Employers urge the Albanese government to use its upcoming jobs summit to restore the Hawke-Keating enterprise bargaining system to boost productivity.
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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 17 in our series for 2022 and today’s date is Friday May 27.
First, I’ll be talking to to Thoughtworks’ Director of the Data and AI Practice, Dave Colls on why businesses should adopt the creative use of artificial intelligence.
And I’ll be talking to Indeed economist Callam Pickering about the latest wages and unemployment figures.
But now, let’s talk to Dave Colls.
The financial leaders of the world’s most powerful countries warned this week of the potential for a global economic slowdown as the threats caused by Russia’s invasion of Ukraine continued to multiply. Globally, the war is sending energy and food prices soaring. In the United States, Britain and Europe, central banks determined to curb inflation are moving to hike interest rates, which risks pushing nations into recession. The developing world faces an emerging debt crisis on top of a growing hunger problem sparked by the war. After approving trillions of dollars in fiscal stimulus to avert the downturn caused by the coronavirus pandemic, world economic leaders are now grappling with the threat of “stagflation” — slow, or negative, economic growth, coupled with rising inflation. The World Bank has also warned of a “huge buildup of debt,” particularly in the poorest countries, with debt payments at their highest level in 20 years. Half of low-income countries are now categorized as being at “high risk” of debt distress, according to the Center for Global Development.
Russia’s war in Ukraine will unleash “the worst food crisis in recent memory”
across vast swathes of the developing world, with the potential to create “hell on earth” for some countries, the World Economic Forum in Davos heard on Monday. As Ukrainian officials including President Volodymyr Zelensky battle to find ways of breaking down a Russian blockade of their exports, a WEF survey of chief economists says the crisis is triggering export restrictions worldwide that will make things even worse. The survey also revealed that most chief economists reckon Europe is staring down the barrel of stagflation this year, while in the US and Asia-Pacific there is more prospect of economic growth even as prices surge. According to the survey commissioned by the Switzerland-based WEF for its annual summit in Davos, about 80% of chief economists predict the Middle East and Africa are facing insecurity or high insecurity in their food supplies over the next three years. The UN Food Agency’s executive director, David Beasley, warned in Davos that some countries could face “hell on earth” this year if Ukrainian exports did not resume. Both Russia and Ukraine are major exporters not only of wheat and vegetable oils but also of fertiliser, which could create spillovers into other crops.
The risk of widespread wage rises of more than 5% is the No.1 threat to the economy, employers say, as they urge the Albanese government to use its upcoming jobs summit to restore the Hawke-Keating enterprise bargaining system to boost productivity. Australian Industry Group chief executive Innes Willox on Monday said businesses were under pressure from unions pushing across-the-board wage rises at “an unsustainable level for many businesses”, citing the ACTU’s call for a 5.5% increase in this year’s minimum wage. Willox cautioned that the latest data showing sluggish wage growth of 2.4% “does not really reflect what is really going on with workplaces”. “It’s very common to hear employers talk about giving workers 10, 20, 30% pay increases to retain staff because of the job shortages,” he said. However, he welcomed Prime Minister Anthony Albanese’s commitment to reforms that increase productivity.
Big business will put changes to the better-off-overall test squarely on the negotiating table when it meets with unions and the new Labor government during Prime Minister Anthony Albanese’s employment summit. The government faces one of its first ideological and economic tests in submitting its case for an increase in the minimum wage to the Fair Work Commission by June 7. But it will confront another when employers revive the debate over enterprise bargaining after Labor forced a Coalition backdown during the election.
Albanese named the promised employment summit as being high on his reform agenda during his first parliamentary press conference as prime minister on Monday: The better-off-overall test (BOOT) – a key workplace system safeguard that ensures workers don’t go backwards during pay negotiations – requires each individual worker to be better off under the terms of any new enterprise agreement than under the industry award for it to be passed. During the election campaign, Albanese accused Scott Morrison of putting workplace conditions “up for grabs” when the then-prime minister revived his commitment to the Coalition’s shelved industrial relations package, which included changes to workplace bargaining that Labor and unions argued would lead to some staff being paid less.
Australia’s new treasurer Jim Chalmers said almost out of control inflation was the major challenge for the economy and record budget deficits would constrain the Albanese Labor government’s spending capacity. Treasury secretary Steven Kennedy on Sunday afternoon met with Dr Chalmers at his house in Logan in Brisbane’s outer suburbs to provide the incoming government briefing known as the “red book”. He also met with the regulators and other key stakeholders after being sworn in as treasurer on Monday, which included leaders of the corporate and competition watchdogs, as well as the Reserve Bank of Australia. The incoming government will inherit a strong economy being buffeted by global forces beyond its control, annual inflation set to hit almost 6%, more than a decade of deficits, and gross debt set to exceed $1 trillion. Dr Chalmers said when it came to managing economic challenges, it wasn’t a case of flicking a switch and everything being better overnight. Labor committed to an additional $18.9 billion in spending promises ahead of polling day, as well as $11.5 billion in savings and revenue measures, leaving the budget about $7.5 billion worse off over the forward estimates. That will add to $224 billion in forecast cumulative deficits over the next four financial years, which will take gross debt north of $1 trillion.
