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 twenty-seven in our series for 2019 and today’s date is Friday August 2.

First I talk to Jonathan Miller, managing director of Bit Trade and Bit Trade Labs. Bit Trade is a digital platform for everyday Australians to trade and manage their blockchain assets, including Bitcoin and Ether.  Bit Trade Labs, on the other hand, is an incubator for blockchain and distributed ledger projects.  It is a mission of both companies to empower people with the tools and knowledge to trade blockchain assets. As the founding member of industry body Australian Digital Commerce Association (ADCA), they are committed to the growth and mass adoption of blockchain and cryptocurrencies in Australia

And I’ll be talking to CommSec economist Craig James about what’s ahead in the market for the week.

But first, let’s talk to Jonathan Miller.

Listen to the full podcast here:

US stock markets have caught a cold from Donald Trump’s latest Twitter outburst, which suggests that his patience with negotiations with China is wearing thin. Investors had not been betting that the two days of trade talks currently happening in Shanghai would reach a resolution, but some had hoped for the groundwork for more detailed talks could be laid. That hope now appears to be forlorn. On the British side of the pond, new Prime Minister Boris Johnson’s insistence that the EU must ditch the backstop (an insurance policy to avoid a hard Irish border) if there is to be a deal pushed sterling to a 28-month low against the US dollar.

Australia’s Consumer Price Index (CPI) rose by a better than expected 0.6% in the June quarter 2019, according to the latest Australian Bureau of Statistics (ABS) figures. This follows no movement (0.0%) in the March quarter 2019 with the rise driven largely by automotive fuel (+10.2%). This took Australia’s inflation to 1.6% year on year growth. The consensus expectation was for 1.5% annual growth.

The Australian share market has finally beaten its record high set nearly 12 years ago, prior to the global financial crisis. The benchmark ASX 200 index has eclipsed its previous intraday high of 6,851.5, set on November 1, 2007.

The broader and older All Ordinaries index already reached a record high last week, The ASX 200 took less than ten minutes after trade opened on Tuesday to reach the record, lifting 0.6% to 6,867 points in early trade. It covers the top 200 companies on the Australian share market and is considered the benchmark index. The broader and older All Ordinaries index already reached a record high last week, also recovering to levels not seen since before the global financial crisis smashed stock prices around the world.

New housing approvals dropped 20% in the year to June to a six-year low as tighter curbs on lending and falling prices hit development activity and made for the weakest 12-month period since 2013. Total approvals slipped to 187,515 in the financial 2019 year, nearly one-fifth below the 232,915 total a year earlier, as approvals of both attached homes – apartments, townhouses, and semi-detached dwellings – and of standalone houses also fell to a six-year low.

Australian bosses who are found guilty of taking advantage of employees could end up behind bars. The federal government has confirmed it is drafting legislation targeting serious worker exploitation after a series of high-profile underpayment cases. The news instantly attracted the ire of business groups who argue that any legislation should be nuanced enough to take into consideration cases of genuine error.

Australian household incomes have gone backward since the global financial crisis the newly-released Household, Income, and Labour Dynamics Australia survey reports.  Several years of tepid growth mean that adjusted for inflation, the average Aussie household is $542 worse off than it was in 2009. Living standards have “stagnated” as more Australians face life below the poverty line. Dependence on the age pension has also risen, despite an increased focus on compulsory superannuation. More than 30% of households now rely on the age pension.

Netflix, Stan, Amazon, YouTube and other digital players could be required to produce more Australian programming under a review of regulation aimed at creating one set of rules across the media landscape. The government has committed to a review of the media regulatory framework – one of the recommendations of the Australian Competition and Consumer Commission’s Digital Platforms Inquiry, – and the need to create a new set of rules that can appropriately account for the massive wave of technology change in the past 20 years.

The current standard mandates commercial free-to-air broadcasters, such as Nine, Seven West Media and Network 10 broadcast 260 hours of content for children under 14 years old and a further 130 hours for preschool children. The ACCC’s final report on digital platforms – delivered last Friday – found digital platforms are more than distributors or intermediaries in Australia. However, the report will make little to save newspapers or journalists.  On the area of concern central to the inquiry’s establishment — the decline in journalism — the recommendations are relatively minor:

  • a code of conduct to treat news media businesses “fairly, reasonably, and transparently”;
  • “stable and adequate” government funding for Australia’s public broadcasters, ABC and SBS;
  • government grants (AU $50 million per year) to support original local journalism; and
  • tax incentives to encourage philanthropic support for journalism.

