Aurelia Butler

SYDNEY (Reuters) – Australia’s Labor government on Tuesday boasted the first budget surplus in 15 years as strong jobs growth and bumper mining profits swelled its coffers, but it will quickly be swallowed up by spending on everything from health to energy and defence.In his second budget since winning power in May last year, Treasurer Jim Chalmers also announced billions in cost-of-living relief aimed at lowering power bills and consumer prices in a helping hand to the Reserve Bank of Australia’s (RBA) fight against inflation.”Providing responsible, targeted relief is the number one priority in our Budget,” Chalmers told lawmakers, while also lauding the improvement in the budget bottom line.”This Budget, we’ve returned 82% of the extra revenue windfall that’s largely come from lower unemployment, stronger jobs and wages growth, and higher prices for key exports.”The highlight was a projected A$4.2 billion surplus for the year to June 2023, the first since 2007/08 and a huge turnaround from the A$37 billion shortfall forecast last October.The former Liberal National government came tantalisingly close to a surplus in 2019, only for COVID-19 to blow a pandemic-sized hole in the accounts and lift the deficit to a record A$134 billion.The latest improvement owes much to a surprisingly strong labour market, which has taken unemployment to near 50-year lows of 3.5% and boosted income tax while curbing welfare payments.High prices for Australia’s commodity exports have also delivered a windfall to mining profits, and thus tax receipts, though prices are now well off their peaks.Chalmers also expects the domestic economy to brake to just 1.25% in 2023/24 from 3.25% this fiscal year, in large part due to a painful 375-basis-points of rate rises from the RBA.That tightening should have the desired impact on inflation, which Chalmers sees slowing to 3.25% by mid-2024, down from the current blistering 7.0% pace. Treasury estimates its relief package for energy bills alone will cut 0.75 percentage points from consumer price inflation in 2023/24.Higher interest rates, however, have sharply raised the cost of funding the government’s near-A$1 trillion in debt, with debt repayments the fastest growing cost in the accounts.Labor has also promised to honour a commitment by the previous government to slash income taxes from 2024/25, cuts that are projected to cost a budget-busting A$254 billion over the first 10 years.The cuts are not especially popular with the public given the vast majority go to the higher paid, but Labor is loath to break an election promise and seems boxed-in.There are plenty of other demands on the public purse. Annual spending on hospitals and aged care is seen rising by 6% or more every year for the next decade, while interest payments are up almost 9% and disability payments 10%.Defence is set for the biggest increase since World War Two amid plans to spend A$368 billion out to the 2050’s on nuclear powered submarines from the UK and United States.All of which means the budget will soon be back in the red, with Chalmers forecasting deficits of A$14 billion in 2023/24 and A$35 billion the year after. As surpluses go, this is very much a one-off.(This story has been corrected to say that first surplus since 2007/08, not 2008/09, and previous estimate was made last October in paragraph 5) More

