Living in two worlds

Today’s headlines reflect the best and worst of humanity. This morning, NASA launched a manned rocket that’s now heading for the moon. Artemis II is scheduled to spend ten days in space. For the next 25 hours, four astronauts will orbit the Earth at an altitude of 74,000km, checking and testing their Orion capsule's systems, before reigniting its service module engine and sending it towards the moon.

The astronauts won’t land on the moon’s surface. That feat is reserved for a future mission. Instead, they’ll loop around Earth’s natural satellite in what’s known as a free return lunar fly-by trajectory. This is a flight path that uses the moon’s gravity to automatically return the capsule to Earth without firing its rocket again.

In many ways, Artemis II resembles Apollo 8. This mission, which launched in December 1968, was the first time humans flew to the moon and returned safely to Earth. However, unlike the current mission, Apollo 8 went into orbit around the moon, circling it ten times before reigniting its rocket and returning to Earth.

Artemis II will establish at least one space exploration first. Its free-return trajectory will see it fly more than 7400 kilometres past the far side of the moon, more than 400,000 kilometres from Earth. This is the furthest any human has ever ventured into space. Apollo astronauts typically flew less than 120 km above the moon’s surface.

Artemis II represents human ingenuity at its finest. It’s a potent symbol of what we can achieve as a species when we aspire to greatness. It’s also an inspiring example of the USA’s extraordinary wealth, leadership and technical know-how.

Contrast this with the war currently unfolding in the Middle East. Five weeks ago, the USA and Israel launched a coordinated aerial attack on Iran. Since then, both nations have relentlessly bombed the Persian nation, destroying military assets and killing its leaders. Iran has responded by attacking its Gulf neighbours, damaging critical oil and gas production infrastructure, while attacks on tankers passing through the Strait of Hormuz have all but stopped oil from flowing out of the Middle East.

President Trump's rationale for starting the war and its ultimate objectives have morphed over time. However, one thing is clear. The quick and easy victory he plainly anticipated has failed to materialise. There's now every prospect of the USA becoming bogged down in prolonged conflict or withdrawing shortly, only to be drawn back in to finish the job at some future point.

The Iranian regime’s resolve hasn’t weakened, despite the devastation of American and Israeli airborne attacks. Instead, global economic activity is cracking under the strain. To quote a recent commentator, “The closure of the Strait of Hormuz has transformed economic prospects globally from the relatively benign to inflationary and, very possibly, in a worst-case scenario, deeply recessionary.”

What seems to have become an increasingly pointless conflict is now at risk of damaging the world’s economy for months, if not years, to come. Iran’s regime remains intact and inevitably more motivated than ever to accelerate its ambitions to develop a nuclear weapon. I'm not sure it's made the world a safer place. 

Meanwhile, here in Australia, most commentators, including the Reserve Bank of Australia, expect inflation to peak at five per cent, further interest rate rises, higher unemployment and greater economic uncertainty. It’s not the kind of year anyone wanted. The USA’s capricious actions in the Middle East stand in stark contrast to this morning’s historic launch at the Kennedy Space Centre. It's like we're living in two completely different worlds.

UPDATE: 10:58am, 3 April

I've just watched live as the Orion spacecraft completed its Translunar Injection Burn, a five-minute rocket burn that sends it to the moon. The last time humans headed for the moon, they were on board Apollo 17. This final moon landing mission took place in December 1972, more than 53 years ago. 

UPDATE: 4 April

The image above was taken by one of the astronauts aboard Orion. It shows the Atlantic Ocean bordered by Africa on the right and cloud-covered South America on the left. If you look closely, you can see auruoa glowing over both poles. Venus makes a guest appearance in the top left corner. The last time we saw an image like this was during Apollo 17.

UPDATE: 7 April

The Orion capsule has safely swung around the far side of the moon today.  The four astronauts on board are now on their way back to Earth. NASA published the image above overnight. If you look carefully, you'll see Australia and a heavily cloud-covered New Zealand are on display. I've rotated the image 90 degrees to make them easier to spot. Awesome!

Two weeks in March

It's been six months now since COVID-19 started appearing in the news.  Then two months ago the Government imposed a national lock-down that saw vast chunks of the Australian economy shut down.  This brief recap in today's newspaper neatly captures the two weeks in March when our world dramatically changed. It's hard to believe all of this happened just two months ago:

On March 12, the government announced its first stimulus package: a $17.6-billion cash handout to pensioners and a boost for business but, as COVID-19 took hold, it was immediately apparent more would be needed.

On March 13, Prime Minister Scott Morrison announced a restriction on gatherings of more than 500 people from March 16, putting an end to live football and concerts. On March 19, Australia’s borders were declared shut, bringing migration and tourism to a dramatic halt.

On March 22, the Prime Minister announced a second $66-billion support package, including a $550 per fortnight supplement to the jobless payment, early access to super and a cash-flow boost for small business.

