Qatar Airlines gets around Qantas protectionism by buying a 25% stake in Virgin.
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 36 in our series for 2024 and today’s date is Friday October 4.
First I’ll be talking to I’ll be talking to I’ll be talking to Melrose Health Group’s CEO, Nathan Cheong. Nathan is a leading figure in Australia’s complementary medicine sector and has just completed a revolutionary new direction for Melrose with the launch of FutureLab, creating Australia’s first over the counter range of longevity supplements.
And I’ll be talking to AMP Capital chief economist Shane Oliver about the last profit reporting season and what it says about the economy.
But first, let’s talk to Nathan Cheong
So what’s happening the news?
Buoyed by a record-high Meta Platforms share price, Mark Zuckerberg’s net worth has climbed almost sixfold in less than two years to $201 billion, the first time he’s exceeded the $200 billion mark, according to the Bloomberg Billionaires Index. He’s moved to fourth place on the list of the world’s 500 richest people behind Elon Musk, Jeff Bezos, and Bernard Arnault. While other tech titans made big jumps in net worth this year — Nvidia Chief Executive Officer Jensen Huang, for example, has more than doubled his wealth to $106.2 billion — none has grown as much as Zuckerberg’s. He’s added $73.4 billion to his fortune since Jan. 1, thanks to his 13% stake in Meta. It’s a far cry from 2022, when the stock, and Zuckerberg’s net worth, took a nosedive after his company had undergone massive changes, including a name change and big investments in the metaverse. At the time, Meta struggled to find its footing with short-form video while competitor TikTok rose in popularity. Now, analysts think that the pivot from Facebook to Meta is finally coming to fruition as the company heavily leans into its Orion augmented reality glasses. “With the confluence of Meta’s hardware improvements over the last five years and progress with AI, Orion represents Meta’s evolution from a social media company to a Metaverse company,” JMP Securities analysts wrote in a note to investors this week. Since 2022, Meta has cut tens of thousands of employees, shrinking its global workforce by 25%. The Menlo Park, California-based company has made moves to improve its stock performance, including a $50 billion share buyback program and Meta’s first-ever quarterly dividend. It has also hopped onto the artificial-intelligence bandwagon, spending heavily on data centers and computing power as Zuckerberg works to build a leading position in the industry-wide AI race. The company recently announced further investments into AI-generated creators, which interact one-on-one with online fans. Unlike Elon Musk, Zuckerberg said he plans to stay out of politics. After earlier offering up his views on social justice, inequality and immigration issues, he has since publicly expressed regret about some of his political activity.
In the most significant shake-up to the country’s travel and tourism sector since the pandemic, Qatar will buy 25% of Virgin from its private equity owner Bain Capital and use the airline to expand its services in Australia where it has been stymied by government restrictions. This will allow Virgin to resume long-haul international flights using Qatar Airways planes and crew and pose a direct challenge to the dominance of national carrier Qantas. Treasurer Jim Chalmers said the government wanted the airline sector to be “stronger and more competitive”, even as he left it to the Foreign Investment Review Board to ultimately decide whether the deal should proceed. “We know across the economy, not just in the airline sector, that foreign investment can be in our national interest,” he said. Government Services Minister Bill Shorten, who will leave parliament in February, said he hoped the FIRB approved the deal, adding the sale of a cornerstone stake to Qatar would mean certainty for Virgin workers. “Four years ago, Virgin was on its knees. Now one of the world’s best airlines wants to buy 25% of it.” Jakob Cakarnis, an analyst at Jarden, said the deal would allow Qatar to bypass a time-consuming negotiation to fly more services, allowing it to compete better with Qantas and its partner, Emirates.
REA, the Australian property platform controlled by Rupert Murdoch’s News Corp, has abandoned its pursuit of the UK’s biggest listing website Rightmove, after its latest £6.2bn bid was rebuffed. Rightmove’s shares were down by about 7% on Monday afternoon after REA walked away, blaming the UK group’s lack of engagement with its previous offers. The UK’s “put up or shut up” rules required REA to make a final offer by 5pm, or give up, after Rightmove rejected its latest offer on Monday morning. REA said the first “substantive engagement” from Rightmove was a pair of meetings over the weekend, despite the Australian group making four offers over the past month. It said all other contact had been “cursory and procedural”. “We were disappointed with the limited engagement from Rightmove that impeded our ability to make a firm offer within the timetable available. They had nothing to lose by engaging with us,” said Owen Wilson, chief executive of REA. In a statement, News Corp chief executive Robert Thomson said the company backed REA’s decision to end its pursuit of Rightmove. “We applaud REA’s financial discipline as it is foolhardy to overpay for an asset, even if it patently had positive potential,” he added. The decision to rebuff REA will increase pressure on Rightmove to show it can expand its business, despite enjoying a huge share of the UK listings market. “Rightmove’s share price has lacked any sustained upward momentum for two years despite being supported by its ongoing share buyback programme and revised strategy,” REA said. The FTSE 100 UK property group earlier on Monday said it had consulted “the full spectrum of its shareholder base” but concluded that the cash and shares offer on the table was “unattractive” and continued to “materially undervalue Rightmove”. REA has criticised Rightmove for its lack of engagement over previous offers. Rightmove on Monday said the two companies’ management teams had had “numerous interactions” over many years, “including discussions around strategy and best practice as recently as June”.