WASHINGTON (Reuters) – U.S. President Joe Biden is due to meet on Tuesday with the top Republicans and Democrats in Congress amid a months-long standoff over the government’s debt ceiling that has brought the nation close to the brink of default and economic crisis.WHAT IS THE DEBT CEILING?Washington regularly sets a limit on federal borrowing. Currently, the ceiling is set at $31.4 trillion, equal to roughly 120% of the country’s annual economic output. The debt reached that ceiling in January and the Treasury Department has kept obligations just within the limit by suspending investments in some federal pension funds while continuing to borrow from investors.The Treasury warned last week that it could have to stop borrowing altogether and rely solely on tax receipts to pay its bills by as soon as June 1, though it also said that cutoff, known as the “X-date” could occur several weeks later. Because the Treasury borrows close to 20 cents for every dollar it spends, Washington at that point would start missing payments owed to lenders, citizens or both.IS THE DEBT CEILING GOOD FOR ANYTHING?Few counties in the world have debt ceiling laws and Washington’s periodic lifting of the borrowing limit merely allows it to pay for spending Congress has already authorized.Treasury Secretary Janet Yellen and other policy experts have called on Washington to eliminate the limit, because it amounts to a bureaucratic stamp on decisions already made.Some analysts have proposed that the Treasury can bypass the crisis by minting a multitrillion-dollar platinum coin and putting it in the government’s account, an idea widely seen as an outlandish gimmick. Others argue the debt ceiling itself violates the U.S. Constitution. But if the Biden administration invoked that argument, which involves the 14th Amendment, a legal challenge would follow.WHAT HAPPENS WHEN WASHINGTON CAN NO LONGER BORROW MONEY?Shockwaves would ripple through global financial markets as investors question the value of U.S. bonds, which are seen as among the safest investments and serve as building blocks for the world’s financial system.The U.S. economy would almost certainly fall into a recession if the government was forced to miss payments on things like soldiers’ salaries or Social Security benefits for the elderly. Economists expect that millions of Americans would lose their jobs. Already, investors have shunned some U.S. debt securities that come due in July and August as they try to avoid bills maturing when the risk of a debt default is highest.HOW DID WE GET HERE?Republicans, who hold a narrow 222-213 majority in the House of Representatives, in late April passed a bill that would raise the debt limit but also set in place sweeping spending cuts over the next decade.The bill has no chance of approval in the Democratic-controlled U.S. Senate. House Speaker Kevin McCarthy wants Biden to negotiate on spending cuts even as the White House insists on a debt limit increase with no strings attached.HAVEN’T WE HEARD THIS SONG BEFORE?This kind of brinkmanship has been part of U.S. politics for decades but worsened significantly after fiscal hawks in the Republican Party grew in power since 2010.In a 2011 showdown, House Republicans successfully used the debt ceiling to extract sharp limits on discretionary spending from Democratic President Barack Obama. Spending caps stayed in place for most of the rest of the decade, but the episode rattled investors and led to a historic downgrade of the U.S. credit rating. More

1. All eyes on U.S. inflationU.S. stock futures edged lower as investors geared up for the release of key inflation data out of the world’s largest economy later this week.At 05:02 ET (09:02 GMT), the Dow futures contract was down by 112 points or 0.33%, S&P 500 futures traded 14 points or 0.34% lower, and Nasdaq 100 futures dipped by 54 points or 0.41%.The latest data on U.S. consumer price growth, due out on Wednesday, is likely to provide further clues about the path ahead for the Federal Reserve’s policy tightening cycle. The core figure, which strips out volatile items like food and energy, is seen slowing marginally on an annual basis.The U.S. central bank raised interest rates by 25 basis points last week, and signaled that it may be at the point of pausing its recent campaign of borrowing cost hikes aimed at corralling inflation.But any signs of persistently sticky inflation could lead the Fed to take a more hawkish approach in its upcoming policy decisions.2. China’s sluggish post-pandemic recoveryChinese imports slipped by more than anticipated in April, while export growth decelerated, in a possible sign that local demand in the world’s second-largest economy remains constrained despite a recent post-COVID reopening.Imports in China dropped by 7.9% during the period, further slowing from a decline of 1.4% in March. Economists had estimated that the figure would contract by 5.0%.Exports, meanwhile, moved up by 8.5% on an annual basis, topping expectations. Yet the expansion was not as fast as the prior month, further pointing to a mixed recovery as the country’s crucial manufacturing sector struggles.The trade data may present a challenge for nations with large exposure to Chinese goods — a notion that led to a softening in a slew of Southeast Asian currencies on Tuesday.3. Saudi Aramco surgesSaudi Aramco (TADAWUL:2222) saw its shares spike after the world’s biggest oil firm announced that it intends to roll out a new dividend policy even as its first-quarter income was hit by lower energy prices.In a statement on Tuesday, the group said that this new performance-linked payout will be between “50% to 70% of [its] annual free cash flow, net of the base dividend and other amounts including external investments.”The funds could help bolster returns to the Saudi government, which is aiming to use the proceeds generated by Aramco to help pay for a massive pivot of the economy away from its current dependence on oil production. Riyadh is Aramco’s largest shareholder.Potentially complicating this strategy has been a recent slip in crude prices. Aramco’s net profit fell by just under a fifth to $31.88 billion in the three months ended on March 31, missing Bloomberg consensus expectations, driven by these declines.4. Oil prices dipOil prices inched lower, paring back earlier gains, with investors keeping a wary eye on the upcoming U.S. inflation data.At 05:03 ET, Brent oil futures fell by 0.79% to $76.41 a barrel, while West Texas Intermediate crude futures dropped by 0.78% to $72.58 per barrel.Prices are still down substantially for the year as markets awaited the latest consumer price index out of the U.S. – the world’s top oil consumer. Trading ranges are tipped to remain fairly tight until the release of the figures, according to analysts cited by Reuters.5. Palantir’s AI focusShares in Palantir (NYSE:PLTR) jumped by more than 19% in premarket hours trading in the U.S. on Tuesday after the big data analytics company hiked its full-year outlook and hinted at strong demand for its new artificial intelligence platform.The Denver-based firm known for its ties to government agencies said it now expects to post adjusted operating profit from operations of $506M to $556M, up from its prior estimate of $481M to $531M. Revenue is also seen at between $2.185B to $2.235B, above the previous guidance of $2.18B to $2.23B.Driving the rosy expectations were Palantir’s first-quarter results, which saw income from operations unexpectedly swing back to profit thanks in part to strong U.S. commercial revenue.In a statement, Co-founder and Chief Executive Officer Alex Karp predicted that the company would be profitable in each quarter until the end of 2023, citing an expected “depth of engagement with” its new AI system that is “without precedent.” More