Anthony Albanese’s history as a consensus builder has given business some confidence that Australia can move forward, just like when everyone – including Canberra, unions and government agencies – was pulling in the same direction at the start of the Covid crisis. Most of all, chief executives are relieved that Australia looks to be on track for a stable majority government, while also encouraged by the rise of the Teal independence movement in Australian politics as a potential counter to Labor’s union-backed instincts. Labor has a longer-term ambition to convert these Teal voters to their side. Outside of the climate demands, many of the Teal candidates, based in former Liberal strongholds in the cities, are aligned with the aspirational values of the Business Council of Australia, ranging from tax cuts for individuals and business to lighter regulation. While the business links of Albanese and his incoming treasurer Jim Chalmers don’t run as deep as the outgoing Morrison government, the new Prime Minister forged strong contacts through his former ministerial post in transport and infrastructure during the Rudd/Gillard governments. This includes names such as Qantas boss Alan Joyce and Sir Rod Eddington, who at the time was the inaugural chair of Canberra-backed Infrastructure Australia under Albanese. Meanwhile Sam Mostyn, the chairman of Citigroup and a Mirvac director remains a public supporter of Albanese and attended his victory celebration in Sydney’s inner west on Saturday. This is critically important, as Mostyn is also the chair of the hyper-connected Chief Executive Women organisation, which counts hundreds of the nation’s top female executives and directors as members as well as having significant links with corporate Australia. Corporate Australia is under no illusions that the Albanese-Chalmers partnership is promising to be a pro-business government. But given lessons of the Covid years and new challenges ranging from hyperinflation to slowing global growth, a co-operative approach would be welcomed.
China must remove its sanctions on Australian products to have any chance of improving relations between the two countries, Prime Minister Anthony Albanese has declared after joining the Quad summit in Tokyo with regional leaders to endorse a firm line against Chinese coercion. While Chinese Premier Li Keqiang sent a letter to Albanese on Monday to congratulate him on his election victory and seek “sound and stable” relations, Albanese responded with a pointed remark about Chinese restrictions on imports of Australian coal, barley, wine and other products in recent years. “With regard to our relations, Australia seeks good relations with all countries. But it’s not Australia that’s changed: China has. It is China that has placed sanctions on Australia. There is no justification for doing that. And that’s why they should be removed,” he said. Treasurer Jim Chalmers has hosed down suggestions the relationship with China would take a turn for the better under the Albanese government. Chalmers has told the Seven Network’s Sunrise program the relationship was complex to manage before Saturday and would remain so.
Australian carbon credit prices have staged a major recovery after Labor’s electoral win but uncertainty still lingers over the medium-term outlook as investors and Australia’s biggest companies wait for details on more aggressive emissions reduction goals, including a tougher “safeguard mechanism”. The spot price for Australian Carbon Credit Units has soared 20% in the last days to $36 a tonne. Investors are betting on rising demand with a greater number of Australian polluters expected to tap credits as Labor tightens the baseline for the safeguard mechanism, its signature climate change policy. Like energy contracts, carbon credits can be bought and sold among big emitters to help companies lower risk and keep on a path to net zero emissions. Westpac is buying carbon credits to hold on its own balance sheet which are used by big customers looking to offset their carbon footprint. The desk is also involved in sustainability financing, including arranging green bonds on behalf of customers. Despite this week’s bounce, prices remain nearly 40% lower than February levels, when the market crashed after former energy minister Angus Taylor allowed fixed carbon contract holders to exit their deals with the Commonwealth to access higher prices in the secondary market.
Employers may be required to train staff to speak up about workplace sexual harassment with a view to preventing it, or at least intervene earlier, and deal with power imbalances without excluding women, under legislation committed to by the new Labor government. The amendment, known as a positive duty, to the Sex Discrimination Act stems from Labor’s pre-election commitment to fully implement all 55 recommendations from the Australian Human Rights Commission’s landmark Respect@Work report by Sex Discrimination Commissioner Kate Jenkins, released in March 2020. Workplace, business, legal and gender equality experts welcomed the commitment, but warned there needs to be proper funding and measurement tools to ensure they are successful. A positive duty will require employers to take active steps to try to eliminate sex discrimination, sexual harassment and victimisation. Maurice Blackburn national head of injuries, Liberty Sanger, said a positive duty would make it crystal clear that when it came to workplace sexual harassment, it was the employer’s responsibility to make sure that the workplace was safe.
