IMF cuts global growth forecasts yet again

The International Monetary Fund has once again lowered its global growth forecast.

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In its latest World Economic Outlook, the IMF warns chronic weakness has left markets vulnerable to shocks and sharp devaluations.

Global growth of 3.2 per cent is expected this year, with a rate of 3.5 per cent expected in 2017.

The IMF’s Chief Economist, Maurice Obstfeld, says it’s a gloomy picture that highlights a need for more coordinated global action.

“Global growth continues but at an increasingly disappointing pace that leaves the world economy more exposed to negative risks. Growth has been too slow for too long.”

Geopolitical shocks and political discord are cited as key reasons for the 0.2 per cent downward revision from the Fund’s January forecast.

The IMF is demanding what it’s calling an “immediate and proactive” response from governments and central banks.

That response, it says, could include increased government budget stimulus, structural reforms aimed at boosting the competitiveness of economies, as well as further monetary policy support.

Australia’s economic growth is predicted to remain at 2.5 per cent in 2016 before lifting in 2017 to 3 per cent, thanks to a lower dollar.

Japan has had its forecast cut by half, to 0.5 per cent, while China’s growth is forecast slightly higher, to 6.5 per cent this year.

Mr Obstfeld says the IMF still has concerns about long-term economic growth in China.

“We worry about the quality of growth more than the quantity of growth. And if the quality of growth is lower in the short run, even though the quantity of growth is higher, you might think that the longer term growth will be will be lower and that’s that’s where the concerns that we have would would come into play in the longer term forecast.”

The IMF expects Brazil’s economy to shrink by 3.8 per cent in this year.

It was previously forecast to shrink by only 3.5 per cent.

White House spokesman Josh Earnest says the United States is prepared to work with Brazil as it struggles through its worst recession in decades.

“It’s in our interest to see their [Brazil’s] economy strong. It’s in our interest to see the country’s economy develop in a way that they can continue to be an important trading partner with the United States.”

Among the risks the IMF is citing are the Syrian refugee crisis, the prospect of severe flooding and drought from the current El Nino and the rise of nationalism in Europe.

And it says a so-called ‘Brexit’, or British Exit, from the European Union could do severe regional and global damage by disrupting established trading relationships.

British Chancellor George Osborne says the IMF warning is significant because it shows there’s already been a negative impact on the British economy.

“They say if we were actually to leave the EU, there would be a short term impact on stability and a long term cost for the economy. So this is the clearest independent warning of the taste of things to come if we leave the EU. I think we’re much better off if we stay in the EU – that would make Britain stronger, safer and better off.”

Former British Chancellor Lord Lamont says it’s important to reflect on the motivations of the I-M-F when considering its recommendations.

“The IMF is an important organisation but it’s very closely connected to the European Union: its managing director is a former French finance minister, it’s bound to reflect their views. At the end of the day this is just a matter of opinion.”

 

Young people missing out on jobs to older workers and migrants: study

Lisa Denny, University of Tasmania and Brendan Churchill, University of Tasmania

Young people have missed out at the expense older workers and migrants in the job market, according to new research on youth employment.

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Government policy and Australia’s sluggish economy have added to the problem.

While Australia avoided the worst of the global financial crisis, unemployment among its youth has mirrored many countries who went into recession.

Prior to the crisis, youth unemployment in Australia was 8.8%, close to the low rates of the 1970s. By 2015, it was 13.9%. While prime-age workers, those aged between 25 and 54 make up a greater proportion of the labour force, the crisis had a greater impact upon young people.

In response, attempts to address youth unemployment have either attacked young people through a restriction of unemployment benefits or have been completely lacking from government policy agendas. The Coalition government introduced a “youth employment strategy” a part of the 2015 budget, which included the “Youth Work Transition” program for those “at risk of long term welfare dependence”.

Our research published in the latest volume of the Journal of Applied Youth Studies suggests the policy levers aimed at population ageing may have been detrimental to youth engagement in the labour force, in recent history at least. Increasing female and mature labour force participation and increasing immigration, combined with a lack of employment demand post the financial crisis are all influencing factors.