But, just two days later, National Cabinet met to decide a list of further shutdowns to include pubs, restaurants, cafes, gyms and beauty salons.

Then, having already designed and costed almost $100 billion worth of policies, Treasury was sent back to the drawing board; this time to design and cost a wage subsidy scheme to cover the wage bill of all industries affected by large declines in revenue as a result of virus shutdowns. It was given just four days to create and cost this new policy.

On March 30, the government’s JobKeeper program was announced.  It initially estimated the program would cost $130-billion. However, the economic impact has proven less severe than anticipated.  Instead of 6 million workers receiving the $1500 per fortnight payment through their employer, Treasury now estimates 3.5 million employees will get it.  As a result, the JobKeeper program now looks set to cost taxpayers just $70 billion – still ranking it among the biggest government programs ever.

2020 is rapidly becoming one for the history books.

Bursting your bubble

The news from Australia is still unfolding with a daily dose of highs and lows.  Yesterday NSW recorded no new COVID-19 cases for the first time since February 29. The same result was reported in Queensland.  This evening the national toll of reported cases is sitting at 6980. These numbers surpass even the most optimistic of forecasts published less than two months ago.

Incredibly, the nation’s COVID-19 death toll currently sits at 98. It had been stable with one less victim for almost a week.  Sadly, another passenger from the deadly Ruby Princess cruise ship pass away overnight.  Elsewhere, health care officials are battling persistent coronavirus clusters in northwest Tasmania, a Sydney nursing home and a Melbourne abattoir.

This week Australia begins its first tentative steps towards winding back its lockdown restrictions.  The Government has announced a three-step plan for putting us back on the road to recovery. While individual states will determine their own timeline through each step, their collective goal is to have all steps in place nation-wide by mid-July.

Step 1 will focus on carefully reopening the economy, and giving Australians opportunities to return to work and social activities. This includes gatherings of up to 10 people, up to 5 visitors in the family home and some local and regional travel. NSW and the city of Sydney are preparing to unwind its first tranche of stage one restrictions on Friday. For example, several major retail chains are reopening and restaurants can offer seating for up to ten diners.

Step 2 builds on step 1 with gatherings of up to 20. More businesses will be permitted to reopen including gyms, beauty services and entertainment venues such as galleries and cinemas.

The final step will see a transition to COVID safe ways of living and working, with gatherings of up to 100 people. Arrangements under step 3 will be the ‘new normal’ while the virus remains a threat. However, international travel and mass gatherings over 100 people will remain restricted until further notice.

Chief Medical Officer Brendan Murphy told a senate inquiry today that it’s "inevitable" Australia will have more coronavirus outbreaks as restrictions on movement ease, but the health system is well prepared. However, with two-thirds of COVID-19 cases in Australia acquired overseas, he believes, international borders will have to remain closed.  Some commentators suggest it’ll be sometime in 2021 before Australian are free to travel overseas again.

The new normal still looks rather terrifying. The Commonwealth Bank, Australia’s largest bank, has released modelling showing house prices could fall by almost a third by the end of 2022 under a prolonged economic slump, as it braces for a sharp rise in soured loans caused by the coronavirus.

Tomorrow the Australian Bureau of Statistics will release its April employment report. All expectations are for the largest ever increase in the number of people out of work. The jobless rate is likely to soar through 7 per cent or higher.

Analysts are tipping anywhere between 400,000 and 650,000 people to have become unemployed in a single month. The previous monthly record, of 65,400 jobs lost in October 1982 during that year's deep recession, will be dwarfed by the April result.

The Government is also facing the largest budget deficit in Australian fiscal history. Deloitte Access Economics predicts it could reach $143 billion this year and $131.6 billion in 2020-21 as the economy slumps due to measures aimed at stopping the pandemic's spread.  The hard work has only just begun.

UPDATE: 15 May
Australia has suffered its single largest monthly fall in the number of people holding a job, with a record 594,000 drop in the number of workers during April.

Figures released by the Australian Bureau of Statistics yesterday showed the unemployment rate spiking a full percentage point to 6.2 per cent last month. 

The participation rate, which measures the number of people in work and also those looking for it, fell 2.4 percentage points. This also helped to keep a lid on the overall jobless rate.

The number of officially unemployed people jumped by 104,500 to more than 823,300. The previous largest increase in unemployment in a single month was 65,400 in October 1982 during that year's recession. The jobless rate peaked at 10.5 per cent the following year.

It's the largest number of people out of work since September 1994. The bureau only started measuring the jobs market on a monthly basis in 1978.

$320 billion and counting

It’s been another extraordinary news day in Australia. Earlier today the Federal Government announced the nation’s largest-ever social security program. The program, worth $130 billion, will subsidise the wages of up to 6 million Australian for the next six months.

To put this figure in perspective, the Government will spend an amount equivalent to 20% of its annual budget between March and September on this one package. It’ll reach almost one in four Australians, and represents direct Government support for 50% of the nation’s labour force.

