Uber will pay over $272 million to Australian taxi drivers to compensate them for lost income because it entered the Australian market illegally.
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.
For the most exclusive access to leading economists and business leaders from around the world, subscribe to Talking Business from my website leongettler.com.
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 8 in our series for 2024 and today’s date is Friday March 22.
First, I’ll be talking to Gartner director of HR Advisory Neal Woolrich to talk about the future of work including remote / hybrid work, employee experience, and engagement,
And I’ll be talking to CommSec chief economist Craig James about what’s happening in the market in the week ahead.
But first, let’s talk to Neil Woolrich.
So what’s happening in the news?
The Reserve Bank has left interest rates on hold amid signs that growth in the economy has dramatically slowed down following 13 interest rate rises since May 2022. The decision to keep rates on hold was widely anticipated, with few economists expecting another rate hike. However, many are predicting the RBA will start cutting interest rates in the second half of this year as inflation continues to moderate. The cash rate remains at 4.35%. Inflation will keep falling from here—but the pace of the improvement will slow. Recent bumps in U.S. inflation highlight the challenges faced in returning inflation to target. On top of that, Aussie services inflation will need more coaxing to come down and the looming stage three tax cuts will add demand to the economy at the same time the RBA is trying to take it out. While there is no certainty about when interest rates may fall, there are fears the impact of previous rate cuts may slow down the economy more than anticipated. The Reserve Bank, the federal government and Treasury have spent much of the past two years focused on fighting inflation. The challenge now is to ensure that growth doesn’t slow down so forcefully that it tips Australia into a recession. The RBA said “the Board is not ruling anything in or out” as far as rates go.
The supply of new homes will crash to the lowest level in over a decade by 2026, worsening housing and rental affordability, and leaving the federal government far short of its goal to build 1.2 million homes by mid-2029. Across capital cities, 79,000 new homes will be finished in 2026, a drop of 26% compared with last year due to planning bottlenecks, labour shortages and soaring material costs. The slump, predicted by industry lobby group the Urban Development Institute of Australia in a new report, will ratchet up house prices and rents, both of which are already at record highs. Based on its forecasts, the industry will need to double its capacity and build an “eye-watering” 300,000 homes between 2026 and 2029 to meet the 1.2 million target. Barrenjoey chief economist Jo Masters said the 1.2 million target was “aspirational. “We’ve never been able to build that many homes,” Ms Masters said. Federal Housing Minister Julie Collins said the government was working with states and territories to help meet the “ambitious national target” of building 1.2 million homes by July 2029. She cited a $3 billion new homes bonus, $500 million housing support program, $10 billion Housing Australia Future Fund, and new incentives to boost the supply of rental housing. The new homes bonus is a $15,000 payment that states and territories will receive for every home delivered above the old target of 1 million homes in the hopes of reaching 1.2 million. Building companies have told me the biggest problem now holding up work is the shortage of skilled trades. They say the most severe shortages are in the finishing traders such as tilers, painters and carpenters. That’s why leading developers like Lendlease have called for the fast-tracking of visas for migrant construction workers and greater investment in infrastructure delivery to boost the supply of new homes and address the deepening housing crisis.
Minor parties led by the Greens will push for the Australian Competition and Consumer Commission to get new powers to break up companies that misuse market power to inflate prices. The changes proposed by the Greens, and which could find support from the Nationals and some crossbench senators, would allow the competition watchdog to apply to the Federal Court to force the divestiture of companies found to have misused their market power. Prime Minister Anthony Albanese last month rubbished calls for divestiture powers, saying “we’re not the old Soviet Union”. Australia’s two major supermarket chains have come under intense political scrutiny over claims of price gouging, profiteering, its treatment of suppliers and making large profits during a cost of living crisis. The Australian Retail Association rejected claims Coles and Woolworths had failed to pass on lower costs to consumers through lower prices, resulting in an unacceptable level of profitability. It told senators net profits after tax had increased at a much slower rate than either sales or costs. It said the supermarket sector was not becoming less competitive, pointing to new entrants in the market including Aldi and Australian Bureau of Statistics data showing food retailing operating margins have reduced from 7.2% in 2008, to 4.8% in 2022.
