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‘A jobs recovery’: Australia slashes taxes, boosts spending

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New economic stimulus measures are expected to push Australia’s budget deficit to a record $167bn following coronavirus.

Australia pledged billions of dollars in tax cuts and measures to boost jobs on Tuesday to help pull the economy out of its historic coronavirus slump in a budget that tips the country into its deepest deficit on record.

Prime Minister Scott Morrison’s conservative government has unleashed 300 billion Australian dollars ($216bn) in emergency stimulus to prop up growth this year, back-pedalling on a previous promise to return the budget to surplus.

Treasurer Josh Frydenberg on Tuesday announced 17.8 billion Australian dollars ($12.8bn) in personal tax cuts and 5.2 billion Australian dollars ($3.7bn) in new programmes to boost employment in a recovery plan aimed at creating one million new jobs over the next four years.

Those measures are forecast to push the budget deficit out to a record $213.7 billion Australian dollars ($153.6bn), or 11 percent of gross domestic product (GDP), for the fiscal year ending June 30, 2021.

“There is no economic recovery without a jobs recovery,” Frydenberg said in prepared remarks to Parliament. “There is no budget recovery without a jobs recovery.”

Australia’s unemployment rate hit a 22-year high of 7.5 percent in July as businesses and borders closed due to strict lockdown measures to deal with the coronavirus.

While the number of deaths and infections in Australia from COVID-19 has been low compared with many other countries, the hit to GDP has been severe.

Australia’s two-trillion-Australian-dollar ($1.4 trillion) economy shrank by 7 percent in the three months ended June, the most since records began in 1959.

In its new projections, the government expects unemployment to rise to 7.25 percent by the end of the current fiscal year and then fall to 6 percent by June 2023. Australia’s GDP is expected to shrink by 1.5 percent for the current fiscal year before returning to growth of 4.75 percent in the next.

Jobs push

Australia will spend four billion Australian dollars ($2.9bn) over the next year to encourage businesses to hire people under the age of 35 as it targets youth unemployment.

The budget also brings forward previously legislated tax cuts for middle-income earners and extends tax breaks for individuals offered in last year’s budget for low- and middle-income earners.

Some of these cuts will be retrospectively backdated to July 1, 2020.

The government’s highly expansionary budget comes shortly after the central bank’s policy decision on Tuesday, at which it kept interest rates at a record low and flagged reducing the high unemployment rate as a national priority.

The Reserve Bank of Australia has slashed interest rates this year to 0.25 percent and pumped billions of dollars into the bond market to keep credit flowing to the economy.

Both the fiscal and monetary support this year has helped restore consumption and business confidence and bring the unemployment rate down to 6.8 percent.

Frydenberg has pledged to pare back the heavy fiscal support once the unemployment rate falls “comfortably below 6 percent”.

Australia delayed the release of this year’s federal budget, which usually takes place in May, as the coronavirus upended most of the economic assumptions underlying its projections.

While most of the measures announced on Tuesday were not new, the government affirmed its strategic priorities that include boosting domestic energy production and manufacturing and infrastructure investment.

Frydenberg said the plans would “ensure Australian manufacturing plays an even greater role in our economic recovery”.

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Trump slams US stimulus deal on Twitter as talks continue

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Trump’s evening tweets came hours after all three major stock indexes fell over the ongoing stimulus deadlock.

United States President Donald Trump expressed scepticism that an agreement could be reached with Democratic leaders on a new round of coronavirus aid relief, seemingly torpedoing hopes for a stimulus plan even as talks continue between Democratic House Speaker Nancy Pelosi and Secretary Treasury Steve Mnuchin.

“Just don’t see any way Nancy Pelosi and Cryin’ Chuck Schumer will be willing to do what is right for our great American workers, or our wonderful USA itself, on Stimulus,” Trump wrote on Twitter Wednesday evening. “Their primary focus is BAILING OUT poorly run (and high crime) Democrat cities and states….Should take care of our people. It wasn’t their fault that the Plague came in from China!”

The tweets came after all three financial indexes fell on Wednesday amid dwindling hopes of a stimulus plan before Americans head to the polls on Election Day November 3.

Pelosi has proposed $2.2 trillion to help struggling businesses and families, while the White House rolled out a $1.8 trillion proposal, which Trump has since said he would be willing to go beyond. But Pelosi and Mnuchin are reportedly getting closer to a deal, with the pair due to speak again on Thursday, Pelosi’s spokesman said in a tweet.

Experts have warned the US needs another round of financial relief for struggling businesses and families in order to recover from the pandemic’s economic downturn. The last round of aid expired at the end of July, including an additional $600 per week in federal unemployment benefits meant to shore up workers in addition to state aid.

Earlier this month, Federal Reserve Chairman Jerome Powell warned that the country’s entire economic recovery is in danger of derailing if the government does not step up to the plate.

“Too little support would lead to a weak recovery, creating unnecessary hardship for households and businesses,” Powell said during an October 7 event with economists and strategists.

