Economy

TOKYO (Reuters) – The Australian dollar hovered close to its highest level of the year on Tuesday, with the central bank set to hold policy steady later and traders focussed on any hints of potential near-term easing.The yen idled in the middle of its range against the U.S. dollar this month ahead of a speech by Bank of Japan Governor Kazuo Ueda that could provide more clues about the pace of interest rate hikes, after the central bank left policy unchanged last week and signalled no rush to tighten further.The euro attempted to find its feet following a nearly 0.5% tumble overnight as weak business activity surveys pointed to additional rate cuts, while sterling tracked close to a 2-1/2-year peak with the Bank of England last week striking a much less dovish posture than the Federal Reserve or European Central Bank.The Aussie edged down 0.1% to $0.68305 as of 0007 GMT, after it jumped 0.45% in the previous session and touched $0.6853 for the first time since Dec. 28.The RBA is widely expected to keep rates steady on Tuesday, but economists and traders have taken opposing views of the potential for lower rates later this year. Of 44 economists polled by Reuters, only four predict a reduction by end-December, whereas traders put the odds at roughly 60% for a cut.Analysts at Commonwealth Bank of Australia (OTC:CMWAY) wrote in a client note that they “expect the RBA’s comments to be hawkish – albeit marginally less hawkish than in August – helping guide AUD higher,” with a test of $0.69 likely this week, a level last seen in February of last year.The Aussie would also benefit from any stimulus announcement from China, they said, with People’s Bank of China Governor Pan Gongsheng due to hold a news conference later on Tuesday on the topic of financial support measures.The yen edged up to 143.45 per dollar, but remained close to the centre of its September range of 147.20 to 139.58, a more than one-year peak reached on Sept. 16.The yen has retreated amid waning bets for aggressive tightening by the BOJ, particularly after governor Ueda struck a cautious tone of Friday, saying the central bank would spend some time monitoring global growth risks.The euro was little changed at $1.1107. A survey compiled by S&P Global showed euro zone business activity sharply contracted this month as the bloc’s dominant services industry flat-lined, while a downturn in manufacturing accelerated.Sterling was flat at $1.33495. The BoE kept rates unchanged last Thursday, with its governor saying the central bank had to be “careful not to cut too fast or by too much”. More

ORLANDO, Florida (Reuters) -China’s political and economic leadership are thought to have a keen sense of history, but Beijing’s tepid response to the unfolding property crash that’s strangling the country’s growth and spreading deflation is baffling.The clear lesson from major housing crises that have occurred in recent decades is that cure and recovery only come following bold, decisive action in the form of massive monetary and fiscal stimulus.Beijing is providing neither and instead taking a scattergun approach. The People’s Bank of China on Friday chose not to cut benchmark borrowing rates, but on Monday injected two-week cash into the banking system for the first time in months and at a lower rate too.But in the words of the Institute of International Finance’s Gene Ma and Phoebe Feng, Beijing’s policy response has been “slow, timid, and sometimes very vague,” a far cry from the “big bazooka” that’s needed.FALLING BEHINDThe impact of this muted response on China’s economy has been stark. Growth in 2024 is likely to fall short of the government’s 5.0% target, deflationary pressures are intensifying at an alarming rate, investment is collapsing, and credit growth is at a record low. Morgan Stanley economists are now forecasting nominal GDP growth of just 3.9% this year and next. For comparison, nominal U.S. GDP growth is currently running at an annualized pace of around 5.5%.China’s stock market is also a notable laggard. As the rising tide of global monetary easing has lifted stock markets around the world to new highs, China has gone in the opposite direction. Shanghai’s blue chip index is down 15% since May, has nearly halved since February 2021, and is close to making new multi-year lows. In many cases, foreign capital is staying away or leaving. Chinese equity funds have attracted inflows in only two of the last 13 months, and foreign direct investment flows have turned negative, according to the IIF.True, foreign investors have continued to participate in the country’s bond market rally. But the overall message is that investors are reluctant to invest in China until there’s a clear path to economic recovery.And that’s nowhere in sight. TRILLIONS NEEDEDThe property sector is pivotal to the crisis. Its implosion is damaging growth, financial stability and household wealth. And the deflation it’s fueling is affecting corporate profitability and investment, while increasing real debt burdens.At its peak three years ago the property sector accounted for a quarter of China’s GDP. Since then, housing investment is down 30%, home sales have halved, and housing starts have plunged by two thirds, according to the IIF. Analysts at Jefferies reckon Beijing may need to spend at least 2 trillion yuan ($285 billion) this year to successfully implement