Albanese gives US Inflation Reduction Act a twist with ‘Future Made in Aus Act’

Good morning. Here's what happened overnight and what you need to know today.

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1.

Australian made: Anthony Albanese will unveil the Future Made in Australia Act today, an Australian version of the US Inflation Reduction Act (IRA), to compete with other countries in the new economy. In a speech to the Queensland Media Club in Brisbane, Albanese will say that the IRA, along with comparable initiatives across the globe, is “not old fashioned protectionism or isolationism - it’s the new competition.” Australia can’t match the IRA dollar-for-dollar, Albanese will note, “but this is not an auction - it’s a competition.” The announcement for the new bill (which will be introduced late this year), explains that the plan builds on existing measures such as the $4 billion in cheap loans for the critical minerals industry, $1 billion for domestic production of solar panels, the $15 billion National Reconstruction Fund (NRF) and the Net Zero Economy Authority. (Capital Brief)

2.

Hot inflation: US consumer price index figures for March came in hotter than expected on Wednesday, leading markets to slash bets that the Federal Reserve will begin cutting rates from July. US headline CPI accelerated to 3.5%, while core CPI (which strips out food and energy) held at 3.8% on a year-on-year basis. Both CPI measures are 0.1% above expectations, and mark the second inflation increase of 0.4% in consecutive months. Housing and fuel costs also rose in March, which in combination contributed to over half of the overall CPI increase. Traders had been anticipating that a rate cut in July would be a near-certainty, but since the figures were released they have halved these bets on timing from around 98% to 50%. Traders are now leaning towards rate cuts beginning from the Fed’s November meeting, which is scheduled for just after the US Presidential election. (US Bureau of Labor Statistics press release)(Financial Times)

3.

Sharing notes: KPMG Netherlands has been slapped with a USD25 million ($38.31 million) fine by the US’ audit regulator over claims of exam cheating and misinforming investigators. The fine is the largest monetary penalty imposed on an auditing firm by the Public Company Accounting Oversight Board (PCAOB) to date. Now former-head of assurance, Marc Hogeboom, was also ordered to pay USD150,000 and is permanently barred from associating with a registered accounting firm. The PCAOB found that improper answer sharing occurred at the firm between 2017-2022 by hundreds of professionals in connection with tests for mandatory firm training courses. The courses were tied to topics including US auditing standards, professional ethics, and independence. Partners and senior firm leaders, including Hogeboom, were found to have participated in the improper answer sharing. (Capital Brief)(PCOAB press release)

4.

Nippon’s Steel: During a press conference with Japanese Prime Minister Fumio Kishida, President Joe Biden emphasised his support for US workers opposed to Nippon Steel’s bid to acquire US Steel Corp, but did not call for continued domestic ownership. The proposed USD14 billion sale has drawn significant pushback from politicians and steelworkers, particularly the United Steelworkers union, who believe the iconic US company should not be sold to an international entity. Biden said: “I stand by my commitment to American workers […] I’m a man of my word, and I’m going to keep it.” The deal is currently being reviewed by the Committee on Foreign Investment in the United States, but concerns are rising that given the political attention being received by the deal, the decision could drag on until after the election. (Bloomberg)

5.

Middle East conflict: The US and its allies believe that major missile or drone strikes by Iran or its proxies against military and government targets in Israel are imminent, according to unnamed sources cited by Bloomberg. The assault could happen in the coming days, and is seen more as a matter of “when, not if,” and would mark a major escalation in the conflict which has now stretched on for six months. Last week, Iran threatened to retaliate for an attack on the Iranian consulate in Damascus, Syria, which killed a number of Iranian military personnel. Iran blamed the strike on Israel, though Israel has not explicitly claimed responsibility for the attack. (Bloomberg)

6.

Big banks=Big rules: The Swiss government announced its plans to close-gaps in its ‘too-big-to-fail regulation,’ after the Credit Suisse crisis ignited concerns that the country’s systemically important banks need safeguarding. The 2023 takeover of Credit Suisse for USD3.25 billion, saw UBS’ balance sheet swell to USD1.7 trillion, which is double the size of Switzerland's annual economic output. The Swiss government proposed a package of 22 measures for direct implementation, to strengthen and develop the country’s too-big-to-fail regime. The report says that the quantitative and qualitative capital requirements for systemically important banks should be tightened in a targeted way and supplemented with a forward-looking component. The report adds that the increase in the capital requirements for UBS will be substantial, “especially if UBS were to retain its current size and structure, or even grow." (Swiss Government report)(Financial Times)

7.

Chips race: Meta has unveiled its new AI chip called ‘Artemis,’ the latest version of its Meta Training and Inference Accelerator (MTIA), in efforts to reduce its dependence on Nvidia. Earlier this year, CEO Mark Zuckerberg said the company planned to acquire roughly 350,000 flagship H100 chips from Nvidia in 2024. The MTIA chip has already been deployed in Meta’s data centres, and the company says that it can handle both low complexity and high complexity ranking and recommendation models which are key components of Meta’s products. Because Meta controls the whole stack, it explains, it is now more efficient compared to commercially available GPUs (graphics processing units). Taiwan Semiconductor Manufacturing Co (TSMC) will produce Meta’s new chip on its ‘5 nanometre’ process, which Meta says is able to deliver three times the performance of its first generation processor. (Meta press release)(Reuters)

8.

Mifid backtrack: The UK’s Financial Conduct Authority has proposed the reversal of its long-standing Mifid rules tied to investment research in efforts to invigorate the country’s capital markets. The FCA said that fund managers should be able to bundle fees for investment banking research along with their trading costs, in a move that would walk back a key element of the EU’s post-financial crisis reforms package. The purpose of the rules was to reduce conflicts of interest and boost independent coverage, which in fact resulted in even less coverage of small and medium-sized stocks. Under the new proposal, asset managers would have the choice of paying for research separately or along with other trade services, to give fund managers greater freedom and bring the country’s regime closer to the US and EU equivalent rules. (Financial Times)