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The Qantas flame-out is a symptom of something much more serious
The sudden and savage outburst of community disdain for Qantas and its senior executives may have taken the suddenly departed Alan Joyce by surprise. But it was a long time coming. After a decade and a half of disregard for its once loyal customer base, a bitter war with its own workforce and a poor financial performance — all while delivering fabulous riches to senior executives — it appears the…
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The soaring cost of energy in the wake of Russia's invasion of Ukraine has delivered windfall gains to Qatar which this year expects to earn about $76 billion in tax from its energy exports. Qatar's budget surplus last year, buoyed by energy exports, was 45 times bigger than the previous year. The UK's energy exports last year delivered tax revenue that was nine times higher than the previous year, after the Conservative government introduced an Energy Profits Levy to compensate consumers as domestic power bills soared. Despite intense lobbying and continued opposition from the oil giants, the UK lifted its headline tax rate for oil and gas producers to 75 per cent, from 40 per cent. And still the companies delivered record profits to shareholders. The UK government expects to pull in an average of 8.6 billion pounds ($16 billion) over the next six years, compared with a yearly average of just 800 million pounds ($1.5 billion) in the six years to last June.
Ian Verrender, 'Why Australia lags behind the rest of the world in taxing oil and energy giants’, ABC
China is now facing what commonly is referred to as the "Middle Income Trap", where it becomes increasingly difficult to maintain growth momentum. China's rising wealth has seen incomes surge and many big firms have looked for cheaper places. Around 40,000 factories shut annually in China as manufacturers move to places like Vietnam, closing off employment opportunities, particularly for the young. Engineering new pathways to wealth is difficult enough. For China, it is even harder after more than a decade of costly and inefficient stimulus, directed largely at housing and infrastructure. That path is no longer affordable. But each time Beijing tries to turn off the stimulus taps, the economy tanks. Each time it has been forced to backtrack, pouring in even more stimulus to fire up a recovery.
Ian Verrender, ‘China's Great Wall of Debt: can it afford a default?, ABC
China's economy is experiencing serious growing pains. And for the first time, it must confront a future where there are no more easy gains to be had. Even on official numbers, its debt to GDP last year rose to 270 per cent, up from 246 per cent the previous year. Those estimates are likely to be undercooked, as much of the internal debt comes from state-owned or state-controlled financial institutions that do not properly record loans.
Ian Verrender, ‘China's Great Wall of Debt: can it afford a default?, ABC
It's worth noting that Evergrande's predicament has arisen primarily because of regulatory action from Beijing. Authorities, concerned about rampant property speculation, profiteering and a huge blowout in household and corporate debt levels, have imposed hundreds of new regulations on the industry in the past two years, including controls on pricing. They now are starting to bite. Property sales have dropped 14 per cent in the past year and financing for property developers has halved from this time last year, with most of the drop concentrated in the past few months. Unless Beijing takes its foot off the brakes, a credit crunch is looming over the property industry from which Evergrande and other big developers will find no escape.
Ian Verrender, ‘China's Great Wall of Debt: can it afford a default?, ABC
There's no doubt a total collapse of Evergrande would severely damage China's economy. But a complete bailout could be equally disastrous and is looking increasingly unlikely. China's property market is worth around $US60 trillion ($83 trillion). It represents about 20 per cent of GDP and 62 per cent of household wealth. Any major downturn in real estate would have two serious effects. Spending would be seriously impacted, hitting the broader economy, and that in turn would see a rise in social unrest and discontent. Many in the ruling elite would be keen to avoid either or both scenarios. Others, however, clearly believe that firm action needs to be taken to rein in debt. And President Xi Jinping appears to fall into this latter camp.
Ian Verrender, ‘China's Great Wall of Debt: can it afford a default?, ABC