its plan to reduce the country’s excess housing stock by purchasing unsold properties and converting them into social housing. And they estimate that up to 7 trillion yuan ($1 trillion) will be needed to get housing inventory down to more healthy levels. EXCESSIVE CAUTIONSo why isn’t Beijing firing the proverbial bazooka? First, flooding the system with liquidity may not address the root cause of the crisis because China’s property bubble is a result of simple oversupply as much as debt-fueled leverage. A flood of stimulus could also weaken the exchange rate so much that capital flight out of the country accelerates. And deep rate cuts would wipe out banks’ already slender interest margins. Finally, China’s leaders have simply shown themselves to be more cautious than cavalier. But this policy paralysis has consequences. By failing to follow its global peers in aggressively cutting rates, the PBOC has helped lift the yuan to its strongest level in over a year. The last thing China’s sluggish economy needs is a buoyant exchange rate.Beijing’s hesitancy may reflect its concern about repeating the mistakes of Japan, which spent decades in a deflationary and slow-growth funk after its housing bubble burst in 1990. House prices there still haven’t fully recovered. But taking an overly cautious approach could make this outcome more likely, not less.WISHING AND HOPINGMany China bulls argue that Chinese assets are attractive because, when push comes to shove, Beijing will ultimately take the necessary steps to stimulate growth. How can investors ignore the world’s largest consumer of many key commodities – an innovative, competitive behemoth with a huge savings pool worth trillions of dollars? But bonds aside, Chinese assets are cheap for a reason. Lots of reasons. And thus far, Beijing has shown little appetite for the overwhelming monetary and fiscal stimulus experts believe is necessary. This could obviously change. But, for now, there’s little indication that it will.(The opinions expressed here are those of the author, a columnist for Reuters.) (By Jamie McGeever; Editing by Andrea Ricci) More

HONG KONG (Reuters) – China’s move to raise retirement ages is a starting point to plug gaping pension deficits and bolster a shrinking workforce but more pain lies ahead as the economy slows, making further reforms urgent, say economists and demographers.Aging populations are a global phenomenon, but the issue is particularly stark in China due to the legacy of its one-child-policy, which was in place for three decades and has exacerbated its demographic challenges. China’s number of births dropped to 9 million last year and the United Nations forecasts China’s working age population will decline by nearly 40% by 2050 from 2010 if fertility rates remain at current levels. Both older and younger workers have expressed worries about the changes as policymakers grapple with widespread discrepancies between rural and urban pensions, maintaining public stability and high youth unemployment. “They need to solve the pension problem now because this is when they still have some growth to finance the deficit,” said Alicia Garcia Herrero, Natixis’ chief economist for Asia Pacific.China’s economic growth rate has slowed from around 8% in the early 2000s to around 5% now and could be as low as 1% after 2035, she said. Wary of public concerns, Chinese lawmakers fast-tracked the policy without public consultation in September, changing retirement ages that had been set in the 1950s.Life expectancy in China has risen to 78 years as of 2021 from about 44 in 1960 and projected to exceed 80 by 2050. Chinese Premier Li Qiang said the reform is a “significant move” to improve China’s social security system and “better safeguard and improve people’s livelihoods,” according to the Xinhua official news agency. Still, China’s state-led basic pension system is under significant financial pressure. About one-third of China’s provincial-level jurisdictions are running pension deficits. China’s Academy of Social Sciences has estimated the pension system will run out of money by 2035 without reforms.Monthly urban pensions range from roughly 3,000 yuan ($425) in less-developed provinces to about 6,000 yuan in Beijing and Shanghai. Rural pensions, introduced nationwide in 2009, are meagre. VOLUNTARY China’s cohort of those aged 60 and older is expected to rise at least 40% to more than 400 million by 2035, equal to the populations of Britain and the United States combined.Migrant workers, who typically receive poor pensions, continue to work into their older years versus state-sector employees with relatively generous government pensions who have less incentives to opt into the higher retirement ages. The contribution period needed to receive a pension in China will rise to 20 years from 15, starting in 2030.Expanding the contribution time frame further “especially in the context of the current state of the gig and informal economy could make it harder for many blue-collar workers to be eligible to receive their pension,” said Stuart Gietel-Basten, professor at the Hong Kong University of Science and Technology.The initial fiscal impact from the raising retirement ages will likely be muted because the increases are largely voluntary, said Ernan Cui, China consumer analyst at Gavekal Dragonomics.”Raising the retirement age may entail only a limited fiscal gain for now…The coming increase will effectively be optional for many workers, though the increase in the minimum contribution period to obtain a pension will not,” she said. John Wang, an analyst at Moody’s (NYSE:MCO) Ratings, said the new legislation could pose a social risk due to China’s demographic challenges and income inequalities. “Successful implementation of China’s retirement age reforms will depend on managing risks…such as the skill set of the elderly population, the available jobs and their adaptability to developments in technology and innovation.”($1 = 7.0465 Chinese yuan renminbi) More