It’s the third stimulus package announced by the Government in as many weeks. To date, these announcements have totalled more than $320 billion in funding. During the Global Financial Crisis the Federal Government engaged in a rather “modest” $54 billion of stimulus spending.

Rumour has it the Government rushed to roll out wage subsidies after Australia’s unemployed ranks swelled by a million people last week. Anecdotal evidence suggests employers were encouraged to let staff go rapidly after generous unemployment benefits were announced ten days ago.

In more good news today, the increase in new Coronavirus cases appears to be slowing. Only 127 new cases have been confirmed in New South Wales since 8pm Sunday, taking the State’s total number to 1918.

This result comes after 174 new cases were announced on Sunday (from Saturday's numbers), and 212 the day before. NSW currently has the nation’s highest number of confirmed cases. This includes 26 patients in intensive care units, 13 of which are on ventilators. Mercifully, to date, only 18 deaths have been recorded nationwide.

With each passing day, the Coronavirus crisis is turning more and more of the world as we know it on its head.

It's life, but not as we know it

Australia appears to be progressively going into lockdown this weekend. Today the Government announced that cruise ships coming from international ports are banned for 30 days. All international visitors arriving after midnight must now go into self-isolation for 14 days. People ignoring these quarantine requirement will face fines of up to $20,000. The police are already enforcing self-isolation where people have ignored medical professionals.

All gatherings of 500 people or more are banned. Major sports events and festivals have subsequently announced cancellations today, following on from a flurry of cancellations on Thursday and Friday. Courts have stopped taking new jury trials until further notice.

Panic buying has emptied more and more aisles at our local Supermarket. People seem to be preparing for increasingly restrictive edicts as infection rates rise nationally. Speculation is growing that non-essential businesses and schools will soon be ordered to close.

The Federal Government has already announced that additional restrictions, covering gatherings in enclosed spaces, are going to be considered by governments on Tuesday evening.

This evening the Federal Government said the Australian pandemic will probably run through our entire winter. This essentially means they’re anticipating significant disruption from now until October.

Something big is going on...

The economic data making headlines this morning is rather sober reading. Highlights so far include:

1. Chinese airlines report domestic traffic volumes are down 84.6%.
2. Wall Street dropped 9.5% overnight. It's now trading 28% below its recent peak.
3. The FTSE in London dropped 10.8% while markets in France and Germany dropped more than 12%.
4. The Australian dollar dropped another 2 cents overnight. It's now trading at a 12 year low.
5. The most profitable air routes for European carriers (i.e. trans-Atlantic) are closed for 30 days.
6. The Australian Government has announced a $17.5 billion stimulus package.

Australia's current toilet paper shortage pales in comparison. We certainly live in interesting times.

Time for some Christmas cheer!

It’s hard to believe Christmas will be here a week from today.  The last couple of months have simply flown by.  Despite being officially unemployed there have been few truly idle moments.  In fact, I’m beginning to wonder how I ever fitted in a 50-60 hour working week.  If stop to consider the last few days I’ve found myself meeting headhunters, helping Garry with his company website, hosting Christmas lunch for his family and working on my interim consulting business.

I’m pleased to report that my business is off to a promising start.  Thanks to the presentation I gave at World PR Forum in Melbourne eight quality business leads have already materalized.  If these convert into real billing work I could find myself busy four days out of five during the early months of next year.  The level of interest has been rather surprising which probably indicates how detached I’d become after 15 years sitting inside the same organization.
 
Unfortunately almost every headhunter says this year has been a shocking year for the recruitment industry.  Despite the OECD’s strongest GDP growth figures, a safe haven currency and declining unemployment figures business sentiment in Australia had fallen to the same level reported during the depth of the GFC.  I continue to be mystified by the perpetual reticence and mild despondency of Australians given the relative strength of its economy.  Negative media spin on every economic subject, coupled with the ongoing trials and tribulations of a minority Federal Government, are progressively taking a toll on the nation’s collective morale.
 
On a more positive note, as I mentioned, we hosted Garry’s family for an early Christmas lunch on Sunday.  The weather dawned bright and warm.  You already could feel the sun’s intense heat radiating through closed window blinds during breakfast.  Temperatures ultimately peaked in the low 30s, before clouds began gathering for light rain shower late afternoon. 
 
We assembled our popular banquet table on our main balcony and enjoyed a delighted lunch under the shade cloth.  Garry prepared a spectacular leg of ham, while I dazzled the crowd with my famous cheese board and a couple of Summer salads.  I even put my hand to a delicious trifle for dessert, laced with brandy custard and Bailey’s Irish Cream.  As expected, we ate far too much and shared plenty of laughs.
 

