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 four in our series for 2019 and today’s date is Friday, February 22.
First I talk to Ben Kearney, the CEO of the Australian Lottery and Newsagents Association (ALNA), Australia’s national industry body for the newsagent industry. He will talk to us all about the industry and how it is evolving.
And then I talk to economist Nicholas Gruen about the placebo effect and how we can improve government and business services.
But first, let’s talk to Ben Kearney.
Donald Trump says trade talks with China have gone very well and has again hinted he could extend a March 1 deadline for reaching a deal. Michael Pillsbury, a leading adviser to Trump on China issues, told Fox that Trump is “essentially giving the Chinese one last chance next week, and then perhaps … a short extension”, referring to the next round of trade negotiation in Washington this week. He pointed out, “notice how the president always refers to the tariffs as bringing in revenue, billions of dollars of revenue to us,” and “so he is not somebody who’s anti-tariff.” Pillsbury also said ,“this coming week’s going to be awfully important when the Chinese come here at the working level.” And, “We’re going to try to find out, I think, what will be in this memorandum of understanding…whether it will have enforcement and time limits and … be tough or just be a cosmetic agreement.”
Britain is set to slap tariffs on farm imports from Australia if the UK leaves the EU without a Brexit deal, a British government minister has warned. Environment, Food and Rural Affairs Secretary Michael Gove told a National Farmers Union (NFU) conference in Birmingham that reports Britain would impose a zero-tariff regime in order to secure friction-less trade in a no-deal scenario were not accurate. He hinted that tariffs would apply to beef and particularly lamb. “There will be protections for sensitive sections of agriculture and food production,” Gove said. He said the tariffs regime Britain would like to apply in the event of no deal will be revealed in “the next few days”.
Labor has stepped up pressure on the federal government to start legislating banking royal commission reforms, presenting draft laws for five changes it says could be passed this week, including ending billions of dollars in commission payments a year earlier than the government had forecast, and protecting consumers. Banks and financial regulators would be forced to report every six months on their progress fixing cultural problems exposed by the royal commission under a plan proposed by Labor. Financial firms would also be named and shamed in decisions by the Australian Financial Complaints Authority when it decides in favour of customers if Labor is elected. With the government insisting the bulk of the 40 recommendations which require legislation should wait until after the election, Labor leader Bill Shorten has sought to portray the “part-time Parliament” as dragging its feet. He released legislation which, if adopted by the Parliament, would remove exemptions from responsible lending standards for point of sale lenders such a car dealers who offer finance. “We’re ensuring that car dealers and other salespeople have to comply with consumer credit laws that apply to credit assistance providers like brokers,” he said. The government has so far committed to look at this recommendation mindful of the effect it may have on business. Labor’s bills would also remove exemptions for funeral expenses policies. The current exemption allows companies like Aboriginal Community Benefit Fund (not an Indigenous company) to sell low-value funeral expenses products without having to comply with the rules around insurance. They are basically unregulated. The third change would be to remove the claims handling exemption for insurance companies.
The Australian Securities and Investments Commission is contemplating more than 40 court cases — including criminal prosecutions — in the wake of the banking royal commission, as it adopts a litigate-first strategy. ASIC enforcement teams have investigations into 12 matters that were case studies before the royal commission and are assessing another 16 case studies. According to the regulator, there has been a 15 per cent increase in the number of ASIC enforcement investigations on foot. ASIC confirmed in the update that it has adopted a new approach that emphasises court-based enforcement. In an update on its steps to implement the banking royal commission’s recommendations, the Australian Securities and Investments Commission (ASIC) also flagged a push for more funds to back its new aggressive approach and to fund new responsibilities it is expected to gain. It said its enforcement teams were “undertaking investigations into 12 matters that were case studies before the royal commission” and assessing another 16 case studies “to determine whether investigations should be commenced”. ASIC has already launched civil action in the Federal Court against an NAB super scheme trustee for charging tens of millions of dollars in “fees for no service” after the practice was exposed at the royal commission, and separate civil action against Dover Financial Services over alleged misleading conduct
Approvals for foreigners to invest in Australian property plunged to their lowest level in almost 10 years falling to levels not seen since the tail end of the global financial crisis. According to Australia’s Foreign Investment Review Board (FIRB) figures, a total of 10,036 residential real estate applications were approved for proposed investment in the 2017/18 financial year, totalling $12.5 billion, the lowest total since 2009/10. That was well below the 13,198 approvals granted in the prior financial year. The figures presented by the FIRB are only for approvals, not an actual investment in Australia. The FIRB said there were many factors that may have contributed to the fall in the number and value of residential real estate approvals last year. It cited anecdotal evidence from Treasury’s business liaison program pointing to a drop off in demand from overseas buyers, state taxes and foreign resident stamp duty increases, foreign investment application fees, tightening domestic credit and increased restrictions on capital transfers in home countries as factors reducing demand.
