Elon Musk’s decision to turn Twitter into X wiped out anywhere between $4 billion and $20 billion in value, according to analysts and brand agencies
Welcome to Talking Business, a podcast produced in Melbourne Australia. The podcast is available on the Acast site, my own website, 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 or at Banking Day.
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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 26 in our series for 2023 and today’s date is Friday July 28.
First, I’ll be talking to serial entrepreneur and business coach Tom Williams from Innovation Consult. And I’ll be talking to Indeed economist Callam Pickering about the latest jobs figures.
But first, let’s talk to Tom Williams.
So what’s happening in the news?
It’s rare for corporate brands to become so intertwined with everyday conversation that they become verbs. It’s rarer still for the owner of such a brand to announce plans to intentionally destroy it. On Sunday, in the middle of a quiet summer weekend, Elon Musk decreed that Twitter’s product name would be changed to “X,” and that he is getting rid of the bird logo and all the associated words, including “tweet.” Musk’s move wiped out anywhere between $4 billion and $20 billion in value, according to analysts and brand agencies. “It took 15-plus years to earn that much equity worldwide, so losing Twitter as a brand name is a significant financial hit,” said Steve Susi, director of brand communication at Siegel & Gale. Musk, whose company has already declined significantly in value since he purchased it for $44 billion in October, announced the change on Saturday night. By Monday morning a new black “X” logo, designed by a fan over the weekend, began to appear across the site. New Chief Executive Officer Linda Yaccarino outlined the company’s vision for X to become a site for audio, video, messaging, payments and banking.
China’s underperforming reopening is dragging down the global economic recovery, the IMF said on Tuesday, despite keeping its forecast for China’s growth unchanged. Maintaining its forecast of 5.2% economic growth for China this year came in contrast to the International Monetary Fund’s upward revision on both India and the US by 0.2 percentage points, to 6.1% and 1.8%, respectively, in its latest “World Economic Outlook”. “China’s recovery could slow, in part as a result of unresolved real estate problems, with negative cross-border spillovers,” the IMF said in its flagship publication. “Sovereign debt distress could spread to a wider group of economies.” The IMF said earlier this year that China would contribute to more than 30% of global growth this year. However, the country’s gradual loss of economic steam, as indicated by its sequential growth of 0.8% in the past quarter, looks like a long-term challenge to ambitious expectations that China would lead the global economic rebound this year. The IMF flagged “negative potential implications for trading partners in the region and beyond”. “The principal risks include a deeper-than-expected contraction in the real estate sector in the absence of swift action to restructure property developers, weaker-than-expected consumption in the context of subdued confidence, and unintended fiscal tightening in response to lower tax revenues for local governments,” it said.
Australia’s inflation rate fell more than expected in the June quarter, increasing the likelihood the Reserve Bank will extend its interest rate pause next week. The headline consumer price index for the April-June period was 6% higher than a year earlier, the Australian Bureau of Statistics said on Wednesday. That compared with the 6.2% pace expected by economists and down from 7% in the March quarter. Prices rose 0.8% for the June quarter alone, easing from 1.4% in the previous three months.
Former senior public servant Kathryn Campbell has resigned from her $900,000 a year Department of Defence job in the wake of the robodebt royal commission report. In a statement issued on Monday afternoon, the department said: “Defence can confirm it has accepted Kathryn Campbell’s resignation from the department with effect from Friday 21 July 2023.” The department said it would “not provide further comment on this matter”. The news comes days after confirmation that Campbell had been suspended without pay from her senior Aukus advisory position following the royal commission report into the robodebt scandal.
