Five Weeks to Decide Australia's Fate: Tax Cuts, Tariffs, and Political Tension

Mar 28, 2025

Good morning. It’s March 29 and the campaign season is in full force. With five weeks left before the elections, the ruling Albanese government is rallying support to defeat Peter Dutton’s Liberal-National coalition in a tight race. The poll is entangled with a host of domestic problems and external pressures, particularly in the face of high cost of living and Donald Trump’s tariffs adding pressure on inflation.

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Today's reading time is 7 minutes. - CJ

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Friday's Australian share market improved from a weaker start to advance for a second consecutive week.

Federal Election Set for May 3; Five-Week Tight Campaign Kicks Off

Australia's Prime Minister Anthony Albanese officially called a national election for May 3, kicking off a five-week campaign before the tight race.

The poll comes as Australians lament rising prices of essentials including food and housing. With inflation concerns and stagnant wage growth contributing to public discontent, Albanese’s Labor party and Dutton’s Liberal-National coalition are banking on key themes such as healthcare, housing crisis, and labor tightness in their respective campaigns.

Albanese is also on a quest to achieve a back-to-back win for his party, a challenging feat that no Australian leader has achieved in over two decades.

Annual Inflation Surprisingly Eases in February Ahead of Central Bank Meeting

Australia’s annual inflation surprisingly eased in February based on data released a week before the Reserve Bank’s policy meeting. The monthly consumer price index indicator decelerated to 2.4% last month from 2.5% in January. Analysts consensus had widely predicted for inflation to remain steady at 2.5%. Trimmed mean inflation, which is the Reserve Bank’s preferred inflation measure, also slowed to 2.7% from 2.8%.

The Reserve Bank, which delivered its first rate cut in four years in February, widely expects inflation to decelerate further amid its years-long battle to restrain price growth through high interest rates. Markets are at odds on the bank’s policy path as the labor market remains tight and in the context of rising external pressures such as trade tensions. The bank will next meet on March 31 to April 1.

Tax Cuts, Expanded Electricity Rebates for Consumers as Election Looms

The Federal government pledged to reduce the income tax to 15% from 16% from July 1, 2026, and further reduce the rate to 14% from July 1, 2027. This translates to an average tax cut of around $43 per week or more than $2,200 in fiscal 2027, and around $50 per week or more than $2,500 in fiscal 2028.

The government also extended the energy rebates until the end of 2025. This means households and around 1 million eligible small businesses will receive another $150 energy rebate as an added relief to consumers already grappling with the rising cost of living.

The tax cuts and expanded electricity rebates come as the Albanese government tries to generate support ahead of the federal elections. Latest opinion surveys show a neck-and-neck battle between the ruling Labor party and the Liberal-National coalition.

Business & Markets

➡️ Wall Street fell Thursday as markets prepared for another escalation in the global trade war. The Nasdaq Composite shed 0.5%, the Dow Jones Industrial Average dropped 0.4%, and the S&P 500 fell 0.3%. The Trump administration went ahead with its plan to slap a 25% tariff on auto imports to the US, with the measure slated to take effect on April 3. General Motors shares tumbled 7.4% Thursday, to mark the sharpest decline on the S&P 500; Ford Motor shed 3.9%.

➡️ Australia’s gas players agree to an emergency supply deal as winter looms. The Australian government asked the country’s top gas producers to commit to 9 petajoules of supply until the third quarter of the year in anticipation of high demand during the winter season. The agreement comes as calls to prioritize domestic demand over export orders mount in the face of threats of an energy crisis.zation.

➡️ Gold reaches a new record as investors rush to safe-haven assets. Gold advanced as investor appetite for safe-haven assets spiked in the face of rising trade tensions. Gold futures climbed past 1% and were trading $3,122 per ounce around 3 am Eastern Time on Friday. The precious metal had smashed record highs early this year against a backdrop of the global tariff war.

Politics & World Affairs

➡️ US Trade Allies React to Trump’s Auto Tariffs. After a brief reprieve, the White House announced a 25% tariff on imported cars and autoparts to the US starting next month amid a campaign to address its deficits with its trade partners. While no specific countermeasure has been put in place so far, major countries in the line of sight of the tariff have lambasted the new levies. Germany asked the European Union to deliver a "firm response" to the US. France’s finance minister wanted his country’s own tariffs against US cars. And Canada’s newly minted prime minister promised to defend Canadian companies.

➡️ Impeached South Korean Prime Minister Reinstated as Acting President. South Korean Prime Minister Han Duck-soo became the country’s interim president following the reversal of his impeachment in a 7-1 court decision. Han first assumed the position of acting leader in mid-December 2024, succeeding Yoon Suk-yeol, who faced a separate impeachment after his controversial declaration of martial law.

➡️ 7.7-Magnitude Earthquake Devastates Myanmar and Thailand, Collapses Bangkok High-Rise. A powerful 7.7-magnitude earthquake struck central Myanmar on Friday, killing at least 144 people and injuring 732 others, with additional casualties in Thailand where a Bangkok high-rise collapsed, prompting Myanmar's military junta to make an unusual request for international assistance amid widespread infrastructure damage.

AI & Technology

➡️ Facebook Launches 'Friends-Only' Tab to Filter Out Algorithmic Content and Sponsored Posts. Facebook is rolling out a new "Friends" tab in the US and Canada that shows only content from friends' stories, reels, posts and birthdays, eliminating algorithmic recommendations and sponsored content as part of CEO Mark Zuckerberg's strategy to return the platform to its original social roots.

➡️ ChatGPT's New Image Generator Strains OpenAI's Infrastructure, Forcing Temporary Limits. OpenAI has temporarily implemented rate limits on ChatGPT's popular new GPT-4o image generation feature due to overwhelming demand causing infrastructure strain, with CEO Sam Altman stating "our GPUs are melting" while the company works to improve efficiency and plans to limit free tier users to three generations daily.

➡️ Claude's Inner Workings Exposed: Anthropic Research Shows 'Universal Language of Though. Anthropic's new "AI microscope" provides insight into Claude 3.5 Haiku's internal processes, revealing the model uses a "universal language of thought" across different languages, plans several words ahead when generating poetry by selecting rhyming words first, and performs multi-step reasoning when answering complex questions.

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