Monthly Archives: April 2021

Australian Politics 2021-04-27 07:28:00


PM Scott Morrison on climate summit with Joe Biden: ‘We have targets and we will beat them’

Prime Minister Scott Morrison has said Australia not be updating its 2030 emissions target ahead of the climate change summit put on by US President Joe Biden.

He said Australia has serious commitments “and we’re meeting them and will beat them”. “We’re keen to ensure there’s a transparency. Australia is one of the few countries in the world where we report our emissions every single year,” he said.

“That was not our plan to do that this evening. We’re making a range of commitments that we have already announced in terms of our critical technologies and partnerships which we have been discussing in particular with the US.

“The last discussion I had with former secretary [John] Kerry, the special envoy, about the partnerships we were putting together with the US on energy technology.

“We are keen to pursue that. I’d make this one comment on the report. And that is the trajectory to any net zero outcome is not linear. Anyone who thinks it is I know doesn’t get it. “The way technology works is there is a long lead time into its development and commercialisation and once the technology is in place, you can see a massive transformation.

“And so your achievement of net zero over time has more of that type of a curve. If you think it’s linear, then that just doesn’t, that isn’t supported I think by the science or the research.”

Australia will not get the comprehensive climate flogging some activists have predicted at Mr Biden’s summit, a leading analyst of the US/Australian alliance has suggested.

The virtual summit of 40 world leaders taking place on Thursday and Friday has already generated policy momentum, with Washington and Beijing committing to work together on climate issues, and Canada announcing it will cut CO2 emissions by 36 per cent from 2005 levels by 2030.

The US, Japan and South Korea are all poised to announce ambitious new emissions targets for 2030 during the summit, which could be as high as 50 per cent.

Professor Simon Jackman from the United States Studies Centre said the Biden summit would be primarily “scene setting before Glasgow”, with the aim of “nudging countries toward tangible goals”.

“You don’t invite people and wag a finger at them,” he said.

And despite frequent references to Australia being a “climate laggard”, Canberra “has a reasonably strong set of talking points”, Prof Chapman said, noting that unlike the US, we never left the Paris Agreement.

The Morrison government’s “technology not taxes” approach to tackling climate was not dissimilar to the Biden administration’s, Prof Chapman said. “It’s really hard to see a carbon tax getting up in the US Congress,” he said.

According to Prof Chapman, Washington has developed a good understanding of the peculiar complexities of the climate debate down under, with former ambassador Arthur Culvahouse calling it “the third rail of Australian politics”.

The “third rail” – a metaphor often ascribed to social security in US politics – refers to the electrified rail in the New York subway, which brings instant death to all who touch it.

“The State Department also well remembers how upset the Australians were during the G20 summit in Brisbane. Obama’s speech at the University of Queensland blindsided the Australians on climate,” Prof Champan said.

“Getting Australia off-side on climate is really counter productive to some of the bigger issues,” he said.

While the Biden summit includes leaders of several developing nations, no Pacific countries other than New Zealand have been invited, and their absence “may make (the summit) a little easier for Australia,” Prof Chapman said.

Their omission pushes focus away from the effects of climate change and toward its causes, and was justifiable, Prof Chapman suggested, because “it’s really the emitters you want to extract commitments from”.

“There will be plenty of opportunity for smaller nations to have their say at Glasgow,” he said.

Pressure on Australia may come from European nations, particularly if carbon tariffs are raised, Climate Council economics expert Nicki Hutley said.

“It’s not something that’s been flagged, but given the Europeans will be there and this is something that’s clearly on their agenda … I’d be surprised if it was not part of the conversation,” she said.

The Europeans are “definitely going ahead” with carbon tariffs, the US is looking at the issue and Australian protestations that it was a new form of protectionism were likely to carry little weight, Ms Hutley said.

There will be enormous pressure on Australia to up its climate commitments, she said.

“We want to have a voice and a role in other areas and if we don’t play ball on climate change that will reduce our ability to have a voice on a whole host of other issues where we want our voice to be important,” Ms Hutley said.


Shopper slams Bunnings Warehouse over seemingly innocent picture of its stylish fire pits - so can you see why they are so angry?

An Australian shopper has been left furious over a seemingly innocent display of outdoor gear at Bunnings Warehouse on Wednesday. The display, which showed off the hardware giant's winter fire pits, was slammed as 'totally unacceptable'.

