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Cheap money not enough to cure our economic ills


The answer is that although few people were willing to commit to a new mortgage during the lock-down period of May, hordes of people who already had loans, perhaps feeling nervous, rushed to switch banks as lenders slashed their fixed rates to as low as 2.19 per cent.

That refinancing bonanza is in part a result of the Reserve Bank of Australia’s extraordinary effort to drive down the cost of borrowing in March, through the cash rate cut and a range of other “unconventional” measures. While housing is not the economy, of course, it is an important channel through which lower borrowing costs flow into the economy.

This week’s wave of refinancing demonstrates that cheaper credit is indeed flowing: home owners are saving on interest as a result of cut-price interest rates, allowing them to spend more, or pay off debt more quickly.

However, the weakness in new mortgage lending also illustrates how rate cuts alone can’t offset the far bigger problems hanging over the economy, such as job uncertainty. And that reflects a wider limitation of slashing interest rates to support an economy: the RBA can free up household cash flow, but cannot make people lift their spending (or force businesses to invest). And that’s really what the economy needs right now: demand.

Which is why economists are so keen to see Treasurer Josh Frydenberg use the federal budget to support the economy in its hour of need when he delivers a key update in just under two weeks.

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First, however, back to all the cheap money that’s sloshing around the financial system and finding its way into household bank accounts. The surge in mortgage refinancing activity is a tangible illustration of how the RBA’s foray into “unconventional” monetary policy has flowed into the “real” economy of household budgets.

As a refresher, back in March the RBA not only cut official interest rates to 0.25 per cent but also unveiled measures to force down bond yields and give banks up to $90 billion in loans at an interest rate of 0.25 per cent. Banks have also been awash with deposits in recent months as nervous households ploughed $40 billion into their bank accounts, and super funds held cash on hand to prepare for emergency withdrawals.

As explained by deputy governor Guy Debelle in a speech last week, the overall effect of the RBA’s various measures has been to bring down the cost of funding for the banking system. The fall in funding costs has been greater than the 0.25 percentage point in the cash rate announced in March. The bank bill swap rate – a gauge of the cost of banks lending to each other – has fallen to just 0.1 per cent.

What are banks doing with the windfall from cheaper funding? Some of it might support their profit margins, but it appears a lot is being passed on to borrowers in the form of low interest rates for new customers, or those who haggle or refinance.

This is reflected in RBA figures that show the average rates on new home loans continuing to fall in recent months to 2.73 per cent and 4 per cent for small business. One small Tasmanian bank is even offering fixed rate mortgages at interest rates of less than 2 per cent.

Given the extent of the economic hit from COVID-19, financial markets are betting that extremely low interest rates are probably here to stay for years to come.

As governor Philip Lowe said after this week’s board meeting, the cash rate will not increase until there is progress being made towards full employment and inflation running sustainably within its 2 per cent to 3 per cent target band. Debelle in his speech said this was “likely to be some years away”.

The challenge, however, is that with a cash rate of just 0.25 per cent, monetary policy is getting closer to the limits of what it can be expected to achieve. The RBA hasn’t exhausted all its options, as a quick look around the world of central banking reveals. Some believe the RBA may act to try to bring down the Australian dollar if it climbs too much higher, and there’s always negative interest rates (though Lowe has said this is “extraordinarily unlikely”.)

But the interest rates lever has been well and truly pulled. The financial system has a huge amount of funding at its disposal, at very low cost, but what the economy needs is stronger demand. Given the uncertainty about future employment and the real worry of a second wave, economists say this requires an ongoing role for the other big arm of economic management: fiscal policy.

Frydenberg has made it clear there will be some further fiscal support in his upcoming economic statement, which might include JobKeeper being extended in some way, or tax cuts being brought forward. With the government’s surplus ambitions long ago blown out of the water, it’s time for fiscal policy to step up to the plate.

Ross Gittins is on leave.

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Australian News

Banks give customers more time to pay off loans amid economic crisis


Banks have eased the burden on Australian families struggling amid the coronavirus-induced financial crisis and softened the looming shock to the economy by extending the home loan holiday by another four months.

