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 forty-five in our series for 2019 and today’s date is Friday December 13.
First, I talk to Matt Poll, an experienced business leader with a passion for innovation. He has recently founded Neos (neos.co.uk), which is an InsureTech business that is focused on delivering smart home protection products and services. Prior to this, he spent fifteen years in the Insurance industry working in the UK and US with AXA and RSA.
And I’ll be talking to economist Nicholas Gruen about how to restore trust.
But first, let’s talk to Matt Poll.
The unexpected drop in China’s exports in November shows one reason why the nation wants to agree on a phase one trade deal – U.S. tariffs are hurting China’s exports at a time when global demand is already weak. Total exports in November dropped 1.1% from a year ago, and to the U.S. they were down 23%, the customs administration said Sunday. That was the worst result for exports to the U.S. since February and the 12th straight monthly decline.
Overall shipments had been expected to rise 0.8%, as retailers and companies stock up before the Christmas shopping season. About 18 months of tit-for-tat tariffs have damaged both economies, with Chinese companies and American farmers selling less to the other side. When the two sides agreed to work on a ‘phase one deal’ in October there was hope that it would lead to a quick resolution of at least some of the underlying issues. However negotiations have stretched out and even if some of the tariffs are removed, both sides will be economically worse off than they would have been without the conflict. The Wall Street Journal reported that the United States and China were planning to delay a new round of tariffs set to kick in on December 15. White House economic adviser Larry Kudlow, however, said no decision has been made yet.
Australia is expected to post the worst profit growth in Asia next year as a weak domestic economy stokes consumer caution and the banking sector deals with a litany of scandals. Earnings for the S&P/ASX 200 Index are seen rising 4.2%, less than half the increase that MSCI’s broadest measure for Asian stocks is expected to achieve, according to data compiled by Bloomberg. Australia’s benchmark index reached a record high last month and is tied with Taiwan as the region’s second-best performer in 2019. Record low-interest rates have helped prop up the benchmark index and overshadowed troubling economic signals for corporate Australia. The nation’s economy slowed last quarter as cuts to mortgage rates and taxes failed to spur household spending, which grew at its slowest pace in a decade.
The cheque may soon no longer be in the mail with the Reserve Bank signaling the payment system may have to end. Reserve Bank governor Philip Lowe on Tuesday said the days of the cheque were numbered while revealing Australians were also quickly giving up on cash as they moved to tap-and-go and other electronic forms of payment.
Addressing the Australian Payments Network Summit in Sydney, Dr. Lowe revealed the bank’s traditional survey of payment systems has found another huge fall in the use of cheques. Over the past year, the number of cheques written has fallen by 19% with the value down by 30%. Much of this is due to the real estate sector moving to electronic property settlements. There are now around four cheques written per person every year with most of those in the commercial sector. At the turn of the century, it was closer to 40 cheques per person. Dr. Lowe said cheques were simply not being used by the vast majority of people or businesses. “At some point, it will be appropriate to wind up the cheque system, and that point is getting closer,” he said.
Business confidence dipped amid flat conditions in November, according to a survey of Australian firms. National Australia Bank’s index of business conditions, compiled from a monthly survey of more than 500 companies, was unchanged at +4 points while its index of confidence fell 2.0 points to 0.
ANZ-Roy Morgan Australian Consumer Confidence rose 0.8%, continuing the upward momentum of the previous week. The gain was led by a lift in sentiment surrounding economic conditions – both for the next year and the long term. Current finances gained 1%, while future financial conditions fell 3.9% and, in contrast to current finances, are below average.
The income squeeze hitting the bottom line of Australian families is continuing into its fifth year as people get less overtime while being offered more flexible hours or the chance to work from home. Figures compiled by the Australian Bureau of Statistics show male median weekly earnings over the past year climbed by 1.3% – well short of the 1.7% inflation rate over the same period.
Median weekly earnings for all men edged up to $1275 in the year to August from $1259. Over the past five years, male median weekly earnings have averaged an increase of 1.6% per annum. Through the same period, the inflation rate has also averaged 1.6%. It’s been a better story for women with their median weekly earnings improving by a solid 4.3% over the past year. Since 2014, average weekly earnings for women have climbed by 2.9%. Despite the increase, they are still $325 a week short of the median enjoyed by men with some of the difference due to higher rates of part-time employment.