Gen Y stay on learning while boomers and migrants continue earning

Figure 1. Labour force participation rate percentage point difference with overall labour force participation rate, by age group, Australia, 1995 to 2015 Australian Bureau of Statistics, Labour force, Australia, Cat. No. 6291.0.55.001.

Participation in the labour force and subsequent employment is influenced by the demand for employment. Over the past two decades, the rate of employment growth generally exceeded the rate of growth in the size of the labour force (the supply of labour) for most of the period, resulting in increases in the employment to population ratio. In 2009, however, there was a decline in both the employment growth rate and the size of the labour force, which was caused by the economic downturn resulting from the financial crisis as well as some effects resulting from the ageing population.

The greatest change in labour force participation rates over the last 20 years has occurred among the youngest and oldest segments of the Australian working age population. Participation rates have changed markedly for youth (aged 15 to 24) and those aged 55 to 64. The deterioration in participation for young people is reflective of their increased participation in education and training as well as the relative level of confidence the group has in securing work.

The dramatic improvement of participation among 55 to 64 year-olds has completely closed the gap between the age specific rate and the overall participation rate. This is consistent with policy intervention to increase both female and mature age labour force participation rates. The raising of the superannuation preservation age and aged pension age (for women), has also played a role. The impact of the financial crisis on the value of superannuation investments has also prolonged the planned exit from the labour force by older workers.

Figure 2. Unemployment rate percentage point difference with overall unemployment rate, by age group, Australia, 1995 to 2015 Australian Bureau of Statistics, Labour force, Australia, Cat. No. 6291.0.55.001.

The youth unemployment rate, derived from the labour force participation rate, has been consistently greater than the overall unemployment rate while all other age groups have averaged lower. However, since the financial crisis, youth unemployment has not recovered at the same rate as for older age groups.

Also, the 55-64 group of workers has increased considerably in size, while the youth group only marginally over the last two decades. The 45-54 group is also growing. And it’s happening as labour force participation levels increase and the employment market languishes. When combined, these factors mean youth employment may deteriorate further.

This predicament has been exacerbated by the introduction of the demand driven skilled migration program since 2008. The shift highlighted a significant and growing mismatch between the skills and experience on offer and those demanded by the Australian labour market. As Figure 3 illustrates, the impact of this policy focus is clear. Since 2005, overall employment growth has exceeded total net overseas migration (NOM), providing some justification for the introduction of the employer-led immigration policy.

But since its introduction and the subsequent financial crisis, net overseas migration has considerably exceeded employment growth. The labour market is now far larger than employment demand. In the five years to 2015, net overseas migration exceeded employment growth by more than 30,000.

Figure 3. Employment growth, net overseas migration and net overseas migration (working-age population), Australia, June 30 1995 to June 30 2015 Australian Bureau of Statistics, Labour force, Australia, Cat. No. 6291.0.55.001, Migration, Australia, 2013-14, Cat. No. 3412.0.

The importance of youth policy

In short, young people have missed out at the expense older workers and migrants, which reflects the current policy settings in place. As we have stated before, young people have been omitted from the Intergenerational Reports.

Youth policy in Australia has become synonymous with education and training policy, overly focused on young people making a series of linear transitions from schooling to post-school qualifications and finally to the full time labour market. This is in spite of decades of research which has demonstrated that transitions for young people in the contemporary labour market are anything but linear.

Efforts to address youth unemployment have focused on skill deficiencies, work ethic and the education system producing job-ready workers. The reality is that poor economic performance and high levels of skilled migration are standing in the way of young Australians entering the labour market for the first time.

We know that once a person reaches 25 they’re more likely to be in the workforce. This suggests that the initial transition from school to work is failing young people. There’s also a reluctance on the part of employers to engage and invest in young people with training. To address this, governments need to put youth at the forefront of policy making.

Lisa Denny is affiliated with the Australian Population Association, peak body of demographers.

Brendan Churchill does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond the academic appointment above.

