This is episode number thirty-eight in our series for 2020 and today’s date is Friday, October 23.
First I talk to InMoment’s Managing Director, David Blakers, who will explore the state of Australia’s business as it pivots towards digital and how that would improve customer relations.
And then I’ll be talking to IFM Investors economist Alex Joiner about the state of the Australian economy in recession, and looking at the bumpy road out of it.
But now, let’s talk to David Blakers.
The US Justice Department accused Google of maintaining an illegal monopoly over search and search advertising in a lawsuit filed Tuesday, the government’s most significant legal challenge to a tech company’s market power in a generation. In its suit, filed in a federal court in Washington, the agency accused Google, a unit of Alphabet, of illegally maintaining its monopoly over search through several exclusive business contracts and agreements that lock out competition.
Such contracts include Google’s payment of billions of dollars to Apple to place the Google search engine as the default for iPhones. By using contracts to maintain its monopoly, competition and innovation have suffered, the suit says. The suit reflects the pushback against the power of the nation’s largest corporations and especially technology giants like Google, Amazon, Facebook, and Apple.
Netflix reported fewer paid subscribers in the third quarter as streaming competition increased and live sports returned to television. The company said it added 2.2 million paid subscribers globally during the quarter that ended September 30 compared with analysts’ estimates of 3.4 million, according to IBES data.
Looking ahead, Netflix forecast it would bring in 6 million new subscribers around the globe, short of the 6.51 million that analysts expected. The streaming video pioneer is trying to win new customers and fend off competition as viewers embrace online entertainment.
The pandemic sparked new interest in the service as people around the world were told to stay home, movie theatres went dark and sports leagues canceled live games. In recent months, major sports resumed play, and nascent streaming services, including AT&T’s HBO Max and Comcast’s Peacock, offered audiences new options.
China has given the world a master class in recovery. Its economy continues its recovery from the Covid-19 pandemic according to its latest official figures. The world’s second-biggest economy saw growth of 4.9% between July and September, compared to the same quarter last year. However, the figure is lower than the 5.2% expected by economists.
China is now leading the charge for a global recovery based on its latest gross domestic product (GDP) data. The near-5% growth is a far cry from the slump the Chinese economy suffered at the start of 2020 when the pandemic first emerged. For the first three months of this year, China’s economy shrank by 6.8% when it saw nationwide shutdowns of factories and manufacturing plants. It was the first time China’s economy contracted since it started recording quarterly figures back in 1992. The IMF expects China to be the only big economy not to contract this year.
Melbourne retailers and hospitality operators have had their hopes of an earlier reopening raised after another day of low COVID-19 cases saw Victorian Premier Dan Andrews float the prospect of a “dark opening” next Monday. The dark opening would enable staff to return to work to prepare shops and venues for customers after they were shut down in July. However, Mr. Andrews warned office workers they should plan to work from home for the rest of the year. Retail and hospitality had been slated for reopening 1 November, but Mr. Andrews raised the prospect of an earlier lift of trading restrictions.
The financial crimes regulator is investigating casino operator Crown for potential breaches of Australia’s anti-money laundering and counterterrorism financing laws. Crown said in a statement to the ASX that AUSTRAC had identified potential non-compliance with the laws including “concerns in relation to ongoing customer due diligence, and adopting, maintaining and complying with an anti-money laundering/counterterrorism financing program”.
The matter has been referred to the agency’s enforcement team, which has begun a formal investigation into Crown Melbourne. Crown said the investigation was focused on Crown Melbourne’s management of customers identified as “high risk and politically exposed persons”, which is likely to include customers brought to the casino by junket operators in China.
Crown chair Helen Coonan has reluctantly conceded that taking no action over the cash-filled cooler bags coming into the company’s Melbourne casino could be seen to have facilitated money laundering. The concession came during a session in which Ms. Coonan was grilled about questionable visa practices, anti-money laundering, and what appeared to be a boardroom coup, and revealed the that group’s chief anti-money laundering compliance officer was about to depart the company.
Facing renewed questioning from NSW Independent Liquor and Gaming Commission’s inquiry into Crown on Tuesday, Ms. Coonan pushed back against suggestions that the casino group took deliberate actions that facilitated money laundering by “junket” operators. “It may have been ineptitude or lack of attention, I don’t know that it was deliberately turning a blind eye,” she said. Commissioner Patricia Bergin asked whether Ms. Coonan agreed that however it occurred, Crown was “facilitating” money laundering. “It’s very difficult to agree with facilitating – I think certainly there were all sorts of signs there I would say Commissioner …” Ms. Coonan replied.