Former High Court judge and royal commissioner Kenneth Hayne have warned directors they have a legal duty to act on climate change risk, include it in corporate strategies and report on it to shareholders, raising the real prospect that boards failing to act could end up in court. Justice Kenneth Hayne says a sense of helplessness and short-termism is no excuse for inaction on climate risk.
In a private address to business leaders, regulators and government officials hosted by think tank, the Centre for Policy Development, Mr. Hayne also took a swipe at the Morrison government, which has come under criticism for its unambitious emissions reduction policies. He said both “learned helplessness” and “short-termism” yielded “a result that fits comfortably with those who still see climate change as a matter of belief or ideology”. “Framing the most recent debates provoked by the bushfire emergencies as part of the ‘culture wars’ reinforces the notion that climate science is a matter of belief, not scientific observation and extrapolation,” he said. “No less importantly, because the debate remains framed as a debate about belief, learned helplessness and short-termism can be translated into the nativist-populist terms that now have such currency in many political systems.” Mr. Hayne said that international expert consensus was now clear that climate change risk was a matter of fact and boards could not hide behind excuses for inaction.
AUSTRAC is hopeful its court proceedings against Westpac will be wrapped up by February after the bank revealed it would not contest the bulk of the 23 million breaches of anti-money laundering laws alleged by the financial intelligence agency. The explosive case against Australia’s oldest bank was heard in the Federal Court for the first time on Monday as Chief Justice James Allsop sought an update on the behind the scenes negotiations underway between Westpac and the regulator. AUSTRAC’s barrister, Simon White, QC, told the court the agency was “confident” that long, protracted litigation with Westpac was unlikely.
People with less than $10,000 in their superannuation accounts are losing as much as 4.4% of their already modest savings to fees charged by fund administrators, new data from the prudential regulator shows. A heatmap published by the Australian Prudential Regulation Authority on Tuesday also reveals Westpac arm BT is consistently delivering substandard returns to members of MySuper funds. It paints a picture of retirement incomes for some savers in MySuper funds, which are supposed to be simple and low cost, being eaten away by high fees and poor returns. Apra member Helen Rowell said the regulator would use the data to put pressure on trustees to either dramatically improve their performance or get out of the industry by closing or merging funds.
The A2 Milk Company’s chief executive, Jayne Hrdlicka, has resigned suddenly amid simmering tensions with the board over the execution of the company’s strategy and to give her full attention to a family issue. In a surprise move, A2 Milk announced early on Monday that Ms. Hrdlicka would be departing after just 18 months in the role, with long-standing former chief executive Geoff Babidge to take the role on an interim basis. Shares in the infant formula group dropped almost 6% in early trading and by the close, the stock was down 3.9% at $13.97. A2 Milk chairman David Hearn said there were no changes to profit forecasts made at last month’s annual general meeting, and a global search was underway for a permanent chief executive. Mr. Hearn said Ms. Hrdlicka was a ”change agent” who had been aggressively pursuing the execution of a strategy of investing more to build an on-the-ground business in China which the board was still right behind, even though there would now be more focus on preserving profit margins and less on chasing market share.
Investors sensed there was more to the departure than the public statement to the stock exchange early on Monday morning. In the statement, Ms. Hrdlicka said the ”reality” had hit home that over the next three to five years the chief executive would need to be ever-present in the company’s main markets of China and the United States.
Power prices are forecast to fall in most Australian states and territories over the next three years, with energy users in Queensland set to see the biggest benefit. Official forecasts published by the Australian Energy Market Commission (AEMC) show the continued price falls are primarily driven by increasing supplies of primarily renewable energy generation in the electricity market. The advisory body predicts further investment in batteries, wind and solar as an “optimal mix” of generation investment to meet power system needs at the lowest cost to consumers. No new investment in gas or coal generation is forecast beyond projects already committed.
Sydney’s dramatic air pollution crisis stemming from the persistent bush fires burning in the city’s surrounds is threatening to choke the tourism industry. The Harbour City’s image as a tourism magnet and a haven of “fresh air and ocean breezes” is in peril as long as the toxic haze shrouds the city, industry experts say. Already, tourist drawcards relying on outdoor activities are seeing dwindling numbers and commuters. In recent weeks, the air quality has “ranked among the world’s worst.”
