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ASX News LIVE | XJO Up, Q3 GDP Grows 0.2%, Bitcoin Hits 19-Month High, US Labour Market Cools

ASX 200 gains 1.65%, best one-day rise in year

Well…

Who saw that coming?

The ASX 200 closed 1.65% higher on Wednesday, its best one-day gain in a year.

Funnily enough, after hitting a 52-week low yesterday, Core Lithium [ASX:CXO] was the best performer today.

Core Lithium finished 17.4% higher.

 

Our growing tax bill

As Shane Oliver said, ‘bracket creep is a stealth tax hike!’

This reminds me of what Milton Friedman and Rose Friedman wrote in Free to Choose:

‘Inflation also yields revenue indirectly by automatically raising effective tax rates. As people’s dollar incomes go up with inflation, the income is pushed into higher brackets and taxed at a higher rate. Corporate income is artificially inflated by inadequate allowance for depreciation and other costs. On the average, if income rises by 10 percent simply to match a 10 percent inflation, federal tax revenue tends to go up by more than 15 percent — so the tax-payer has to run faster and faster to stay in the same place. That process has enabled the President, Congress, state governors and legislatures to pose as tax cutters when all they have done is to keep taxes from going up as much as they otherwise would have gone up. Each year, there is talk of “cutting taxes.” Yet there has been no reduction in taxes. On the contrary, taxes correctly measured have gone up — at the federal level from 22 percent of national income in 1964 to 25 percent in 1978; at the state and local level from 11 percent in 1964 to 15 percent in 1978.’

 

Aussie economy not in recession but ‘going through a very challenging period’

Productivity picks up in 3Q but still down 2.1% annually

An interesting result was a pickup in productivity in the September quarter.

GDP per hour worked was negative for the previous four quarters but rose 0.9% in the September quarter.

Despite this, annual GDP per hour worked is down 2.1%. And real unit labour costs are up 3.9% annually, rising 1.2% in the September quarter.

One reason GDP per hour worked picked up was a fall in hours worked.

The ABS reported:

‘We worked 0.7 per cent less hours than we did last quarter, though the amount of time we spent at work was still high by historical standards. This was the first quarterly fall in hours worked since measures were introduced to prevent the spread of COVID-19 in September quarter 2021. It meant labour productivity rose 0.9 per cent during the September quarter, though productivity was still down 2.1 per cent through the year.’

I wrote about the importance of productivity and real unit labour costs here. A snippet:

‘Labour unit costs measure wages growth in relation to productivity. Higher labour unit costs imply wages are rising without a related lift in productivity.

Real unit labour costs rose a substantial 3.2% in the quarter and are up 5.8% for the year!

Why is this a big deal?

Anaemic productivity is bad news for labour unit costs and by extension, services inflation.

As Lowe said back in June, there is a ‘close relationship between inflation and the rate of growth in unit labour costs.’

Here’s the kicker:

‘Over the entire inflation targeting period, the cumulative increase in the CPI has closely matched that in unit labour costs, although there have been periods of divergence.’

‘The best solution to this is a lift in productivity growth. If we’re going to have 2.5% inflation, we cannot have unit labour costs persistently growing at 3.5 to 4%. We have to have labour cost growth starting with a ‘2’.’

 

 

GDP per capita down 0.3% year on year

Australia’s gross domestic product per capita fell 0.5% for the quarter and 0.3% for the year.

Our real net national disposable income fell 0.6% for the quarter and is up a measly 0.9% for the year.

Also, look at the household saving ratio.

It was 7% in the September 2022 quarter, 3.8% in the December 2022 quarter, 3.5% in the March 2023 quarter, 2.8% in the June 2023 quarter .. and 1.1% in the September 2023 quarter.

A steady dwindling.

The wage price index rose at fastest rate on record

The Aussie wage price index rose 1.3% in the September quarter, the fastest quarterly rise on record.

