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Hedge Clippings | Friday 24 May, 2019
The excitement's over, now back to work!
After all the expectations and then, depending on one's political leanings, the excitement or disappointment of the final result, it's now back to normal. Or as near normal as life ever seems to be.
There wouldn't seem to be much that Hedge Clippings could add to the reams that have been written, spoken or broadcast over the past five and a half days, except everything is always much easier to understand when looking in the rear-view mirror. Firstly, Shorten and Bowen underestimated the effect of their franking grab, and Sco-Mo made the most of it, aided and abetted by the financial services sector in general, and Geoff Wilson in particular. For those who missed it first time around, or our reminder on Monday, here's a link to our own effort in the form of the Ballad of Wee Willie Short One.
Secondly, it'll likely be a while before a convoy of environmentalists (probably the kindest thing they were called on their trip once north of the Tweed) travel to Queensland to tell a bunch of prospective coal miners what they should be doing with their employment chances. Amazing how dumb some otherwise intelligent people can be.
And finally, let's not forget Sco-Mo ran a good, direct and clear campaign. Probably the most important outcome was there's presumably now stability in and around the PM's office, and hopefully a clear policy agenda.
Meanwhile the RBA seems more likely than ever to be on the way to easing in June - at least if you listen to financial markets and the bookies - but let's not forget bookies (in spite of Hedge Clipping's previous incorrect prediction) can get it wrong as well. We're still not convinced that a 25 or even 50 bp easing will have any great effect on inflation, as the RBA's firepower looks severely limited. Tax cuts due in July might help stimulate consumer spending to a degree, and the banks' easing of lending restrictions might help the property market, but the view ahead is "caution" in spite of the events of last weekend.
The macro issue - or risk - that we see is an ongoing escalation of the trade war between Presidents Trump and Xi. One would think there's too much to lose to see the situation deteriorate further, but there's too much face to lose for either of them to be seen to be the loser. Having said that, Trump's probably correct in saying enough is enough, but that should have been said by his predecessor - or his predecessor's predecessor.
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