SOUTH AFRICA: Budget Delayed As Coalition Infighting Over VAT Hike Boils Over
Feb-20 07:25
- Shortly after he was supposed to start his annual Budget Speech, Finance Minister Enoch Godongwana announced that it would be postponed until March 12 after his African National Congress's (ANC's) main coalition partner Democratic Alliance (DA) threatened to vote against the proposed hike of the VAT rate by 2pp to 17%. Early signs that the ANC and its coalition partners were on collision course emerged earlier in the week in the form of reports of their conflicting views on tax increases. Apparent brinkmanship from all sides led to a failure to break the deadlock, resulting in the first Budget delay in South Africa's post-apartheid history. The decision to postpone the Budget was made to allow for a restart of intra-coalition negotiations.
- There were divergent accounts of what led to the deadlock in intra-coalition budget talks. Minister in the Presidency Khumbudzo Ntshavheni said that ministers from the ANC were among the first to object the VAT rate hike and the decision to delay the budget was a cabinet decision, denying DA leader John Steenhuisen's claim that it was his party that stopped the planned tax increase. President Cyril Ramaphosa later called the decision "mature and collegial". Separately, a Daily Maverick source report noted that Godongwana "had presented the 2pp VAT increase to GNU partners only on Wednesday morning," with earlier discussions cantering on a 1pp increase.
- Leaked documents showed that other planned announcements included a change to income tax brackets, an excise duty hike, or a fuel levy relief for another year. The initial proposals may now be up for renegotiation.
- BusinessDay reported that the ANC's Chief Whip Mdumiseni Ntuli called an urgent meeting of ANC cabinet members in order to prepare for the planned talks with coalition partners aiming to resolve the budget impasse.
- G20 Foreign Ministers or their designated representatives touch down in South Africa for a summit today. US Secretary of State Marco Rubio decided to skip the summit and an acting ambassador will participate in his stead.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
UK DATA: Private regular wages a notable surprise - but MPC could play down
Jan-21 07:21
- Looking at more detail into that upside surprise for UK private regular wage data. It comes in at 5.96%Y/Y in the 3-months to November (so is a soft 6.0%, but still above the 5.8% MNI median).
- A decent amount of the surprise looks to be from an upward surprise to October single month data. That has been revised up to 6.68%Y/Y from 6.42%Y/Y. The new November single month data was 6.12%Y/Y. Revisions to a year ago are minor and the September single month data was barely revised.
- Remember that only a third of the sample is carried out each month, so really you need to compare the single month figures to where they were 3-months ago - and for this cohort private regular pay was 4.60% in August (so we have still seen a notable increase to 6.12%Y/Y).
- So what conclusions can we draw? The BOE has doubted the data recently (and noted some inconsistencies with survey data in the December MPC minutes). While other MPC members have played down the importance of wage data if the economy starts to slow and unemployment starts to increase.
- However, the bottom line here is that wage data at these levels remains incompatible with a 2% inflation target (particularly with stagnant productivity growth). But wage data is also a lagging indicator, responding to previous inflation rather than forward-looking.
- So there's something for everyone here. On the one hand wage data is higher than expected, but it also seems the MPC is inclined to play down "volatility" in this series.
MNI EXCLUSIVE: MNI INTERVIEW: BOJ To Set Rate At 0.75% In Q3 - Kameda
Jan-21 07:17
A former BOJ official shares his policy rate outlook. On MNI Policy MainWire now, for more details please contact sales@marketnews.com
BTP TECHS: (H5) Resistance At The 20-Day EMA
Jan-21 07:08
BTP TECHS: (H5) Resistance At The 20-Day EMA
- RES 4: 122.85 High Dec 11
- RES 3: 120.98 61.8% retracement of the Dec 11 - Jan 13 bear leg
- RES 2: 120.45 High Jan 2
- RES 1: 119.32/35 20-day EMA / High Jan 17
- PRICE: 119.24 @ Close Jan 20
- SUP 1: 118.27/117.16 Low Jan 16 / 13 and the bear trigger
- SUP 2: 116.59 76.4% retrace of the Jun - Dec ‘24 bull cycle (cont)
- SUP 3: 116.07 Low Jul 8 ‘24 (cont)
- SUP 4: 115.45 Low Jul 3 ‘24 (cont)
The current bear cycle in BTP futures remains in play and last week’s fresh cycle low reinforces current conditions. However, from a short-term perspective, the latest rally highlights a corrective phase. Resistance to watch is 119.32, the 20-day EMA. A clear break of this level would signal scope for a stronger retracement. The bear trigger has been defined at 117.16, the Jan 13 low.