The reality is that there is little that governments can do to reverse the technological disruption of the journalism business. The internet has made it clear that news organizations aren’t primarily in the journalism business. The stories they produce play an incomparable social role — but their business model is to deliver an audience to advertisers. Social media and search give advertisers better tools to target messages to more precise groups of potential consumers. It is a phenomenally better mousetrap.

Crown Resorts shares are sliding 3% every day on allegations of money laundering and dealings with Commonwealth government agencies to fast track visas for high rolling gamblers as the Morrison government has ordered a national integrity watchdog to examine a string of allegations about the conduct of Commonwealth officials linked to Crown’s casino operations. The allegations would be probed by the Australian Commission for Law Enforcement Integrity.  Attorney-General Christian Porter stressed that did not mean he had evidence before him which supported the allegations raised by The Sydney Morning Herald and The Age and 60 Minutes.

He said it was now a matter for the integrity body to decide whether the allegations warranted further investigation. The Coalition and Labor opposed an earlier motion from crossbench MPs to establish a parliamentary inquiry, saying it was “totally ill-equipped” to deal with the allegations and it would be detrimental to run both at the same time. Independent MP Andrew Wilkie told Parliament the stories published by The Sydney Morning Herald and The Age concerning Crown Resorts were “just the tip of the iceberg”. Mr. Wilkie likened the organisation to the Vatican saying it appeared to be “an independent sovereign state” where “laws do not apply”.

Independent senator Jacqui Lambie said she was not surprised at the revelations about government officials and the casino’s operations, declaring the affair was proof of the need for a federal commission to investigate corruption. According to the reports, two Australian ministers approached domestic border-control authorities in a bid to speed up immigration clearances for Crown’s big-spending overseas customers. Jacqui Lambie, among the independent lawmakers who collectively hold the balance of power in Australia’s Senate, said the reports showed the country now needs a national anti-corruption body. In a statement, Austrac said it’s “actively addressing the significant risks of money laundering through casinos, particularly through casino junkets.” 

Former prime minister Paul Keating has lashed government MPs lobbying for a delay in the increase of the superannuation guarantee as “monkeys” and described the prospect as “grand theft”. In criticisms echoed by the nation’s biggest retirement fund, AustralianSuper, Mr. Keating also argued it was highly unlikely employers would use any delay of the guarantee to pay higher wages. The Morrison government has faced mounting internal pressure to consider delaying or dumping the legislated schedule for increases in the rate of mandatory superannuation from 9.5% to 12% by 2025 or even consider dumping the compulsory savings regime for lower-income earners. Mr. Keating, whose government introduced the superannuation guarantee in 1992, said the impact of holding back the increase dwarfed the controversial franking credits reform Labor took to the last election.

The corporate regulator says the reputations of Australia’s banks will continue to suffer in the short term as fresh examples of misconduct are unearthed and a backlog of legal actions is cleared. The Australian  Securities and Investments Commission’s Sean Hughes said banks were making the right noises about transparency and co-operation but there was plenty of litigation to get through first. ASIC is pursuing the banks over dozens of matters under its new mantra of “why not litigate”, with around 25 cases flowing directly from the Hayne Royal Commission  This includes the action against NAB for its role in the fees-for-no-service scandal.

More cases are in the works and the public should brace themselves as they come to light. Among the growing caseload being shouldered by Mr. Hughes is the regulator’s action against ANZ for allegedly gouging $50 million in fees from customers for shuffling money between their own accounts. It says the bank charged 460,000 customers unlawful fees more than 3 million times since 2003. Among the customers, it incorrectly charged was farmers, the bank’s own staff and the bank’s retired staff.