Australian wage growth is not growing at all. Figures from the Australian Bureau of Statistics show hourly wage growth excluding bonuses grew by 0.5 per cent in the three months to December, coming in below the 0.6 per cent pace expected. The increase left growth over the year at just 2.3 per cent, unchanged from the level reported in the previous quarter.
Australia’s biggest companies are ignoring calls from regulators and investors to do more to mitigate the risks of climate change, with a new study finding that many of the nation’s top 100 companies still do not identify climate change as a material business risk. Of 72 big listed companies operating in sectors, more than half (57 per cent) identify climate change as a material business risk Investors have been voting against companies not taking action and regulators have warned businesses that don’t mitigate risks could be held liable Companies have pledged to do more to meet global guidelines aimed at reducing carbon emissions. The report, released by environmental campaign group Market Forces, is based on public information from 72 big listed companies operating in sectors considered high-risk on climate change. It found that just 32 per cent of the companies disclose detailed discussions of specific climate risks and opportunities facing their businesses.
Banks may make it harder for consumers to get car loans, credit cards and personal loans under proposed rules from the corporate regulator. After the royal commission put bank lending practices under the microscope, adding to pressure from regulators, the Australian Securities and Investments Commission last week issued a consultation paper on responsible lending, which reiterated some of its concerns about how customers’ living expenses were assessed by banks. In response to the paper, which will be followed by consultation with banks over the coming months, some banking analysts predicted certain types of consumer credit could be tightened. Macquarie analysts said the regulator’s move to update responsible lending rules could have a bigger impact outside the home loan market, given that banks have already tightened up their mortgage lending criteria significantly in recent years.
And despite being shamed by the Royal Commission which saved its toughest criticism for NAB and its bigwigs, and despite revelations of the bank’s appalling behaviour — and the fact Commissioner Kennerth Hayne remained unconvinced the NAB leaders had learnt from their mistakes — NAB chief executive Andrew Thorburn will receive more than $1 million when he steps down at the end of the month. NAB has confirmed Mr. Thorburn will receive a payment of $1,041,449, in lieu of 26 weeks’ notice, which is in line with his contract. He will also be eligible for any outstanding leave. It means he’ll be walking away from more than 883,000 performance rights — worth an astounding $21.7 million. In the year to September 2018, Mr. Thorburn was paid $4.3 million. And now after the bank has been exposed, he walks off with a golden handshake
Coca-Cola Amatil has written down the value of fruit and vegetable processor SPC by another $146.9 million, citing the uncertain outcome of the current sale process. The latest write-down, which takes SPC’s book value to zero, follows a $172 million write-down in 2016, a $404 million write-down in 2014,
The war over milk between the big supermarkets continues with Coles announcing it will not follow Woolworths in increasing the price of milk to support Australian dairy farmers. Instead, Coles insists it’s supporting the industry in other ways and has called for an industry-wide levy on milk. This comes the day after Woolworths announced they would be dumping their $1-a-litre product, and from today would be selling milk for an extra ten cents per litre. The extra money will go to 450 dairy farmers which supply the chain. In a statement, Coles said they are “exploring additional options” but said a price increase could add to customers’ cost of living expenses.