Mr Cruel victim ‘wasn’t going willingly’

Melbourne schoolgirl Karmein Chan promised to put up a fight if grabbed by ‘Mr Cruel’.

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The 13-year-old told her mum she wouldn’t go willingly after seeing media reports about Mr Cruel’s abduction of Nicola Lynas.

Karmein’s comment proved to be prophetic: she was kidnapped by the child sex offender whose terrifying crimes culminated in her murder.

It may be that Karmein managed to identify Mr Cruel, who went to extremes to conceal his identity when he abducted 10-year-old Sharon Wills in 1988 and 13-year-old Nicola in 1990.

Mr Cruel told his victims his freedom was more important than their lives, Assistant Commissioner Steve Fontana said on the 25th anniversary of Karmein’s abduction.

“We suspect she was pretty feisty and confronted and put up a fight with this particular offender and may have actually identified him,” he said on Wednesday.

“We know that she was probably not a compliant type of victim in these matters.”

It is speculation, for police still do not know who Mr Cruel is or why he stopped after Karmein.

He went to great lengths to ensure he was never identified by his many suspected victims, even when dropping off Nicola and Sharon.

“They had been thoroughly washed, clothes changed. There’s a whole range of things that he did to make sure that they did not see him and that he did not try to leave any traces behind,” Mr Fontana said.

Mr Fontana, a senior investigator in the original Mr Cruel task force, believes Mr Cruel is still alive and has kept reminders of his victims.

“We believe that he will still have items that were probably stolen from the children,” he said.

Police had 32 `Sierra files’ on people who could not be eliminated as possible suspects, one or two of whom were of “real interest”.

The profile suggests someone well read, very intelligent and cautious, who meticulously planned and executed his crimes.

Mr Cruel may have died, moved or been jailed for other offences after taking Karmein, whose remains were found a year after her abduction.

He may have been one of the thousands of persons of interest interviewed by police.

“We may have actually spoken to the offender, which is why he hasn’t offended again,” Mr Fontana said.

Mr Cruel’s horrific series of crimes terrified Melbourne families in the late 1980s and early 1990s, devastating Karmein’s family and those of the other victims.

Karmein’s family did not appear with Mr Fontana when he announced the reward over her murder has been increased to $1 million, because of the crime’s continued significant impact on them.

“It was an emotional roller coaster for them – and still is,” Mr Fontana said.

It also took a toll on the 40-strong Spectrum task force and second investigative team that reviewed its work and new leads earlier this decade.

“Everyone that’s been involved in this case becomes very passionate about it,” Mr Fontana said.

Vegie oils may not help your heart: study

Replacing butter with vegetable oils may lower your cholesterol but may not curb heart disease risk or help you live longer, a new study suggests.

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US scientists have re-analysed data from two old experiments, including the Sydney Diet Heart Study, and found switching to vegetable oils rich in linoleic acid lowered blood cholesterol.

But this did not translate into improved longevity or a lower risk of heart disease.

In fact, people who had a greater reduction in blood cholesterol had a higher, rather than lower, risk of death.

The scientists say their findings, published by The BMJ, add to doubts about the widely held belief that vegetable oils rich in linoleic acid – an omega-6 polyunsaturated fat – are good for heart health.

In a linked editorial, University of Queensland senior lecturer Lennert Veerman said the benefits of choosing polyunsaturated fat over saturated fat now “seem a little less certain than we thought”.

Omega 6 polyunsaturated fat sources include margarine spreads and corn, sunflower and sesame oils.

The scientists analysed data from the Minnesota Coronary Experiment (MCE), conducted 45 years ago, involving 9423 participants from state mental hospitals and a nursing home.

One group replaced their saturated fat intake with linoleic acid from corn oil and corn oil polyunsaturated margarine, while the control group had diets high in saturated fat, including butter and common margarines.

An analysis of the unpublished data from a similar trial in Sydney found the risk of death from coronary heart disease was higher in those who replaced saturated fat with vegetable oil rich in linoleic acid.

The MCE findings add to growing evidence that incomplete publication of the research has contributed to “overestimation of benefits” of replacing saturated fats with the vegetable oils, the researchers said.