The photograph was posted on Twitter by the 'Ban Recreational Wood Burning' page. 'Promoting these polluting firepits. Do you promote cigarettes as well? Firepits emit much more toxic pollution then cigarettes,' the post read. 'It's time to make sales of wood burners illegal. Clean air is a basic human right. Not Karen using her firepit,' it continued.

But the complaint didn't get much support from the Twitter community.

'Nothing like a few mates gathered around the fire with a few beers. Even better when you can cook on it. I love the smell of wood smoke,' one man wrote.

Bunnings Warehouse Outdoor Living Category Manager Mick Heanue also commented on the complaint, telling Daily Mail Australia: 'All our fire pits comply with state and national safety standards.'

Some readers actually thanked the page for the heads up after spotting some fire pits they liked in the picture.

'Thanks for the reminder - I’m gonna fire mine up tonight. Won’t use it for warmth but it’s always nice to watch through the windows from inside the house. Can’t wait,' said one man.

'Thanks for letting me know, will pick one up before it gets cold,' another added.

Others called out the use of the name 'Karen'. 'Karen is actually one complaining about people using BBQ in the park so (the page) is actually being a Karen,' one person said.

More people joked that fire pits were amazing for bringing family and friends together and 'scaring off the "woke"'. 'Is it OK if I burn old furniture in my fire pit? Shouldn't stink too much once the vinyl has burnt off,' said another.

But the page's author was not amused by the reactions.

'It's a definition of a Karen when their privilege effects others human right to clean air,' they countered. 'Any exposure of wood smoke isn't good for us. Wood smoke lingers to other peoples homes.'

The account has just 97 followers and constantly posts about the impact of wood burning.


Outrage as innocent schoolboys are forced to stand in front of class and and labelled 'oppressors' – all because they are white, male and Christian

A youth worker forced Year 11 male students at a co-ed public school to stand up in front of the class as she condemned them as historical 'oppressors' because they are white, male, and Christian.

The female Kingston City Council worker gave a talk about privilege, pronouns, and intersectionality at Parkdale Secondary College in Mordialloc, Melbourne, last Wednesday.

She then asked students who are white, male and Christian to stand up, The Herald Sun reported.

The woman told these students that they were 'privileged' and 'oppressors', sparking outrage among parents and local councillors.

Kingston councillor Cameron Howe said it was 'disgraceful behaviour' as he wrote in response to reports of the incident on Facebook.

'Reverse racism is becoming more prevalent and not only does it not belong in our schools, but those who hold these toxic views are not morally or intellectually superior to others,' he wrote.

Mr Howe called for the female youth worker to be fired, along with the father of a male student at the school.

'The council needs to take this extremely seriously, there are a lot of furious parents of young boys and we need guarantees that something like this will never happen again,' a father in the school community said.

A 16-year-old female student said she was 'shocked' by the presentation and the male students felt 'ashamed' and 'targeted'.

'It was so messed up, we thought for a moment it was a joke, but then we realised it wasn't and we were so upset and angry by it all,' she told the Herald Sun.

'She basically said straight, white, Christian males were oppressors and they held all the power and privilege in ­society.'

Principal David Russell said the school did not 'support or condone this approach and messaging' as presented by the guest speaker', in a statement to parents on Sunday.

He said the school wrote to Kingston Youth Services and Kingston City Council to express its disappointment about the 'inappropriate' presentation.

Kingston mayor Steve Staikos apologised to affected students and said the council’s chief executive would investigate.

China's trade attacks fall flat: Impact of sanctions on Australian goods is 'limited' as exporters switch to other markets

The impact of myriad Chinese trade sanctions on Australian goods in the past year has been 'quite limited', with most exporters managing to find other markets, according to a new report.

China has targeted Australian beef, barley, coal, copper, cotton, seafood, sugar, timber and wine.

Before the sanctions, these exports were worth about $25 billion in 2019, or 1.3 per cent of gross domestic product.

As of end-January, the value of these exports to China had dropped to about $5 billion a year, the analysis by Lowy Institute chief economist Roland Rajah shows.

But most exporters - barring wine and beef producers - appear to have managed to shift their goods to markets other than China.

'Looking at exports of barley, copper, cotton, seafood and timber, sales of these products to other markets rose sharply, but only after China's sanctions intensified in late 2020 - with the stark shift signalling this was indeed mostly a result of trade diversion,' Mr Rajah said.

'However, Australia's wine industry has struggled to make up for the loss of the premium China market.

