Welcome to Talking Business, a podcast produced in Melbourne Australia. The podcast is available on the Acast app, the Apple Podcast store or wherever you go to get your podcasts. Or you can get it at the Business Acumen website at www.businessacumen.biz.
I am Leon Gettler. My job is to review and monitor the week’s news in business, finance, and economics. I bring it all to you, every week.
This is episode number thirty-three in our series for 2019 and today’s date is Friday September 13.
First I’ll be talking to Tamara Loehr who has delved into the world of investment with a current focus on her online beauty-disrupter ‘Dollar Beauty Tribe,’ designed to promote cruelty-free, vegan indie brands. Loehr has become globally known as a leading wellness entrepreneur.
And then I’ll be talking to IFM chief economist Alex Joiner looking at the state of the economy.
But first, let’s talk to Tamara Loehr.
China’s exports unexpectedly contracted in August, with sales to the U.S. tumbling amid the escalating trade war between the two nations. Exports decreased 1% in dollar terms from a year earlier, while imports declined 5.6%, leaving a trade surplus of $34.84 billion, the customs administration said Sunday. Economists had forecast that exports would grow 2.2%, while imports would shrink by 6.4%. Shipments to the U.S. fell 16% from a year earlier.
President Donald Trump’s administration raised tariffs on Chinese goods at the start of the month and is set to ratchet up levies further in October and again in December if there is no breakthrough. China and the U.S. will hold face-to-face trade negotiations in Washington in the coming weeks after a rapid deterioration in relations last month left global investors reeling amid increasing evidence the conflict is harming both nations.
A Washington Post-ABC News poll found 6 in 10 Americans say that a recession is either “very likely” or “somewhat likely” in the next year. That fear compares with 69% who said a recession was likely in fall 2007, shortly before the recession began later that year. Concerns over the economy — and specifically Trump’s handling of trade negotiations with China — have become a drag on the president’s public standing, particularly with women.
The world must invest $1.8 trillion by 2030 to prepare for the effects of global warming. And that would yield $7.1 trillion in benefits, according to a group led by Bill Gates and Ban Ki-moon. Slowing the planetary march toward climate catastrophe—and the multitrillion-dollar investment required to do it—has become a central issue of global and national debate. But there’s the equally expensive matter of dealing with the here and now: From historic wildfires to unprecedented hurricanes, global warming has reshaped the lives of millions, with increasingly tragic consequences.
While humans must pay to end the burning of fossil fuels, they must also pay to change how they live, invest and build in a climate-changed world. On Monday, an international commission of government and private-sector officials told countries and corporations that they have 15 months to jump-start reforms aimed at adapting to that changing environment. In a new report, the 34-member group, led by Microsoft Corp. founder Bill Gates, former UN Secretary-General Ban Ki-moon and World Bank Chief Executive Officer Kristalina Georgieva, concluded that $1.8 trillion in investment by 2030 concentrated in five categories—weather warning systems, infrastructure, dry-land farming, mangrove protection, and water management—would yield $7.1 trillion in benefits. Chief among them is avoiding the costs of waiting too long.
Business conditions deteriorated by another 2.0 points to their weakest level in five years, and confidence slumped by 2.4 points, in August, according to the latest NAB Business survey. Both are well below their long-run averages. Momentum in the business sector continues to slow, with profitability at its weakest level in more than five years and trading and forward orders also down. Following disappointing non-mining profits and private investment data from last week’s releases, this does not bode well for Q3.
And pessimism about the Australian economy is on the rise. First, the ANZ-Roy Morgan Australian Consumer Confidence fell 1.0% last week. And then the Melbourne Institute and Westpac Bank Consumer Sentiment Index dropped by 1.7% to 98.2 in September, swinging from a 3.6% rise in August.
Demand for mortgages picked up sharply in response to rate cuts in June and July, with 5.1% m/m growth in July. This marked its biggest monthly gain in four years, as owner-occupiers and investors roared back into action as sentiment changed and credit curbs eased. The monthly increase picked up on June’s 3.2% gain and lifted the total of monthly new loan commitments to $17.9 billion in seasonally adjusted terms. Investor lending gained 4.7%- the biggest monthly increase since the 9.9% chalked up in September 2016 at the peak of the boom – to $4.6 billion, while owner-occupier loans rose 5.3%, the fastest gain in almost four years, to $13.3 billion.
