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 two in our series for 2019 and today’s date is Friday June 28.
First I talk to Toby Littin, the CEO of Auckland based Parkable, a Deloitte Fast 50 winner, which provides staff parking solutions for enterprises and small businesses and a sharing economy-style public parking app and which has just entered the China market.
And I’ll be talking to RMIT economist Professor Sinclair Davidson about the government’s chances of getting its tax cuts package up in the following week with the new parliament resuming post-election.
But first, let’s talk to Toby Littin.
Listen to the full podcast here:
Fund managers aren’t holding their breath ahead of this week’s meeting between presidents Donald Trump and Xi Jinping, saying they don’t expect much progress to be made when they meet at the G20 on Friday and Saturday. A common view among China investors: there’s little chance the two leaders will suddenly reach an agreement and resolve a trade dispute that has weighed on markets over the past year.
The market consensus expects a possible detente in Osaka but no substantive agreement. An agreement of any kind, however, might not matter. A US-China agreement to keep negotiating on trade doesn’t mean they’ve made any progress on the points that divide them: codifying intellectual property protections, opening up China to more foreign investment, measures to rebalance the trade deficit, and the timing of the removal of existing tariffs. Indeed, the damage to the U.S. and global economies may already have been done with the imposition of import tariffs that are disrupting manufacturers’ supply chains, eroding business confidence and investment, and raising prices for business and consumers.
But Prime Minister Scott Morrison will call for urgent reform of the World Trade Organisation at the G20 by recognising the legitimacy of many of the United States’ grievances with China and declaring international trade rules are no longer capable of dealing with Beijing’s behaviour. At the same time, the Prime Minister will warn the “collateral damage” caused by the US-China trade war was spreading and that both sides needed to resolve their dispute in a way which did not undermine the interests of other nations, including Australia.
During his interview on NBC’s Meet the Press, President Trump blasted Federal Reserve Chairman Jerome Powell, claiming Powell has “raised interest rates too fast.” Insisting to host Chuck Todd that he never threatened to demote Powell despite reports to the contrary the president complained that he hasn’t gotten the benefit of low rates but that the economy will “bull through it.” “But I’m not happy with his actions,” Trump said. “No, I don’t think he’s done a good job. I think this if he didn’t raise rates Obama had very low rates. So Obama was playing with funny money. I wasn’t. I’m playing with the real stuff.”
Reserve Bank governor Philip Lowe has urged the Morrison government to get infrastructure projects “shovel-ready” in case they are needed for an emergency stimulus to pull Australia out of an economic downturn. Dr. Lowe said the Coalition should borrow while interest rates were at record lows to fund construction of projects. The central bank board is tipped to cut interest rates to 1% when it meets in July, as weak wages, employment, and inflation data continue to hamper the federal government’s claims of an economic recovery. Dr. Lowe also said major infrastructure funding should be run like monetary policy – at arm’s length from the government – so that voters trust it is fit for purpose.
A scramble by financial service companies to bring in external consultants to help compensate customers in the wake of the banking royal commission has helped Deloitte post record revenue of $2.3 billion, up 13% for the year. The strong top-line result was also driven by the big four consulting firms’ surging advisory business – revenue in consulting was up 19% in the year – and despite the slowdown in business buying due to the federal election.
Data from a global banking standards body shows oversight of Australian banker pay is way out of step with global standards putting it dead last in a study of 20 peer nations. A progress report from the Financial Stability Board (FSB) reveals Australian banks have not addressed four of 12 standards designed by the FSB making it the worst performer in a survey that includes Russia, Mexico, and Saudi Arabia. The FSB developed the set of principles and implementation standards in the aftermath of the GFC to promote sound pay practices and align compensation with prudent risk-taking.
The sixth report has chosen to zero in on Australian remuneration practices and deficiencies as a case study. Board oversight of banker pay has been a particular failing of Australian banks according to the FSB who gave Australia a ‘red’ rating across three of six standards relating to governance, meaning no significant bank had implemented the FSB’s recommendations. The next worst performers were Russian banks who attracted a ‘yellow’ rating across three of the six standards relating to governance, meaning most significant banks had implemented the standards but not all of them. Released last week, the report has special significance in Australia where the majority of shareholders at NAB, Westpac, and ANZ voted against the remuneration report during the AGM season in December.