(Reuters) – A look at the day ahead in Asian markets.A mood of caution may hang over Asian stocks on Tuesday, following a fairly directionless U.S. session the day before and as investors brace for an interest rate decision in Australia and remarks from Bank of Japan Governor Kazuo Ueda.That said, the slender gains eked out on Wall Street kept the S&P 500 within 0.3% of last week’s record high, and pushed the Dow to a new peak of 42,190 points. The feel-good factor from last week’s Fed move has not faded just yet.Indeed, the bullish case for risky assets may have gotten a boost on Monday from Chicago Fed president Austan Goolsbee, who said the Fed’s policy rate is still “hundreds” of basis points above neutral and that there are “a lot of cuts” to come over the next year.This follows surprisingly dovish comments on Friday from Fed Governor Christopher Waller, who said inflation is softening much faster than he previously thought and August PCE inflation could be very low.But there’s often a fine line between deep rate cuts encouraging investors to load up on risk, and concerns over why policy is being loosened so much so quickly. This is why all economic activity and labor market data between now and the Fed’s next meeting will be scrutinized so closely.The Reserve Bank of Australia is the next major central bank to deliver its latest policy decision and guidance. With inflation running above the central bank’s 2%-3% target range and the job market looking strong, there is virtually no chance of a rate cut yet.All 43 economists polled by Reuters expect the RBA to keep its cash rate on hold at 4.35% on Tuesday, and 40 of them say there will be no move on rates this year.Aussie swaps markets are attaching a roughly two-in-three chance of a 25 basis point rate cut by the end of this year, and imply a full 100 bps of easing next year – significantly less than all G10 central banks except the Bank of Japan and Swiss National Bank. The BOJ is the only major central bank raising rates, and investors will be looking to a speech from Governor Kazuo Ueda on Tuesday for clues on the pace and extent of tightening. The BOJ left rates unchanged on Friday and signaled it is in no rush to raise them again. The People’s Bank of China, meanwhile, injected 14-day liquidity into the financial system on Monday for the first time in months, and at a lower rate than before. But investors will need a lot of convincing that Beijing’s stimulus efforts will be enough to fight off deflation and revive growth.Here are key developments that could provide more direction to Asian markets on Tuesday:- Australia interest rate decision- BOJ Governor Kazuo Ueda speaks- Japan flash PMIs (September) More

LOS ANGELES/SYDNEY (Reuters) -Bill Thompson’s fight to stop offshore wind farms was once confined to the tiny U.S. state of Rhode Island where he lives. Today, he is part of a global movement.In April, Thompson, who is director of the activist group Green Oceans, got an email from a fellow anti-offshore wind group more than 10,000 miles (16,000 km) away called Responsible Future (Illawarra Chapter). They were looking for advice on ways to combat projects off Australia’s southeast coast. In August, he got another request, this time from French group PIEBIEM fighting projects in Brittany.”It’s always nice to know that other people are thinking the same way you are,” he told Reuters.These groups are among a dozen or more local activist organizations across the U.S., Europe and Australia who told Reuters they have begun sharing tactics, talking points and other resources in their common mission to derail offshore wind – a development they hope will transform what was once a disorganized scattering of local activists into an increasingly sophisticated global network.Several anti-offshore wind groups said they believe governments and wind developers, such as Orsted (CSE:ORSTED), Avangrid (NYSE:AGR) and Shell (LON:SHEL), are downplaying the environmental damage caused by projects as they promote the renewable energy source as a solution to climate change. In most cases, the groups are looking to anti-offshore wind activists on the U.S. East Coast for advice, citing their years of success in slowing or cutting the size of major projects, eroding public support for the technology, and winning over conservative politicians like former President Donald Trump, whose administration had supported offshore wind, but now opposes it virulently as the Republican presidential nominee.Offshore wind is a nascent industry in the U.S. and a key pillar of President Joe Biden’s plan to fight climate change. However, plans to install turbines along every U.S. coastline have been challenged by soaring costs and supply chain snags and