With one family Christmas behind us, we have one to go.  Garry and I fly to New Zealand on Saturday to join the rest of my family for a final reunion.  Sadly, Christmas this year comes with a poignant mix of celebration and sadness.  Dad’s health continues to decline and the end is clearly approaching.  After much debate and discussion the family moved him to a retirement home last Friday to ensure he’s receiving the best possible palliative care. 

They've reassured us that keeping someone with Dad's challenging health complications at home simply isn't viable anymore. He now needs at least two full-time carers on hand 24 hours a day; each properly trained to nurse an increasingly immobile man. It’s heart-breaking to know this is his final home. 

However, Mum has done a sterling job caring for Dad at home this year. The medical staff are full of praise for her efforts. She has given Dad the very best of care, keeping him safe and in familar surroundings, far longer than anyone thought possible.  Often to the detriment of her own health and well being. I salute her.

Finally, with things so uncertain, Garry and I have cancelled the short road trip we’d planned around the central North Island.  As I reflect on my father's situation the misguided woes of Australian business leaders swiftly pale to insignificant. Life is far too short to be worrying about "what might happen" when our national economy remains the envy of the world.  It's time for some Christmas cheer!
 
UPDATE:  5:30pm
Just as I was about to put this post to bed, a headhunter called to touch base.  II’s been encouraging to see at least four firms actively connect me with on a regular basis while others warmly respond to every update I share.  They say the job search process is often a waiting game, tempered by irregular bursts of unpredictable activity.

Paid in full

I am debt-free! This week I repaid the remaining balance on my share of our apartment’s mortgage. The final payment was made just a month shy of the loan’s eighth anniversary. I never imagined I’d ever be able to clear my share of the debt so swiftly. In a roller-coaster year of emotions, both high and low, reaching this milestone has been an uplifting way to end 2011.

Technically the bank still considers me indebted as Garry has yet to pay down his remaining share of the mortgage. Encouragingly, a steady rise in Sydney house prices over the last eight years means that the outstanding balance is barely a quarter of the apartment’s current value. As negative economic headlines continue to dominate the news it’s encouraging to know that our financial future is increasingly secure.

Where did our savings go?

It’s been another remarkable week for the Australian dollar. Yesterday it rose to a new record high against the US dollar, for the third time in as many days. One Australian dollar now buys you US$1.075. Analysts are tipping that the dollar will hit US$1.10 before the year is out. The last time it traded at this level was 1982 before the currency was floated. It’s hard to believe that despite relocating back to Sydney I still live in a country whose currency is worth noticeably more than the US dollar.

While living in London we got rather use to the concept of earning money worth more than the US dollar. However, the Sterling was always a rare breed. In all of our travels the only other currencies trading at similar levels were in the Middle East, reflecting no doubt the power of an oil economy. For example, the Omani Rial is currently buying US$2.60 and the Jordanian Dinar is buying $US1.40. In ten days I fly San Francisco for work so the strong Australian dollar has made some impromptu shopping incredibly tempting.

Of course a strong Australian dollar spells more bad news for the savings we’ve left in the UK. Yesterday one British pound was buying A$1.52 for several hours before closing one cent higher. Incredibly the rate's been worse in recent months. While we were stranded in Antarctica the pound hit a record low of A$1.51 on New Year’s Eve. Regular readers will recall my lament over the plunging value of the pound. When we first arrived in the UK the pound was buying almost a dollar more than today. As a result Garry and I have simply decided to view our UK savings as a long-term currency investment as we wait for the Bank of England to start raising its base rate.

UPDATE: April 29
The Australian dollar climbed to yet another yesterday. It's now buying US$1.095. Most analysts expect it to reach US$1.10 before the end of next week.  Some analysts are now predicting the dollar will peak at US$1.15 before the year over.  It's hard to believe our dollar is worth 10% more than the US dollar.

UPDATE: May 2
Incredibly, the Australian dollar passed the US$1.10 mark this morning.  In less than a month the dollar has appreciated almost ten percent against its American rival.

An economic dawn?

After two years of economic doom and gloom this week’s headlines were filled with unexpected good news. It seems only right that I document this story after two years of blogging about the global recession’s impact. Much to the surprise of nation’s financial commentators, the UK’s economy grew 0.8% in quarter ending September 30. This was double the most optimistic predictions and follows an impressive second quarter of 1.2% growth rate.

This means that, since the start of 2010, the UK’s economy has rebounded at an impressive annualized rate of 3.2%. Economists say this trend is significantly stronger than the recovery in the early 1990s seen after the nation’s last recession. This news also came at a perfect time for the Government. Only six days earlier, on October 20, it had announced details of plans to slash public sector spending by an average of 19%. At least 490,000 public sector jobs are expected to go over the next three years.

Many commentators were up in arms about the size and scale of the proposed cuts. Claims were made that the private sector couldn’t create jobs fast enough to avoid further economic hardship. The scale of the cuts was such that they’d damage the nation’s long-term growth prospects and leave a generation of long-term unemployed in their wake. This week’s news has undermined the more extreme claims. It simply reinforced the credibility of rising employment figures published a week earlier. In the three months to August the number of people in work rose by 178,000.