'Total beef exports are also down, though this is more a reflection of supply-side issues after years of drought.'

The effect of China's trade sanctions on Australia's exports 'has been completely swamped by the booming iron ore trade - which China hasn't been game enough to touch'.

'Hence, the total economic impact of China's trade coercion against Australia seems to have been quite limited thus far,' Mr Rajah said.

Mr Rajah argues while China had targeted products for which it had alternative suppliers, there were also alternative buyers for Australian goods.

'And this shuffling of global trade is precisely the reason the damage inflicted on Australia has been limited,' he said.

The research published on Thursday comes after the federal government urged exporters to look for new Asian markets to combat the economic fallout of coronavirus and strained relations with China.

Trade Minister Dan Tehan on Wednesday released the final report of the Asia Taskforce - a joint project between the Asia Society and Business Council of Australia.

It provides a blueprint for Australia to compete more successfully in the region.




26/4/21: What Low Corporate Insolvencies Figures Aren’t Telling Us


One of the key features of the Covid19 pandemic to-date has been a relatively low level of corporate insolvencies. In fact, if anything, we are witnessing virtually dissipation of the insolvencies proceedings in the advanced economies, and a simultaneous investment boom in the IPOs markets. 

The problem, of course, is that official statistics - in this case - lie. And they lie to the tune of at least 50 percent. Consider two charts:


The chart from the IMF is pretty scary. 18 percent of companies are expected to experience liquidity-related financial distress and 16 percent are expected to experience insolvency risk. The data covers Europe and Asia-Pacific. Which omits a wide range of economies, including those with more heavily leveraged corporate sectors, and cheaper insolvency procedures e.g. the U.S. The estimates also assume that companies that run into financial distress in 2020 will exit the markets in 2020-2021. In other words, the 16 percentage insolvency risk estimate is not covering firms that run into liquidity problems in 2021. Presumably, they will go to the wall in 2022. 

The second chart puts into perspective the IPO investment boom. Vast majority of IPOs in 2020-2021 have been SPACs (aka, vehicles for swapping ownership of prior investments, as opposed to generating new investments). The remainder of IPOs include DPOs (Direct Public Offerings, e.g. Coinbase) which (1) do not raise any new investment capital and (2) swap founders and insiders equity out and retail investors' equity in. 

The data above isn't giving me a lot of hope, to be honest of a genuine investment boom. 

We are living through the period of fully financialized economy: the U.S. government monetary and fiscal injections in 2020 totaled some $12.3 trillion. That is more than 1/2 of the entire annual GDP. Since then, we've added another $2.2 trillion. Much of these money went either directly (monetary policy) or indirectly (Robinhooders' effect) into the Wall Street and the Crypto Alley. In other words, little of it went to sustain real investment in productive capital. Fewer dollars went to sustain skills upgrading or new development. Less still went to support basic or fundamental research. 

In this environment, it is hard to see how global recovery can support higher productivity growth to bring us back to pre-pandemic growth path. What the recovery will support is and accelerated transfer of wealth:

  • From lower income households that saved - so far  - their stimulus cash, and are now eager to throw it at pandemic-deferred consumption; 
  • To Wall Street (via corporate earnings and inflation) and the State (via inflation-linked taxes).
In the short run, there will be headlines screaming 'recovery boom'. In the long run, there will be more structural unemployment, less jobs creation and greater financial polarization in the society. Low - to-date - corporate insolvencies figures and booming financial markets are masking all of this in the fog of the pandemic-induced confusion. 

The S&P 500 Falls Back from Highs on Biden Capital Gains Tax Plan

In addition to rising prices, S&P 500 (Index: SPX) gained a new concern in the trading week ending on Friday, 23 April 2021 in the form of much higher capital gains tax rates.

Those prospects caused stock prices to fall sharply as the first details of the proposal were announced on Thursday, 22 April 2020. See if you can tell within 2-4 minutes of when the story broke and investors began absorbing that new information in a chart showing the index' trading value for the day:

Yahoo! Finance: S&P 500 Index Trading Value on 22 April 2021

If not for that news, the S&P 500 would almost certainly have closed the week at a new record high. As it was, the S&P 500 is trading within the lower end of the redzone forecast range on the alternative futures chart:

Alternative Futures - S&P 500 - 2021Q1 - Standard Model (m=+1.5 from 22 September 2020) - Snapshot on 23 Apr 2021

That's expected given the assumptions behind the redzone forecast range, which has just another couple of weeks to run.