China trade beats hopes as exports rise

China’s trade performance blew past expectations in March, with exports returning to growth for the first time in nine months, providing more evidence of stabilisation in the world’s second-largest economy.

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March exports rose a blistering 11.5 per cent from a year earlier, customs data showed on Wednesday, the first increase since June and the largest rise since February 2015, although economists warned that base effects and seasonal factors played a major role in producing the number.

Recent data and surveys of manufacturing and services activities have hinted of slight improvements in the broader economy, which appears to be trickling down to the country’s exporters.

Imports continued to fall but less than expected, declining by 7.6 per cent in US dollar denominated terms, led by sharp corrections in imports of tax-free foreign goods, rentals and leasing and imported equipment.

However, import volumes of most major commodities rose.

Analysts noted a surprise rise in imports from Hong Kong, which rose 116 per cent from a year ago, could reflect capital flight out of yuan assets masking itself as import transactions.

The imbalance left the country with a trade surplus of $US29.86 billion ($A38.87 billion) for the month, data from the General Administration of Customs showed, versus a forecast of $US30.85 billion.

“I think the base effect was a pretty big factor, as last year’s base was low,” said Ma Xiaoping, analyst at HSBC, adding that because many export figures reported in March actually capture some February orders due to the variable dates of the lunar new year holiday every year.

“I think we should focus on the better than expected imports growth rate, which means domestic demand is also recovering, driven by infrastructure investment and also the real estate sector recovery.”

Economists polled by Reuters had expected March exports to rise 2.5 per cent, after tumbling 25.4 per cent in February – the worst showing since May 2009, and expected imports to fall 10.2 per cent, following February’s 13.8 per cent dip.

Premier Li Keqiang said last week that China’s economic indicators showed signs of improvement in the first quarter but a sluggish world economy and volatile markets deprive the changes of a solid foundation.

Recent factory activity surveys have fanned hopes the economy may be steadying but the government will have to keep up policy support to cope with lingering global uncertainties and the expected pain from its “supply-side” reforms.

China’s producer prices fell less than expected in March while consumer inflation stabilised, a sign that strong deflationary pressures in the country’s industrial sector may be lessening.

Key economic data, including first-quarter economic growth, are expected this week. The government aims for economic growth of 6.5 to 7 per cent this year. The economy grew 6.9 per cent in 2015, the weakest pace in a quarter of a century.

Chinese stock markets appeared to celebrate the data, with benchmark indexes in Hong Kong, Shanghai and Shenzhen rising more than 2 per cent.

The yuan also firmed slightly, with traders seeing the high surplus as providing additional firepower against depreciation pressure.

International booze guidelines bamboozle

International guidelines for alcohol consumption are so confusing it is enough to turn you to drink.

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Scientists who studied low-risk drinking advice around the world concluded that there is a “substantial” risk of misunderstanding.

Guidelines were found to vary greatly, with measurements of the amount of alcohol in a “standard drink” ranging from 8g (Iceland, UK) to 20g (Australia).

In the most conservative countries, “low-risk” consumption meant drinking no more than 10g of alcohol per day for women and 20g for men.

But in Chile, a person can down 56g of alcohol per day and still be considered a low-risk drinker.

New UK advice introduced in January this year says men should not drink more than 14 units of alcohol per week, the same as the limit for women. The previous guidelines were 21 units for men and 14 units for women per week.

That raises another much-debated question: what constitutes a unit of alcohol? For the record, a unit translates to 10ml, or 8g, of pure alcohol – the amount of alcohol the average adult can process in an hour.

A one-unit alcoholic drink is roughly equivalent to 250ml of 4 per cent-strength beer, 76ml of 13 per cent wine, or 25ml of 40 per cent spirits.

The UK has now joined the list of nations, including Australia, Portugal and South Africa, that are gender-blind when it comes to drinking guidelines.

Other countries, such as the US, assign different daily or weekly limits for men and women.

The scientists, writing in the journal Addiction, surveyed the definitions of “standard drink” and “low-risk” drinking in 37 countries around the world.