On a purely selfish note I’m pleased to see positive economic news finally emerging. It means the value of the Sterling will slowly begin to climb above its current low point. Over the course of the recession, the Sterling fell dramatically in value against the Australian dollar. By last month the rate had sunk as low as £1.00 = A$1.60. Exactly two years earlier we’d been getting one additional Australian dollar for every pound exchanged. Believe me when I say that you really do notice the absence of a dollar! Today, you receive A$1,000 less for every £1,000 you convert.

Naturally, as we prepare to return to Australia, the exchange rate is very much on our minds. Garry and I have worked hard to bank respectable savings. With so much at stake we’ll be forced to leave much of this money in the UK until the rate bounces back. Here in Swiss Cottage, the Government isn’t the only party pinning its hopes on a strong recovery.

Austerity blues

A 24-hour strike has been called on Monday across the Underground network. It’s the second strike in a month as unions fight plans to close ticket offices and cut 800 jobs. Another two strikes are threatened in the months ahead if the dispute isn’t resolved. Today’s paper was also reporting news of a two-day strike at the BBC. Journalists, technicians and other broadcast staff are due walk out on October 5 and 6 over a growing pension dispute.

Such protests appear to be on the rise throughout Europe as Governments begin implementing increasingly painful austerity plans. On Wednesday a general strike was called in Spain, while protests against austerity measures were held in Greece, Italy, the Irish Republic and Latvia. France has also witnessed angry protests against a planned increase in the minimum retirement age.

Such protests seem dangerously devoid of reality as European Governments continue chalking up staggering deficits. Yesterday the Irish Government announced that its bail-out of the nation’s banks had risen to 45billion euros. The increase will see the government run a budget deficit equivalent to 32% of GDP this year. One statistic really captured my imagination; each Irish taxpayer has forked out the equivalent of 22,500 euros to keep Ireland’s banks solvent.

Elswhere, France has already announced plans to cut spending by 45billion euros over the next three years. The German government has proposed plans to cut its budget deficit by a record 80billion euros. The Italian government has approved austerity measures worth 24billion euros over the next two years. Spain has announced spending cuts of at least 8% and on it goes.

In the UK, on October 21, the Government will announce the results of its ambitious spending review. Almost every Government department will outline proposed spending cuts between 25% and 40% over a four-year period. Once agreed these measures will be progressively introduced starting early next year.

It's clear that strikes and protests will be an increasingly dominant news theme in the months ahead.

Why it might be time to go home

I’ve published several blog posts about the state of the UK economy since the global recession unfolded. The burgeoning Government deficit is the current economic topic de jour. For several years now the UK Government’s been spending at least £159.2 billion more each year than it earns from tax receipts and other income; roughly 11.5% of GDP. As the Government borrows more and more to cover the shortfall, total government has passed a staggering £1000 billion, more than 68% of GDP. Effectively, the Government’s debt has grown almost 75% in little more than two years.

Reducing the annual budget deficit, and reining in national debt, has become a primary focus of the new coalition Government. It released an emergency budget in late-June, warning of an unprecedented level of austerity in the years ahead. Tomorrow, every major Government department is submitting draft proposals on how they might cut their budget by 25%, and in a worst case scenario, by 40%. As this morning, the Treasury had yet to receive a single submission.


As the extent of planned spending cuts starts to crystalise commentators predict a rising tide of public sector protests, strikes and disruption. Job losses affecting more than 600,000 public sector workers are anticipated over the next two years, while the quality of service is expected to fall. The UK isn’t going to be a fun place to be this winter.

This misery will be further compounded by rising taxes including a 2.5% increase in VAT (as GST is called here) from January, a 10% rise in capital gain tax and the loss of tax breaks for middle and high income earners. The welfare state is also under attack as benefits are cut, additional means-testing is introduced and a number of social services vanish. As the chart below shows, currently the UK's unemployment is alsmot twice that of Australia. It will surely rise in the months ahead.


In short, the UK's in for a depressing period of austerity. Contrast this bleak picture with that of news stories coming from Australia; stories of economic growth, falling Government debt, falling unemployment and booming exports receipts. The charts above say really it all. I know where I’d rather be. It’s time to go home.

UPDATE - July 23
According to official data released today, the UK economy grew by a faster-than-expected 1.1% in the second quarter of the year. The BBC, says this was the nation's "fastest quarterly expansion since 2006." The result is rather impressive when you compare it to the 0.3% growth reported in the first three months of this year. The last time the UK had growth of more 1.1% in any quarter was in 1999. Watch for politicians on all sides to claim credit for these surprising results in the days ahead.

