Australia calls itself the Lucky Country, a nation so fortunate in geography and natural resources that it hasn’t had a recession in nearly three decades.
“Just the area of Australia that’s now impacted is unheard of. So we are in uncertain territory,” says Martin North, principal at the research firm Digital Finance Analytics.
The wildfires have killed more than two dozen people more than a billion animals. They’ve destroyed more than 1,800 houses, an untold number of commercial buildings and thousands of acres of prime farmland, according to the Insurance Council of Australia.
Insurance losses so far have totaled nearly a half billion dollars, but the numbers are likely to rise sharply, says Campbell Fuller, the council’s head of communications.
“For [the fires] to burn across such a wide area, over such an extensive period, is uncommon. In fact, it’s unprecedented to have that number of bushfires burning concurrently,” he says.
The fires have damaged two pillars of the Australian economy: the agricultural sector, which was already weakened by a severe drought, and the all-important tourism industry.
Winter in the Northern Hemisphere is peak tourist season in Australia, when visitors from Asia and Europe flock to the country, eager to soak up the sun and enjoy the country’s outdoor lifestyle.
As news of the wildfires spreads around the world, fewer tourists are arriving and those who do come have had to endure less-than-ideal conditions.
Even in Sydney, far from the fires, skies are so smoky that fire alarms have gone off in office buildings. Ferry service in the city’s world-famous harbor has sometimes been canceled because of poor visibility.
The campground run by Fiona Austin in Shoalhaven, south of Sydney, is usually full this time of year, but tourists were ordered to evacuate, and only a few people remain.
“It’s affected a lot of businesses, and I can’t see people coming back at the moment when the fires are still burning,” Austin told NPR’s Jason Beaubien.
The fires mark something of a change of fortune for the Australian economy, sometimes called the Wonder Down Under.
The country has benefited enormously from its proximity to Asia, says Justin Wolfers, an Australian native who is a professor of economics and public policy at the University of Michigan.
“Not only did we start the last few decades a relatively rich country in the club of the first-world industrialized countries, we’re also parked right next to Asia, which is where much of the world’s growth has come from over the past few years,” Wolfers says.
China, in particular, has been hungry for the kinds of commodities Australia has a lot of, such as coal, natural gas, wheat and wool, and it sends more tourists to Australia than any other country.
Wolfers says the Australian government has also demonstrated more skill than other countries at navigating the challenges of the global economy, like the Asian financial crisis of the late 1990s.
While the U.S. Congress was squabbling over how to address the Great Recession, the Canberra government was acting swiftly to stimulate spending and cut interest rates, he says.
Unlike other industrialized countries, Australia has experienced a steady rise in population, largely because of immigration, so even in slow times the economy has kept growing, Wolfers adds.
Some of that growth has eased in recent years, as China’s economy has slowed. Australian consumers are spending less, and housing prices, which have skyrocketed in recent years, have fallen.
“The growth levels in Australia are lower than they’ve been in a very long time,” North says. “We were already looking … pretty shaky and that was before all of the bushfires.”
One potential problem is that many Australians haven’t updated their insurance policies over the years or have let them lapse altogether, he notes.
Australia has suffered through catastrophic fires before, such as the 2009 conflagration in Victoria, which did billions of dollars in damage. But the current fires are affecting a much bigger area, and they’ve also begun earlier, making it hard to assess how much they’ll cost.
“What’s really concerning to us is that this is still relatively early in our typical bushfire season” and there are worries about how much longer it will last, says economist Katrina Ell of Moody’s Analytics.
Ell doesn’t think a recession is likely, but North isn’t as sure.
The fires started in relatively unpopulated areas, but they’re moving closer to the cities, where they can do a lot more damage, he says.
Turkey’s Erdogan replaces finance minister amid economic turmoil – Aljazeera.com
Nureddin Nebati takes on the role of finance minister after Lutfi Elvan resigns.
Turkish President Recep Tayyip Erdogan has replaced the country’s finance minister after weeks of economic turmoil in which inflation soared as the lira plummeted to record lows.
The currency has lost more than 40 percent of its value against the US dollar this year, making it the worst-performing of all emerging market currencies.
According to a presidential decree issued near midnight on Wednesday, Erdogan accepted the resignation of Lutfi Elvan and appointed his deputy, Nureddin Nebati, as the new finance minister.