The property sector was bracing for sharp falls in housing prices in September when the deferrals offered to borrowers was to expire alongside the Morrison Government’s JobKeeper and JobSeeker support schemes.

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The lifeline from the lenders comes at a critical stage as Victoria is forced back into a six-week lockdown from midnight as coronavirus cases in the heavily populated state continue to soar.

It also follows a grim survey from the ANU which revealed the number of Australians unable to pay their rent or mortgage on time more than doubled as a result of the pandemic.

The banking industry’s peak body described the “next phase” as an opportunity for those whose incomes are still impacted to return to repaying their mortgages through a restructured or varied loan.

If this is insufficient in getting customers back on their feet by the time the initial six-month deferral expires, borrowers will be offered an extra four-month home loan holiday.

“Those who are able to repay their loans will resume doing so, which is in the best interests of those customers and allows support to be directed to those who need it,” the Australian Banking Association chief executive Anna Bligh said.

“Encouragingly, many customers have already chosen to resume making repayments.”

The deferral extension from September through Christmas won’t be offered automatically. It will be provided to those who genuinely need extra time and further support, the ABA says.

Some may have their mortgages back on track within the four months allocated.

The Commonwealth Bank said it had launched a three-month check-in with its affected customers about their financial positions and found many of its retail and business borrowers have resumed paying loans in full.

But some still need targeted support to help get back on their feet.

“While many customers are doing better than we expected, we know that some customers will require further support and we will contact them over the coming months to discuss the options that might be available to them,” CBA chief executive Matt Comyn said.

“To date, our coronavirus measures since March 2020 have provided about $15 billion in direct financial support to customers and stimulus for the economy.

“Supporting customers who continue to experience financial difficulty is a priority and we are tailoring our support to make sure each customer gets the advice and assistance that suits them.”

The Federal Government has been criticised for not extending the wage support schemes beyond the September cut-off but Treasurer Josh Frydenberg told Channel 7’s Sunrise program this morning that “targeted” income support will be announced in his July 23 economic statement.

He told The Australian that Victoria entering its second lockdown will cost the economy about $1 billion a week.

“When I made a statement to the parliament in May I talked about the economic cost of a lockdown being about $4 billion dollars a week, and given that Victoria is about a quarter of the national economy, then you’re talking about an impact of around a billion dollars a week for the Victorian economy alone, which is very significant,” the Treasurer said.



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NSW-Victoria border closure is worth the economic pain


Victorian Premier Daniel Andrews’ decision on Tuesday to send metropolitan Melbourne back into lockdown, in response to surging COVID cases, will deal a further blow to hopes of a recovery in the state.

But like so many questions in economics, assessing these restrictions means looking at both costs and benefits. If you only look at the negative economic impact of tighter restrictions — and there will undoubtedly be many — you only get half the story.

Monday’s decision to shut the NSW-Victoria border is the most dramatic in a series of recent border closures by state governments trying to stop the spread of the coronavirus.

The last time this happened was the 1918-19 Spanish flu pandemic, also following an initial attempt by the federal government to have all states work together.

That border closure, put in place by NSW, was unsuccessful. NSW State Archives and Records reports that closing the border did not stop the Spanish flu gradually spreading throughout the state after it reached Sydney on a ship.

But regardless of how successful this closure is a century later, it’s clear there will be nasty side-effects for some parts of the economy.

NSW accounts for about a third of national economic output, and Victoria makes up just under a quarter. Closing off the movement of people between the states and having Melburnians stay home is undoubtedly a setback to the federal government’s plan to reopen activity, and Treasurer Josh Frydenberg has acknowledged it will probably cost jobs.

The pain from the border closure will be particularly acute for the already struggling tourism and travel industries, at a time when inter-state visitors brought a ray of hope after international tourism had ground to a halt.