Spring at last

Tomorrow is the first official day of Spring. The daffodils and snowdrops have started sprouting. I’ve even noticed buds on some trees starting to swell. These milestone couldn’t come soon enough. Winter has been particularly wearing this season. As recently as this week we soldiered through yet another bout of rain and sporadic snow flurries. On the home front, Garry has come down with a debilitating chest cold and I’ve been working extra-ordinary hours covering for staff on leave and senior vacancies we’re currently filling. With all this happening around me, I’m beginning to truly appreciate the psychological impact of the seasons on Britain life.

Thirty years ago, during the last winter as cold as the current season, civil unrest and union strikes crippled the nation. This infamous Winter of Discontent eroded confidence in the Government of the day, paving the way for the General Election that ultimately brought Margaret Thatcher to power in May 1979. History seems set to repeat itself as the nation’s major parties prepare for another General Election. The winter’s been harsh and current economic conditions are almost a bleak.

This week the Office for National Statistics revised last quarter’s GDP growth figure from 0.1% to 0.3%. In any other year this would have been positive news. However, the Pound’s value fell during the week as fears grow that GDP will contract again during the first quarter of 2010. This so-called double-dip recession is a distinct possibility for many reasons.

January’s foul weather hit retail sales hard as people stayed home. The pound has fallen again in value making basic imports, including petrol, more expensive. At the same time, VAT (goods and services tax) has returned to its pre-recession rate of 17.5% and several other Government stimulus policies have come to an end (including a stamp duty ‘holiday’ on house sales and rebates for scrapping old cars). Finally, factor in the dampening sentiment of a pending election, and you can understand why most economists think economic growth will be subdued at best.

Roll on Summer!

ON A LIGHTER NOTE
I came across these wonderful images of our Winter. While it’s been harsh and relentless, the nation has experienced some incredible scenes. Take a look.

It's almost time for kissing babies

This billboard appeared outside our office this month. It’s one of almost a thousand posted across the country at an estimated cost of £400,000. Each shows David Cameron, leader of the Conservative party, looking rather presidential and ever so slightly air-brushed. If opinion polls are to be believed, he’ll soon be Britain’s next Prime Minister. The nation’s general election campaign is clearly underway, well before a polling date is announced.

The British Parliament sits for a maximum of five years, after which it is dissolved and a general election is held. Much like Australia and New Zealand, the prime minister has the power to choose the election’s date. Once he (or she) calls on the Queen to dissolve parliament an election must be held 17 working days later. This year a general election must be held no later than June 3, 2010, seeking voter endorsement for 646 MPs.

We’re set for an interesting time in politics. The Conservative Party has been in opposition for 13 years. It lost power in 1997 after being soundly trounced by Labour’s largest ever parliamentary majority. How times have changed. Most polls currently show the Conservatives rating ten to 16 percentage points ahead of Labour. Worse still, the Labour Party is still saddled by enormous debts it clocked up during the last election.

At last count, Labour owed at least £11.5 million. As a result, this year’s campaign budget has been capped at £8 million. Contrast this with the Conservative Party, with debts of almost £5 million. It expects to raise a staggering £25 million for the next campaign, effectively outspending Labour three to one. Both parties spent similar amounts during the last election. By law, the main parties cannot spend more than £18 million on the campaign. However, individual candidates can spend up to £40,000 each this year, thus swelling the overall spend.

As the current billboard bitz suggests, the nation’s burgeoning public debt will be a key election issue. The Government has attempted to kick-start the economy by boosting spending. Funding this stimulus has resulted in it borrowing money a rate of more than £50 million per day. This strategy will be under intense scrutiny by the opposition. It claims that savage cuts in public sector funding must start sooner rather than later to bring national debt back under control.

No doubt, Prime Minister Gordon Brown is praying for good news tomorrow when the Office for National Statistics releases its economic data on 2009’s last three months. Commentators expect the nation’s Gross Domestic Product (GDP) to show growth for the first time in 18 months, thereby officially ending the recession. Labour will be praying hard for plenty more good news in the months ahead.

UPDATE - January 26
We're officially out of recession. The UK economy grew a meager 0.1% in the final quarter of 2009. One tenth of one percent doesn't sound like much of a recovery! This result means that the 12-month economic decline in 2009 hit a record-breaking 4.8%. It's been a tough year.

Haste makes waste?

At last count there were 3.03 million vehicles registered in Greater London, of which 2.6 million were cars. These cars represent about 9.2% of the nation’s total count of 28.4 million cars. In 2008, private cars, clocked up an average of 8,130 miles each. That's almost more miles than our own car has done in the last five years. We're clearly not doing our bit!.

However, as more and more cars pour on to local roads, average vehicle speed in London has fallen below that of a horse-drawn carriage. In 1903 traffic in central London travelled at a speed of 12mph. By 2007 the average had fallen to 11mph. I’ve even seen statistics that claim London drivers spent around half their time in queues, incurring 2.3 minutes of delay for every kilometer they traveled.

