This is episode number ten in our series for 2020 and today’s date is Friday, April 10.
And yes, it’s Good Friday.
First I talk to uniSA’s Professor Jana Matthews giving her tips for business survival in this pandemic.
And then I’ll be talking to economist Nicholas Gruen looking at what lessons we can learn from the pandemic and how we can do things better.
But first, let’s talk to Jana Matthews
Spare a thought for plutocrats when Forbes publishes its annual ranking of billionaires. They tend to be hit harder by market routs than mere millionaires because their portfolios are loaded with riskier assets. Most are nursing hefty losses inflicted by covid-19. A few, though, have done well. The net worth of Jeff Bezos, Amazon’s founder, has risen by almost $3bn since the start of 2020 as demand for its goods and services has boomed. Eric Yuan, boss of Zoom, is richer by the same amount, thanks to an explosion in video-conferencing.
Global aviation’s peak body the International Air Transport Association (IATA) has put 11.2 million jobs at risk in the Asia-Pacific region alone, as it pleads for governments to support the hard-hit industry. The International Air Transport Association (IATA) said worldwide job losses could reach 25 million if urgent financial support in the form of tax relief, loans or loan guarantees did not come soon.
ANZ Australian Job Ads fell 10.3% m/m in March to be down 18.2% y/y. In trend terms, job ads declined 2.0% m/m and 13.1% y/y. This fall of more than 10% in March, was the largest monthly fall since January 2009, during the GFC. Most of the fall occurred over the second half of March as Australian COVID-19 cases escalated, restrictions on movement tightened, and shutdowns of non-essential services broadened.
Australia’s trade surplus fell in February, with a decline in exports outpacing the fall in imports. The Commonwealth Government ban on travelers from China to Australia looks like it was a key contributor, with travel exports down over 14% m/m. This is the largest percentage fall in almost two decades. A decline in resource exports (primarily from iron ore exports and non-monetary gold) was the other main reason exports fell.
Two thirds or 66% of Australian businesses reported that their turnover or cash flow had reduced as a result of COVID-19, according to the latest figures from the Australian Bureau of Statistics. In a survey taken by the ABS in the week from March 30, nearly half of trading businesses – 47% – made changes to their workforce in the last two weeks as a result of COVID-19. As much as 70% of accommodation and food services temporarily reduced staff work hours. Two in five businesses or 38% changed how they delivered their products or services, including shifting to online services. Over a third of businesses have renegotiated their lease and rental arrangements and a quarter have deferred loan repayments.
Businesses will be able to reduce workers’ hours under a new “JobKeeper enabling stand down”, under changes the Coalition government brought to Parliament on Wednesday. Attorney-General Christian Porter also confirmed that employers will legally be able to ask workers to take most of their leave while still receiving the $1500-a-fortnight job subsidy from the government. But workers must be left with their final two weeks’ leave and cannot be forced to use that up.
Mr. Porter has thrashed out the details of the new JobKeeper program with the Australian Council of Trade Unions. But he said they had “agreed to disagree on casuals”, with the government refusing to budge on its insistence that to qualify for the JobKeeper payment a casual needs to have worked with the same employer for at least 12 months. A number of non-Australians on working visas will also miss out.
New research released reveals the impact COVID-19 is having on the mental health of Australia and New Zealand’s workforce, with 45% of workers saying their mental health has declined over the last few weeks. In the study conducted by Qualtrics, a key finding reveals 65% of workers are feeling more stressed and two-thirds are feeling more anxious at their jobs.
Additional key findings include:
- The drivers for a decline in mental health are due to anxiety (24%), being worried about their job (20%), stress (18%), working from home (9%), and feeling less busy (7%)
- A third of ANZ respondents say they are feeling less productive working from home
- Feelings of social isolation (14%) is the hardest thing about working from home followed by feeling connected to a team (9%)
- Half of respondents said having a pet has helped reduce their anxiety
The research surveyed 2,757 workers from the US, UK, France, Germany, Australia and New Zealand, and Singapore between 27 March and 2 April
The Australian economy is set to contract by almost 4% this calendar year and unemployment will spike to almost 9% as the country grapples with the COVID-19 pandemic, before rebounding sharply at the end of 2021. The Australian Financial Review’s economist survey for the March quarter showed economists are forecasting a median 3.9% contraction in calendar 2020. The virus has claimed tens of thousands of lives around the world, caused 1 million infections, and is already taking a toll on global growth, with the latest US unemployment rate soaring to its highest point since 2009 at 4.4% Australia won’t escape the economic fallout.