Illustration: Simon Letch

Illustration: Simon Letch Credit:

Deloitte Access Economics reports that inter-state tourism is worth $39 billion in annual spending, about a quarter of the domestic tourism economy. “It’s a sobering outcome when the industry was starting to feel some optimism about travel and visitation returning,” says Access partner Adele Labine-Romain, pointing out South Australia and Tasmania’s sectors are particularly dependent on spending by inter-state travellers.

Business travel is another likely casualty, though much of this has already been replaced by Zoom meetings in recent months.

The border closure is also a further blow to the reeling aviation sector, given Sydney to Melbourne is also one of the world’s busiest air routes (or at least it was until the virus struck).

Less tangibly, the confidence of households and businesses may well suffer from the border closure and Melbourne’s lockdown. And such a hit could have a real influence on economic activity, because if consumers all tighten their purse strings at the same time, it makes a bad situation worse for businesses that depend on us spending money.

Even so, the closure of the NSW-Victoria border — and indeed the other state borders closed this year — do not mean all economic links are severed.

Trucks have continued crossing state borders for months, and the NSW government says freight will be given special treatment, as will people in border towns who have a permit. Industry is worried about the complexities of a permit system and the potential for delays, with the Logistics Council pointing out there are 7300 heavy vehicles that cross the NSW-Victoria border every day.

But these disruptions need to be seen against the much bigger economic benefit from containing the virus —which, without a vaccine, can only be achieved by restricting the movement of people.

For all the financial pain of the last few months, Australia’s economy has emerged in better shape from the pandemic than the experts were fearing in March.

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That track record is the result of moves to suppress the spread of the virus, which allowed the earlier-than-expected lifting of restrictions — until now in Victoria.

There is therefore an economic case for trying to protect this position in other states, including NSW, while doing what’s needed to contain the virus in Victoria.

And this is not just some theoretical argument cooked up by economists — there’s already early evidence of how fresh outbreaks can have real financial consequences.

ANZ Bank’s weekly data on customer spending on Tuesday showed Victoria lagging other states, which the bank put down to the recent surge in COVID-19 cases in Melbourne.

Closing the NSW-Victoria border will have real costs, but these should be compared with the economic and human costs we’d face from the virus spreading more widely in our two most populous and economically significant states. In that contest, a border closure looks like the lesser of two evils.

Ross Gittins is on leave.

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Avoiding an economic ‘cliff’ will require more spending


Just how much “fiscal space” a country has is a judgment call, but it’s safe to say Australia has a fair bit more up its sleeve. The same report said our projected government debt for 2021 as a share of the gross domestic product was about half the average for advanced economies.

But how far should governments go in propping up businesses and jobs that have been destroyed by measures to contain COVID-19? And when should we start to worry about the risks of taking on even more public debt?

So far, Australia’s economy has fared better than most in this crisis. The government rightly responded to the pandemic with one of the biggest stimulus packages in the world, relative to our size, which prevented much economic and social misery.

However, economists are still pretty gloomy when looking at what we’re facing in a few months’ time.

The sheer size of Australia’s stimulus effort, and the fact the spending is concentrated in the six months to September, means that removing it will have a big impact. ANZ Bank has even forecast the economy will shrink in the three months to December because of stimulus being withdrawn.

Business leaders are nervously awaiting this final quarter of the year, with National Australia Bank chief executive Ross McEwan last week supporting targeted packages to support the hardest-hit industries.

Illustration: Simon Letch

Illustration: Simon LetchCredit:

And Prime Minister Scott Morrison has indeed signalled there will be some targeted support for the sectors that have been forced to effectively close, such as aviation and international tourism.

The questions are how much extra support there will be, who will get it, and when does the downside of all that debt outweigh its benefit?

There are clearly limits on how much we can and should borrow, but the view of most market economists is we’re not there yet, especially in an era of ultra-low interest rates. More to the point, attempting to rein in debt through “austerity” would make a bad economic situation even worse.

Independent economist Saul Eslake says one of the key lessons of the aftermath of the global financial crisis overseas was the damage caused by withdrawing stimulus too early. “Germany, Britain and to at least some extent the United States tightened fiscal policy too early in 2010 and dealt their recoveries an unnecessary setback, and we don’t want to do that,” he says.