Our work from home revolution has powered a spike in cybercrime, costing consumers more for everyday products and dragging billions of dollars out of the economy. The months between April and June saw a 65% increase in cybersecurity incidents, according to PwC’s 2021 Global Digital Trust Insights survey of thousands of business, technology, and security executives from large companies.
The need to stop the spread of coronavirus forced millions of employees — particularly computer-bound office workers — to work from home in March and April. An astonishing number of employees moved quickly this year from working on computers linked to secure servers, inside buildings protected by passcards and gates, to performing vital business roles from their kitchens and bedrooms. That shift was always going to be an opening for malicious and opportunistic cybercriminals.
Westpac, the Perth Mint, and hundreds of Australians have been ensnared in a major global tax evasion investigation into an offshore bank linked to organised crime syndicates. The J5 taskforce made up of the tax chiefs of Australia, the US, UK, the Netherlands, and Canada are investigating Euro Pacific Bank in Puerto Rico, fronted by celebrity business commentator Peter Schiff.
An investigation by The Age, The Sydney Morning Herald, 60 Minutes, and The New York Times found that simultaneous raids around the world in January could lead to about 100 Australians investigated and jailed over tax evasion. The customers of Euro Pacific are advised to create accounts using front companies in other tax havens, creating a web of arrangements that are difficult to trace. Westpac facilitated the Puerto Rican’s bank’s dealings with its Australian customers, while Perth Mint partnered with Euro Pacific to allow wealthy customers to buy gold.
Australia faces a different economy over the coming years as a result of the drop in migration due to the pandemic-induced closure of international borders. It will also weigh on the pace of Australia’s economic recovery from the recession, leading economist Chris Richardson says. The latest Deloitte Access Economics quarterly business outlook predicts the population will be about 600,000 smaller over the next two years than earlier forecast, even if Australia opens international borders gradually through 2021.
But for Australia, migration is tied to a bunch of sectors, like housing and commercial construction, and higher education. The report forecasts the unemployment rate rising to 8.6% next year when the Australian Treasury is expecting a peak of 8% by the end of this year. Mr. Richardson also believes governments, as seen in the wake of the global financial crisis, will withdraw support sooner than they should due to the politics of debts and deficits.
More men than women have lost their jobs during the COVID-19 crisis and their pay has dropped further, analysis of the latest statistics shows. The latest Tax Office payroll data and analysis by Deloitte Access Economics and KPMG shows that while there was an initial washout of jobs for women in the pandemic-triggered downturn, those positions have recovered faster than jobs for men.
An analysis of labour force employment and unemployment data shows a greater number of jobs have been lost and not regained for men than women since the crisis began in March. Jobs worked by men decreased by 5% since March, while jobs worked by women decreased by 4.2%, the Australian Bureau of Statistics figures showed. Payments to men dropped 5.6%, while payments to women decreased by 0.4%. The number of unemployed men (including those still actively looking for work) has risen 125,000 since March, while the number of unemployed women has risen 96,000 over the same timeframe.
Victoria’s severe lockdowns have hampered the recovery of women’s jobs. KPMG’s analysis shows that while women experienced sharper job losses in April and May than men, women have returned to the workforce at a faster pace than men since then.
Billionaire Andrew Forrest’s private investment company has flagged a spending spree on lifestyle assets and iconic Australian brands after buying RM Williams for about $190 million. Retail analysts say Andrew ‘Twiggy’ Forrest’s RM Williams buy-up is a bid to capitalise on consumer ‘patriotism’ that’s emerged since the onset of the pandemic.
They believe more iconic brands will soon fall under his wing. In a vote of confidence in tourism, entertainment, and consumer spending in the economic recovery from the COVID-19 pandemic, the mining billionaire wants to build the biggest lifestyle company in Australia. The Forrest family’s private investment company Tattarang slipped under the guard of private equity giant TPG Capital to secure RM Williams – the leather boot, clothing, and accessory maker most Australians associate with images of outback life.
