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Hedge Clippings | 17 October 2025 A Week Jim Chalmers Would Rather Forget It started with a backflip that was as inevitable as it was overdue. The Treasurer finally dropped the proposed plan to tax unrealised capital gains in superannuation balances over $3 million (although the amount is irrelevant, it was the concept that was the problem) -- an idea that had baffled economists, infuriated fund managers, and confused just about everyone else. Even among Labor's supporters, the policy looked tone-deaf. The notion that retirees and super funds could be taxed on paper profits, particularly in volatile markets, was always destined for the scrapheap. In the end, Chalmers bowed to a combination of political reality, a nudge from Paul Keating (never one to stay silent on superannuation), and what insiders describe as a not-so-gentle push from Prime Minister Anthony Albanese himself. The retreat was wrapped in the usual political spin -- "consultation," "refinement," "listening to stakeholders" -- but it was, quite simply, a climbdown from an idea that never should have seen daylight. Unfortunately for the Treasurer, the week didn't get any easier from there. During a "fireside chat" in New York, RBA Governor Michelle Bullock followed up with a blunt reminder that Australia's fiscal trajectory is unsustainable. Government spending, she warned, is growing faster than national income. The RBA, already worried about sticky inflation, coupled with falling productivity, now faces the added complication of a budget that's not pulling in the same direction. Bullock's comments were unusually pointed, suggesting rising concern inside Martin Place that fiscal policy and monetary policy are working at cross-purposes. And then came the kicker: fears that inflation is still running hotter than the RBA expected, her tone suggesting that the RBA might be preparing the public for the possibility that rates will stay higher for longer -- something neither homeowners nor the Treasurer will want to hear even if we are still two and a half years away from the next election. Whether Bullock's concerns are confirmed or not will be known on October 29th, when the ABS releases both monthly and quarterly inflation numbers for September. The June quarter annualised number was an encouraging 2.1%, but August's monthly figure (admittedly only partial) was a worrying 3.0%. If that trend continues, the central bank won't be loosening the reins on Melbourne Cup Day, so for anyone backing a rate cut, that might look like a long shot indeed. They might be encouraged by yesterday's September unemployment rate, which rose to 4.5%, the highest since November 2021. Although still historically tight, it's a signal that the labour market, one of the last bastions of strength in the post-pandemic recovery, may be beginning to soften. Ordinarily, a rise in unemployment might nudge the RBA toward cutting rates to prevent a sharper slowdown -- but if inflation is still above target (or even worse, rising) and with government spending still climbing, the central bank's hands will be tied. It's a classic economic tug-of-war: growth is faltering, inflation is lingering or rising, and the government's fiscal stance isn't helping either side win. For Chalmers, the optics are rough. After months of claiming Australia's economy is resilient and well-managed, the data is beginning to tell a different story -- one of slowing growth, weakening labour demand, and persistent cost-of-living pressures. The Treasurer can take small comfort in the fact that Australia is hardly alone in facing these challenges, but politically, that won't count. He's lucky the opposition is such a mess. However, in a single week, Albo has forced him to back down on a politically toxic policy, he's fended off criticism from Keating, the architect of superannuation, and listened to the central bank warn that his budget settings could be fuelling inflation. Add a rising unemployment rate to the mix, and it's no surprise Chalmers might be wishing for a quiet weekend -- perhaps one spent far from the Canberra bubble. Unfortunately, in the current environment, there's no such thing as a quiet week in economic policy. News | Insights New Funds on FundMonitors.com Quarterly State of Trend report - Q3 2025 | East Coast Capital Management 10k Words | October 2025 | Equitable Investors Investment Perspectives: Data Centres - An update is required | Quay Global Investors September 2025 Performance News Bennelong Concentrated Australian Equities Fund Argonaut Natural Resources Fund Glenmore Australian Equities Fund |
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