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ANZ Bank head of Australia economics David Plank, who is forecasting a budget deficit of $200 billion for the coming financial year, also says the debt being racked up is worthwhile. “I don’t think a deficit of $200 billion in 2021 is inappropriate. I think what would be inappropriate would be sharply withdrawing government spending,” he says.

Deloitte Access Economics partner Chris Richardson says that with official interest rates at rock bottom and unemployment high, it is a time for government spending to step into the breach. “A given dollar of government spending can do more good today than at any other time that Australians have ever known,” Richardson says.

Importantly, none of this is to say we should be writing a blank stimulus cheque, nor that every business can be saved. Further public spending to get the economy off a “cliff” is a far cry from what proponents of modern monetary theory advocate – expanding the money supply to finance government spending.

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It is also a sad reality that many businesses are likely to fail during this recession. It won’t be in the economy’s interests to have a series of so-called “zombie” companies – those that only survive because debt is extremely cheap, but are unable to invest.

Indeed, Eslake points out that part of improving Australia’s low productivity growth will involve allowing capital and labour to move to more productive uses. “We don’t want to adopt a suite of policies that inhibit the movement of labour and capital from low productivity uses to higher productivity uses,” he says.

Australia’s economy still faces a highly uncertain outlook as it tries to avoid the”cliff”, and there will no doubt be many hard decisions facing economic managers in the months ahead. But whether to provide more targeted stimulus to the economy should not be one of them.

Ross Gittins is on leave.

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Scott Morrison says ‘there is hope’ for Australia despite economic downturn and coronavirus crisis


The prime minister has addressed the ongoing coronavirus crisis in Victoria, reminding Australians that spikes in cases should not come as a shock to Australians.

Victoria recorded 33 new coronavirus cases today, its highest daily case report in months.

Speaking on A Current Affair, Prime Minister Scott Morrison said while he probably wouldn’t take his family to the hotspots in Victoria, the occasional outbreak should be expected.

“We have always said as we continue to move forward and the economy opens up, there will be outbreaks and cases and what matters is how we respond to them. They are inevitable,” Mr Morrison said.

“We can‘t expect there to be no cases. That is not success. What success is, is that we live alongside the virus, deal with the challenges that come along, keep opening up the economy, we keep getting people back into jobs.

“I‘d go to Victoria, but I wouldn’t go to the hotspots. That’s the point. There’s a localised outbreak and they’re containing that and that’s what’s important.

“If you are living in Wangaratta, you are as exposed as you are if you live in Wagga. I think we need to keep this in perspective.

“There is an outbreak in Victoria, and what would be described internationally as a modest level, but it requires a very swift and very comprehensive response and the Victorian government is leading that and they are getting strong support from other states and they are getting strong support from the federal government.”

Mr Morrison said Australians were living through “the hardest time we have seen since the Great Depression”.

“These are very hard times. Those hard times are showing themselves with people losing their work, they’re showing themselves with people losing businesses, showing themselves with people unable to connect in the way they have in times past with big family gatherings and those sorts of things,” he said.

“These are really hard times. The thing is about where we are as Australia, there is hope.

“Today the IMF, the International Monetary Fund, handed down the outlook for the local economy and they handed out an improved outlook for Australia from what they said from April to May.”

“This is the hardest time we have seen since the Great Depression but Australia is doing better than almost every other country in the world, both on the economy and on the health front we are working together to get through this.”

Mr Morrison said despite massive job cuts since the coronavirus crisis hit – the latest being at the ABC and Qantas – the PM was proud of how the country had handled it.

“I have been so proud of how Australians, despite setbacks, have clung together.

“I know what happened in my own community with what has happened with Qantas we are going to get support from each other. I think we will continue to do that.”

The PM was also questioned about how the Qantas job cuts would affect the country – especially his own electorate of Cook where most of the job cuts are expected to occur.

“These jobs have been lost because of the coronavirus. This is the COVID-19 recession. And for a business, Qantas, that needs to fly planes around the world, when you can’t do that, that has an obvious impact,” Mr Morrison said.