Nebati, 57, has a bachelor’s degree in public administration and a master’s degree in social sciences from Istanbul University. He also holds a doctoral degree in political science and public administration from Turkey’s Kocaeli University.
His predecessor had only been in the role since November 2020, when he was appointed after the resignation of Erdogan’s son-in-law, Berat Albayrak.
Elvan’s year-long tenure was marked by numerous crises.
Earlier on Wednesday, the Turkish Central Bank intervened in markets to prop up the nosediving lira, which has lost nearly 30 percent in value against the dollar in just a month.
Under pressure from Erdogan, Turkey’s officially independent central bank lowered its key interest rate in November for the third time in less than two months. It did so despite inflation approaching 20 percent – four times the government’s target.
Erdogan believes that high interest rates cause high inflation – the exact opposite of conventional economic thinking – and has insisted he would keep rates low.
Turkey’s currency hit yet another record low of more than 14 to the dollar before recouping some losses on Wednesday after a central bank move to sell reserves. One dollar bought 13.22 lira as of Wednesday afternoon.
The recovery, however, was short-lived after Erdogan appeared again to defend his “new economic model” against the “malice of interest”.
Since 2019, Erdogan has sacked three central bank governors who opposed his desire for lower interest rates. The president, who has blamed the lira’s troubles on foreigners sabotaging Turkey’s economy and on their supporters in the country, believes lower rates will fight inflation, boost economic growth, power exports and create jobs.
On Tuesday, figures showed Turkey’s economy had grown by 7.4 percent in the third quarter, compared with a year earlier, but some analysts believe the surge could be short-lived due to the high inflation and currency meltdown.
Meanwhile, public discontent appears to be on the rise.
Last week, demonstrators protested economic policies in the largest city of Istanbul and the capital, Ankara, while the main opposition Republican People’s Party plans a rally for early elections on Saturday in the southern city of Mersin.
Dollar recovers in face of Omicron; commodity currencies slide
The U.S. dollar recovered from a loss on Wednesday after reports the Omicron coronavirus variant is spreading and oil prices turned down, hurting commodity currencies.
The dollar index against major currencies was up 01% in the afternoon in New York after having fallen 0.3% in the morning. The greenback gained against the dollars of Canada, Australia and New Zealand and against the euro and British pound.
“What you are seeing is a classic risk-off move in FX markets and that means the dollar outperforms against the commodity currencies,” said Erik Bregar, an independent foreign exchange analyst.
The dollar lost to the Japanese yen currency, which is often seen as a safer haven, giving up 0.3% to 112.805.
The shifts underscored the hour-to-hour fragility of foreign exchange rates as traders weigh what the Omicron variant might do to plans that Federal Reserve Chair Jerome Powell signaled on Tuesday to move more quickly to raise U.S. interest rates.
The variant is becoming dominant in South Africa and has appeared in the United States.
“We’ve gotten these conflicting claims about the new variant, and Powell’s comments really threw the markets for a loop,” said Marc Chandler, chief market strategist at Bannockburn Global Forex.
“People are still pretty nervous,” Chandler said.
The dollar’s rebound started as a report from the Institute for Supply Management came out showing that U.S. manufacturing activity picked up in November amid strong demand for goods, keeping inflation high as factories continued to struggle with pandemic-related shortages of raw materials.
An earlier report on U.S. private payrolls suggested that Friday will bring a “solid jobs report” when the government posts more comprehensive payroll numbers, Chandler said.
“Friday’s U.S. jobs data is the next big thing,” he said.
The greenback is up nearly 7% this year. November was its strongest month since June.
The euro lost 0.2% on the day to $1.1314 at 3:21 pm ET (1507 GMT).
The British pound, often considered a risk-on currency, fell back 0.2% against the dollar after having been up 0.4%. The pound is struggling to recover after reaching its lowest level in nearly a year earlier this week on fears over vaccine effectiveness against the Omicron variant.
The Australian dollar lost 0.4% to $0.7103 and the New Zealand dollar lost 0.3% to $0.6805. [AUD/]
Prior to the tailspin caused by Omicron’s advent, the main driver of exchange rates had been expectations of the different speeds at which central banks will raise interest rates.