AMP’s bottom line will be hit by as much as $30 million a year by a federal government bill that requires the wealth giant to hand over 370,000 superannuation accounts with low balances to the tax office. AMP said the theindicative operating earnings impact on its retained businesses in FY 19 is expected to be approximately A$10 million (after tax), with an annualised impact of up to A$30 million (after tax) from 2020..The earnings impact will predominantly be in the Australian wealth management business.
And the profit reporting season continues. Here are some of the results. BHP Billiton underlying attributable profit from continuing operations fell to $US4.03 billion ($A5.66 billion) for the first half of 2019, down 8 per cent from $4.4 billion for the first half of 2018. Westpac reaped $2.04 billion in profits during the last three months of 2018. In its first half-year result as a standalone company since being spun out from Wesfarmers in November, Coles reported net profit after tax of $381 million for the six months to December 31 – down 29 per cent from the same period a year earlier. That included discontinued operations as a result of the demerger. Woolworths’ earnings before interest and tax rose 1 per cent to 1.4 billion IOOF profit came in at $135.4 million for the half year ended Dec 31, compared with $45.2 million over the same period a year ago. Seven West Media’s statutory net profit for the first half was down 13.8 per cent to $86.2 million. Cochlear net profit for the six months to December 31 rose 16 per cent to $128.6 million. Oil Search’s bottom line profit in the year ended December 31, 2018 rose to $341.2 million from $US302.1 million, broadly in line with analyst forecasts. Perth-based engineering group Monadelphous reported an 18 per cent drop in net profit to $30.7 million. Blackmores made a net profit after tax of $34 million. Beacon Lighting’s net profit rose 3.2 per cent to 11.6 million in the 26 weeks to December 31. McGrath posted a net profit after tax loss of $3.3 million compared with the $1.8 million loss the previous corresponding period. Brambles lifted its underlying profit of 1 per cent to $504.4 million. Ansell’s net profit fell 91% to US$39.5 million. GWA’s net profit after tax was $26.6 million, up 7.3 per cent. Health insurer nib has delivered a 5 per cent increase in interim net profit to $74.5 million. The Bank of Queensland expects 1H19 cash earnings in range of $165-$170 million compared to $182 million last year.
The Australian arm of social media messaging giant Snapchat contributed a $13.1 million profit to its loss-making parent company. Whitehaven Coal posted a 19 per cent lift in first half net profit to $305.8 million. Corporate Travel Management’s statutory net profit was $38.9 million. Domino’s net profit fell 9.2 per cent to $53.3 million after booking $25.7 million in one-off legal and store conversion costs. Gas pipeline owner APA Group’s bottom line net income rose 27 per cent to $157.4 million. The a2 Milk Company said net profit jumped 55.1 per cent to $NZ152.7 million ($146.7 million) in the first half of the 2019 fiscal year. Crown’s normalised net profit (which removes the impact of gambling win rates) rose 0.9 per cent to $194.1 million. Fletcher Building swung to a first-half profit of $NZ87m from a year-earlier loss of $NZ273 million. Insurance brokerage Steadfast’s profit jumped 17.6 per cent to $38.2 million. Reject Shop’s net profit after tax came in at $10.6 million, down 40.4 per cent. Worley Parsons profit jumped to $82.4 million from $1.4 million a year ago, boosted by revenues from a UK acquisition. Sonic Healthcare’s profit fell by 2.4 per cent to $223 million. Wisetech Global’s earnings before interest, tax, depreciation and amortisation came in at a lower than expected $48.5 million. Civil and mining contractor NRW Holdings’ earnings increased to $28.2 million compared to $15.3 million in the previous corresponding period.
And that’s it for this week. And next week I talk to Luke Annear about his business iAuditor the world’s most powerful checklist and inspection app. He’ll talk about Spotlight – a real time incident report app and how his apps are changing the way businesses deal with risk and ohs. He’ll talk about how he built his $400 million business and how he got New York investment firm, Tiger Global to invest in his company. I’ll also be talking to Indeed economist Callum Pickering about last week’s wages and jobs figures, and what they mean for the economy. 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. Wishing you all a great week, take care, be good and looking forward to bringing you Talking Business next week.