Today Garry and I got a taste of this congestion driving to the supermarket. Traffic was backed up everywhere as we drove north forcing us to take an winding route on back road bordering Hampstead Heath. Things got even worse coming home. Traffic was backed up in the supermarket carpark, as the local access road was chocked in all directions. It took us 15 minutes to travel just 400 metres, a journey that should take less than two minutes from the Supermarket exit to the nearest A road. According to the Government this sort of congestion poses a very real long-term economic threat. If left unchecked, by 2025, it could cost an extra £22 billion a year in wasted time in England alone.


The City of London’s answer to this problem became a globally renowned case study in traffic management. In 2003, the city introduced an 8-square-mile congestion charging zone in the central city. From Monday to Friday, between 7am and 6pm, a daily charge of £8 is paid by every vehicle entering or travelling within the zone. Their presence is detected and monitored by 688 cameras at 203 sites scattered across the city.

The cameras can record number plates with a 90% accuracy rate using sophisticated number plate recognition technology. Every day they tracks and photographs the license plates of more than 250,000 cars. Travel in the zone without paying the charge and they’ll ensure you attract a fine of between £60 and £180.

The system’s success attracts considerable debate, even more so given its £130.1 million annual running cost. In 2003, six months after the congestion charge was first brought in, traffic speed rose from 8.5mph to 11mph, cutting journey times by 15%. However, more recent analysis suggests that this modest 1.5mph improvement has since disappeared. By 2008 traffic speeds were virtually back to their early 2003 levels. It’s no wonder 43% of people living in London do not own or have access to a car. Walking is probably faster.

Where has all our money gone?

Overnight the Reserve Bank of Australia (RBA) raised interest rates by 0.25%. Australia is now the first G20 country to increase interest rates since the global recession took hold. Its base rate also remains above that of many nations. This means Australian banks typically offer a higher interest rate on regular savings.

In the UK most savings accounts current pay zero interest. In desperation banks here have taken to offering one-year introductory rates of up to 3% for new account holders. This practice forces savers to bank hop annually in search of a modest return. Given this dour savings scenario, international investors are pouring money into Australia and thus the value of its dollar is steadily rising.

On the back of today's RBA news the value of the Australian dollar soared against most major currencies. This morning the dollar is worth almost 89 US cents. Meanwhile the British pound plunged in value and is now buying A$1.77. Regular readers of this blog will recall that we were getting A$2.58 for the same pound this time last year (as the chart above shows all to painfully). It's hard to fathom that money we earn in London is now worth one third less than it was a year ago.

Garry and I regularly transfer money to pay our Australian mortgage so the pound's plunging value definitely hurts. However, on a slightly more positive note, later this month Garry and I pass a critical milestone with our mortgage. We officially repay half of our loan with our next regular payment. It's comforting to know we now own more of our Sydney apartment than the bank does. We'll take our economic good news wherever we can find it.

UPDATE - October 8
Today the Australian dollar climbed to its strongest level against the British pound since May 1985. One pound is now buying less than A$1.75. Where has all our money gone?

FURTHER UPDATE - October 13
The forex fell to A$1.71 this morning. I nearly wept.

The end is nigh

It’s time for me to get off the fence. I admit that Summer is officially over. There no point pretending otherwise as today is the autumn equinox. This basically means we enjoyed exactly 12 hours of daylight and 12 hours of darkness over the last 24 hours. In fact it's almost dark by the time I get home from work these days. Fortunately, the weather has remained relatively warm (by English standards) with temperatures hovering around 20°C most days. I even joined colleagues for an alfresco lunch in the garden bar of a local pub today.

Daylight isn't the only thing that's rapidly diminishing at the moment. This week the Pound Sterling has weakened against major currencies once again. £1.00 is currently buying only A$1.87. This time last year we were briefly getting A$2.67. It's hard to believe the same currency is now worth 80 Australian cents, or 30% less in a single year.

The dramatic decline in the value of the pound really highlights the rather dire state of the UK economy. The message is hammered home by a story out today about Britain's EU budget contribution. Each member state makes a budget contribution on the size of its economy. The budget typically remains stable from year to year, while the contributions vary between countries. In 2008 Britan contributed €844 million to budget, down from €4.16 billion the year before. It's not exactly a ringing endorsement of the UK economy.

Given this situation the dominant news story right now is a noisy debate over the size and scale of public sector spending cuts required to get the nation's ballooning budget deficit back under control. As the Government bails out banks and pumps stimulus spending into the national economy its overall debt has grown by £172 billion in a year The national debt now stands at £804.8 billion, or 57.5% of GDP.

A couple of months ago, the Institute for Fiscal Studies, estimated that the government will have to reduce spending, or increase taxes, by £90 billion over the next decade to bring down the deficit. This equals £2,840 for each family annually by 2017-18. Furthermore, analysts estimate that if the Government wants to protect health and education spending, cuts by other public sector departments will need to exceed 13%. Of course none of these cuts are likely to happen before the next General Election (which must take place before June 4 next year). As a result, I can see the Summer of 2010 remembered for its bitter public sector strikes and deteriorating public services.

