Australia’s monthly inflation rate increased to its highest level in 2024 in the latest indication that the Reserve Bank won’t be cutting interest rates soon and might yet hike again.
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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 22 in our series for 2024 and today’s date is Friday June 28.
First, I’ll be talking to Scott O’Neill, the founder and director of Rethink Investing, a Sydney-based company which started out as a commercial property buyers agency which has now become a national company that also works as a residential buyers agency, a property law advisory agency, mortgage broking and finance company.
And I will talk to EY economist Cherelle Murphy about Australia’s latest inflation figures and what these mean for interest rates.
But first, let’s talk to Scott O’Neill
So what’s happening in the news.
Australia’s monthly inflation rate increased to its highest level in 2024 in the latest indication that the Reserve Bank won’t be cutting interest rates soon and might yet hike again. Consumer prices rose 4% last month from a year earlier, the Australian Bureau of Statistics said on Wednesday. That compared with the 3.6% pace recorded for April, and the 3.8% rate expected for May by economists. The annual trimmed mean inflation was 4.4% in May, up from 4.1% in April. The monthly inflation figures are less complete than the quarterly ones, which won’t land until 31 July. The RBA expects the quarterly inflation pace will accelerate to 3.8% in the April-June period from 3.6% in the March quarter.
Coles and Woolies face mandatory fines under a new mandatory code. Treasurer Jim Chalmers has agreed to a mandatory Food and Grocery Code of Conduct, paving the way for multibillion-dollar fines for the supermarket giants in a move that could cause apprehension in the business community. Dr Chalmers said the government would also adopt all 11 recommendations of a review into the code undertaken by former Labor cabinet minister Craig Emerson. In addition to making the code mandatory, Dr Emerson recommended stiff penalties of up to $5.2 billion for the largest chains, stronger protections for supermarket retribution, an anonymous complaints process managed by the competition watchdog, and new avenues for mediation and arbitration. The supermarket duopoly Coles and Woolworths control about 65% of the supermarket sector, and have garnered the lion’s share of complaints about market abuse, price gouging and misleading conduct. “This is about getting a fair go for families and a fair go for farmers,” Dr Chalmers said. “We’re cracking down on anticompetitive behaviour in supermarkets, so people get fairer prices at the checkout.” Dr Emerson’s interim report in April was welcomed by groups including the National Farmers’ Federation, while the Australian Chamber of Commerce and Industry gave cautious support, arguing it was important the new code did not create an expectation of equivalent regulatory moves in other areas of the economy where there was a similar concentration of market power. Labor will move swiftly to introduce legislation implementing the changes in a bid to dull public anger over rising food and grocery prices and supplier anger over alleged abuses of market power.
Anthony Albanese has escalated his campaign against nuclear power by appointing Matt Kean to chair the Climate Change Authority, with the former NSW Liberal treasurer and energy minister declaring he had rejected nuclear technology because he didn’t want to bankrupt Australia’s most populous state. Coalition MPs said there was a sense of “utter shock” in the NSW Liberal division because Mr Kean had created the impression he was going to do something commercial. And they called him a traitor. Former deputy prime minister Barnaby Joyce accused Mr Kean of being consistently “treacherous” and said he should have joined the Labor Party at the start of his political career. Mr Kean however said that as state energy minister he considered how to replace the capacity of four retiring coal-fired power stations by 2030 and ruled out nuclear “based on economics and engineering”. “The advice that I received at the time which was most compelling was from the Chief Scientist of NSW, Professor Hugh Durrant-Whyte …” he said. “His advice to me was that in order to bring nuclear into the system, it would take far too long and would be far too expensive for NSW. I didn’t want to bankrupt the state and I didn’t want to put those huge costs onto families.” The Prime Minister, who said he had “no plans whatsoever” to repeal John Howard’s federal moratorium on nuclear, said Mr Kean understood “the folly that walking away from the renewables transition represents for our nation”. As the Coalition ramped up pressure on Labor to reveal the cost of its clean-energy transition, Climate Change and Energy Minister Chris Bowen revealed had had hand-picked Mr Kean and made the recommendation to Mr Albanese and cabinet because he was “the best for the job”.