Australia’s prudential regulator has been bestowed with a spread of gifts including expensive chocolates, fruit baskets and porcelain display plates from some of China’s biggest banks The Australian Prudential Regulation Authority was the lucky recipient of $719 worth of Haigh’s Christmas chocolates from Bank of China, a $129 fruit basket from Agricultural Bank of China and a display plate of unknown value made by famous porcelain artisans Royal Copenhagen from E Sun Commercial Bank It was also gifted a boxed saki flask and cup valued at $300 from China’s Everbright Bank at the opening of its first Australian branch held in February this year in Sydney’s Barangaroo. The presents are recorded in the prudential regulator’s gift registry from July 2017 to June 2019 which has been released as part of a Freedom of Information request. Details of the gifts from China’s state-owned banks have emerged as the APRA battles perceptions that its executives have been captured by a jet-set culture of global regulators making frequent trips to exotic locations.
Industry groups have urged the federal government to relax restrictions on foreign skilled workers to allow infrastructure projects to be sped up without exacerbating cost blow-outs. Australian Industry Group head of policy Peter Burn said more infrastructure could be built faster by increasing the intake of skilled migrants after Reserve Bank governor Philip Lowe said governments could do more” on infrastructure spending. Skilled migration is capped at 70,000 people a year, part of a new annual total migration cap of 160,000 people. The total cap was dropped earlier this year by the Prime Minister from 190,000 people previously.
A greater reluctance by young people to become car owners is worsening the slide in new vehicle sales that has now lasted for longer than the global financial crisis in 2008 and 2009. A 10.1% plunge in the number of new vehicles sold in Australia in August to 85,633 vehicles compared with a year ago had the nation’s 3500 car dealers frustrated at banks and financiers for making it harder for potential buyers to obtain a loan. The new vehicle sales slowdown has now extended for 17 months, longer than a 15-month slide during the GFC, with house price, falls, uncertainty around the economy and job prospects combining to unnerve potential customers.
Coca-Cola Amatil is folding its Aussie-based alcohol and coffee portfolios into the larger Australian beverages segment as it continues a wider restructuring. Under the new organisational structure announced on Monday, the Australian-based alcohol and coffee operations will join the Australian Beverages team under the leadership of managing director Peter West. The beverages bottler said the move will further simplify its manufacturing and sales model following June’s sale of food processing business SPC, with its New Zealand and Fiji business segment also set to absorb NZ-based coffee and alcohol, Fiji’s Paradise Beverages, and the international alcohol sales team.
The coffee portfolio in Indonesia will now be part of the Indonesian business. Coca-Cola Amatil’s alcohol and coffee managing director Shane Richardson will leave the company following the shuffle. Group managing director Alison Watkins last month named the alcohol and coffee segments a bright spot in the company’s first-half result, with coffee and alcohol revenue and growth targets remaining on track for the full 2019 financial year.
The poorest fifth of Australian households is spending more of their income on housing than ever before, while the burden has barely changed for the wealthiest households. Analysis from the independent Grattan Institute shows the cost of housing is widening the gap between rich and poor, despite income inequality remaining mostly steady. It finds that once the cost of housing is taken into account, household disposable income has grown by twice as much for the richest Australians than it has for the poorest.
The analysis combines the Australian Bureau of Statistics figures for disposable income with data on housing and occupancy costs. The ABS assigns Australian households into five groups, known as quintiles, based on disposable income. In 2018, the poorest fifth of Australian households spent 29% of their gross incomes on housing costs. That burden has grown significantly over time – from 21.9% in 1995 and 23.7% in 2008. Meanwhile, the relative cost housing has barely changed for the richest fifth of Australian households. In 2018, this group spent 9.4% of gross income on housing costs, compared with 9.3% in 1995. Middle-income households – the third quintile – spent 16% of gross income on housing costs in 2018. That was up from 13% in 1995 and 15.1% a decade ago.