“I have had a long association with the company, even before I went into parliament, and I know how just absolutely devastating it would be.

“Qantas is a family and there is such a level of pride in people working there and putting that uniform on regardless of what role you play.

“I was at Qantas just as COVID-19 was escalating and I went down there to thank the staff for the amazing work they did in getting Australians out of Wuhan in China. That is their nature, they always turn up.

“For my own community in the Shire in southern Sydney, they will be gutted because everyone will know someone who will ultimately be affected by this but at the same time they will, I’m sure know that this would not be completely unexpected but it won’t make it any easier.”



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ASX set to fall as Wall Street tumbles on rising virus cases, weak economic view


It sets up the ASX for sharp losses this morning, with futures at 5.53am AEST pointing to a drop of 106 points, or 1.8 per cent, at the open. On Wednesday, the Australian sharemarket added 0.2 per cent.

“Today was finally the day markets came to terms with the fact that increasing COVID-19 cases could mean a slower recovery in the economy,” said Art Hogan, chief market strategist at National Securities in New York.

Shares of US airlines, resorts and cruise operators slumped as these sectors have been hardest hit by lockdowns. Royal Caribbean Cruises, Norwegian Cruise Line and Wynn Resorts all tumbled along with the NYSE Arca Airline index plunged.

The pandemic also appeared to be causing wider and deeper damage to economic activity than first thought. The IMF said it now expects global output to shrink by 4.9 per cent, compared with a 3 per cent contraction predicted in April.

Advanced economies have been particularly hard hit, with US output now expected to shrink 8 per cent, more than 2 percentage points worse than the April forecast.

Wall Street’s fear gauge, the CBOE volatility index, rose to a one-week high of 37.12 during the session.

Today was finally the day markets came to terms with the fact that increasing COVID-19 cases could mean a slower recovery in the economy.

Art Hogan, chief market strategist at National Securities

Before Wednesday’s sell off, a slate of better-than-feared economic reports, easing lockdowns and massive stimulus measures had powered the Nasdaq to an all-time high and put the benchmark S&P 500 on track for its best quarterly performance since 1998.

“The market seemed pretty confident we were going to be in much better shape in 4-6 months from now. With the resurgence of cases they’re starting to discount that,” said Shawn Cruz, senior manager for trader strategy at TD Ameritrade in New Jersey.

Cruz also cited increasing tensions between the United States and Europe. On Tuesday the New York Times reported that Europe might not allow visitors from the United States when it reopens.

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Then the United States moved to maintain pressure on the European Union in a 16-year dispute over aircraft subsidies by flagging possible changes in tariffs on EU goods, as the date for a decision on reciprocal EU duties slipped to the autumn.

In addition to coronavirus concerns, Carnival Corp faced a credit rating downgrade by Standard & Poor’s for its bonds to junk status as the agency forecast continued weak demand for the cruise industry.

Dell Technologies was a bright spot, as its shares jumped after a report said the company was considering spinning off its roughly $US50 billion stake in cloud computing software maker VMware.

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Local News - Victoria

$320 million plan to raise Mornington Peninsula from economic slump


The project, to be delivered in sections, would create 83 jobs.

It would take in views of Western Port and Port Phillip bays, loop around Cape Schanck and pass the Port of Hastings.

Mornington Peninsula Shire mayor Sam Hearn said the proposed trail would attract visitors from around the world and showcase the region’s diverse landscapes, coastlines and local food.

The proposed bay trail would take in Cape Schanck on the peninsula.

The proposed bay trail would take in Cape Schanck on the peninsula. Credit:The Age

“It would be a big boost to our tourism economy,” he said. “We’ve got some great trails and hikes … but we think this offers something unique and fits with the global market for those holidays that combine an epicurean, physical recreation and environmental experience.”

Mornington Peninsula Regional Tourism Board chair Tracey Cooper said the community faced a worrying future and high youth unemployment without government intervention.

“I’m quite concerned about the immediate 12-month future for the peninsula,” she said. “I think the council needs to do everything it can to accommodate investment.”

