January 2018

Expect a big fight on industrial relations this year as job numbers grow but wages lie low

The disconnect between the current strong employment growth and the weak growth in household incomes remains the biggest issue for the coming political year, and it has emerged as the greatest weakness to the government’s economic argument.

One of the more absurd suggestions that did the rounds when the Rudd government introduced the Fair Work Act was that the new laws were swinging the pendulum too far in favour of unions.

The claim continued despite evidence to the contrary. In May 2012, the then BHP chairman Jac Nasser suggested that the review of the Fair Work Act would be “an opportunity to move the pendulum back to a more appropriate balance”. A couple of months later, Tony Abbott said he wanted to “restore the workplace relations pendulum to the sensible centre. That’s where it always should be”.

Despite losing 40% in a matter of weeks the cryptocurrency still has further to drop according to experts at Capital Economics

Bitcoin has all the hallmarks of a classic speculative bubble and even after almost halving in value in a matter of weeks it still has further to fall, according to a leading team of economists.

As regulators in South Korea again signalled on Thursday that they were considering a ban on cryptocurrency exchanges, Capital Economics also dismissed claims that bitcoin and its imitators could replace established currencies as “rubbish”.

Bitcoin, which rose to more than $19,000 in December, recovered by 18% on Thursday after suffering heavy losses in the preceding two days.

Its value was sitting at $11,560 on the Luxembourg-based Bitstamp exchange shortly after 2am GMT. Other cryptocurrencies include Ethereum and Ripple.

Extreme weather, such as droughts in Australia, pose significant risk to growth, IMF warns

The International Monetary Fund has lifted its forecasts for global growth, saying momentum is building in global economic activity and Donald Trump’s tax cuts in the US are likely to stimulate activity further.

It says the growth momentum is expected to carry into 2018 and 2019, and it has revised upwards its global growth forecasts by 0.2 percentage points for both years, from 3.7% to 3.9%.

But it has warned that extreme weather events – such as droughts in Australia, and hurricanes in the Atlantic – pose a significant risk to its positive forecasts, saying “recurrent, potent climate events” impose “devastating humanitarian costs and economic losses” on affected regions.

It has also warned growing financial vulnerabilities could derail its forecasts, as could increasing trade barriers flowing from poorly executed trade renegotiations between the UK and the rest of the EU, and between the US, Canada and Mexico.

It says Trump’s corporate tax cuts are expected to stimulate activity, with the short-term impact in the US mostly driven by the investment response to the tax policy changes.

It estimates the effect on US growth of the tax cuts will be positive through 2020, accumulating to 1.2% through that year, with a range of uncertainty around its central scenario.

Resurrected trade deal will bring just 0.5% of real national income, economists say.

The revived Trans-Pacific Partnership trade agreement will produce a “very small” benefit for Australia but the “symbolism” of the deal should not be underplayed, economists say.

Paul Dales and Katie Hickie from Capital Economics have written to clients saying the resurrected Trans-Pacific Partnership (TPP), announced by Malcolm Turnbull this week, will not produce the large benefits people think.

They say the boost to Australia’s economy will be “very small” and, of the 11 countries involved in the agreement, Australia will receive the smallest increase in national income.