Australia’s major telecommunications companies have been ordered to block eight websites that are hosting videos of the Christchurch terrorist attacks or the alleged gunman’s manifesto in the first move from the eSafety Commissioner to use new rules. While the sites have already been blocked voluntarily by the telcos for five months, the violent material hasn’t been removed leading the eSafety Commissioner to formally order an additional six months’ block. The massacre was live-streamed on Facebook and the video was uploaded millions of times across the internet. At the time, there were no guidelines informing the providers what sites to block and when to remove restrictions and this left the telcos in a difficult legal position.
The corporate watchdog is suing the operator of a boiler room that fired up backpackers with booze cruises and ritzy overseas trips to flog junk insurance to vulnerable people including Indigenous Australians. The Australian Securities and Investments Commission filed the action against Select AFSL, BlueInc Services, IMS and director Russell Howden for in the Federal Court’s NSW registry on Monday morning. ASIC is alleging the companies and their representatives broke multiple provisions of the Corporations Act and the ASIC Act. While not all of the laws carry a financial penalty, it is understood a bill could run into the tens of millions of dollars. Court documents list 14 examples of vulnerable customers who were lied to, misled or otherwise bulldozed into buying insurance policies they had no use for.
Insurance giant Suncorp says there is a heightened risk of bushfires this summer, echoing warnings from experts after unusually warm and dry conditions earlier in the year. After parts of northern NSW and Queensland have been hit by fires that destroyed homes during the first week of spring, chief executive of Suncorp, Steve Johnston, on Monday said the insurer had a “higher expectation” of bushfires over the upcoming summer. Although he was reluctant to make firm predictions, Mr Johnston pointed out there was more potential fuel for bushfires than in the past two years. Earlier this year, Suncorp lifted its budget for natural disaster claims, in part because climate change is causing more frequent extreme events. Suncorp owns a range of major insurance brands including AAMI, GIO, Bingle and Apia, and its view is consistent with the insurance industry’s peak body, the Insurance Council of Australia.
Australian business leaders’ skills lag those of their American counterparts, with a chunk of sales, revenue and profit potentially being left behind by poor managers, a study has found. As separate research warns of growing market concentration in some of the nation’s key export sectors, work done by the federal Industry Department suggests efforts to develop new Australian firms will flounder without a boost in management ability. The study, released on Monday, looked at a range of ways management ability is measured at the firm level, from overall skills to particular issues such as digital ability and supply chain administration. It found American business managers outperformed Australian managers across all measures.
Online retailer Kogan has launched its power and gas offering to customers, as part of its strategy to become a one-stop household shop. Residential customers in Victoria, NSW, southeast Queensland and South Australia can now purchase power off Kogan Energy, and customers in Victoria also have the option to buy gas through the online retailer. The power is provided by renewables generator Meridian Energy, through its subsidiary Powershop. Powershop will provide backend and system support for Kogan Energy customers.
Gender equality among Australia’s top chief executive ranks could be 80 years away, with the latest survey showing female appointments are going backward and some companies have no women at all in their leadership teams. Of the 25 chief executives appointed to lead Australia’s top 200 companies in 2019, only two were women, with the percentage of women in the top role slipping to 6% from 7% a year earlier. The annual census by Chief Executive Women (CEW), which represents 560 of Australia’s most senior female corporate leaders, slams “slow progress” in achieving gender balance with 17 companies still having no women in their executive leadership teams.
More needs to be done to encourage women to become tradies, according to a Charles Sturt University study. It identified hurdles at every stage of a woman’s career which prevent them entering these male-dominated industries and assisting with a skills shortage, such as the fact that girls are more likely to be pushed towards higher education than boys, through to a lack of appropriate facilities such as toilets and change-rooms for women on worksites.
And that’s it for this week. And next week, I’ll be talking to Marcus Schmitt, Founder and CEO, of COPYTRACK, a leading worldwide image copyright enforcer. COPYTRACK protects image copyrights for professional photographers and ensures photographers get paid for unauthorized use of their work.
And then I’ll be talking to Michael Every, head of Financial Markets Research Asia-Pacific for Rabobank. We’ll be talking about the latest in the trade war between the US and China.
And of course, I’ll be bringing you all the week’s news. In the meantime, you can find me on Twitter at talkingbizz, on Facebook and on LinkedIn. And if you want, leave a comment. Have a great week, take care, be good and looking forward to bringing you Talking Business next week.