She said the council should also work with food producers to expand their farm-gate sales businesses to help offset the cost of losing supply deals with restaurants.

Cr Hearn said the council was seeking about $320 million in total funding to allow work to begin on the projects immediately.

The council wants to secure $25 million to fund a project piping recycled water from the Eastern Treatment Plant to local farmers and food producers, rather than flowing out to Bass Strait.

The project would aim to provide 1425 megalitres of water per year to farmers and increase revenue by $65 million annually.

A spokesman for Flinders MP Greg Hunt, whose electorate covers the peninsula, said the federal government had already provided $700 million for multiple infrastructure projects in recent years.

He said the Commonwealth had also committed $2 million for the Baxter-to-Somerville bike path that will form part of the bay trail and $70 million for an overpass the council was seeking to build, in addition to several other projects that amounted to about another $10 million.

“We are not aware that either the Victorian government or Mornington Peninsula Shire has contributed funding to any of these projects, but we encourage them to do so,” he said.

A state government spokesman said Victoria had spent billions of dollars supporting businesses, workers and families during the pandemic.

“Right now our focus is on getting on with the job of the hundreds of projects we’re fast-tracking to get people back into work, but we’re only too happy to work with councils across the state on the projects that matter to their residents,” he said.

The council is seeking to establish a “technology park” near the Port of Hastings it says will create 3000 jobs and attract manufacturers in the medical technology and pharmaceutical sectors.

The preferred location will be decided by September, but the council wants the state government to fast-track the rezoning of the land.

The Andrews government spokesman said there was no current rezoning request for the Port of Hastings.

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With economic recovery far from assured, the PM’s nerve may be fraying


In which case, why not borrow as much as you need? Because that word “debt” just sounds so bad. And that debt will have to be repaid by our children. Actually, it won’t be. Governments rarely repay debt. What they mainly do is roll it over while they wait for the economy to outgrow it, with help from inflation.

And ask yourself this: what do you think your kids would prefer to inherit? A bit more public debt or an economy that’s been deeply recessed for a decade, with stagnant living standards, little opportunity to get ahead and stories about how much better things were in their parents’ day.

Illustration: Simon Letch

Illustration: Simon LetchCredit:

Recessions always involve the private sector – businesses and households – contracting and the public sector expanding to take up the slack and get things moving again. In our particular circumstances, six years of weak wage growth and record household housing debt means consumers have little scope to start spending big.

For their part, businesses won’t spend on expansion until they see a reason to. Morrison’s notion of incentivising business with investment tax breaks, changes to wage fixing and cuts in red tape is magical thinking.

That leaves it up to the government to keep spending until the private sector has the wherewithal to spend. Without a government-laid foundation, believing in “business-led growth” is believing the economy runs on spontaneous combustion.

I suspect Morrison has looked at our prospective budget deficits and taken fright. Paradoxically, although he readily agreed to the JobKeeper wage subsidy scheme when told it would cost $130 billion, when Treasury realised it wouldn’t take nearly as long to “flatten the curve” as the epidemiologists had led it to expect and so cut the cost to $70 billion, Morrison saw this as a miraculous escape from the sin of profligacy.

Illustration: Andrew Dyson

Illustration: Andrew DysonCredit:

The ideologically pure end of his own party started urging him to spend no more. And this week he started talking about the need to find budgetary savings. This would be completely contrary to the advice he received only last week from the Organisation for Economic Co-operation and Development that “there is ample fiscal space to support the economic recovery as needed”. This is the OECD’s way of saying “if you Aussies think you have a frightening level of debt, you’re kidding yourselves”. The International Monetary Fund says the same.

The OECD continues: “The scarring effects of unemployment – especially for young workers – should be alleviated through education and training, as well as enhancing job search programs. Firms should continue to be supported … The authorities should be considering further stimulus that may be needed once existing measures expire … Such support should focus on improving resilience and social and physical infrastructure, including strengthening the social safety net and investing in energy efficiency and social housing.”