The government has defended its second budget surplus as Australians struggle with rising cost of living pressures. The surplus came in at $15.8 billion for the last financial year and marks the first time since the 2006-7 and 2007-8 budgets there’s been back-to-back surpluses. Treasurer Jim Chalmers attributed the economic win to responsible spending while supporting families. “One of the reasons we are proud of the consecutive surpluses that we’ve delivered for the first time in almost two decades is we haven’t done that or cost of living relief. We’ve done that and cost-of-living relief,” he said on Monday. “Spending in the last financial year was much lower than anticipated at budget, and revenue was lower as well … So this bigger surplus is not because we taxed more, it’s because we spent less.” Chalmers said the surplus was a sign of “responsible economic management”, pointing to total revenue coming in $3.7 billion lower than forecast. While personal income tax did make up more than half the government’s total tax intake, it collected $5.3 billion less in tax receipts than estimated. Experts agreed the government had “resisted temptation” to spend money amid criticism that households are going backward. But crossbench senator Jacqui Lambie said households doing it tough did not “give a stuff” about surpluses. “Nobody’s talking about a surplus, and if they were and they truly understood, they’d be saying, well, how about you put some of that surplus out to us, so we can put bread and milk on the table for our kids,” she told Nine’s Today show. Meanwhile, Opposition treasury spokesperson Angus Taylor said, “households have been going backward”, claiming the standard of living had collapsed under Labor. Chalmers rejected the criticisms, pointing to Australians saving money through stage three tax cuts, energy bill relief, cheaper childcare, and medicines during the government’s first term. “These surpluses are all about fighting inflation, making room for the cost of living relief, building a buffer against global economic uncertainty and also paying down the Liberal debt that we inherited so that we pay less interest on it,” Chalmers said.
Australia’s television industry has faced an uphill battle competing against international streaming services with big budgets and different rules on the content in which they invest. The AFL grand final, which ran on the Seven Network on Saturday afternoon, shows how critical sport is for free-to-air television, which relies on mass eyeballs for advertisers. This why the AFL’s grand final clash between the Brisbane Lions and Sydney Swans was watched by more than four million viewers – the highest-rating match for the sport since 2021 and the most popular event on television this year. Data released late on Sunday by television measurement provider OzTAM shows an average of 4.02 million national viewers watched Brisbane’s 60-point thrashing of Sydney on 7plus Sport – the biggest-ever audience for the AFL on a streaming platform. AFL grand finals typically sit among the most watched events in Australian sport. Just three sports events since OzTAM began supplying data in 2001 have out-rated the sport – the Matildas’ semi-final against England and the penalty shoot-out against France in the FIFA Women’s World Cup last year, and Lleyton Hewitt’s Australian Open final against Marat Safin in 2005.
Rank-and-file Labor members are urging the Albanese government to curtail negative gearing and capital gains tax concessions as part of an ambitious reform agenda, which targets 75% homeownership by 2035. The call from Labour for Housing, a national group of members similar to the influential Labor Environment Action Network, will pile pressure onto Prime Minister Anthony Albanese and Treasurer Jim Chalmers, who insist they have no plans to curb the tax breaks, but who concede Treasury is exploring options to do so. Mr Albanese and Dr Chalmers last week tied themselves in knots explaining why Treasury was exploring options to curb negative gearing and CGT concessions. Labor MPs were issued with talking points designed not to rule out changes to either the 50% CGT concession for property investors or negative gearing, but both Mr Albanese and Dr Chalmers insisted they had no plans to make changes. “It is not our policy,” the prime minister said. The language was similar to that used by the government when it claimed Treasury came up with the idea to revamp stage three tax cuts, in that it had not been specifically requested. Labor took overhauls to negative gearing and CGT concessions to both the 2016 and 2019 elections, which it lost. There is a degree of sensitivity among MPs who ran in those polls, in particular 2019, given the changes were seen as a drag on the party’s vote. But with housing shaping up to be a key issue at the next election due before May next year, many in the party believe Labor needs an ambitious agenda to respond to the Greens – who want to abolish negative gearing and the CGT concession for investors and freeze rents – and the Coalition, which wants to allow people dip into their superannuation for a home deposit.