Great work if you can get it

It’s been a busy time at work as our financial year draws to a close. It’s always a stressful time as we work to finish strongly and finalise new budgets for the year ahead. As you’d expect, this year’s budget has been all the more challenging as the global recession continues. The stress certainly isn’t helped by continuing headlines of doom and gloom.

This week the Government reported the nation’s largest quarterly rise in unemployment since 1971 (when the measurement methodology was last changed). An astonishing 281,000 people became unemployed in the three months to May. More than 2.38 million people are now out of work. The numbers are simply mind-boggling.

Two weeks ago the Office for National Statistics reported that the national economy shrank by 2.4% in the three months to March; the largest decline since 1958. The result stunned economists, as most had predicted a far smaller drop of 1.5%. GDP is now 4.9 per cent lower than the first quarter of 2008. Depending on who you listen to this is the worst single-year decline in UK history. Within in days it was also announced that projected government debt will to rise to a staggering £1.4 trillion, nearly doubling to 80% of GDP.

Fortunately the news isn't so grim in our household. Garry heard this week that his contract, which expires at the end of the month, is likely to be renewed for a further six months. This will take him through to the New Year with full time work.

Obama my neighbour

The G20 Summit kicked off tonight in London. The G20 is a group of 19 countries, plus the European Union, who collectively represent 85% of the world's GNP. The Group's leaders are in town for the next two days debating a global plan for economic recovery and reform. Their presence has resulted in a massive £10 million security net across the city.

More than 5,000 police are curently on duty, including 2,500 in the central financial district alone. Many have been drafted in from outside London, escorting 40 armed conveys or containing seven officially registered demonstrations. The first of these protests began today outside the Bank of England where twenty-two people were arrested. Another two demonstrations are in full force this evening, with early reports of one death.

Police fear these protests will become increasingly violent, with much of the anger directed at banks and their staff. As a result, workers in the financial district are being urged to dress casually so as not to draw the attention and ire of protesters. In Garry's office everyone has been told to dress down, while staff in my office are advised to do the same if venturing into town for meetings.


President Obama is staying at Winfield House, located on the edge of Regent's Park, less than ten minutes walk from our house. With the president in the neighbourhood, security is understandably tight. This morning I walked to work through the park and stumbled across an overwhelming police presence.

The entire northwest corner of the park was fenced off, with large crash barriers spaced at regular intervals and bolted firmly to the ground. Police patrolled in pairs every 20 metres along both sides of the fence, while scores more sat armed and waiting in a dozen minivans. The police clearly mean business!

This evening as I was coming home, Baker Street tube station was also swarming with police officers. They were out in force to prevent trouble as fans made their way to an England v Ukraine World Cup football qualifier at Wembley Stadium. I think I've seen more policemen today than I've seen in three years.

Tomorrow morning at 7am we'll be woken by the President's helicopter departing for the Summit's East London venue. Apparently more than one identical helicopter typically flies in convey, to confuse potential threats and provide a back-up at all times. I'm guessing we won't run in Obama at the local Tesco any time soon.

Farewell inflation?

Depending on the metric you chose, the UK is currently experiencing rising inflation, or absolutely no inflation. Today the Retail Prices Index (RPI) fell to zero. This index measures the price of popular goods as well as mortgage payments and energy costs. The last time this index flat-lined was March 1960, 49 years ago. Economists predict the RPI will fall up to 4% over the next year, remaining in negative territory for the longest period in more than a century.

Apparently the last time the nation experienced sustained deflation was in the Victorian era. During this period the development of mass production technology and a new national transportation infrastructure (canals and railways) progressively lowered the cost of goods. The Times newspaper says that wholesale prices fell 50% between 1870 and 1896, while the British economy grew a steady 4% annually.

Surprisingly, the more narrowly defined Consumer Price Index (CPI) increased today. Everyone predicted this index, measuring a basket of commonly purchased goods and services, would fall in line with the RPI. However, the rising price of imported fruit and vegetables drove the index up from 3% to an annual rate of 3.2%. Despite this news there is a sense that most prices are falling. I've certainly noticed the change. The price of bread is down, as is cheese, gas, petrol, air travel and clothing. It's a good time to shop if you have the cash.

It’s also an odd time to living in the UK with so many history making metrics in the headlines. Last week unemployment officially rose above two million for the first time since 1997. Many economists predict it will peak above three million next year, representing more than 10% of the workforce. Currently, one in five companies are estimated to have imposed a wage freeze. Add to this the lowest interest rates ever set by the Bank of England and there's no question we’re witnessing economic history in the making.

NOTE:
On March 30 Spain reported its first ever bout of deflation as the annual inflation rate came in at negative 0.1%.