As the ABS put it:

‘More jobs had wage movement and the average change in wage was significantly higher. The labour market stayed tight. The unemployment rate in the month of September was 3.6 per cent, and more than 14 million people were employed. The number of people in jobs grew by 0.5 per cent compared to the month of June.’

Household saving ratio lowest since 2007

Australia’s household saving to income ratio fell for the eighth straight quarter to 1.1%. The lowest level since the December quarter of 2007. The ratio means households saved only 1.1% of their income in the September quarter, despite the Wages Price Index rising 1.3% — the faster quarterly rise on record.

ABS’s Keenan said:

“The removal of the Low and Middle Income Tax Offset in the 2022-23 financial year meant many households had a higher income tax bill this quarter, which has contributed to the fall in the household saving ratio,” Ms Keenan said.

“Increased interest paid on home loans and inflationary pressure on households were also likely factors behind the fall in the household savings ratio.”

Government spending rises, household spending flat

Government spending rose 1.1% in the September quarter, higher than the 0.6% rise in the June quarter.

The Reserve Bank is probably not too happy government spending is rising at the same as the bank is trying to tame inflation.

While government consumption expenditure rose, household spending was flat.

Katherine Keenan, ABS’s head of national accounts, said household spending was flat ‘as government benefits and rebates reduced household spending on essential services such as electricity’.

Australia’s GDP rose 0.2% in Sep quarter, up 2.1% annually

Australia’s gross domestic product (GDP) rose 0.2%, seasonally adjusted, in the September quarter. GDP rose 2.1% year on year.

ABS’s Katherine Keenan said growth has slowed over 2023, with government spending and capital investment the main drivers of growth this quarter.

The 0.2% quarterly growth was the lowest since the September quarter of 2022. The latest figure also undershot market expectations of 0.4%.

Massive ABS data dump

The ABS just released a swathe of data on Australia’s national accounts, balance of payments, tourism, jobs, and personal income.

Must have been a busy few days leading up to the data dump.

Let’s go through the releases here.

Magnis Energy loses board control of iM3NY to creditor

David Ross, The Australian journalist accosted at Magnis Energy‘s AGM, reported overnight that Magnis ‘has been stripped of its key battery gigafactory Imperium3 New York after lenders swooped on the company last week‘.

Sifting court papers, Ross found an admission from Magnis that iM3NY is under the control of the creditor Atlas Credit Partners. Atlas advanced iM3NY a $100 million loan, the covenants of which iM3NY breached, prompting Atlas’s board spill.

A Magnis spokeswoman told Ross the company didn’t announce the board changes because they were ‘under legal review and thus we are unable to make any comment’.

But Ross’s article prompted Magnis to request a trading halt today.

Magnis requested the halt to ‘allow the company the time it needs to prepare a disclosure in relation to iM3NY Credit Facility’.

Since November 2021, the stock is down ~95%.

 

ICYMI

In case you missed it, here’s the latest episode of What’s Not Priced In.

You wouldn’t guess who overtook Pilbara as the most shorted stock

Pilbara Minerals is no longer the most shorted stock on the ASX.

The dishonour goes to … Betashares US Treasury Bond 7-10Y Currency Hedge ETF.

Fascinating.

Lithium stocks take a beating

Lithium stocks are cratering.

Yesterday, many prominent lithium stocks hit new lows.

Stocks like Pilbara Minerals, IGO, Allkem, Sayona Mining, Core Lithium, Lake Resources, and Piedmont Lithium.

Once the hottest thing in town, now far from it.

Bitcoin hits 19-month high

Good morning! It’s Kiryll manning the live blog today.

Let’s start with Bitcoin.

The original cryptocurrency is surging again. Overnight, Bitcoin hit a 19-month high, trading at ~US$44,000.

Year to date, Bitcoin is up 165%.

What’s going on? Is appetite for riskier assets growing? Is this a harbinger of wider market exuberance? What is sustaining this rally in Bitcoin?

Kiryll Prakapenka

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