to the city at least part of the time.”

The impact of the pandemic is reducing. If unemployment spikes enough to see rate cuts come sooner than is currently expected, we could also see more workers in the office, provided they still have a job!

Former US President Ronald Reagan made famous the following line: “The nine most terrifying words in the English language are: “I’m from the Government and I'm here to help”. But as they say ‘they’re all doing it nowadays’ and the Albanese Government is playing follow the leader.

As the AFR’s Phil Coorey pointed out: “Prime Minister Anthony Albanese will warn today there is no choice but to try to mimic the clean energy and supply chain subsidies being offered by other nations, including America’s Inflation Reduction Act (IRA), to safeguard national security and sovereignty. This is all about interference in the economy.

Coorey explained that he made the point “that neither Australia nor other like-minded nations implementing IRA-style schemes – such as the US, Canada, Korea, Japan and the European Union – were walking away from global markets or the rules-based order.”

The strategy is being portrayed as mission critical interference and encouragement by his Government to prepare us for the future, which can’t be overdependent on foreign suppliers for important products the economy requires.

So, the PM has launched an industry protection program to make sure we are less dependent on the free market and overseas manufacturers for critically important supplies, which became a worrying issue during the pandemic, when supply chains broke down. Interestingly, Opposition leader Peter Dutton largely agrees with the policy, though he doubts whether we could rival China when it comes to delivering solar panels at competitive prices.

The Government has unveiled its Future Made in Australia Act that will introduce new government-assisted programs to make more ‘stuff’ here, and will lump in some programs already in existence, such as the $15 billion National Reconstruction Fund and the critical minerals strategy. The latter program ensures that minerals we need for technologically advanced products are kept and owned in Australia.

This is new protectionism is the new ‘competitive environment’ of a global economy, which is terrified of being over-reliant on China for important products, such as solar panels.

This is where the new Solar Sunshot program will come in, but Coorey says it has been criticised “for being unrealistic because the vast bulk of the world’s solar panels are made in China, meaning Australia could not hope to compete on cost without the imposition of tariffs on imports.” The PM says they’re largely made by machines, which should reduce the impact of higher labour costs here. And it comes as US Treasury Secretary Janet Yellen recently went to China to talk about Beijing’s “unfair trade practices”.

Yellen, who’s an economist and former US central bank boss and would have grown up espousing the value of free trade (especially as her country was the most competitive in the world), now, when it comes to critically important supplies, has certainly changed her tune.

This is what she said after her China trip: “We don’t want to be overly dependent, and they want to dominate the market. We’re not going to let that happen. People like me grew up with the view: If people send you cheap goods, you should send a thank-you note. That’s what standard economics basically says. I would never ever again say, ‘Send a thank-you note.’”

Under this Future Made in Australia Act, the following will be given high priority:

1. The National Reconstruction Fund.
2. The government’s skills agenda.
3. Initiatives to encourage the domestic manufacture of batteries.
4. The hydrogen headstart program.
5. The Net Zero Economy Authority.
6. A greater role for super funds to invest in these critically important areas; and
7. $1 billion in subsidies, grants, and other forms of support for the domestic production.

Interestingly, the Centre for Policy Development, the right-wing think tank, largely supports the policy. “The indisputable fact is that the industries of 2050 and beyond will need to look very different to the industries of today, and we can’t rely on capital markets to chart the best course over the long-term,” said Toby Phillips, the CPD economy program director to the AFR.

This will be a big push program for the Government ahead of the 2025 election campaign, which clearly has started!