This coincides with Treasurer Josh Frydenberg fast-tracking legislation to end the payment of “grandfathered” commissions to financial advisers by 2021, rejecting Labor’s claims the government was dragging the chain on implementing the banking royal commission’s recommendations. A ban on grandfathered commissions would bring all existing financial advice contracts in line with the 2013 ban on commissions under the Future of Financial Advice reforms. The final report of the Hayne royal commission recommended repealing the grandfathering provisions “as soon as is practicable”.

Qantas and Virgin Australia are raking in some of the highest fees per passenger in the world, according to a new report. Australia’s airlines are envied globally for their ability to “get more money out of passengers above basic airfares,” with both Qantas and Virgin Australia landing in the top 10 for highest revenue per passenger, thanks to extras like seats with more legroom, meals, drinks and baggage fees. Qantas scoops up $1.6 billion annually, or $59 per passenger; Virgin Australia hauls in $50 per traveller.

The Australian consumer’s obsession with quality coffee is ushering in a high-end espresso machine sales boom. Coffee snobs seeking to craft a barista-worthy single origin-brewed cup at home are driving up the sale of home coffee machines by 20% annually, with the market now worth about $250 million. Stores such as Harvey Norman are cashing in as brands demand between $5,000 to $6,500 for the machines, and coffee aficionados begin to chase beans with a passion “similar to the pursuit” of wine connoisseurs.

Cash Converters says it will record a statutory net loss of between $2 million and $4 million, compared to a profit of $22.5 million in 2017-18, it tells the market. It is also tightening its lending standards after a credit risk review. Shares have been hammered. Without additional costs, Cash Converters pre-tax profit would be between $18 million and $20 million.  This is due to writing off a $1.6 million investment in a third-party loan management software platform, $1.4 million of restructuring costs, and $5 million for bad debts, which have been brought forward after a credit risk review.  Cash Converters incurred a $16.4 million class-action settlement during the financial year and is still waiting for the outcome of the Lynch proceeding. Legal costs are running at about $3.2 million for 2018-19.

Rare earth producer Lynas Corp’s quarterly sales revenue and production have slipped, with recent trade tensions between Beijing and Washington curtailing demand for its ore in China as the car market there slows. Lynas reported a 4.6% fall in revenue due to softer prices for its product in the June quarter, during which the company focused its sales on strategic customers outside China. China was the key driver of the result, with trade tensions slowing the growth of the country’s auto market.

Vodafone Hutchison Australia has posted a half-year loss of more than $150 million, in its first financial results since the competition watchdog made the shock decision to block the proposed $15 billion mergers with TPG Telecom. But the company insisted performance had remained “stable in the face of significant headwinds”, and said it was committed to the merger, which remains a possibility pending the outcome of a Federal Court challenge. In the six months to June, VHA reported a loss of $153.4 million, a 66% increase on the same period last year, when losses were just $92.3 million.

The company is yet to turn a profit since it was established 10 years ago.  The firm, a joint venture of Hong Kong-based CK Hutchison and UK-based telco giant Vodafone Group, saw revenue fall 1.7% year on year to $1.738 billion. The average revenue per user (ARPU) per month, a key measure for telco companies, also fell more than 5% to $34.52. However, cost cuttings coupled with new accounting standards saw earnings before interest, tax, depreciation, and amortisation, increased by 14.3% to $584.6 million.

Adelaide Brighton’s net profit after tax was down by as much as 30% to between $120 million and $130 million for the year ending 31 December, 2019. It has also revealed a likely $100 million non-cash impairment.  The profit decline is due to worse than expected conditions in residential and civil construction in Queensland and South Australia, increased raw material costs “and one-ff shipping costs associated with the cancellation of import orders for cementitious materials given the softening volumes in Victoria”.

And that’s it for this week. And next week, I’ll be talking to Rod North, founder and Managing Director of Bourse Communications. North has survived four market Booms and Busts, working in the financial services industry for 30 years and he will give his assessments of which way the market will go in 2019-20.

And I’ll be talking to Alex Joiner, chief economist of IFM investors.

And of course, I’ll be bringing you all the week’s news. In the meantime, you can find me on Twitter at talkingbizz, on Facebook and on LinkedIn. And if you want, leave a comment. Have a great week, take care, be good and looking forward to bringing you Talking Business next week.