In cryptocurrencies, bitcoin was up less than 1% at $57,220 at 3:17 pm ET (2017 GMT).
(Reporting by David Henry in New York; Additional reporting by Joice Alves and Elizabeth Howcroft in London; Editing by Jonathan Oatis and Andrea Ricci)
Biden says economy 'in strong shape' ahead of holidays – BBC News
The US economy is in a strong position, President Joe Biden has said, thanks to action taken by the government to free up supply chain blockages and tackle the rising cost of living.
He predicted that prices, which have been rising sharply, would ease.
The president said policies to tackle bottlenecks at ports and lower the price of fuel were working.
“We’re heading into a holiday season on very strong shape,” he said. “It’s not because of luck,”
Asked how supply chains would weather disruption from the new variant of coronavirus, President Biden said he was an “optimist”, but that it was too soon to know what the impact might be.
As a result of the economic recovery a typical American family was now better off than before the pandemic struck, the president said, describing a 40% reduction in child poverty as “a moral victory”.
“Americans on average have about $100 (£75.33) more in their pockets every month than they did last year [and] about $350 more each month than they did before the pandemic, even after accounting for inflation,” the president said.
Since taking office, the Biden administration has pumped billions of dollars of stimulus into the US economy, including direct cheques to households and tax breaks.
Economic growth has rebounded as the impact of the pandemic began to ease, and after shrinking 30% in the first six months of 2020, the economy is now back at the size it was pre-pandemic.
However, higher demand for goods, and on-going disruptions to the supply and delivery of those goods, has helped push inflation up to 6.2% – the highest it has been for 31 years.
“I’ve used every tool available to address the price increases,” President Biden said.
Releasing part of the US’s oil reserves last month, in an action coordinated with several other nations, to try to bring down the price of fuel had been “making a difference”, he added.
Independent economic analysis indicated his Build Back Better bill would reduce inflationary pressures, he stressed.
The bill was fully paid for, and would contribute to deficit reduction, by “making the largest corporations and the richest Americans pay a little more in taxes”.
A change in mindset
The $1.9tn (£1.4tn) Build Back Better bill, which includes social and climate spending, still needs to be voted on in the US Senate.
Asked why he believed he would be able to bring down inflation when previous administrations in the 1970s and 1980s failed, the president said: “This is the first time I’ve seen labour and business so ready to cooperate.
“People are in a different state of mind than in the Carter and Nixon years.”
Earlier this week, President Biden hosted the chief executives of several of the countries’ largest manufacturers and retailers, including Walmart and CVS Health, Mattel and Best Buy.
The executives reported that their inventories were up and shelves well-stocked, ready to meet the consumer demand for the holidays, he said.
Biden said the administration had “broken up log jams” in the supply chain through various methods, such as by encouraging port operators to work longer hours.
He also pointed to the easing of rules over truck drivers’ hours. The measures were working, he said, with the number of containers left sitting on docks for over eight days down by 40%.
Michael Pearce, US economist at Capital Economics, thinks the president was right to suggest that some of the stresses on the economy were starting to ease, but that all the problems wouldn’t go away overnight.
“It’s still the case that there are very severe supply problems. Even if they’re starting to fade, it’ll take some time for that to work its way through, especially now that inventory for a lot of goods is so lean,” he told the BBC.
Inflation which remained would therefore persist well into next year, he said, in part thanks to the trillions of dollars pumped into the economy through the pandemic.
The Omicron variant, and expectations that it will hurt economic growth, were probably having a greater impact on the price of fuel, than the move to release oil reserves, Mr Pearce added.
Diane Swonk, chief economist at Grant Thornton, thinks Mr Biden’s Build Back Better bill could have a pro-inflationary impact in the short term unless it was tweaked further by lawmakers.
She felt Omicron, the easing of supply chain problems, and a reduction in government stimulus over the coming months would “take the steam out of inflation but it won’t cool it down enough”.
“The risk is until we can really wrestle the virus to its knees we’ll continue to see disruption, even as demand starts to slow again,” said Ms Swonk.
“We’re starting to see more broader based inflation that likely will linger longer.”
KFL&A reports 34 new COVID-19 cases, 304 active – Globalnews.ca
Turkey’s Erdogan replaces finance minister amid economic turmoil – Aljazeera.com
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