Shutdown could harm US economy

Financial markets are taking the partial shutdown of the US government in their stride in hope of a swift political breakthrough.

Australian shares ended Wednesday's trading session 0.2 per cent higher, while the Australian dollar was modestly lower at around 93.5 US cents.

US Congress failed to reach a compromise on its budget ahead of the US financial year-end on September 30, prompting the shut down that sent about 800,000 public servants home without pay and left only essential government services open.

Bank of America Merrill Lynch economist Saul Eslake said, if the shutdown lasts a few days, there should be only a minor impact on the world's largest economy.

Longer than that and the consequences become more significant. If it extends to a couple of weeks it could reduce US growth in the December quarter by 0.5 per cent.

Any longer could wipe out all growth in the quarter.

The bigger concern will be if the US Congress doesn't agree to lift its debt ceiling by the middle of this month, risking default for the first time.

'If Congress isn't able to resolve this impasse before the US hits the debt ceiling, one of the possible consequences could be a fall in the US dollar and further unwelcome (upward) pressure on the Australian dollar,' Mr Eslake told ABC radio.

'The Reserve Bank clearly wants a lower exchange rate and is quite frustrated about its inability to fulfil that.'

The Reserve Bank of Australia (RBA) left the cash rate unchanged at 2.5 per cent at its monthly board meeting on Tuesday.

But RBA governor Glenn Stevens said a lower currency would assist in rebalancing growth in the economy.

Economists believe that after slashing the cash rate to an all-time low, the central bank will be reluctant to cut much further.

National Australia Bank has pushed back its expectation of a further rate reduction to February 2014, rather than next month.

But NAB still expects economic growth to slow to around two per cent by the end of the year, and well below trend at around three per cent.

This will put pressure on employment and with the new federal government shedding public servants the jobless rate could hit 6.75 per cent in the second half of 2014.

The rate was 5.8 per cent in August.

'With the big picture still unmoved, we continue to see a cut coming but right now there is no rush,' NAB group chief economist Alan Oster said in a note to clients.

The improvement seen in confidence, retail spending, manufacturing and house prices since the August interest rate cut failed to extend into August building approvals, which fell by a larger than expected 4.7 per cent.

Housing Industry Association chief economist Harley Dale said, while approvals are still trending higher, the recovery has been too slow and too narrow geographically.

'This has been the case for some time and the situation simply isn't changing,' Dr Dale said in a statement.

source: skynews.com.au

Stop being so stupid, US voters tweet

The roiling debate over the US government shutdown is extending to Twitter, Facebook and Instagram as fed-up Americans turn to social media to register their disgust with federal lawmakers for shutting down the government.

Those posting pulled no punches, calling members of congress 'immature', 'stupid' and 'idiots' who need to 'grow up'. There were a few attaboys, too, by self-described red-state conservatives who cheered on the Republican leadership's unwavering stance against President Barack Obama's healthcare plan, even if it meant suddenly pulling the pay cheques of about 800,000 federal workers and threatening popular federal programs.

But mostly, tweeters said they couldn't understand why a compromise between the two sides seemed so elusive.

'(hash)DearCongress, You should not be getting paid. In fact, you all should be fired!' tweeted Bruce Swedal, a 46-year-old Denver real estate agent who says he is worried about what the shutdown might do to home sales if federally backed loans dry up.

The public outcry playing out on social media sites this week is a new twist.

During the last shutdown of government operations, in 1995, angry Americans would have had to look up their congressman's address and sit down and write an old-fashioned letter or email. But with the advent of Twitter, popular hashtags like (hash)governmentshutdown and the Today show's (hash)DearCongress let voters log their complaints to all 532 members of congress at once - provided they stay within the allotted 140 characters or less.

Voters also weighed in on the more humorous side of things, offering pick-up lines that federal workers could use in bars, some of which were advertising cheap drink specials throughout the day to those furloughed.

'The library is closing, mind if I check you out instead?' one person offered with the hashtag (hash)ShutdownPickupLines.

Added another tweeter: 'It's not like we have to go to work tomorrow.'

For their part, legislators used Facebook and Twitter to reiterate long-held talking points, further angering dissenting voters.

Republicans said Obama's healthcare program would be too catastrophic to allow, while Democrats accused Republicans of sending the government into a free fall to appease a small minority.

House Speaker John Boehner's post urging Senate Democrats to back down earned more than 13,000 'likes' on Facebook and an additional 13,000-plus comments from voters, either hailing the Ohio Republican as a hero or calling him everything from a 'crybaby' to a 'terrorist'.

House Democratic leader Nancy Pelosi's Facebook post blaming Republicans for the shutdown earned fewer than 2200 'likes' and 1400 posts.

Meanwhile, federal programs used Twitter to announce that they would no longer be responding to tweets or other social media posts until the shutdown ends. Even the first lady, Michelle Obama, said her own personal tweets would be limited.

One Twitter account, which for two years has been providing detailed updates on NASA's Voyager 2 program, offered this less-than-comforting post before going dark: 'Due to government shutdown, we will not be posting or responding from this account. Farewell, humans. Sort it out yourselves.'

Swedal, the Denver real estate agent, said in a telephone interview that he doesn't think his tweets will make a difference. In the end, he says, politicians are likely to do whatever they want.

'But at least I feel better,' he said.

source: skynews.com.au