90 seconds at 9 am with BNZ: Greek deal passes but no European approval yet; Australia shaken by job losses; Obama to tax the American rich more

Greek deal passes but no European approval yet; Australia shaken by job losses and bank rate hikes; Obama to tax the American rich much more

Here's my summary of the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand, including news Greece's parliament has approved a new austerity deal, but its European donors have yet to agree to their side of Greece's bailout bargain.

German ministers remain unconvinced about Greece's ability to follow through on its pomises, given its failures in the past and a likely change of government as soon as April when elections are held. The political problems facing the package were reinforced late yesterday when rioters torched more than 40 buildings in central Athens. See more here at Reuters.

However, some relief over the successful parliamentary vote helped boost US and European stock markets overnight, and lifted 'riskier' 'risk-on' currencies such as the New Zealand dollar. Stocks rose around 0.5% and the New Zealand dollar rose over 83.5 USc. See more here on global markets here at Bloomberg.

Meanwhile, across the Tasman, the Australian economy is creaking after news of a series of job losses and mortgage rate hikes.

Commonwealth Bank of Australia and National Australia Bank yesterday joined ANZ and Westpac by increasing their floating mortgage rates, even though Australia's official cash rate has not been changed. See more here at Sydney Morning Herald.

The news came as ANZ announced 1,000 job losses in Australia and a freeze on pay for most executives as it battles slowing lending growth and higher foreign funding costs. See more here at Bloomberg. Also, a further 450 jobs may be lost in Australia as bed retailer Sleep City was put into receivership overnight. See more here at Sydney Morning Herald.

It's important to watch what's happening in Australia closely because it is New Zealand's dominant trading partner and an outlet valve for many New Zealand workers who would otherwise be unemployed. Our economy was cushioned through 2008 and 2009 from the effects of the Global Financial Crisis by the relative strength of the Australasian banking system and a strong Australian economy, which soaked up many of New Zealand's 'excess' workers.

Now the Australian economy is struggling under the weight of high household debt, unaffordable housing, a high Australian dollar, weak retailing and contracting manufacturing.

China jury out

China's ability to bounce out of the latest European and American downturn is also worth watching. Both New Zealand and Australia were cushioned by China's startling surge in lending and construction spending through late 2008 and 2009 as it quickly shifted its economic levers in response to the Global Financial Crisis and a slump in global trade.

The jury is still out on whether China can pull off the same dramatic shifting of the levers a second time around. Yesterday China decided to roll over loans from state-owned banks to local governments that could not repay capitalising loans made through 2008 and 2009, but a second round of lending is in doubt. Also, there are inflation pressures that may restrain the Chinese authorities from turning on the monetary stimulus taps again.

There is also a different political landscape in China, with a change of leadership being engineered later this year that might slow down or disrupt decisions by the China's leaders.

Obama's tax plan

Meanwhile in America, US President Barack Obama has presented an election year budget to Congress that includes US$3.8 trillion of spending and and US$2.5 trillion worth of revenues, leaving a budget deficit in the coming year of US$1.3 trillion or 8.5% of GDP.

However the big news is Obama's plan to increase taxes on the rich, including introducing a 39.6% tax on dividends received by high income earners, up from 15% previously. It is known as the Buffett tax, given the billionaire investor has called for higher taxes on the rich given most billionaires pay lower tax rates than their secretaries.

Also, Obama is proposing increasing America's Capital Gains Tax from 15% to 20% and lifting the top income tax rate to 39.6% from 35%.  See more here at the White House's Budget overview site.