attracted multiple lawsuits over concerns about the industry’s impact on tourism, property values, fishing and marine habitats. Reuters reporting reveals how the groups’ global cooperation presents a fresh challenge to the industry as it allows new opposition groups to quickly tap into years of work done by others. In many cases, it also helps to propagate viral, politically powerful, but sometimes false talking points, including that turbines kill endangered whales and do nothing to slow global warming.”It’s a huge problem, and I don’t think the industry has got its head around A, what’s happening, and B, what to do about it,” Ben Backwell, CEO of the Global Wind Energy Council, a Lisbon-based industry trade group, said.Opposition groups say they are just getting started.”We would like to go further, for example with joint declarations, and a better media impact, to alert public opinion,” said Eric Sartori, secretary of PIEBIEM, which in French stands for Preserving the Environmental Identity of Southern Brittany and the Islands against Offshore Wind. A U.S. West Coast group told Reuters this month it is starting a national anti-offshore wind organization. Other groups, including Responsible Future (Illawarra Chapter), said they have discussed forming a global coalition, especially as the rest of the world steps up trying to catch up with China, Britain and Germany, the top producers of offshore wind energy.INCUBATED ONLINESartori of PIEBIEM said he first contacted Green Oceans and another group in Nantucket after seeing pictures of broken wind turbine blades washing ashore in Massachusetts this summer on social media platform X. Sartori said Green Oceans’ Thompson helped, including by providing him a quote from a U.S. government agency suggesting offshore wind has no climate benefit. That quote – “it is anticipated there will be no collective impact on global warming as a result of offshore wind projects” – now appears on PIEBIEM’s web site next to photos of fiberglass shards littering Nantucket’s coast.The Bureau of Ocean Energy Management told Reuters the quote was part of an environmental analysis of a project, and that the second half of the sentence – not present on PIEBIEM’s site – says wind projects “may beneficially contribute to a broader combination of actions to reduce future impacts from climate change.” BOEM routinely states in its environmental reviews that wind power will not change the course of global warming on its own but can help when combined with other actions.In other groups, posts range from skepticism about whether wind turbines can survive high winds to fears they will obstruct ocean views. The most viral, however, is that offshore wind development threatens whales.That claim caught fire in the U.S. in early 2023 after several New Jersey and New York groups blamed the industry for a spate of whale deaths and caught the attention of conservative media.The claim is now repeated by opponents across the globe, including in France and Australia.The U.S. government says the claim has no merit, and links most human-caused whale deaths to vessel strikes and entanglement in fishing gear.A clean energy trade group, American Clean Power Association, said it is addressing opposition by working to communicate the benefits of offshore wind, such as economic growth and energy independence.”Misinformation undermines trust, fosters confusion, and divides communities at a time we need more American energy,” a spokesperson for ACP said.EXPERT BACKINGGreen Oceans has enlisted the support of Spanish marine biologist Josep Lloret, who has raised concerns about the potential environmental harms of offshore wind in the Mediterranean Sea, and hosted a talk by Texas-based journalist Robert Bryce who is skeptical of the renewable energy transition.Other groups piggy-back off their work.“Green Oceans … the beauty of them is they have scientists behind them, so we could look at the papers they are saying are factual and determine they are peer reviewed,” said Jenny Cullen, president of Australia’s Responsible Future (Illawarra Chapter). “It wasn’t Charlie down the road using ChatGPT to pull up BS.” The tactics are already helping turn an industry that received little opposition during its early days in Europe decades ago into a political hot potato.In New Jersey, where opposition to offshore wind is arguably stronger than in any other U.S. state, support for the industry stood at 50% late last year from 80% four years earlier, according to a poll by Stockton University.Trump has also joined the movement, promising to halt offshore wind projects if he wins back the presidency in November. His administration several years ago had promoted offshore wind as a part of his “America First” agenda, and held a record offshore wind government auction in 2018. Trump’s campaign did not respond to requests for comment.In Australia, which is a new target for offshore wind developers, the main opposition party has also swung behind the movement, and public opposition has been growing – reaching 18% in September, from 12% a year earlier, according to polls from Freshwater Strategy. In France, meanwhile, a Senate committee in July recommended cuts to the nation’s offshore wind target, arguing the technology is expensive and lacks maturity. The nuclear powerhouse is already lagging its neighbours on renewable