Sales of new cars in Australia have fallen for 14 consecutive months, according to the Federal Chamber of Automotive Industries. More than 1.1 million new vehicles were sold in Australia over the 12 months through May, down 7% on the previous period — which CommSec said was the biggest annual decline in more than nine years. In addition to economic conditions, there are other shifts occurring in the market that could prove a speed bump for car sales. Car sharing is a growing industry in Australia and could be a viable alternative to ownership for inner-city drivers.
A deal with the Senate crossbench to pass the $158 billion in tax cuts is looking increasingly likely after Labor effectively ruled itself out of the debate with a complicated compromise offer that was rejected immediately by the government. Tasmanian Senator, Jacqui Lambie, who has formed a loose bloc with Centre Alliance, could also support the tax cuts. Should the government win crossbench support, a divided Labor Party might still find itself having to explain to voters whether it will repeal the top end tax cuts if it wins the next election, potentially keeping the issue alive for years.
At a meeting of the shadow cabinet on Monday, Labor resolved that it would ask the government to split the bill for its three-stage, $158 billion tax package when it came to Parliament next week. It also demanded the government bring forward the second stage by three years to July 1 this year, the same time as stage one begins, this year to maximise the economic stimulus.
But it continued to withhold support for stage three, which is due to begin in 2024, and believes this should be split from the bill and be debated at a later date. The government immediately rejected the proposal, as did key crossbench party the Centre Alliance, which is seeking assurances from the government for lower gas and power energy prices in return for supporting the whole tax package. It is understood independent Tasmanian Senator, Jacqui Lambie, who has formed a loose bloc with Centre Alliance, could also support the tax cuts if satisfied with the energy price guarantees. This would deliver the tax cuts and sideline One Nation.
But Home Affairs Minister Peter Dutton has infuriated the federal government’s potential allies in Senate negotiations over income tax cuts worth $158 billion, putting a “cordial relationship” at risk with his eagerness to repeal refugee medical transfer laws. The row has triggered a warning from Centre Alliance, which has two crucial votes in the Senate, against any government plan to scrap the law passed in February allowing doctors to recommend the transfer of refugees to Australia for medical treatment. Angry at the way Mr. Dutton has characterised the refugee law, Centre Alliance Senator Stirling Griff accused the Home Affairs Minister of an “outright lie” and said the false claims would undermine talks on the sweeping tax cuts.
The new warning comes after One Nation leader Pauline Hanson attacked the government for failing to negotiate with her on its tax cuts while Tasmanian independent Jacqui Lambie keeps the government guessing on her stance.
Prime Minister Scott Morrison has vowed to slash government red tape to unlock investment and opened the door to industrial relations reform, challenging business to make the case for change and to deliver “shared gains” for workers and employers. In his first major domestic policy speech since winning the election last month, the Prime Minister rebuffed criticism his government lacks a reform agenda also outlining plans to overhaul the vocational training system and embrace technology to deliver greater competition in banking, insurance, and utilities for consumers.
Declaring his task is to get consumers and businesses “off the economic sidelines”, Mr. Morrison also ratcheted up pressure on Labor to back the full $158 billion income tax cut package, which would deliver an immediate boost to the economy the equivalent of two interest rate cuts. In the wake of pleading from the Reserve Bank that monetary policy alone was not enough to drive growth, Mr. Morrison said that regulatory and bureaucratic barriers that stop businesses investing need to be lifted to “provoke the much needed ‘animal spirits’ in our economy”. With the Coalition gun-shy on workplace reform since the backlash against WorkChoices in 2007, Mr. Morrison told the West Australian Chamber of Commerce and Industry new Industrial Relations Minister Christian Porter will take a “fresh look at how the system is operating and where there may be impediments to shared gains for employers and employees”.
The Morrison government has signaled a major overhaul of the superannuation sector. Assistant Minister for Superannuation and Financial Services Jane Hume has set a deadline of 2021 for the shake-up, the year the compulsory superannuation guarantee is set to rise from 9.5 to 10%. The changes include reintroducing legislation to make all superannuation opt-in for under-25s, saving $2.6 billion in fees. Senator Hume plans to act on the Productivity Commission’s recommendations for the sector after a review found workers could be entitled to an extra $500,000 for retirement.