For the current fiscal year, which won’t show the full extent of the COVID-19 hit to the economy given it started in the third quarter, the median economist forecast is for a contraction of 1%. The economic pain is expected to continue through fiscal 2021, with the median forecast for a contraction of 1.5%. Two straight quarters of negative growth are widely regarded as the definition of recession, something Australia hasn’t experienced since 1991.
It won’t be until the end of 2021 that the economy will move back into growth. The median forecast for the end of 2021 is for a rebound to 3.20%. Every economist in the survey expects the unemployment rate to rise significantly from its current level of 5.1%, and the median forecast is that the rate will hit 8.5% by the end of June. The jobless rate is expected to fall back slightly by the end of the year, to 8%. Inflation is expected to stay well below the Reserve Bank of Australia’s 2% to 3% target band, the economists believe. It will hit 1.4% by the end of June, according to the median economist forecast, and fall further to 1.25% by the end of the year.
The millions of Australians suddenly working from home to combat the coronavirus pandemic could result in workers’ compensation claims “skyrocketing”. Occupational rehabilitation provider Rehab Management has recorded a 17% increase in mental health claims since mid-January when the coronavirus started to emerge. That is across its workers’ compensation, compulsory third party and government agency clients, and includes mental health as both a primary and secondary condition.
Meanwhile, workplace health and safety experts warn employers must act now to avoid a spike in physical injuries from poor ergonomic workstations, decreased movement and trip hazards from electrical cords or children’s toys. Rehab Management chief executive Marcella Romero said she expected mental health claims to double over the next six weeks as more people are forced to stay home. If sustained it could go up significantly over the longer term, as it did during the global financial crisis in 2008.
Police officers were deployed to supermarkets after Woolworths and Coles pledged to dramatically escalate their social-distancing policies in an effort to stem the spread of COVID-19 ahead of the Easter rush. From Monday, Woolworths and Coles limited the number of customers in-store and shoppers needed to wait in cordoned-off queues outside the stores until people inside left. “Traditionally, the Thursday in the lead-up to Easter is one of our busiest times in-store.
We ask our customers to pre-plan their Easter shopping to avoid the usual Thursday spike in numbers,” said Woolworths managing director of supermarkets, Claire Peters. “Customer limits will be specific to each location and based on the size of the store. Our store managers will use commonsense discretion to manage this in the interest of community safety.” Ms. Peters conceded Easter this year would be different but said staff would do their best to manage the demand for essential items. Security guards and police officers are expected to manage the queues at peak times and enforce the 1.5m social-distancing rules.
Blood products giant CSL has joined forces with Japanese rival Takeda in an unprecedented move to develop a COVID-19 plasma treatment that uses the antibodies of recovered patients to help the seriously ill. The therapy, which is being developed from scratch, will be a “hyperimmune” treatment, requiring plasma donations from many individuals who have fully recovered from the respiratory virus and whose blood contains antibodies that fight COVID-19.
Using blood products from people who have recovered from an illness to help the critically ill is an old approach that had been used against polio. Convalescent plasma therapies were also used in the effort against SARS, MERS, and Ebola. When someone contracts a virus or receives a vaccine, their immune system develops antibodies (proteins that bind to parts of a virus to prevent infection). This is known as active immunity. It can take someone a week or so to start producing antibodies when they’re infected with a virus for the first time, but if they contract it a second time, their immune system responds to the virus more quickly.
Hyperimmune therapies, like the one being developed by the CSL-Takeda consortium, are a form of passive immunity and are designed to help people who cannot synthesise the antibodies. The alliance was formed with the idea that by working collectively, the time to market for a new therapy could be significantly reduced. But the timing is dependent on numerous unknown factors, including the rate of convalescent plasma collection and regulatory approval. Hypothetically it is possible a SARS-CoV-2 plasma therapy could be on the market ahead of a vaccine. The question is whether other companies will join their alliance.
Sales at upmarket department store David Jones have slumped nearly 20% over March due to the impact of the coronavirus, though its stores will remain trading for now. David Jones’ South African parent company, Woolworths Holdings, updated investors on the retailer’s performance on Monday night, saying the company had seen a “significant” reduction in foot traffic throughout March, as the government’s response to the virus intensified.
