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Macroeconomics

Macroeconomics
High power costs: Can we unplug decisions of the past?
Australia is a global giant when it comes to energy; with vast coal, oil, gas and uranium reserves and unused land area that’s climate-ready for renewables such as wind and solar. So why is there a decade-long and counting energy supply shortage for industry and households, especially on the east coast, that’s pushing up our electricity costs? Momentum to move away from fossil fuels into cleaner energy sources has been growing for decades and the first cab off the rank to move away from has been coal, one of the most polluting energy sources on the planet. While global miners such as BHP (ASX : BHP) and Rio Tinto (ASX : RIO) have moved away from coal production, energy intensive countries such as China, Germany and India - while purporting to maintain efforts towards zero carbon emissions - have actually increased the construction of coal-fired energy plants. Even America has now decided to rekindle its - as Trump has put it - “beautiful clean coal” industry, undoing a decades-long move away from its use in power generation. Find out more: Trump to revive coal for AI despite clean energy boom Bonkers, right? Well, there are reasons behind their moves, and they’re largely due to high consumption - all three countries
Macroeconomics
Eastern, southern states' gas shortfall grows: ACCC
Gas supply in Australia’s eastern states could fall short from July to September amid a decline in production, according to the ACCC. Projected supply for the period is 493 petajoules in total, while demand is expected to reach 502 petajoules. Minister for Resources Madeleine King said that Australia’s government had secured least 9 petajoules of additional gas from east coast producers, in line with ACCC recommendations. “This changed outlook reflects the susceptibility of the supply/demand balance to short-term reductions in gas production and changes in LNG producers’ intended exports and swaps,” said ACCC commissioner Anna Brakey. “The east coast supply and demand balance is projected to worsen further over the next few years, which will increase the impact of LNG producers’ decisions on the market. It remains crucial that LNG producers have regard to the domestic outlook before making any significant variations to export volumes or schedules.” In southern states, the ACCC projects gas demand will be 127 petajoules. This is 40 petajoules higher than supply, double the area’s shortfall in Q3 2024, though the ACCC said adding surplus gas from Queensland and southern gas reserves would likely be sufficient to meet dem
Macroeconomics
US consumer confidence, durable goods orders decline
United States consumer confidence declined for the second consecutive month in January, reflecting growing economic uncertainty among Americans. The Conference Board consumer confidence index fell to 104.1, from 109.5 in December, below expectations of 105.6. The index, which evaluates Americans’ perceptions of current economic conditions and their outlook for the next six months, revealed a significant drop in confidence regarding present conditions, down 9.7 points to 134.3. Views on current labour market conditions fell for the first time since September, while short-term expectations for income, business, and jobs declined 2.6 points to 83.9. According to the Conference Board, a reading below 80 may indicate a potential recession. Despite these concerns, consumer spending remained strong through the holiday season. Retail sales rose 0.4% in December, buoying GDP growth to an annualised rate of 3.1% for the third quarter of 2024, driven by resilient consumer activity and increased exports. However, rising credit card balances and delinquencies reported by the Federal Reserve Bank of Philadelphia suggest that consumer spending may be under strain. The share of respondents planning to purchase big-ticket items i
Macroeconomics
Wholesale electricity prices dip, but stay volatile: AER
The Australian Energy Regulator (AER) has released its biennial Wholesale Electricity Markets Performance Report today, with key findings including a decrease in wholesale electricity spot prices since late 2022 due to lower fuel costs, increased renewable generation, and government intervention. AER Chair Clare Savage said: “However, the market remains unpredictable, with outages, weather variability, and high demand contributing to price spikes.” “Greater spot price volatility can flow through to higher forward contract prices that then impact household electricity bills," Savage said. The report evaluates the National Electricity Market (NEM) and provides insights into market dynamics, competitive conditions, and structural changes. Savage said: “Renewable sources like wind and solar delivered 32% of electricity in the past year. During the day they are increasingly setting prices and leading to negative price periods. But during evening peaks, when prices are at their highest, traditional generators still set the price over 90% of the time. “From a competition perspective, this influx of renewables is driving a lessening of market concentration during the day while ownership of dispatchable generation remains co
Macroeconomics
US Treasury yields hit 4-month highs after Trump win
U.S. Treasury yields rose spiked to fresh four-month highs after Donald Trump’s presidential election win over Kamala Harris, coupled with strong Republican Congressional gains, as investors anticipated that a Trump administration with a possible GOP-controlled Congress would drive economic growth and potentially elevate fiscal spending. The yield on the 10-year Treasury jumped over 14 basis points to 4.433%, the highest since July. The 2-year Treasury yield also rose, up by about 7 basis points to 4.274%. The surge reflects market expectations that expansionary policies under a Trump presidency, such as corporate tax cuts and increased tariffs, could boost growth but also raise the fiscal deficit and inflation. Higher yields typically signify investors demanding more compensation for holding government bonds amid increased spending and borrowing.Understanding the 10-Year Treasury Bond YieldThe significance of the 10-year Treasury yield extends beyond simple returns. It is widely viewed as a reliable gauge for setting mortgage rates and reflects investor confidence levels. When economic confidence is high, bond prices fall, leading to increased yields as investors seek out higher returns. Conversely, low confidence r

Macroeconomics
Week ahead: Key inflation data, Fed commentary in focus
Market participants will be closely monitoring key inflation data and remarks from several Federal Reserve officials this week, in the wake of last week's significant rate cut. PMI data will also offer fresh insights into global economic strength, while gold prices are set to extend their record rally. Inflation Data The Fed's preferred inflation gauge, the personal consumption expenditures (PCE) price index, is set to be released on Friday. It will show if inflationary pressures have continued to cool as the central bank begins easing its previously restrictive monetary policies. Economists are forecasting a 2.5% year-over-year increase in the PCE index for August. The Fed’s most recent projections estimate the inflation rate to fall to 2.3% by year-end and 2.1% by the close of 2025. Other key economic releases this week include a final reading on Q2 GDP and reports on consumer confidence, durable goods orders, new and pending home sales, and initial jobless claims. Fed Commentary Comments from Fed officials will be closely monitored for additional insights on last week's aggressive 50-basis point rate cut. Atlanta Fed President Raphael Bostic will speak first on Monday, followed by Chicago Fed Preside