Treasurer Jim Chalmers has appointed Chris Barrett, a seasoned economist and former chief of staff to another Labor treasurer, to head the Productivity Commission for the next five years. Barrett’s appointment for a term of five years starting in September followed “a rigorous process involving interviews with two departmental secretaries and the Australian Public Service commissioner”, Chalmers said on Monday. Barrett, a deputy secretary of Victoria’s treasury and finance department since January 2021, has held a range of senior appointments at home and abroad. These included being Wayne Swan’s chief of staff from 2007-10, a role then taken up by Chalmers. Barrett was Australia’s ambassador to the Organisation for Economic Cooperation and Development in Paris from 2011-14, after which he became executive director of Berlin-based European Climate Foundation from 2015-19. The commission has often criticised Australia’s poor track productivity record in the past decade, including in its most recent five-year report. Outgoing Reserve Bank governor Philip Lowe, too, has warned rising wages without workers becoming more efficient would mean higher interest rates for longer if inflation was to be reined in. The commission has also tended to criticise subsidies to support renewable energy while backing “a single, explicit carbon price”, a policy the Abbott government scrapped in 2014. Last week, it warned against “old-fashioned protectionism” by governments trying to support industries such as a national battery strategy.
Labor will scrap a $200 million online calculator introduced by the Coalition to crack down on incorrect welfare payments, as Government Services Minister Bill Shorten calls for better ethical oversight of policy in the wake of the illegal robo-debt scheme. Mr Shorten announced he is scrapping the entitlement calculator engine project, announced in early 2020. Designed to calculate welfare entitlements faster and more accurately, former minister Stuart Robert planned to use the calculator across aged care, veterans payments and modernisation of the health care system. In July 2020 he said the system would save taxpayers “enormous amounts of money” and increase speed in service delivery, while “removing friction for customers across government”. But Mr Shorten said, despite hundreds of millions announced for development of the calculator, the government has “nothing to show for it”. Instead, it will be written off and discontinued, as Mr Shorten pushes for a new “kitchen cabinet” of experts to help embed ethical oversight in government services.
Home loan delinquency rates across banks and non-bank lenders are surging, reaching levels not seen since the start of the Covid-19 pandemic, before government support measures were implemented. More Australians are also falling behind on their personal loan repayments than at any time in credit bureau Experian’s records, which date back to 2019, when comprehensive credit reporting began in Australia. Experian’s analysis of the latest credit data shows 1.41% of all home loans were in arrears, up from 1.39% a month earlier, and the highest level since the pandemic ramped up in March 2020. It was the fifth consecutive monthly increase in mortgage arrears and a third of a percentage point higher than in April 2022, before the Reserve Bank raised the cost of money 10 times from nearly zero to 3.6% over the following year as it sought to slow down the economy to avoid high inflation becoming entrenched in people’s expectations. The late payment statistics across mortgages, credit cards and personal loans in the more recent months of May and June are likely to be even higher, given the RBA hiked the cash rate again at policy meetings in those two months to leave it at 4.1% before pausing in July. The numbers from the credit bureau also show demand for credit has plummeted, with applications for buy now, pay later (BNPL) products falling the most, followed by credit cards, home and personal loans. Experian is one of the three largest credit bureaus in the country. It collects data from credit-licensed companies every month, including banks, non-bank lenders and BNPL companies. Arrears data shows the proportion of accounts that have missed at least one payment in the previous 15 days. It includes close to 90% of all credit products in Australia. Missed payments on credit cards have risen for the third consecutive month to sit at 2.08% of all credit card accounts, the highest level since April 2020. Close to 6% of all personal loan borrowers had missed at least one repayment in April, the highest in 15 months. The Experian numbers follow the release of statistics by credit rating agency Moody’s Investors Service, which earlier this month said 30-day arrears in prime quality home loans mostly provided by non-bank lenders had risen to 1.6% in March. While it takes about two months for all credit-licensed companies to report comprehensive data to the bureaus, the latest statistics confirm what banks have warned of in recent weeks: mortgage stress is climbing – albeit from low levels – and will continue to do so. The rapid increase in the cash rate has meant many fixed-rate mortgage borrowers paying only 2% on their mortgage a year ago are now being forced to refinance their loans at about three times that rate, squeezing household budgets.