This resulted in a 19% in comparable sales throughout March, which has continued into April, with Woolworths focused on “stimulating trade, reducing inventory and generating cash”. David Jones’ comparable sales for the first nine weeks of the calendar year were up 0.5% prior to the impact of the virus. The company’s downbeat results come as a poor omen for the rest of the retail sector, especially rival department store Myer, which closed 60 stores and stood down 200 workers two weeks ago.
However, David Jones’ drop in sales appears to be at the lower end, with other Australian retailers reporting falls of between 50 and 70% in recent weeks. Stablemate Country Road Group, which consists of Country Road, Mimco, Trenery, Witchery, and Politix, weathered such a drop over the last two weeks of March, with sales down 60%. Overall, sales for Country Road Group declined 32.3% in March. The company closed its stores across Australia and stood down 5000 employees on March 28 as its smaller format stores were unable to comply with social distancing laws. Woolworths indicated it would apply for the government’s JobKeeper payments.
Petrol and diesel supplier Caltex will temporarily shut down its only oil refinery and will slash at least $50 million in capital investments in the face of slumping demand for fuels due to COVID-19. The company also advised it will examine options for an outright sale of core freehold retail sites, in parallel with its preparations to spin off a 49% interest in the sites.
The Lytton refinery in Brisbane will be shut down next month as a planned outage for maintenance work is brought forward. The plant, one of only four refineries remaining around the country, will only be restarted “when margin conditions have sufficiently recovered,” Caltex said on Monday, citing weak refining margins that are “creating operating cash flow challenges” at Lytton.
Caltex reiterated its expectation that jet fuel demand will drop 80-90% due to flight restrictions, and added that it had started to see reductions in retail petrol demand of 30-50%, and in diesel of 10-30%, compared to last year. Demand reductions at Caltex’s international operations in New Zealand and The Philippines have been greater due to higher levels of government restrictions.
Flight Centre is cutting harder into its store network, chopping 800 outlets globally while raising $700 million to ride out the pandemic’s throttling of the travel industry. The cuts eliminate almost half of outlets catering to leisure travelers at Flight Centre and are part of a move to reduce costs by almost 70% at the Brisbane-based travel agency.
BHP’s front-line mine-workers have been told they could be eligible for workers compensation should they contract the coronavirus on the job, highlighting the exposure faced by all types of Australian companies whose ”essential” employees continue to work through the pandemic. Prime Minister Scott Morrison has given mine sites and camps an exemption from of the social distancing rules being applied to other sectors such as the requirement for indoor venues to have a minimum of four square metres of space for each person and for restaurants to cease operating.
Mining companies like BHP and Rio Tinto have implemented a swath of social distancing and hygiene measures to ensure workers’ health is not compromised by the communal nature of life in mine camps, nor the logistical realities of fly-in-fly-out (FIFO) work However BHP indicated in an internal memo circulated on April 2 that it could face workers’ compensation claims, saying eligibility for compensation would ”depending on the circumstances” under which the employee contracted the virus. It is believed the same legal vulnerability could be faced by any company whose employee contracts the virus in the course of their work. BHP said in the memo that a virus contraction on the job would not be counted as a lost-time injury.
ASX-listed dentistry group 1300 Smiles Ltd has temporarily shut half of its practices, has the rest open on a part-time basis and stood down most of its staff. It is also negotiating with landlords for rent relief. The group, which operates 31 practices in Queensland, Sydney and, Adelaide, said it had been trading better than expected up until late March, but government restrictions amid the coronavirus pandemic had caused a major upheaval in the past week.
Large rival Pacific Smiles stood down most of its staff last week and temporarily shut 76 of its 93 surgeries in New South Wales, Victoria, Queensland and, the Australian Capital Territory. 1300 Smiles managing director Dr. Daryl Holmes said the company would aim to subsidise wages through the Federal Government’s JobKeeper program for staff who had been stood down. Most dentists and support staff have either been stood down or are taking annual leave.
And that’s it for this week. And next week, I’ll be talking to Greg McLardie, the founder and managing director of Two Hands, a company that exports lobsters to China. With COVID-19, the Two Hands system allows fishers, chefs and restaurant owners to bypass the unethical Chinese fish markets, and have seafood delivered directly to restaurants. This is a solution to mitigate the chances of food tampering/fraud which is rampant in China. And then I’ll be talking to AMP Capital chief economist Shane Oliver, analysing how the markets are responding to COVID-19.
In the meantime, you can find me on Twitter at talkingbizz, on Facebook and on LinkedIn. And if you want, leave a comment. Wishing you all a safe and healthy week and looking forward to bringing you Talking Business next week.