Van Eck Australia will list a fund tracking the price of carbon across across four global emission trading schemes on the local sharemarket as the investment manager moves to meet surging demand for green portfolio exposures it said was reinforced by Green and Teal election victories. The local arm of the $US85.5 billion ($A120.1 billion) Wall Street investment firm on Monday lodged an application with the Australian Securities and Investments Commission to launch the VanEck Global Carbon Credits ETF (Synthetic) on the Australian Securities Exchange. Claiming to be Australia’s first listed retail fund of its kind, and the first globally for VanEck, the ETF will invest in futures linked to the price of carbon credits, which are permits issued by governments allowing companies to offset their carbon or greenhouse gas emissions. The pending fund will track a new Aussie-dollar version carbon prices from four of the world’s most established markets: the EU Emissions Trading Scheme, UK Emissions Trading Scheme, California’s Western Climate Initiative and the Regional Greenhouse Gas Initiative of northeastern US states such as Connecticut, New York, New Jersey, Maine and Massachusetts.
Funds under management in the industry super sector have surpassed $1 trillion for the first time on record, despite a rout in global equity markets causing the super system to contract in March for the first time in two years. Funds under management in the super system fell to $3.44 trillion from $3.47 trillion in March on the back of depressed equity markets. But the industry super sector defied the crunch, with assets under management increasing 13.4% to $1.1 trillion, according to data released by the Australian Prudential Regulation Authority. It means that industry funds manage almost one in every three dollars in the super system.
AGL Energy has been hit with a fresh attack following Labor’s election victory,with billionaire Mike Cannon-Brookes saying the company’s demerger plan plan was not aligned with Paris green goals and at odds with a nation wanting stronger climate action. Over 55% of investors last year voted in favour for AGL, Australia’s biggest polluter, to set short, medium and long-term decarbonisation goals despite it telling shareholders to vote against the resolution. Mr Cannon-Brookes, AGL’s largest shareholder, is fighting a planned separation of the company into separate retail and generation businesses and wants it to quit coal by 2035 to meet Paris climate accords, a pact to keep temperatures growing less than two degrees from pre-industrial levels with an aim of limiting rises to 1.5 degrees.
Qantas has bought a majority shareholding in Byron Bay-based online travel booking website TripADeal for an undisclosed sum as it targets double-digit earnings growth in its frequent flyer segment this financial year. The deal also includes options for the airline to buy the rest of the business in four years’ time from other shareholders in the business. Qantas said the deal would be accretive to earnings targets for the frequent flyer business which, in addition to the growth targets for the year ending June 30, is aiming to earn from $500 million to $600 million by the 2024 period.
A major cost cutting program weakened Star’s risk and compliance function, outgoing chairman John O’Neill said during his second day before a royal-commission style inquiry. Mr O’Neill drew parallels between Star Entertainment and the banking royal commission, telling the inquiry that “like the banks we are underdone on risk and compliance”. And he said a pre-pandemic cost cutting program hindered that progress. Mr O’Neill also said Star was not alone, with rival Crown Resorts increasing its risk and compliance team from 30 to 130 people.
The local arm of US tech giant Facebook paid just $24m in tax last year, despite raking in advertising revenue of $1.1bn – most of which was sent offshore, according to financial results filed with Australia’s corporate regulator. Facebook’s advertising revenues surged to $1.12bn for the year ended December 31, according to the company’s latest financial filings, up from $746.6m in 2020.
The company also posted a pre-tax profit of $61.1m, nearly doubling from $37.9m a year earlier. It booked just $24.2m in tax in 2021, up slightly from $20.2m a year earlier, with the majority of the company’s revenue – $949.3m – sent to an offshore subsidiary, for “purchasing advertising inventory.” That was nearly double the $559m in revenue sent to its offshore subsidiary a year earlier. “The company pays for advertising inventory to other related parties in accordance with an advertising reseller agreement,” Facebook said in its financial disclosures. Facebook and Apple have come under increased scrutiny for diverting hundreds of millions of dollars in revenue away from Australia to other jurisdictions. Last year in July, Australia and New Zealand agreed in principle to a new tax scheme negotiated by the OECD which would come into effect in 2023, and would target 20 to 30% of the net profits of large multinationals engaged in automated digital services, like Facebook. Some countries currently impose a direct digital services tax but Australia does not.
And that’s it for this week. And next week, I’ll be talking to and Brisbane fitness entrepreneur Tim West – who is behind Aussie boxing gym startup UBX which has sealed a $88m UK expansion deal.
And I’ll be talking to economist Saul Eslake about the economic challenges for the new Albanese government
In the meantime you can catch me on Facebook, Twitter Instagram and 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.