Here's our summary of the market moving headlines for the week that was:

Monday, 19 April 2021
Tuesday, 20 April 2021
Wednesday, 21 April 2021
Thursday, 22 April 2021
Friday, 23 April 2021

What were the positives and negatives in the past week's markets and economics news? Click through to find Barry Ritholtz' take, where the positives outweighed the negatives!

25/4/21: Impact of foreign shareholders on the performance of the Chinese banks

 A new paper (pre-print version): Gurdgiev, Constantin, and Jiagi, Li, The Journey of a thousand miles: a decade of impact of foreign shareholders on the performance of the Chinese commercial banks (April 25, 2021). Handbook of Banking and Finance in Emerging Markets, eds. D. K. Nguyen, Edward Elgar Publishing, August 2021, forthcoming., Available at SSRN: 


We analyze the impact of foreign shareholdings on the performance of 28 Chinese commercial banks over a period of 2010-2019, capturing the period prior to and following the reforms of 2014. Using panel data GMM with instrumental variables, we consider bank performance from three perspectives: profitability, quality of assets and liquidity. The individual performance indicators are return on equity (ROE), non-performing loan (NPL) ratio, loan-to-deposit ratio, and loan loss coverage ratio. We find that foreign shareholdings have a significant negative impact on ROE. Increase in foreign investment is coincident with growth in the size of Chinese commercial banks in terms of assets that is faster than the increases in the banks’ return on capital. These findings are intuitively justified: if foreign investors increase banks’ appetite for growth, growth in assets under management will tend to outpace growth in returns on assets in the earlier stages of new investments. From the quality perspective, we show that banks’ NPL ratio is negatively correlated with foreign shareholdings and the correlation is significant both statistically and empirically. NPL ratios fall in the banks with more foreign participation. This result stands contrasted by the fact that some foreign investors (activist and hedge funds), seek to invest in Chinese listed banks with higher NPLs. In terms of liquidity performance, foreign share ownership has a significant negative influence on banks’ loan-to-deposit ratio. Loan loss coverage ratio significantly increases, along with the increasing foreign participation in Chinese commercial banks shareholdings. Combined, these effects suggest significant positive twin effect of foreign shareholdings on Chinese commercial banks risk profiles. As the result, Chinese banks with higher foreign shareholdings are better prepared to sustain losses from bad loans and state risks and have lower risk exposures to bad loans. The combined effects of our findings strongly suggest that Chinese banks’ ROE can be expected to pick up in the near future with further financial opening in the sector and the greater involvement of foreign investors that comes along with it.

25/4/21: Impact Finance perspective of the systemic threats to blockchain applications


New paper (pre-print version): 

Gurdgiev, Constantin and Fleming, Adam, Informational efficiency and cybersecurity threats: A Social Impact Finance perspective of the systemic threats to blockchain applications (April 25, 2021). Forthcoming, Chapter 12 in Innovations in Social Finance: Transitioning Beyond Economic Value, eds. Thomas Walker, Jane McGaughey, Sherif Goubran, and Nadra Wagdy, Palgrave Macmillan, 2021, Available at SSRN:


Crypto-assets and blockchain technologies hold the promise of providing more secure systems for managing public and private data, enhancing public trust in data collection, and increasing the efficiency of social impact finance transactions. However, to-date, blockchain technologies have struggled to deliver on these promises. Specifically, cybersecurity threats to blockchain technologies are accelerating and becoming more impactful over time, generating growing risk to the use of the blockchain technologies in social impact finance services provision. Our analysis data on cybersecurity breaches involving cryptocurrencies trading platforms from 2014 through 2019 shows that cryptocurrencies markets have, to-date, failed to develop informational efficiencies necessary to sustain these technologies’ deployment in impact finance. Faced with increasing cybersecurity threats permissionless blockchain systems appear to be more vulnerable to shocks, than they were in the past. Cyber breaches in the cryptocurrency markets create major risk contagion pathways, which are dramatically increasing volatility of both directly attacked currencies and other major cryptocurrencies; as well as present an increased risk of system-wide attacks that threaten not only the accounting and transactional accuracy and efficiency of the crypto-based fintech solutions, but also the data stored using public blockchain protocols. These findings lead us to conclude that, absent dramatic improvements in the regulation of cryptocurrencies and exchanges, public blockchains based on traded crypto-assets are not suitable for large scale deployment in social impact finance applications.