Trump has frequently used Twitter to weigh in on the continuing stimulus talks. On the same day Powell spoke, Trump tweeted that he had told his representatives to halt stimulus negotiations with Democrats until after the election – before making an about-face hours later and urging Democratic legislators to cast targeted financial lines to businesses and households.

Last week, he tweeted: “STIMULUS! “Go big or go home!!!” even as Senate Republicans expressed support for a pared-down aid package.

On Wednesday, Trump’s chief of staff, Mark Meadows, told Fox Business “the president’s willing to lean into this” with Republican senators if a deal is reached.

Talks are continuing as the timeframe for a pre-Election Day vote narrows, with investors around the world closely watching what comes out of Pelosi and Mnuchin’s discussions Thursday.

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Obama says Trump treats presidency ‘like a reality show he can use to get attention’

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Scott Olson/Getty Images/FILE
Scott Olson/Getty Images/FILE

Businessman Andrew Yang will join Young Americans for Biden and youth-focused organizations Student Debt Crisis and Rise, as well as the student loan start-up Savi, for a town hall and phone bank Wednesday.

Yang, a former Democratic presidential candidate and CNN contributor, ran on a platform that emphasized Universal Basic Income and student debt relief for young Americans.

During the virtual event with Yang, Student Debt Crisis, Rise and Savi will announce the launch of a new joint initiative between the groups, which includes a student loan education tool and hotline for student loan borrowers.

“With 45 million student loan borrowers, it’s a massive bloc of voters who could easily tip the election and Rise’s work with Student Debt Crisis is the first concerted effort to define ‘student loan voter’ as a category with political power,” Rise CEO Maxwell Lubin told CNN.

In September, Rise and Student Debt Crisis teamed up to endorse the Biden-Harris ticket. Wednesday’s virtual event with Yang marks the first time the student-focused groups will partner with Savi.

Rise, a student-led advocacy group with chapters on college campuses across the country, has mobilized more than 80,000 students in battle ground states with a get out the vote campaign since the summer, Lubin said. 

Student Debt Crisis is a national organization dedicated to teaching young people how to manage their student loans. They regularly hold clinics to help young people understand their loans and work nationally to reform student debt and higher education policies. 

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Pins and needles: US stocks close lower as stimulus talks drag

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Investors are increasingly worried that Democratic legislators and the White House may not reach a deal on a vital stimulus package before Election Day.

Wall Street’s three major averages closed lower on Wednesday after a volatile trading session, as investors worried whether difficult negotiations in Washington, DC would produce a deal for a fresh United States coronavirus stimulus package.

The Dow Jones Industrial Average closed down 97.97 points, or 0.35 percent, at 28,210.82.

The S&P 500 – a gauge for the health of US retirement and college savings reports – lost 0.22 percent, while the tech-heavy Nasdaq Composite Index shed 0.28 percent.

White House Chief of Staff Mark Meadows said that while there are a number of differences between the White House and Congressional Democrats, Republican President Donald Trump was “willing to lean into” working on an agreement.

Before starting afternoon talks with Treasury Secretary Steven Mnuchin, US House Speaker Nancy Pelosi said there was still a chance for a deal despite resistance from Senate Republicans, though she acknowledged it might not pass until after the November 3 Election Day.

“As long as she keeps dangling the carrot out there that there’s still a chance that something could get done, investors continue to remain optimistic,” said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles, California.

“You would rather have more long exposure than have too much cash if an agreement is reached. That’s a big if,” James added.

James said investors were holding out hope a deal could be reached on Thursday.

“Everybody’s going to be sitting on pins and needles waiting for the next headline between now and the end of tomorrow’s trading day,” he explained.

After the closing bell, Pelosi spokesman Drew Hammill said the day’s session “brings us closer to being able to put pen to paper to write legislation”.

Instead of ploughing money into the market broadly, Michael O’Rourke, chief market strategist at JonesTrading in Stamford, Connecticut said investors picked stocks as they looked at third-quarter financial results.

Of the 11 major industry sectors, nine closed lower, with energy leading the percentage decliners. Communications services was the biggest gainer.

Shares in Snapchat messaging app owner Snap Inc finished up 28 percent after it beat user growth and revenue forecasts, as more people signed up to chat with friends and family during the COVID-19 pandemic.

The news helped boost other social media companies with Facebook Inc up 4 percent and Twitter Inc climbing 8 percent in the communications services index. Smaller social media firm Pinterest Inc also gained close to 9 percent.

Dampening the mood, however, was Netflix Inc, which tumbled almost 7 percent after it kicked off earnings for the market’s high-flyers club. The video-streaming service missed expectations for subscriber growth as competition increased and live sports returned to television.

Shares in electric-car maker Tesla Inc rose 4 percent after the closing bell after it reported quarterly earnings. Tesla beat analysts’ estimates for third-quarter revenue as it made record vehicle deliveries, overcoming disruptions caused by the COVID-19 pandemic.

Of the 84 S&P 500 firms that have reported third-quarter results, 85.7 percent have topped expectations for earnings, according to IBES Refinitiv data.

Investors also have their eyes on the upcoming elections. Trump and Democratic challenger Joe Biden will face off in their second and final debate on Thursday night.

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