“This should not be any cause of concern as arrangements have been made for the rollover/repayment of this debt,” the ministry said in a statement.Pakistan’s economy has been in turmoil for months due to an acute balance of payment crisis, with its central bank reserves falling to cover just a month of controlled imports.There have been concerns the South Asian country could face a default on its external payment obligations, especially if it fails to resume an IMF deal, which it has been trying to negotiate since February. More

WASHINGTON (Reuters) – U.S. President Joe Biden meets Republican House Speaker Kevin McCarthy and other congressional leaders at the White House on Tuesday afternoon for closed-door talks as a potentially catastrophic June default looms.The 4 p.m. EDT (2000 GMT) meeting is not expected to produce anything close to a final agreement on raising the debt limit, but will be closely scrutinized by global investors, U.S. voters and Washington lawmakers. Reuters spoke to political tacticians and advisers inside and outside the White House and Congress about tell-tale signals that could come from the meeting. Here’s what they will be looking for: WHOM WILL BIDEN BRING? The meeting is set to include Biden, McCarthy, Senate Democratic Majority Leader Chuck Schumer, Senate Minority Leader Mitch McConnell and House Democratic minority leader Hakeem Jeffries. As invitees to the White House, they’re not expected to bring any other lawmakers. The people Biden brings, whether Cabinet members like Treasury Secretary Janet Yellen or congressional experts like legislative affairs Director Louisa Terrell, will signal what the president expects to get done in the meeting, experts said. White House spokesperson Karine Jean-Pierre said on Monday that the meeting will likely be Biden and the four legislative leaders, but that details may change. The bottom line is the fewer the people, the more serious the president is about getting down the nitty-gritty of a deal. WHEN THE NEXT MEETING IS First meetings tend “not to be super productive,” said Rohit Kumar, co-leader of PwC’s national tax office in Washington, who participated in a number of Oval Office meetings while serving as a top McConnell aide. Instead, participants tend to restate their public positions. He said the most productive outcome would be a decision on how they move forward with negotiations. “…They designate the people who will lead the negotiations for each side, and decide who’s going to make the first offer. And then you start the actual process of negotiating, trading paper – however you’re going to do it,” he said.MCCARTHY, BIDEN’S TONE BEFORE AND AFTER Heading into Tuesday’s meeting, Biden and McCarthy have cast one another as stubborn, misguided and, at times, dangerous. Observers are wondering if that tone will change, as it did after McCarthy met with Biden in February Biden will speak to reporters at the top of the meeting, and it’s common for lawmakers to talk to reporters outside the Oval Office at the White House following high-profile gatherings. White House officials say they want this to be a productive meeting, not just Washington theater. But they aren’t sure if McCarthy will feel the need to play to the conservative base and stand firm, or act as a flexible dealmaker seeking resolution.House and Senate Republicans have repeatedly said they would not vote for the “clean” debt-ceiling hike that Biden has called for. BIDEN’S NEXT STEPS Biden will travel to New York’s Hudson (NYSE:HUD) Valley on Wednesday to once again pressure Republicans to pass a clean debt ceiling hike and highlight that a House Republican plan would cut veterans’ health care visits, support staffs at schools and Meals on Wheels for seniors.The event will take place in a politically competitive region that saw Republicans make gains in 2020, a sign that the White House believes Republican cuts are a winning issue for Democrats.Biden is not currently expected to tour battleground states in the weeks ahead, and he heads to Asia for a diplomatic trip late in the month. He may reconsider if he thinks it will help to ratchet up the pressure on McCarthy and Republicans, advisers say. MARKET PANIC? The meeting is set to begin just as the U.S. stock market closes for the day. That means whatever news comes out of the discussions can’t send U.S. markets plunging, but Asian markets, which will be open, have historically moved on debt ceiling fears, too. The market price of insurance against a U.S. default has jumped, with one-year credit default swaps trading 157% higher than three months ago. A severe market reaction to any post-meeting messaging would draw investor anger and may accelerate pressure on both sides for a resolution. More