Households using rooftop solar will get paid up to a third less for supplying power to the grid as energy retailers around the country cut rates in response to a massive oversupply in the market. A reduction this week in the price of solar offered by EnergyAustralia is the latest in a series of price cuts by power companies that is expected to prompt households to change their power consumption habits, including when and for how long they use appliances. The country’s third-largest energy retailer advised customers in New South Wales that it would slash its flat feed-in tariff (FiT) for solar – the price retailers pay for excess energy produced by rooftop solar systems – to 5¢ a kilowatt-hour, from 7.6¢, from October 1, reflecting similar changes nationally. EnergyAustralia is the last to reduce its feed-in rates in NSW after Origin Energy and AGL cut their rates to 5¢ mid-year. The rates have dropped because the rise in households with solar panels has meant solar output has flooded the energy grid. Gavin Dufty, national energy director for St Vincent de Paul Society, said as whole sale prices in the middle of the day, when the sun was shining, retailers could buy energy from the market cheaper than they could buy from customers. The challenge for consumers was to change their consumption behaviour to get the most out of their solar, Mr Dufty said.
Chocolate lovers already feeling the sting of high prices should brace for worse: costs will continue to rise as global cocoa supplies are at their lowest level in two decades. Economy-wide price pressures from the rising costs of labour, packaging and energy have been driving up the cost of chocolate for the past couple of years. The cocoa crunch means lovers of dark chocolate will be the hardest hit, but there’s a silver lining for fans of the milk variety, who will avoid the worst of the price hikes because their favourite products contain less of the expensive cocoa. Consumer Price Index data showed year-on-year inflation is 4.6% in snacks and confectionery. This follows a similar price increase that hit in the June quarter of 2023 and market analysts at Rabobank said the cumulative price rise was 22% from June 2022 and June 2024. Rabobank said cocoa prices rocketed upwards earlier this year, when cocoa that had been selling for around $3000 a tonne for the past few years shot up to $12,000 a tonne. While prices have eased back to $8000 a tonne, many chocolate manufacturers are about to use the last of the cocoa they bought years ahead under hedge contracts to buffer against future price spikes. But Rabobank commodity analyst Paul Joules said a chronic global shortage of cocoa supplies, the key ingredient in chocolate, means the “the worst is still yet to come for consumers”. All chocolate varieties will feel the pinch in one way or another, with Rabobank warning that companies will shrink the size and cocoa content of products to maximise their profits. Joules analysed how cocoa prices may flow through to chocolate prices overseas, and found that a 100 gram block of chocolate with 70% cocoa content could rise from $4.90 to $6.50. “A similar increase could be expected in Australia,” Joules said.
Iron ore price spiked over the weekend after three of China’s biggest cities eased curbs on home-buying, bolstering the demand outlook in the world’s biggest consumer of the steel-making ingredient. Shanghai, Guangzhou and Shenzhen loosened rules, following through on Beijing’s latest efforts to prop up the embattled property sector. The spot price surged $US10 to $US110.10 a tonne by Monday morning, continuing a rapid rise from below $US90/t earlier this month. A sub-$US90/t price had previously not been seen since 2022. Iron ore futures on the Singapore Exchange were trading hands at $US112/t. Iron ore, which had been one of the year’s worst performing major commodities as China’s economy slowed, has been revived as policymakers in Asia’s largest economy moved more aggressively to shore up the economy. Central to that effort have been initiatives to drag the real estate market out of a years-long slump. Guangzhou became the first tier-one city to remove all restrictions on homebuyers. Shanghai, China’s financial hub, and Shenzhen, the southern city known for its tech industry, announced they were lowering minimum downpayment ratios for first and second homes to 15% and 20%, respectively. China’s central bank also announced on Sunday that it would allow refinancing of mortgages. But economists and analysts have broadly warned that the stimulus impact on longer term steel demand, and consequently the iron ore price, has been overblown. “While we see upside risk to our price forecast from potential additional stimulus announcements, we still expect iron ore prices to fall to US$85 a tonne,” Goldman Sachs commodities analyst Aurelia Waltham said. ANZ China economist Raymond Yeung last week said the stimulus package “is far from being a bazooka” and said concerns still linger about the Middle Kingdom’s economic recovery. “Without the presence of other ministries, we have concerns about the impact on the real economy because China seems to have fallen into a liquidity trap,” he said.
And that’s it for this week. And next week, I’ll be talking to Chris Noone, CEO of ASX listed car subscription company Carly about the Australian Tax Office ruling on car subscriptions, what they mean for Carly and car users and why car owners are cautious about transitioning from gas guzzlers to EVs.
And I’ll be talking to economist Sinclair Davidson.
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.