The competition watchdog has asked major media groups to rate their dealings with Meta and reveal how much money they make from Facebook and Instagram, as it prepares to decide whether the tech giant should be forced to the negotiating table. In confidential documents sent to news outlets, the Australian Competition and Consumer Commission demanded extensive details about how media outlets make money, how important social media is, and what would happen if Meta blocked all news. One publisher said a news ban would cut its revenue by 25%. Meta, then known as Facebook, agreed to pay at least $70 million to outlets in 13 deals struck under the News Media Bargaining Code, a law introduced in 2021 by the Coalition to correct a power imbalance between news outlets and Facebook and Google. Earlier this month, Meta announced it would not renew those three-year deals which end later this year. News is not a vital part of its platform, it said, claiming to send 2.3 billion referrals to Australian publishers last year worth $115 milllion. The ACCC is advising Assistant Treasurer Stephen Jones whether to force Meta to negotiate deals with news outlets, known as “designation”. It is a politically loaded question that will have a significant effect on Australia’s media landscape. Media outlets have suffered a deep downturn in advertising over the past year, cutting hundreds of jobs as people – and companies – tighten their belts in a cost-of-living crisis. An increasingly fragmented advertising market, dominated by Google and Meta but with powerful emerging players in Amazon and TikTok, is making it harder for media outlets to make enough money to pay for news. The ACCC has asked each publisher for a ranking of what drives revenue – subscriptions, advertising or physical sales, for example, and how much money publishers make in total and from Facebook and Instagram referrals.
Private health insurer Bupa has joined the growing ranks of white-collar employers experimenting with shorter work weeks after launching a nine-day fortnight trial late last year. The pilot gives participating employees an extra day off each fortnight without reducing their pay,and comes after rival health insurer Medibank started testing a four-day week in October. Staff involved in the trial are guaranteed an extra day off each fortnight and are not expected to work the same number of hours in nine days as they did in 10 Participating employees also take different days off to ensure there are no disruptions to the health insurer’s service delivery. Cecelia Herbert, principal behavioural scientist at employee experience platform Qualtrics, said four-day weeks and nine-day fortnights could potentially deliver “huge value” to organisations adopting them. Hundreds of employees are believed to be taking part. When Medibank launched its four-day week trial, group lead for people, spaces and sustainability Kylie Bishop said it was about empowering employees to cut out low-value tasks and focus on doing work that had the greatest impact for customers. Medibank’s trial was based on the 100:80:100 model advocated by global advocacy group 4 Day Week Global. Employees retain 100% of their pay but reduce their working hours to 80% while seeking to maintain 100% of their productivity.
Commonwealth Bank is expanding its lending market by switching the focus of its behavioural economics team to climate change. The savings on the average electricity bill from installing rooftop solar, batteries and heat pumps are now so attractive that it is economically irrational not to go for it, especially when financed with discounted lending rates. There are potentially billions of dollars of loans to be made to customers electrifying their homes by switching from coal-fired power and gas appliances to solar and battery powered. An equally large line of lending opportunities will be available from the switch to electric vehicles and home connected EV chargers. CBA comes to household electrification with advantages. Let’s face it: CBA is the main financial institution for 35% of Australians, it has a quarter of all mortgages sold in Australia, and it has a suite of products for financing rooftop solar panels, batteries, heat pumps and Teslas, which account for more than half the EVs sold in Australia. Scientist Saul Griffith told the CBA’s third annual sustainability conference in Sydney last week that about $2 trillion could be spent electrifying residential houses between now and 2050. If that happens, he says there will be $1.7 trillion in fossil fuel savings. And CBA aims to be providing most of those loans.
Lawyers behind a class action lawsuit run on behalf of Australian taxi drivers against Uber Technologies, say the US company has agreed to pay $272 million, in the fifth-largest class action settlement in Australian legal history. In an announcement on Sunday night, Maurice Blackburn Lawyers said the Supreme Court of Victoria would sit on Monday morning to close out a case that began in 2019. The lawsuit was initially brought on behalf of Melbourne taxi driver, Nikos Andrianakis, but grew as a class action to incorporate more than 8000 taxi and chartered drivers, who said Uber had harmed them financially by setting up and running its UberX services in Australia illegally. The case was due to run until May 17, but a deal has been struck. It was fully announced on Monday morning. In a statement on Sunday night Maurice Blackburn Lawyers Principal Michael Donelly said the historic settlement followed a gruelling five-year legal battle. He said Uber had “fought tooth and nail at every point along the way” but had finally “blinked”. The case against Uber, which first launched in Sydney in 2012, was for lost income for drivers and loss in the value of licenses purchased by taxi and hire car, limousine and charter vehicle owners, when Uber launched with cheaper and more convenient services, despite being unlicensed.