energy and has fallen behind targets set by the European Commission. In tandem with their successes, groups opposed to offshore wind have been dogged by accusations they are backed by right-wing interests linked to the fossil fuel industry.A 2023 study by researchers at Brown University mapped links between U.S. groups and conservative think tanks, including a case in which the Delaware-based Caesar Rodney Institute supported a lawsuit to block the Vineyard Wind project filed by a Nantucket group, ACK4Whales.Amy DiSibio, a board member of ACK4Whales, said her group is not partisan and has distanced itself from the pro-fossil fuel think tank. A New Jersey group, Protect Our Coast NJ, said the same.”It takes away from our message,” Robin Shaffer, president of Protect Our Coast NJ, said in an interview. More

Here’s what the main political parties propose on the economic front:FREEDOM PARTY – FPOThe far-right FPO, which narrowly leads opinion polls, wants deregulation and lower taxes, including:- Cutting corporation tax on small businesses from 23% to 10%- Scrapping a tax on carbon emissions introduced in 2022- Price controls during times of severe inflation on food, rent and energy as well as reducing sales tax on essentials- Expanding renewable energy while saying Russian gas will continue to be required- Greater annual pension increases particularly of small and minimum state pensionsAUSTRIAN PEOPLE’S PARTY – OVP Second behind the FPO in polls, the ruling conservatives also want lower taxes and lighter regulation, including:- Progressively cutting employment taxes- Making corporation tax at least 0.5% lower than the average rate among EU member states- Gradually cutting tax take as a percentage of GDP to 40% from 43.1% in 2022, according to OECD data- Putting automatic expiry dates on laws that introduce new regulations so they are only renewed if necessary- Removing two regulations for each new one introduced- Self-sufficient energy supply based on renewables, without mentioning a timeframeSOCIAL DEMOCRATS – SPO Polling around 20% of support, the leftist SPO calls for a shift in the tax burden from income to assets, saying this will allow them to cut taxes for 98% of taxpayers.They propose:- Bringing corporation tax back to 25% from the 23% which the OVP-Greens coalition reduced it to – Special levies on energy companies and banks that have profited from rising energy prices and higher interest rates- Gradually turning state holding company OBAG into the main vehicle for promoting renewable energy and the green transition, including using dividends paid to it by companies like oil and gas firm OMV and A1 Telekom Austria (OTC:TKAGY) to fund it- Quickly reducing dependence on Russian gas- Testing a four-day working week with companies and unionsNEW AUSTRIA – NEOSThe liberal party is polling about 10% and calls for:- Reducing employment taxes so workers take home more pay- Abolishing capital gains tax for long-term stock market investments to boost savers’ returns and domestic investment- Funding more apprenticeships and supporting vocational education to ensure it is seen as the equal of academic qualifications- Moving away from fossil fuels and Russian gas, setting up “one stop shops” to expedite approval of infrastructure needed for the green transition- Raising the retirement age to reflect greater life expectancyTHE GREENSIn coalition with the OVP since 2020 and polling about 8%, the left-wing Greens want a more active industrial policy and greater taxation of wealth instead of income.They propose:- Cutting subsidies for environmentally-damaging businesses to help fund infrastructure for the green transition- Expanding a carbon emission tax introduced in 2022, and the “climate bonus” paid out to Austrians from the proceeds- Abolishing licences for about half the jobs which today require them, such as travel agents, cooks and goldsmiths- Making Austria draw all its power from renewable sources by 2030, with a law mandating a move away from Russian gas- Progressively cutting the work week to 35 hours once skilled worker shortages have been addressed More

The median estimate from 11 analysts forecast the overall consumer price index (CPI) would fall to 4.73%, which would be its fourth consecutive fortnight of decline, though it would still be above the official target of 3%, plus or minus a percentage point.The core inflation index, which excludes products with high volatility to better gauge price trends, is projected to decrease to 3.97%, which would be its lowest level since February 2021.In the first 15 days of September, prices were estimated to have increased by 0.15% compared to the previous two weeks, with core prices up by 0.23%, according to the Reuters poll.The central bank’s board cut its benchmark interest rate by 25 basis points in early August in a divided vote. The board anticipated that the inflationary environment would allow it to discuss greater monetary easing.The Bank of Mexico’s next monetary policy decision will be announced on Thursday, just over a week after the Federal Reserve began a process of easing its monetary policy with an aggressive half-percentage-point rate cut, paving the way for the Mexican central bank to lower interest rates again.The National Statistics Institute, INEGI, will release on Tuesday the consumer price data for the first half of September. More