Spotless Group Holdings has submitted a formal application for the removal of Spotless from the Australian Securities Exchange (ASX) official list. The Spotless Board said it considers the delisting to be in the best interests of Spotless and its Shareholders because they are seeking to minimise their expenditure and want to reduce costs. Also, they have seen low trading volumes and an erratic share price. Two shareholders in Spotless collectively hold 99.44% of the ordinary shares in Spotless which have been trading at $1.76.
The News Corp tabloid newspaper the Herald Sun is offering journalists a financial bonus of between $10 and $50 for driving digital subscriptions and traffic through their own stories. If readers land on a paywalled story and they decide to subscribe to access the full story, the reporter will be financially rewarded after a certain target is reached, potentially earning them hundreds of dollars extra each week. This is a wrong decision because research shows increased traffic does not lead to more advertising. Secondly, it encourages clickbait. Thirdly, reporters will focus on stories about crime, sex, and entertainment, not investigative journalism, politics, and analysis. And fourthly, it will cost the loss-making Herald Sun money.
Independent retail wholesaler Metcash’s full-year underlying profit has fallen 3%, to $210 million, with earnings growth in its hardware and liquor businesses unable to fully cover falls in groceries. The company said on Monday that food sales to IGA, Drakes and other supermarkets fell 0.5%, driven by poor trading in Western Australia. Earnings from the grocery business fell 3%. Like for like sales at the IGA fell 0.5 %, which was an improvement from a 0.9% fall last year. Metcash’s sales to its Home Timber and Hardware and Mitre 10 stores were hit by the slowdown in housing construction and the loss of a large customer in Queensland and fell 0.9%. Bottom line net profit after tax for the year was $192.8 million, compared to a $148 million loss last year, which was driven by a $345.5 million in write-downs and goodwill impairment.
Online retailer Kogan.com has announced plans to enter the retail energy market in a multiyear agreement with Powershop Australia, the company that will provide the power and gas services. The new offering will be named Kogan Energy and is expected to be launched before December 31. The agreement would simplify the provision of power and gas services and make “these essential services more affordable through digital efficiency”, Kogan said in a statement to the Australian stock exchange.
Australia’s female athletes are struggling to cash-in on their surging popularity and the tidal wave of publicity generated by stars like Ash Barty, Steph Gilmore, and the Matildas. Despite the growing interest in female sport, the salaries earned by the athletes themselves remain “despicable,” according to M&C Saatchi Sport & Entertainment managing director Jamie Gilbert-Smith. Brands and sporting associations need to close the pay gap between male and female athletes and invest in growing women’s leagues to capitalize on the recent surge in popularity, he adds.
Transurban could get taxpayer compensation for closing lanes on its CityLink cash cow to build its next massive toll road, the West Gate Tunnel. In another windfall to the tolling giant, the company would also be compensated if the government introduced a congestion-busting tax on motorists. Transurban, which owns CityLink, is now building the West Gate Tunnel, a $6.7 billion project linking the West Gate Freeway in Yarraville and CityLink in the Docklands. Thousands of West Gate Tunnel documents were released by the state government last week, including an unredacted version of the project’s contract.
It reveals that Transurban would be compensated if it loses tolling revenue by closing traffic lanes on Citylink in order to build the tunnel. The payments would apply if the traffic disruptions were unforeseen and had not been scheduled with Transurban. They could arise from planning approval delays, changes to the project’s design or new laws affecting the road. If the road’s builders CPB Contractors and John Holland are responsible for unforeseen CityLink disruptions, the joint venture would be slugged with the bill. This is designed to minimise unplanned impacts or extended delays to motorists. But the builders’ bill is capped at an undisclosed amount, with the government to pay any outstanding fees. An independent auditor has been barred from calculating the compensation payments, the documents also show.
And that’s it for this week. And next week, I’ll be talking to Professor Jason Potts, a director of the Blockchain Innovation hub at RMIT, who looks at how Facebook is changing the banking system with its cryptocurrency model. And he says, it will be followed by others, like Apple and Microsoft. So banks should watch out.
And I’ll be talking to RMIT economist Jonathan Boymal looking at what’s ahead in the Australian property market with the RBA cutting interest rates
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.