Canadian private equity giant Brookfield has been in talks with Singaporean company Singtel to buy close to 20% of Optus. Should the company be worth about $16bn, that would put the size of the deal at around $3bn. Talk about a sale have been unfolding for at least a couple of months, and were flagged in an industry publication around the end of last year. If it goes ahead, it will be the biggest foreign investor to foreign investor sale in Australian history.
Corporate Australia risks heightening Australia’s skill shortage as a chunk of large businesses look to slash learning and development budgets this year to combat a deterioration in the economy. One in eight medium and large Australian businesses are planning to slash their learning and development budgets by 50% this year, with Deloitte Access Economics and RMIT Online estimating it will result in missing out on skills valued at $2bn, or $5.6m per day. This comes as the skills gap has been further exacerbated by the emergence of critical technologies such as AI. Analysis shows 1.8 million new tech skills will be needed by 2030 if workers are to keep pace with changes. Industries with lower employment growth were more likely to cut learning budgets, including consumer services businesses and construction, which has seen a number of outfits go insolvent in the past year because of inflationary pressures. Deloitte Access Economics partner John O’Mahony warned a substantial chunk of businesses slashing training budgets was a key indicator businesses would be looking to make redundancies amid a slowdown in the country’s economy.
Rio Tinto has bowed to sustained pressure from big investors to start reporting how much it spends on so-called green steel projects and other efforts to reduce carbon emissions for iron ore mined in Australia and turned into steel in China. The decision improves so-called scope 3 disclosures and comes after what Fidelity International and the Australian Council of Superannuation Investors described as years of lobbying for better financial transparency. Fidelity and ACSI are charged with representing the priorities of Climate Action 100, a group of institutional investors responsible for about $US68 trillion ($A104 trillion) in assets under management, in discussions with Rio. Rio said on Tuesday that it had agreed to beef up its reporting on efforts to reduce carbon emissions from the processing of iron ore by its mainly Chinese steel-making customers. The company intends to spend up to $US6 billion on decarbonisation across its business to 2030. Rio committed to improving disclosure on investments to reduce customer, or scope 3, emissions from processing iron ore through investment in green steel making projects and other technologies. It will now reveal how much it has spent on steel decarbonisation and provide spending forecasts over three-year periods along with detailing what milestones have been achieved.
MYOB and Xero face competition for their accounting tools from National Australia Bank, which is using artificial intelligence to create a rival focused on sole traders. NAB Bookkeeper is an entry for the bank into the small business software market dominated by the cloud accounting giants. The software uses machine learning to help small traders automate administrative tasks, such as invoicing and managing cash flow. NAB, the country’s largest business bank by loans, will undercut Xero’s and MYOB’s pricing. And while their systems are typically overseen by human accountants, the bank’s will be fully automated. The product was developed with Thriday, a start-up that the bank’s venture capital fund invested in two years ago. Thirday was founded by former ANZ head of mobile banking Michael Nuciforo. Mr Nuciforo, citing Reserve Bank data, said about 60% of Australia’s 2 million businesses used cloud accounting software, mostly Xero or MYOB. This left a big target market for Bookkeeper, especially among tradespeople, creatives, gig workers and consultants.
And that’s it for this week. And next week, I’ll be talking to Ndevr Environmental founder, Matt Drum, and his views on climate change and the impact this will have on the private sector.
And I’ll be talking to economist Nicholas Gruen about how Australia Post can improve its services in the bush by letting in some competition.
For the most exclusive access to leading economists and business leaders from around the world, subscribe to Talking Business from my website leongettler.com.
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Wishing you all a safe and healthy week. And looking forward to bringing you Talking Business next week