Tattarang chief investment officer John Hartman said the company, which controls $17 billion of assets, was eyeing more acquisitions and would target other iconic Australian brands and experiences. Assets on its radar are thought to include everything from hotels and resorts, outback tours and rail journeys, theme parks, and sporting events as the Fortescue Metals Group founder and chairman bets big on Australia and its appeal to locals coming out of lockdown and the rest of the world.
And FutureFeed, part-owned by Andrew Forrest, Woolworths, and GrainCorp, has sold the first licence to grow and produce a seaweed additive that reduces greenhouse gas emissions from cattle. It has issued leading seaweed technology developer CH4 Global with the first licence to sell and distribute the product for methane reduction in farm animals. CH4 will trial ocean farming of the Asparagopsis seaweed off the coast of South Australia and New Zealand as it eyes a local slice of a global market for the feed additive predicted to grow to $US10 billion ($14 billion) by 2030.
Zoom Meeting subscribers can now create, host, and charge money to attend virtual events on the platform through a new feature that lets the video-conferencing software maker monetise its ever-growing role in the virtual event industry. A new feature called “OnZoom” has been designed to let users search for online events ranging from Pilates to group meditations and for the hosts to create and sell places in them.
Event hosts can schedule and hold one-time events, an event series, and drop-ins for between 100-1000 attendees depending on their Zoom Meeting licence, as well as to list and sell tickets directly through the platform. The platform will also let not-for-profit organisations accept donations, and for hosts to promote OnZoom events via email lists and social media.
Attendees can search through a directory of public events and buy tickets online, as well as favourite, share and rate OnZoom events. The launch of OnZoom means the NASDAQ-listed company can no longer just be described as a software-as-a-service company that runs a free service and a subscription premium service. Now, it will also operate as a two-sided tech-enabled marketplace like Airbnb and Freelancer.
Online retailer Temple & Webster made more profit in the September quarter than it did in the entire year ended June 30 amid a boom in furniture and homewares spending. Temple & Webster earned $8.6 million before interest, tax, depreciation, and amortisation in the three months ending September, compared with $8.5 million in fiscal 2020, chief executive Mark Coulter told shareholders at the annual meeting.
Sales in the year to date (July to October 19) have risen 138%, year on year, after soaring 130% in the June quarter, with October sales more than double those last year. The extraordinary sales and earnings growth highlights the shift to online shopping and the cocooning trend triggered by the coronavirus pandemic.
Consumers stuck at home are spending on new sofas and dining suites, carpets, kitchen wear, lighting, and manchester, spending money they might otherwise have spent on overseas travel. Harvey Norman, Nick Scali, JB Hi-Fi, and Beacon Lighting have also reported strong sales growth in the June and September quarters, but growth at bricks and mortar stores has paled in comparison to that at pure-play online retailers such as Temple & Webster.
The company is taking advantage of the structural shift to e-commerce by adopting a high growth strategy, investing in areas such as technology and data, brand awareness, and private label products to grow its share of the market. According to the NAB online sales index, the online furniture and homewares category grew around 57% during the pandemic (April to July) while Temple & Webster’s sales grew around 150%.
Westpac has announced a partnership with Afterpay on its new digital banking platform, in the first major partnership between the ascendant buy now, pay later provider, and a big four bank. It will see Afterpay offer banking services to its 3.2 million Australian customers using Westpac’s banking licence and newly developed technology platform. But that’s not the point.
This deal is about both sides piggybacking off each other’s strengths and using technology and data to build deeper ties with customers. In a statement to the ASX on Tuesday, Afterpay said the collaboration agreement would enable the introduction of Afterpay savings account and cash flow tools for Australian customers from the next financial year.
The fintech, which has seen 700% growth in its stock price since March, said the new products would complement Afterpay’s existing business model by “offering additional, customer-centric alternatives to traditional banking products”. The new savings accounts will initially be able to perform basic banking activities such as the payment of bills, budgeting, and cash withdrawals, with new features to be introduced over time.
And that’s for this week. And next week, I’ll be talking to Lachlan Donald, CEO of Australian tech company BuildKite. COVID-19 has forced businesses to build new software overnight – Buildkite gives developers the tools they need to keep up with the demand for software built with speed, scalability, and security. And I’ll be talking to AMP chief economist Shane Oliver.
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 safe and healthy week and looking forward to bringing you Talking Business next week.