Profit growth rebounds; One Nation’s by-election blitz; $4 stamps on the way
News in brief
One Nation has won a previously safe Labor seat in a WA by-election, taking 57% of the two-party vote and the Liberals finishing a distant third. The result comes as new polling puts One Nation just one point behind Labor on the primary vote nationally, and six points ahead of the Coalition.
Auction clearance rates have softened heading into spring, with the preliminary capital city rate falling to 52% as buyers grow more wary of another interest rate rise. Listings are starting to climb, but some sellers are switching to private sales rather than risk passing their property in at auction.
A Senate committee wants the government to consider cutting Australia’s tobacco excise, arguing high prices have helped fuel a $15 billion illicit market increasingly linked to organised crime.
The price of a standard stamp rises to $1.85 tomorrow, but Australia Post says $4 stamps and weekly letter deliveries could eventually be inevitable as mail volumes collapse.
The US has struck a deal for control of more than 65 billion barrels of Venezuela’s oil reserves, with President Donald Trump arguing it will eventually help lower petrol prices. But years of underinvestment mean analysts expect any significant increase in Venezuelan oil production could take years.
Fear-o-meter
US Fed Chair Kevin Warsh, speaking at the Federal Reserve's annual symposium at Jackson Hole:
"On the price-stability side of our mandate, the numbers are more concerning. The Fed's preferred measure of inflation, the 12-month change in the PCE price index, stands at 3.7 percent... None of these measures are perfect, but they all tell a similar story: Inflation is running above our 2 percent target. So the Fed's predominant focus right now should be on prices.
Especially in light of recent developments, it is a credit to the Fed as an institution—and consistent with the best of the Fed's traditions—that market prices show confidence that we will deliver price stability. And I can assure you . . . they're right.
The thing about market measures of inflation expectations in economic history is that they tend to look strong and durable until they don't. Those expectations are not pushed around easily, and right now they are well anchored. But they must be closely minded. It's the Fed's job to make sure that inflation expectations do not get unanchored.
There is one signal nobody can miss: The responsibility for 65 months of sustained, elevated inflation sits squarely with the central bank. And that is where it belongs.
Here is my standard: We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do. That's our job . . . our mandate . . . and our charge to keep."
Fear & Greed Q+A today
On the week ahead, including the release of the June quarter GDP figures, as well as what last week's inflation and household spending figures tell us about the strength of the economy:
“What cost of living crisis? And I don't mean that flippantly necessarily, but while the inflation numbers, yes, they surprised on the high side, and yes, inflation's not falling to the extent that we would like it - and certainly to the extent that the Reserve Bank would like - the biggest shock, arguably, was the household spending numbers. Up one per cent in July, up seven per cent through the year.
The interesting subset of those numbers is that spending on essentials, by definition, continues to track along at an okay pace. Spending on discretionary items - so that's nice-to-do things, holidays and restaurants and cafes - is booming.
So the numbers are completely at odds with the consumer sentiment numbers, which remain pretty weak. But the household spending numbers really point to the economy, and the household sector - which is over half of the economy - performing way better than anybody was thinking.”
Australia’s biggest companies are finally making more money again after three years of falling profits, but the recovery isn’t as broad as the headline numbers suggest.
With August reporting season coming to an end, earnings are on track to grow 11.6% this financial year, according to AMP. Strip out mining and energy, though, and that falls to about 5.3%. Around 67% of companies are earning more than a year ago, but only 36% have beaten expectations, below the usual 40%.
The brighter story has been dividends. Almost six in ten companies have increased payouts, helped by stronger-than-expected balance sheets. BHP and Rio Tinto beat dividend expectations, while Ampol lifted its payout 362% and Viva Energy increased its dividend 173%.
The question now is whether the recovery can continue. Several companies have delivered strong results while simultaneously warning that demand has softened early in the new financial year.
Greed-o-meter
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