1. Why the social media ban for under 16s is bad policy
Children need protection from the ills of social media, but the government legislation to ban under 16-year-olds from accessing sites is rushed, potentially ill-conceived and has far too many unknowns. The bill in parliament has bipartisan support after the Opposition forced changes so people won't have to hand over IDs to social media platforms. But consider this. The bill was introduced to parliament last week and sent off to committee for a single day, and still received 15,000 submissions. According to The Guardian, the vast majority of people attending the committee were against the ban. The legislation contains few details about how it will work, apart from the social media companies taking reasonable steps to ensure users are at least 16 years of age. Details will come later, after the legislation is passed, although the Minister for Communications will have broad powers over methods used and platforms affected. Elon Musk's X has rightly pointed out that these powers could be weaponised. Many experts think this is bad policy, including youth mental health experts. Why does this policy have to be rushed through? Because both Labor and the Coalition believe it is a vote winner. That might be true, but it doesn't make it good policy.
2. Bitcoin valuations are spooking investors
A week ago, it seemed inevitable that Bitcoin would hit the $US100,000 a unit mark. Since then, it has fallen nine per cent, though is up about 40 per cent since Donald Trump was elected, and 150 per cent over the past year. Since Trump was elected, the value of cryptocurrencies are up $US1 trillion. I still struggle to understand the intrinsic value of Bitcoin, though appreciate some of its enormous advantages. If I hold one Aussie dollar, the government and Reserve Bank guarantees its value. There is no such guarantee on Bitcoin, and its value could rise and fall. It is a speculative investment first, and a currency second. It is coming under pressure because $US100,000 a unit seems too high a price, and also because some of Donald Trump's posts - notably higher tariffs for Canada, Mexico and China - hurt riskier assets. Its rise may continue, and if enough people want to buy and sell Bitcoin then there is a market. But on the fundamentals alone, I really can't understand why it is trading at the current levels.
3. Sea cables keep the world modern
My favourite story this week is about "Australia Connect" - a deal between Google, data centre group NextDC, state governments, telco group Vocus and others to build two new subsea cables between mainland capital cities and Christmas Island. A subsea cable uses fibre optic technology to carry digital data. I'm talking about telephone calls, the internet, data transfers, the whole shebang. Subsea cables are the carriers of technology. Without them we don't have a modern society. As a result, they are extremely high value targets for malicious actors. (Germany and Finland have a 1200-kilometre subsea cable between them that was severed last week, and the two countries are blaming Russia.) Australia needs the big users of the technology, such as Google, to be part of the manufacture and development of more fibre optic cables and networks around the country and the region. Kudos to Google. Check out the link at the bottom of the newsletter to a video on subsea cables: it is fascinating.
4. Labor spending is a problem for interest rates
If Labor spends a record $87.1 billion "off budget" over the next four years, as the Australian Financial Review is reporting, on top of the $149 billion deficit forecast "on budget" by Deloitte Access Economics, then interest rates won't fall much in the next few years. Broadly, a neutral federal budget means Canberra isn't adding to, or subtracting from, demand. A budget surplus is restrictive, and a budget deficit is expansionary. In the past two financial years there have been surprise, small surpluses because of inflation and high commodity prices. The Labor government could have spent the extra money but decided to save it instead. They should be commended for that. However, the "off budget" spending - things like forgiving $16 billion of student debt and indexing HECS repayment thresholds, is inflationary. If the government continues to run big deficits, it means the hard work on getting inflation lower, and keeping it there, falls to the Reserve Bank. And that means interest rates will stay high, and when they start falling, they won't fall by much.
5. China is now the sensible global trade player
China sounds like the sensible voice in world trade, and that hasn't happened before. In response to Donald Trump's threats to impose a 25 per cent tariff on all Mexican and Canadian imports, and an extra ten per cent on Chinese imports, Beijing said a trade war helps no-one. And they are right. Implementing tariffs is a bad economic policy. Full stop. Mexico is the US's number one trade partner and Canada is number two. If Donald Trump adds a tariff to Mexican imports, computers will become more expensive. So too cars and car parts, trucks and oil. General Motors and Ford can kiss goodbye to being competitive. There's medical equipment, beer, tomatoes, fridges and air conditioners among a host of other products. Many of these goods are also imported from Canada, which is a big pharmaceutical base for the US. Donald Trump wants to stamp out the abuse of fentanyl, which is fair enough. But what about all the other medications that become 25 per cent more expensive - medications that save lives. Donald Trump apologists argue he is simply posturing a position. It is a negotiating tactic. If so, it is a dumb one. Donald Trump is a major negative for the global economy, including Australia.
BEST OF THE WEEK
IF YOU MISSED THIS ONE, CATCH-UP NOW
Spring selling season is drawing to a close - and buyers are finding themselves with the upper hand. The Property Pendulum, presented by Domain and Fear & Greed, takes a look at what's selling, who's buying, and the best advice for both sellers and buyers looking to make the most of the market right now.
"Some news reports cover the markets by talking about the ASX200, but others focus on the All Ords. What's the difference?"
AND ONE LAST THING...
Okay, we're a bit obsessed right now with undersea cables. Did you know there are hundreds of these connections crisscrossing the world's oceans, with an estimated 1.5 million kilometres of cable on the sea floor? And because of Australia's location, we own or control about 400,000 kilometres of cables - enough to lap the world 10 times.
Which leads us to this extraordinary video. It's been viewed 10 million times and shows exactly how these cables are laid on the ocean floor. (And yes, you even get to see a shark attacking one of the cables).
