30th April 2021
On the Rise: Inflation and the Metal Boom
Exported metal ore reached a record high of $16.4 billion in March, with iron and copper ore up 21 and 62 percent respectively. Coal also increased 9 percent as exports to China increased by 17 percent, driven by iron ore. The global drive to build renewable energy has increased demand for copper, with the majority of the surplus driven by price rather than volume. ABS head of international statistics Sean Crick notes that “Green technology is copper intensive, driving recent demand.” Elsewhere, exports to Japan increased 26 percent, while exports to Singapore and India remained steady.
The RBA’s core inflation measure is at its lowest on record as annual inflation rose to 1.1 percent, significantly lower than economists expected. Government subsidies in home building and education prevented prices from rising as much as anticipated. The federal government’s Homebuilder grant and similar grants by the Western Australian and Tasmanian state governments were a key reason behind keeping price rises down, as new dwelling prices fell.
The most significant price rises were fuels for automotive and medical and hospital services, rising 8.7 percent and 5.3 percent respectively. Accessories rose 7.3 percent, reflecting demand for discretionary items such as jewellery, indicating that many Australians have recovered economically.
The board of the RBA has reinforced its position to not increase the record low 0.1 percent cash rate until inflation is between 2 and 3 percent. They further predict that this will not occur until 2024 at the earliest.
Biden Announces $1.8 Trillion Family Aid Plan
US president, Joe Biden, has revealed a $1.8 trillion dollar plan to fund childcare and education opportunities across the country whilst also creating new benefits to support lower income families. It is called the ‘American Families Plan’ and is likely to have a significant impact on US welfare and tax codes.
Most notably, the plan includes a $200 billion program to make pre kindergarten free for all 3-4 year olds, and $109 billion towards making community college free for any American who wants it. Additionally, there would be $225 billion invested in the childcare sector to raise wages for childcare workers and improve accessibility to their services and facilities.
The plan also outlines the creation of a national paid family and medical leave program which would provide workers up to $4,000 a month if they require leave to care for a new child, care for a seriously ill loved one, deal with an illness or another serious reason.
Lastly, it proposes $800 billion in tax credits which will expand childcare credits for lower income families whilst also providing income tax credits to childless workers.
White house officials have stated that the plan would be funded by taxing wealthy individuals. This will consist of a higher capital gains tax and income tax on individuals earning more than $400,000 a year.
White House senior advisor, Anita Dun, wrote “The president has been clear that our tax system is broken when a hedge fund manager making hundreds of millions of dollars is paying taxes at a lower rate than the janitor working in his office or the housekeeper at his mansion,”. Although some argue that measures such as raising the capital gains tax could deter investment, in the long run, investing in education and in children will likely pay for itself. Ultimately, the plan presents several important measures which could make a strong positive impact on both welfare and the future economy if it is passed by Congress.
The views expressed within this article are those of the authors and do not represent the views of the Finance Student's Association. All images and references in this article are for fair and educational purposes only. The content in this article is not intended as legal, financial or investment advice and should not be construed or relied on as such.