To be fair, should Morrison turn from spending to cutting before the economy has fully recovered, he’d be no more disastrously wrong-headed than Britain’s David Cameron and other European leaders after the global financial crisis, when they started tightening their budgets too soon and condemned their countries to a decade of weak growth.

You can see Morrison’s change of tack in his poorly received HomeBuilder package. Reviving the housing industry is a standard part of the response to every recession, but this is the package you have when you’re only pretending to have a package.

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It’s too small to make much difference and the deadlines for its $25,000 grants are so tight few people are likely to be eligible. Glaring by its absence was any mention of spending on social housing.

But this raises another of the Libs’ hang-ups. They oppose government spending in general, but spending that helps the needy in particular.

Ross Gittins is the Herald’s economics editor.

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Assessing the societal and economic benefits of satellites


Resources for the Future (RFF) announced today the winners of three grants, totaling $300,000, to quantify the benefits of using satellite data in decisions that improve socioeconomic outcomes for people and the environment.

These awards advance the work of the Consortium for the Valuation of Applications Benefits Linked to Earth Science (VALUABLES), a partnership between NASA and environmental and natural resource think tank RFF.

The three winning teams are led by researchers from Moravian College, Salisbury University, and the University of Wyoming, with transdisciplinary personnel drawn from eleven more academic institutions and organizations.

The award winners will conduct impact assessments that quantify the societal benefits of using Earth observations in health, ecosystem, and water quality applications.

We are so appreciative of the 41 teams that competed for the grants, the 12 teams that submitted full proposals, our anonymous external reviewers, and feedback from our NASA partners.”


Alan Krupnick, Senior Fellow , Research for the Future

Krupnick is also a VALUABLES team member who led the Grants for Assessing the Benefits of Satellites (GABS) competition.

“Each of the winning projects features an interdisciplinary team, is on a compelling topic, and is being handled creatively and with state-of-the-art methods.

The results of this research and demonstration of research methods to estimate the value of information from satellites should redound to benefit all of society, both in the areas targeted for research and to the improved generation and use of satellite information.”

The winning projects address diverse topics with important practical applications:

  • Sonia Aziz (Moravian College) leads a field experiment that provides a satellite data-driven early warning system for cholera in Bangladesh through access to a cell phone app for a “treatment” community. Cholera rates and other outcome metrics will be compared to those of a “control” community without the app.
  • The project team includes Emily Pakhtigian (Penn State University), Ali Akanda (University of Rhode Island), and Kevin J. Boyle (Virginia Tech).

    “We expect to provide estimates of potential societal benefits of satellite data as well as necessary inputs for policymakers to design and implement effective policies to limit the incidence and spread of cholera,” say Aziz and her colleagues. “Providing households with satellite-aided information regarding the nature of cholera risk should improve their averting decisions.”

  • Jill Caviglia-Harris (Salisbury University) leads a project to explore how the Brazilian Forest Code is enforced through the use of satellite data that monitors deforestation. Satellite data already are being used for management and enforcement; this project will estimate how much deforestation would have happened without the satellite data and compare that to deforestation and its consequences with the satellite data.
  • The project team includes Andrew Bell (New York University), Trent Biggs (San Diego State University), Katrina Mullan and Thaís Ottoni Santiago (University of Montana), Erin Sills (North Carolina State University), and Thales West (New Zealand Forest Research Institute).

    “This will be the first study to estimate the amount of avoided deforestation resulting from the use of satellite images to support the Forest Code,” say Caviglia-Harris and colleagues. “Our contributions will add to the limited evidence on whether and how the availability of satellite imagery has helped protect designated areas, and the even thinner literature on the benefits of monitoring deforestation to inform climate change policy and commitments.”