And in further escalation of the nuclear debate, former prime minister Paul Keating has launched an attack on Opposition Leader Peter Dutton, labelling him a “charlatan” and an inveterate climate change denialist over his support for nuclear energy. Mr Dutton responded by labelling the comments a “petulant outburst” and cited Prime Minister Anthony Albanese’s recent suggestion that Mr Keating’s statements on foreign affairs were “unfortunate. The former prime minister accused the Coalition leader of seeking to “camouflage” long held “climate denialism” with a nuclear fantasy – “the most dangerous and expensive energy source on the face of the earth”. “Dutton, like Abbott, will do everything he can to de-legitimise renewables and stand in the way of their use as the remedy nature has given us to underwrite our life on earth,” Mr Keating said in a statement on Sunday. “Only the most wicked and cynical of individuals would foist such a blight on an earnest community like Australia.” The former Labor leader’s comments highlight the ramping up of rhetoric occurring ahead of the next federal election, with both sides honing their attack lines and whitling down the key issues. Mr Keating’s broadside comes after Mr Dutton over the weekend accused Mr Albanese of being “a child in a man’s body” in a speech to the Liberal Party Federal Council. The Coalition last week unveiled aspirations to build seven nuclear power stations by 2050, with the first producing electricity by 2035 if it was a small modular reactor, or 2037 if a larger plant was found to be the best option. The opposition has argued nuclear plants will help Australia achieve net-zero by 2050 but said it would scrap Labor’s interim 2030 targets. The plants would be paid for and operated with taxpayer money. The plan has united clean energy groups in angry opposition and raised concerns among business about delaying the energy transition by creating uncertainty about the net-zero pathway.
Seven West Media chief executive Jeff Howard has lost some of his most senior lieutenants including the head of sport and chief revenue officer as he attempts to reduce the company’s cost base. Kurt Burnette, chief revenue officer, and Lewis Martin, head of sport and managing director of Seven Melbourne, are the highest profile exits at the media company controlled by billionaire Kerry Stokes. Chief marketing officer Melissa Hopkins will also depart the business. Mr Burnette has worked for Seven since 1990 when he began as a sales assistant; Mr Martin joined in 1994 as a sales executive. Ms Hopkins, who is also chief audience officer, joined Seven last May. Seven West owns the Seven Network and Perth’s The West Australian. Applications for voluntary redundancies at The West began last week, but the job cuts are not limited to the publishing division. The redundancies are in response to Seven West’s commercial deal with Facebook and Instagram owner Meta, estimated at $15 million annually, expiring at the end of this week. Seven is more vulnerable than its competitors to weaker market conditions, with free-to-air television advertising constituting nearly 90% of its total revenue. The advertising market continues to face challenges. Guideline SMI figures for April indicate a 10.4% decline overall compared to the same period in 2023. Revenue for the calendar year 2023 was also down 10% compared to the previous year. Morningstar analyst Brian Han said last week the structural challenges facing the free-to-air television and broadcast video-on-demand industries would hinder Seven’s ability to grow its profit margins.
And Australian households are saving much less than their global peers as mortgage repayments and tax bracket creep eat into disposable incomes, new research shows. But a sharper-than-expected deterioration in the jobs market could force shoppers to cut back on spending even further and save more. The research from RBC economists Su-Lin Ong and Robert Thompson comes as economists debate the extent to which households will save or spend the $23-billion-a-year stage three income tax cuts from July 1. Spending of the tax cuts could keep upward pressure on inflation, delaying interest rate cuts or even forcing another rate rise by the Reserve Bank of Australia. Households saved just 0.9% of their disposable incomes in the three months to March, which was about 5.8 percentage points below the pre-pandemic average, RBC estimated. The fall in the savings rate means Australian consumers are stashing away much less of their income than their advanced economy peers, many of whom are saving more than they were before the onset of COVID-19. While saving and spending tend to have an inverse relationship, Ms Ong said, the past few years had been an unusual time when both the savings rate and consumption growth had moved in the same direction – lower. “This likely reflects the unusual period of negative real household disposable income for a sustained period. Households have, accordingly, saved less as well as spent less,” she said. While the Australian Bureau of Statistics revised consumer spending figures are higher in the March quarter national accounts, annual growth in household consumption was still a soft 1.3%.