The agreement is subject to the approval of the IMF executive board, which is due to discuss it in July.The $133 million funding, under the IMF’s Resilience and Sustainability Facility, is to support structural reform efforts and investments to address rising risks associated with climate change.The latest review of Niger’s three-year Extended Credit Facility should release funds to help cover its external financing needs. More

China’s import volume posted its biggest contraction in a year last month, while exports expanded at a slower pace than expected, casting doubt over the pace of the country’s economic recovery after three years of pandemic restrictions.Imports fell 7.9 per cent year on year in April, a far deeper decline than analysts’ expectations of a 0.2 per cent contraction, according to a Bloomberg poll. Exports in the month rose 8.5 per cent compared with a year earlier, following an unexpected jump in March and benefiting from a low base last year.Tuesday’s mixed trade data release was closely watched across markets for clues on the state of China’s economy, which has thrown off conflicting signals as it emerges from three years of closure under anti-coronavirus rules.Gross domestic product expanded 4.5 per cent in the first quarter of the year and exports expanded after months of weakness, while tourism over a recent national holiday surpassed pre-pandemic levels for the first time. But factory activity figures released last week showed signs of sluggishness and authorities have warned of an incomplete recovery as global demand for goods waned.The renminbi fell 0.2 per cent against the dollar on Tuesday following the publication of trade data to Rmb6.9254. In Hong Kong, losses for the Hang Seng China Enterprises index sharpened, leaving the benchmark down 2.1 per cent.Hao Zhou, chief economist at Guotai Junan International, said the trade figures and the import data in particular were “somewhat downbeat” and suggested they pointed to slowing growth momentum in the second quarter.Beijing has set a cautious growth target of 5 per cent for the full year, its lowest in decades, after missing a 5.5 per cent target in 2022 when economic growth came in at just 3 per cent under the impact of onerous Covid-19 restrictions and outbreaks of the virus in the country’s biggest cities.Economists have widely pointed to an export slowdown in 2023 as one of the biggest challenges facing Chinese policymakers, given high global inflation and weakness in consumer demand.In March, exports unexpectedly surged 15 per cent after several consecutive months of declines, while imports contracted 1.4 per cent, beating expectations of a 5 per cent decline.

The 8.5 per cent rise for exports last month came against a low base compared with a year earlier, when Shanghai was plunged into a multi-month lockdown that weighed heavily on economic activity.Capital Economics estimated that after adjusting for price changes and seasonality, export volumes fell 4.4 per cent in April compared with March, reversing the strength of the previous month’s figure.“This suggests that global demand for Chinese goods remains weak,” wrote China economist Zichun Huang. Zhiwei Zhang, president at Pinpoint Asset Management, suggested the contraction of imports in April may have been partly driven by the slowdown in global consumption, which affects China’s imports of parts and components which are then processed and exported. More

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