  • Stephen Newbold (University of Wyoming) leads the development of a model that describes how lake visitors in California adjust their recreation choices when outbreaks of harmful algal blooms are announced.
  • This will improve our current understanding of how early warning systems supported by satellite data allow recreators to divert their visits away from water bodies currently experiencing a bloom, and instead visit un-impacted sites, thereby increasing the overall enjoyment of water-based recreation activities, reducing the risks of adverse health effects, and mitigating the regional economic impacts associated with lost visitation days.
  • The project team includes Sarah Lindley and Shannon Albeke (University of Wyoming), Joshua Viers (University of California, Merced), Robert Johnston (Clark University), and George Parsons (University of Delaware).

    “Predicting where and when these events will occur is an ongoing challenge, and early prediction is important because it allows steps to be taken to reduce the damage caused by harmful algal blooms,” Newbold and colleagues say. “The case study should shed light on the value of satellite-based early warning systems in other regions of the United States and beyond.”

“These projects will generate much-needed quantitative evidence on how satellite data improve societal outcomes,” says Yusuke Kuwayama, an RFF fellow and the VALUABLES Consortium director. “But more importantly, they will help grow the community of Earth scientists and social scientists working together to demonstrate the return on investment in scientific information.”





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Trump takes aim at Fed’s grim economic outlook


“The Federal Reserve is wrong so often. I see the numbers also, and do MUCH better than they do,” the president tweeted. “We will have a very good Third Quarter, a great Fourth Quarter, and one of our best ever years in 2021. We will also soon have a Vaccine & Therapeutics/Cure. That’s my opinion. WATCH!”

Administration officials are under pressure from a steep drop Thursday in the stock market. The Dow Jones industrial average skidded 1,500 points, or 5.5 per cent, by early afternoon. The Standard & Poor’s 500 index sank 4.7 per cent.

Trump has pointed to the stock market’s recent rebound as a sign that the economy will come roaring back to life, but many economists and the Fed have cautioned that the recovery will be slow because many companies are still not operating at full capacity and the labor market remains extremely weak.

I think we’ve learned that if you shut down the economy, you’re going to create more damage.

Stephen Mnuchin

Large parts of the US economy shut down in March and April as federal, state and local officials tried to stop the spread of the novel coronavirus. Many began allowing businesses to reopen in May, though many still have strict restrictions.

Trump said in late May that “we are not closing our country” if there is a second wave of coronavirus cases.

“I think we’ve learned that if you shut down the economy, you’re going to create more damage,” Mnuchin told CNBC on Thursday.

Asked about those comments later on Thursday, Mnuchin seemed to leave open the possibility that the economy could be shut down again in an extreme scenario, while stressing that the odds of that happening were remote.

More than a dozen US states are seeing new highs in positive coronavirus cases and hospitalizations, according to Washington Post data, as public health restrictions nationwide are loosened.

“This is the president’s decision and not my decision,” Mnuchin said. “My comment was based on a set of facts that people gave me. It’s my expectation we will make medical progress between now and the end of the year. I don’t expect we will need to shut down the economy again. Could there be some rare extreme scenario that occurs that based upon medical advice the president does [shut down the economy]? I think that’s extremely unlikely.”

Fed chairman Jerome Powell's dire economic projections have been criticised by the White House.

Fed chairman Jerome Powell’s dire economic projections have been criticised by the White House.Credit:Bloomberg

Federal lawmakers have for months grappled with competing pressures between safeguarding public health and the impact of restrictions on the national economy. US deaths due to COVID-19, the disease cause by the novel coronavirus, have surpassed 100,000, and as many as 2 million Americans are now infected. Economic shutdowns have led to record unemployment numbers and led to a severe economic contraction.

Trump and Mnuchin celebrated a better-than-expected May jobs report at a White House news conference last week, but substantial uncertainty remains about the economic recovery. Robert Redfield, the director of the Centres for Disease Control and Prevention, has warned of a devastating second wave that would coincide with the flu season and strain the nation’s health-care system.

On Thursday, Kudlow maintained a consistently optimistic view of the economy, touting business reopenings as well as rebounding demand for automobiles and housing.

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“I do think Mr. Powell could lighten up a little when he has these press offerings. You know, a smile now and then, a little bit of optimism, OK,” Kudlow told Fox News. “I’ll talk with him and we’ll have some media training at some point.”

The Washington Post

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