They found that although the World Health Organisation (WHO) had defined a standard drink as one containing 10g of alcohol, this was not accepted by half the countries studied.

Nor was there any general agreement to follow the WHO’s recommendation that both men and women should limit themselves to two standard drinks per day.

Thaiday talks up Bennett-Knights tension

Time heals all wounds, apparently – except when it comes to Wayne Bennett, Darius Boyd and the Newcastle Knights.

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Brisbane veteran Sam Thaiday says there’s still plenty of tension between supercoach Bennett, Boyd and their former club ahead of their visit to Suncorp Stadium on Saturday night.

More than a year has passed since the pair quit the Knights to return to Red Hill, but it hasn’t stopped them from wearing the blame for the team’s continued woes, and in particular Bennett for the state he left their playing roster in.

Boyd stepped in to defend Bennett this week when he told News Corp the Knights needed to look at themselves – not at others – as the source of their struggles.

“There’s probably a little bit of feeling there,” Thaiday said on Wednesday.

Thaiday is also expecting fireworks from former Bronco Dane Gagai, who has been one of Newcastle’s best in a poor start to the season as he pushes for another representative jumper.

“We’ve got a couple of ex-players in that team as well that are going to probably stand up and really have a crack,” Thaiday said.

“I know Dane Gagai’s probably one of those players who will be one of their best on the night and will be playing a tough, good brand of footy.

“He’s probably pushing himself into maybe Australian selection or even a call-up to the Queensland team again.”

Boyd didn’t train on Wednesday for the second time this week, but he is still expected to take his place in the Brisbane team on Saturday, having been given time to deal with personal matters.

The Knights edged Wests Tigers 18-16 last weekend to notch their first win of the season.

While Brisbane go into the game as overwhelming favourites, the burden of expectation seemed to weigh down on the Broncos in last week’s scrappy win over St George Illawarra.

“They’re always the tougher games,” second-rower Alex Glenn said.

“Everyone gives you raps and reckons you’ll do it easy and that’s where sometimes you fall into a weakness.

“That’s where we’ve got to train extra hard and make sure we stay to our standards, turn up and play our hearts out – and not just turn up and expect the win to happen.”

Fortescue may exceed FY production target

Fortescue Metals is on track to exceed its full-year production guidance after unseasonably mild weather in Western Australia helped boost shipments in the March quarter.

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The world’s fourth biggest iron ore producer shipped 42 million tonnes during the three-month period, up four per cent from a year ago, while continuing to lower costs.

“Our production is running a few per cent higher than the target, because there hasn’t been any weather impact,” chief executive Nev Power told reporters.

“Our guidance still remains at 165 million tonnes but we are not going to adjust our production on a daily basis.”

Fortescue, which has raced to cut costs amid a prolonged downturn in commodity prices, said it stripped cash costs further as part of an ongoing program.

C1 cash costs were down to $US14.79 per wet metric tonne from $US15.80 in the previous quarter, and 43 per cent lower than a year earlier.

“While we are continuing to look for every opportunity, ongoing cost cuts will be more challenging because of the recent increase in the Australian dollar and higher fuel prices,” Mr Power said.

The miner, however, has maintained its target of reducing cash costs to $US13 per wet metric tonne, and will look for more productivity gains to offset the impact.

Iron ore prices, which plunged to a decade low of $US38 a tonne in late 2015, have since recovered slightly but are still down more than 70 per cent over the past four years.

Spot prices jumped to $US58.50 a tonne on Wednesday, boosting sentiment in sector stocks.

Fortescue shares were trading nearly seven per cent higher at $3.17 each, at 1340 AEST, while larger rivals BHP Billiton and Rio Tinto were also up by a similar level.

Mr Power said, while Fortescue has benefited from the strong run in recent months, he expects iron ore prices to remain very volatile.

The higher prices helped boost the company’s cash balance by $US200 million, and chief financial officer Stephen Pearce said he is looking at various options to trim a $US5.9 billion debt pile.