Business says casual workers will get the upper hand under Labor’s proposed rights for regular casuals to convert to permanent employment every six months. Workplace Relations Minister Tony Burke on Monday detailed the proposal for employees to have the choice to convert to permanent after just six months in a job – and every six months after that – if they can prove they have regular working patterns. The right, which would cover an estimated 850,000 casual workers, is on top of existing requirements for employers to offer every casual permanent employment after 12 months in the job unless they have reasonable business grounds not to. The new six-month test – where casuals could trade their 25% loading for permanent benefits such as annual leave – follows Mr Burke’s assurances that he would not change the law so that regular casuals could claim back pay for permanent entitlements such as annual leave, redundancy or other entitlements.
Technology entrepreneur Mike Cannon-Brookes and his fashion designer wife Annie have separated. The couple – who married in 2010 – separated more than a month ago. Cannon-Brookes is the co-founder and co-chief executive officer of collaboration software firm Atlassian, which was established in 2002. Cannon-Brookes had a fortune of about $19 billion this year, according to the Financial Review Rich List. The renowned environmentalist is also a part-owner of the South Sydney Rabbitohs. His personal net wealth is built on the back of his 22% stake in Atlassian, a productivity software company, co-founded with Scott Farquhar. US-listed Atlassian, valued at $US46.6 billion ($69 billion), posted a net quarterly loss of $US209 million for the quarter ending March 2023. Mike and Annie Cannon-Brookes also own stakes in a number of Australian businesses through their investment company Grok Ventures, most notably ASX-listed utility AGL and payments company Tyro. Sydney-based Grok picked up a 11.3% stake in AGL last year and has been actively pushing the company to speed up its exit from coal. He has also amassed a large property portfolio, headlined by the purchase of Fairwater, a 1.1-hectare beachfront estate in Point Piper, in 2018 for $100 million. The couple were yet to move into the grand 1880s sandstone residence, which was long home to the late Lady (Mary) Fairfax. The family divide their time between Rosehill Farm, at Kangaloon in the Southern Highlands, and a historic house in Double Bay known as Verona, bought a few weeks before Fairwater for $17 million. The Cannon-Brookes portfolio is held either in Mike’s own name or the CBC Co Pty Limited corporate entity, of which he is the sole director and owner. While the portfolio is not in Annie’s name, she is widely tipped to have spearheaded much of the property acquisitions in both Sydney and the northern beaches. News of the Cannon-Brookes separation comes less than a fortnight after Andrew “Twiggy” Forrest and Nicola Forrest announced they would end their marriage after 31 years. They said the decision will have no impact on their mining business or charity foundation.
Tech giants Salesforce and NTT along with AGL, American Express and NBN are joining the banking sector in handing back unwanted office space as they grapple with staff demanding to work from home. The rise of flexible working practices and staff cuts have kick-started a wave of activity in the market as companies reassess their space requirements. One of the biggest downsizing is from tech giant Salesforce, which initially leased about 35,000 square metres in the building in Sydney’s Circular Quay that bears its name, but now only needs 20,000 square metres. It is not alone, with American Express letting go of four floors at its Shelley Street site in Barangaroo. Meanwhile, ASX-listed Lendlease, which announced a tenancy reduction strategy in 2021 following the group’s restructure which included the sale of the Engineering and Services business, continues to whittle down its footprint at Barangaroo. According to Lendlease, it has so far subleased 4500 square metres at Barangaroo. Sublease space usually consists of extra capacity a tenant has earmarked to lease in times of expansion. If the space is not needed, it can be sublet to other businesses. The current CBRE sublease Barometer shows Sydney’s subleasing availability has grown to about 125,000 square metres – an increase of 27,700 square metres from the same time last year. Utility heavyweight AGL has opted to sublease three floors at the EY building at 200 George Street, while NTT (formerly Dimension Data) is reviewing its 6000 square metre requirement at the GPT-managed Darling Park Tower 3, after the group said its global staff can all work from home. Westpac opted to offer