Pharmacists have labelled as “insulting” the Albanese government’s deal with the Greens to make pharmacies the sole supplier of vapes, saying they are not tobacconists or “garbage collectors”. Health Minister Mark Butler on Monday backflipped on plans to mandate doctors’ prescriptions for all vape sales but said the government would still limit their sale to pharmacies. Under the changes that would come into effect on October 1, anyone over 18 who can currently buy vapes would still be able to do so, but only from a pharmacy, while those under 18 would need a prescription from a doctor. Labor argues a lack of action on e-cigarettes would enable a new generation of nicotine addicts amid a proliferation of products targeted at young people, including flavoured vapes. Under the new laws, vapes will be regulated as a schedule-three pharmacist-only medication, and be subject to plain packaging rules. As a schedule-three product, anyone purchasing a vape will have to show ID to prove their age and talk to the pharmacist who will provide professional advice about the use of vapes. Limitations will also be placed on the concentration of nicotine available. Vaping products for sale in pharmacies will have to meet product standards and seek approval and permission from the Office of Drug Control to be able to be lawfully sold in Australia. Greens health spokesman Jordon Steele-John said his party did not support “prohibition” and so had sought changes that would allow vapes to continue to be purchased by anyone over 18 from a pharmacy.
Cash transporter Armaguard has sealed an agreement with the country’s largest banks and retailers to deliver the Linfox-controlled group an additional $50 million, assuring the distribution of bank notes and coins throughout the economy for at least a year. This is good news, for now, for those Australians who still use cash. The distribution of bank notes and coins throughout the country faced an uncertain future when an earlier attempt in April to bail out the troubled Armaguard collapsed. While use of cash is down to about 13% of transactions in Australia, access to it is vital for those who rely on it, including people in regional areas with poor connectivity, people without digital skills and those who consider cash more reliable. For this reason major businesses, such as the large retailers who use Armaguard’s service, rely on a cash-in-transit service The new agreement, finalised over the weekend, will provide additional funding for Armaguard for a year from July 1. Plunging cash use has squeezed Armaguard’s profit because it operates under contracts that link revenue to volume, while fixed costs remain high. In many European countries, cash has been designated an “essential service”, and is regulated by central banks. The $50 million injection will be funded by Armaguard’s biggest customers – Commonwealth Bank, Westpac, National Australia Bank, ANZ, Coles, Woolworths, Bunnings and Australia Post. The funding will be contingent on the struggling company, a subsidiary of the trucking empire of billionaire Lindsay Fox, hitting efficiency and restructuring milestones to put it on more sustainable financial footing. The transaction was negotiated by former union heavyweight and Linfox director, Bill Kelty; Linfox executive chairman Peter Fox; and Armaguard CEO Mick Cronin. The ABA team was led by its chairman and NAB boss Andrew Irvine; CEO Anna Bligh; and head of policy Chris Taylor.
Myer would purchase Just Jeans, Jay Jays and a number of other well-known brands owned by Premier Investments under a proposal from the department store that would mark the biggest shake-up of billionaire businessman Solomon Lew’s retail empire in nearly two decades. This would give Lew a seat on the board of the department store giant and bolster Myer’s loyalty program. The proposal is part of a broader strategic review being conducted by Myer’s new executive chairwoman, Olivia Wirth. Under the plan, the department store would acquire Premier’s Apparel Brands division – which also owns the Portmans, Jacqui E, and Dotti brands – in exchange for new shares. Premier, which is controlled by Mr Lew, owns around 31% of Myer. He would own just under 30% of Myer should the transaction proceed. Ms Wirth, the former chief executive of Qantas Loyalty, was appointed executive chairman of Myer in March. Her arrival has put focus on its Myer One loyalty program and the potential to grow profits through more online sales and an expanded roster of private label brands.
And that’s it for this week. And next week, I’ll be talking to Deborah Rathjen, the CEO of biotech firm Carina, a Australian clinical stage immunotherapy company researching and developing CAR-T therapies for personalised cancer immunotherapy treatment.
And I will talk to economist Nicholas Gruen about why Australia’s anti-corruption watchdog and the Public Service Commission took no action over the Robodebt commission’s findings on the scandal.
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