Fortescue surprised the market last month after announcing talks with Brazilian iron ore giant Vale to blend their iron ore, in a deal that would help the two companies boost their combined market share in China.

Work on developing the right blend is continuing, Mr Power said, with the first volumes expected to hit the market in the second half of 2016.

PM to canvas ‘range of issues’ in China

Malcolm Turnbull won’t say whether hot-button issues such as Australia’s concern about cheap steel imports and tensions over regional maritime borders will be raised during his first trip to China as prime minister.

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Mr Turnbull will join about 1000 business leaders, three federal ministers and two state premiers on the two-day visit, which includes talks and banquets with President Xi Jinping and Premier Li Keqiang.

Asked if the discussions would include China’s territorial ambitions in the South China Sea or the issue of steel imports, Mr Turnbull repeatedly told reporters in Perth on Wednesday the talks would cover “a range of issues”.

“The Chinese leaders … know that I have very clear and consistent views on all of these issues and that we say the same thing privately as we do publicly,” he said.

The visit comes amid a slowing of the Chinese economy, which is crucial for Australian jobs and growth.

Business chiefs will be seeking to build on the China-Australia free trade agreement which came into effect in December, cutting tariffs across many economic sectors.

The Chinese economy is changing from one based on growth in exports to a greater consumer focus.

Australia is seeking to open more doors to trade in food and agriculture, financial services, aged care, education and urban services.

As Chinese visitors to Australia top the one million mark, the prime minister will launch a new Tourism Australia promotion in Shanghai.

Mr Turnbull will also launch an innovation “landing pad” for start-ups.

Over two days he is expected to have about four hours of talks with the two Chinese leaders.

Mr Turnbull is expected to underline Australia’s position that China’s actions in the South China Sea are raising anxieties and tensions among its neighbours.

Australia believes disputes of the ownership of the various reefs should be settled by international law and the economic growth of the region depends on peace and stability.

Fifteen Australian chief executives will sit down with their Chinese counterparts for a business roundtable, which will report to the prime minister.

Queensland premier Annastacia Palaszczuk and Tasmanian leader Will Hodgman will also be involved in trade and investment talks.

Opposition Leader Bill Shorten said the prime minister needed to be resolute in Australia’s support for international forums to resolve maritime border disputes.

“I also hope he speaks up for the Australian steel industry,” he told reporters in Canberra.

Make good on entitlements, PM tells Palmer

Queensland Nickel workers will know within 24 hours how much assistance they will get from the federal government.

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In the meantime, Prime Minister Malcolm Turnbull has told businessman-MP Clive Palmer to reach into his own pocket and cover $73 million in entitlements owed to hundreds of workers made redundant by the company’s collapse.

Some of them have been waiting months for payment, unable to access welfare support while administrators determined how much they are likely to receive.

Liquidation of Queensland Nickel automatically triggers the Fair Entitlements Guarantee – a taxpayer-funded safety net to cover the unpaid entitlements of workers.

“A decision will be made in the next 24 hours,” Employment Minister Michaelia Cash told Sky News on Wednesday.

The minister has the discretion to order an early release of the funds, but believes Mr Palmer is morally obliged to cover the entitlements.

“I think it is a disgrace that Clive Palmer may well get off the hook,” she said.

Mr Turnbull also insists Mr Palmer should be the one making good the entitlements.

“That’s the very least he can do in these circumstances,” he said, noting that Mr Palmer had held himself up as a great business leader and philanthropist.

Townsville-based federal MP Ewen Jones took aim at Mr Palmer after the administrators found he secretly acted as a shadow director of Queensland Nickel.

Mr Palmer used the company as a piggy bank to prop up his other businesses and spending $21.5 million on donations to his political party, they said in their report.

The findings have been dismissed as “a lie” by the businessman.

“It is galling up here that we have to sit through his performances,” Mr Jones said.

Opposition Leader Bill Shorten has penned another letter to Mr Turnbull requesting urgent federal support.

“In light of (the) recommendation by the company’s administrators that QNI be placed in liquidation, I ask that you belatedly and urgently reconsider your decision,” he writes.