space to the market in February 2022, which it has subsequently leased to TPG at Barangaroo. In Melbourne, NBN has 16,000 square metres of available space at 655 Collins Street, formerly known as Media House when it was home to The Age newspaper. ANZ Bank has 13,000 square metres it is looking to re-lease at 839 Collins Street, while NAB has a large amount of space of about 25,000 square metres at its 800 Bourke Street tower in Docklands. Australian Super is downsizing at its 130 Lonsdale Street office while NTT is also subleasing office digs at 35 Collins Street. IAG is offering 4000 square metres at 181 Collins Street, while ME Bank has space at its 360 Elizabeth Street office. Telstra has 23,000 square metres available at 300 La Trobe Street, but the telco only has two years left on the lease contract so has a short-term sublease strategy. The space hitting the market underpins the tough conditions that office landlords and investors are facing and that is translating into lower returns for unlisted funds that also own buildings but are pressured to redeem units to worried clients. The uncertain economic outlook continues to take its toll on Australian core wholesale property funds as they recorded a negative total return in the second quarter of 2023, according to the MSCI/Mercer Australia Core Wholesale Monthly Property Fund Index, from MSCI Real Assets, a part of MSCI. The overall quarterly total return for the index was -2.8% for second quarter of 2023. The office funds were the main culprits as they recorded a -5.2% fall in capital growth, as values start to see some significant adjustments.
The site of the first resort development proposed at the picturesque Twelve Apostles on the Great Ocean Road has been put on the block. The move by a private consortium, which has worked for years on a scheme for a $200m hot springs and accommodation resort beside one of the country’s most-visited attractions, comes as domestic and international tourism picks up. This has also prompted a surge in hospitality assets hitting the block after a logjam created by the pandemic. Hotels on offer range from the ultra-luxury Ritz-Carlton Hotels in Melbourne and Perth to boutique properties such as The Woolstore 1888 by Ovolo in Sydney’s Pyrmont. But the site beside The Twelve Apostles stands out as the area is one of the most under-serviced for accommodation in the country. Developer Don Musto said last year that there was enormous tourism demand for the region. But there had been virtually no development besides the nearby sightseeing helicopters. He said The Twelve Apostles was a prime global tourism destination, which had been held back. Work on the 80ha development was set to start early next year, but the developer is instead testing market interest in the project. Three companies – Rocdon Development, Quattro Corp and Pomeroy Pacific – had partnered on the eco-resort development, which has a conditional $7.25m Victorian government grant. The Twelve Apostles project is set back 900m to limit the environmental impact and has been promoted as having the potential to shift the nature of visitors from day trippers to longer stays. Real estate agents Stonebridge Property Group and HTL Property are marketing the 79ha freehold site. Designed by Neil Architecture, The 12 Apostles Hot Springs & Resort is billed as shovel-ready, and has permits in place for natural bathing, multiple food and beverage outlets and a 150-pod luxury wellness resort. The project also has a thermal bore license and EPA approval. The Twelve Apostles are world-renowned and visited by 2.2 million people each year very few people stay nearby. Projections by the developer would see the resort thriving year-round with hot spring bathing providing hot and cold therapy. The Victorian government has separately kicked off construction work on a new, architecturally designed visitor viewing area at a cost of $9.2m.
And that’s it for this week. And next week, I’ll be talking to Parry Laxman, the founder and CEO of Kangarama which is on a mission to incorporate innovation, functionality and sustainability to create ‘wearable safety’ scrubs. And I’ll be talking to economist Nicholas Gruen about the better ways of firms and super funds to invest in ESG.
In the meantime you can catch me on Facebook, Twitter, Instagram, LinkedIn and YouTube. And if you want leave a comment. For the most exclusive access to leading economists and business leaders from around the world, subscribe to Talking Business on the Apple podcast store or on my website leongettler.com.
If you want to contact me, email me at leon@leongettler.com. I answer all emails.
Wishing you all a safe and healthy week. And looking forward to bringing you Talking Business next week