And with Sydney’s air quality hitting11 times the hazardous level on Tuesday and the Department of Planning, Industry, and Environment recorded an Air Quality Index in parts of the city above 1400, more than 12 times the 200 level considered hazardous to people’s health, New South Wales Unions urged workers to consider going home. “Air quality in parts of NSW has deteriorated and work outside is no longer safe without protection,” the peak body tweeted . “We’re advising all non-essential workers to work indoors or from home.” “The smoke hazard is 10 times the healthy limit,” Unions NSW Assistant Secretary Thomas Costa told Business Insider Australia. “We consider it illegal to be forced to work in these conditions and will stick up for any worker who wants to down tools.” “Only emergency and essential service employees should be working outdoors today.”
With Australia dealing with its worst drought on record, sentiment in the nation’s agricultural sector is at a 15-month low as Australia’s farmers brace for a hot, dry summer with drought conditions intensifying across large swathes of the country, the latest quarterly Rabobank Rural Confidence Survey has found The driest spring on record – along with bushfires which heralded an early start to summer – saw the latest survey report the sixth-lowest reading in its 18-year history, with two-in-five farmers expecting conditions in the agricultural economy to deteriorate even further in the coming year.
Confidence this survey was down across all commodity sectors and states, except Queensland where it remained subdued. The final survey for 2019, released today, found of the 1000 farmers questioned, 41% expect agricultural economic conditions to worsen in the next 12 months (up from 30% in the September quarter), while 31% expect them to stay the same. Only 17% had a positive outlook on the year ahead, compared with 25% in the previous survey.
The national sheep flock is expected to collapse to its smallest size since 1904 amid warnings the drought’s impact on the economy and the agricultural sector will linger for up to a decade. Analysis by the rural forecaster suggests the farm sector is facing its toughest period since the 1950s when drought and the end of the Korean War wool boom hit producers across most of the nation.
The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) on Tuesday said it now expected farm production to fall another 3% through 2019-20. It would be the third successive annual decline, the first time that had occurred in 63 years. The brunt of the drop is being borne by crop producers.
Wheat production is now expected to be 8.4% down on last year’s drought-affected harvest to be the third smallest this century. Wheat exports are tipped to reach $3.3 billion, a $500 million downgrade on ABARES’ September forecast. But the livestock sector is facing the toughest recovery once the drought breaks. ABARES is forecasting the national flock to fall to 64.9 million as farmers, without access to water and feed, reduce their sheep numbers. It would take the flock to its smallest size since 1904. The flock peaked at almost 180 million in 1970 but has averaged about 70 million over recent years.
Petrol and diesel supplier Viva Energy has flagged a drop in profit of between 28 and 41% this year as improved fuel sales volumes and a strong operation at its Geelong refinery failed to offset the impact of lower retail fuel margins. Underlying net profit after tax is expected to fall to between $135 million and $165 million in 2019, from $229 million last year, Viva said on Monday, citing figures that have been restated after adopting new accounting standards.
Earnings from the refining business are expected to be largely flat, at $120 million-$130 million, compared with $125 million last year. But earnings in retail, fuels, and marketing would fall to between $840 million and $855 million, from $938 million in 2018. The weaker outlook comes as the country’s only other listed fuels supplier, Caltex Australia, is fielding an $8.6 billion takeover approach from Canadian convenience retailing giant Alimentation Couche-Tard. Viva, which owns the former Shell Australia refining and petrol station network, said it had delivered “strong” top-line sales growth of petrol and diesel, with sales volumes up about 4.3% on last year, helped by the restructuring of its retail alliance with Coles in February. The Geelong plant saw periods of record production, it noted.
Prime Media Group has said it’s consulting with Seven West Media about their proposed merger after Bruce Gordon and Anthony Catalano said they would block the deal. Prime said if Mr. Gordon, who holds 11.59% of shares, and Mr. Catalano, who holds a 14.57% stake, voted against the scheme of arrangement then the scheme would not be approved.
And that’s it for this week. And that brings an end to Talking Business for 2019. It’s been a privilege presenting all the week’s business, finance and economics news, in about 30 minutes, with insights from business people and economists.
In the meantime, you can find me on Twitter at talkingbizz, on Facebook and on LinkedIn. And if you want, leave a comment. You can also check this year’s Talking Business episodes on the Acast archives or on the app.
Have a great week, take care, be good and looking forward to bringing you Talking Business starting on February 7 2020. Wishing you all a happy and safe Christmas. And Happy New Year.