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-six in our series for 2019 and today’s date is Friday July 26.
First I talk to Philip Morris, Australia Managing Director Tammy Chan looking at how the company has closed the pay gap between male and female employees and embraced gender equality. It’s a model for other businesses.
And then I’ll be talking to economist Callum Pickering, looking at Australia’s latest job market figures. They’re not good, and he says they will get worse.
But first, let’s talk to Tammy Chan.
The global economy is in a “precarious” position and likely to slow, the International Monetary Fund (IMF) has warned. Releasing its mid-year update to its world economic outlook, the IMF downgraded forecast growth for this year and next by 0.1 percentage points. At 3.2%, world gross domestic product (GDP) growth is tipped to be its slowest since 2009, during the depths of the global financial crisis.
Amazon is hoping to build up its channels streaming business for launch in Australia in 2020. Amazon has been meeting with local content providers and broadcasters to scope out their interest in putting their content on Amazon Channels. Amazon Channels is an additional product available on top of subscription video-on-demand service Amazon Prime Video, which launched in Australia in 2016. It acts as a hub, or aggregator, for third-party channels and streaming services in a similar vein to Foxtel and Fetch, except it does not involve hardware such as a set-top box.
In the US, Amazon has more than 100 channels, ranging from HBO, Showtime, CBS All Access, Major League Baseball, NBA League Pass, Comedy Central, and STARZ. The US viewing landscape is highly fragmented. For content providers, Amazon Channels is another avenue to market to tap into people who don’t subscribe to traditional cable TV. For consumers who don’t have cable or Pay TV, Amazon Channels essentially acts as a new format of pay-TV provider, but online-only, and allows them to pick and choose their content.
In the US, Amazon makes channels available to its Prime subscription customers for a fee – for example, the HBO channel is $US14.99 per month and Showtime is $US8.99 per month – and gives those third-party providers an avenue to market leveraging Amazon’s scale. However, in Australia HBO and Showtime do not have direct-to-consumer streaming services as they do in America, and they have signed exclusive deals with Foxtel and Stan, which is owned by Nine, publisher of the Financial Review, The Age and Sydney Morning Herald. The deals also cover life-of-series, meaning Amazon would not have access to popular shows that began during the current deals as long as they continue to be made.
This coincides with the former chief executive of Foxtel warning the pay-TV business will need to have a dramatic overhaul to stay competitive and shore up its earnings as Australians turn towards Netflix. Peter Tonagh, who was Foxtel’s CEO for about two years until January 2018 when he was replaced by Patrick Delany, says that the embattled business would not be able to spend as much on content, including sports, in future. Foxtel is set to make a swathe of changes next week, which is expected to include a rumoured partnership with Netflix and software updates to the iQ3 and iQ4 set-top television boxes.
The federal government has accused Labor of being trapped in a welfare mentality over its calls to increase Newstart. a move Treasury has forecast will cost $12.5 billion over the four-year forward estimates and $39 billion over a decade. Facing growing calls to boost the unemployment payment by as much as $75 a week, the government has gone on the offensive, accusing Labor putting welfare before aspiration. On Newstart, Labor has not nominated a dollar increase, just that it should be boosted following a review. The Greens and the welfare lobby are among those calling for $75 a week.
Others demanding an increase to Newstart, which had its last above-inflation boost in 1994, include the Business Council of Australia, KPMG, the ACTU, Coalition backbencher Barnaby Joyce and National Seniors Australia. The seniors’ group has become engaged as a consequence of growing unemployment among older people of working age, some of whom, especially women, are destitute. There are 173,196 people aged over 55 on Newstart. The government is ideologically opposed to a real increase in Newstart and it argues that most recipients of the payment – currently $277 a week – are on other welfare payments as well. It argues Newstart is designed to help find work and is not meant to be a living allowance, like the aged pension. And it is also guarding its promise to return the budget to surplus in 2019-20.
Low interest rates won’t be enough for Australia to generate wage growth, the Reserve Bank and Morrison government have been warned amid signs shoppers are continuing to tighten their belts. As Labor calls on the government to do more for those parts of Australia where the jobless rate is above 20%, an exclusive analysis by Ernst & Young suggests a key part the RBA’s plan to lift wages may fail without a major change in government policy. The bank has cut official interest rates twice since the start of June with the stated aim of driving the unemployment rate down to at least 4.5%, which it believes will be low enough to put upward pressure on wages.
But Ernst & Young chief economist Jo Masters said there were now 462,000 more Australians looking for work than job vacancies while under-employment – those people wanting more working hours – is 8.2%. Ms. Masters pointed to the US, where the unemployment rate was at a 50-year low and there were 1 million more vacancies than people out of work and yet wage growth was only now starting to lift. In NSW there were 115,000 more people looking for work than available vacancies, in Victoria 98,000 and in Queensland 128,000.
Top financial executives may soon have to wait seven years to claim all their bonuses, as the banking, insurance and superannuation regulator moves to align pay with long-term performance. APRA is proposing to cap the financial performance component of executive incentives to 50%. The proposals would allow boards to claw back remuneration for up to four years after it was issued if problems later arose The executive pay guidelines follow scathing findings from the banking and financial services royal commission Responding to a key recommendation from the financial services royal commission, the Australian Prudential Regulation Authority (APRA) concluded that existing remuneration practices were “not incentivising the right behaviours” in financial companies.
The “far-reaching” proposals would see lucrative bonuses for top executives deferred for as long as seven years and give company boards the power to claw back incentives up to four years after they were paid out in cases where poor performance or misconduct became apparent. The overhaul of executive pay would cover all APRA-regulated entities, including the “big four” banks and AMP, which were heavily criticised in Kenneth Hayne’s royal commission findings earlier this year, with a focus on senior executives at “complex” institutions. APRA deputy chair John Lonsdale said the commission’s findings played a key role in prompting the changes.
Carlton & United Breweries, the maker of seminal Australian brands like Victoria Bitter, Carlton Draught, Great Northern and Crown Lager, has been acquired by Japan’s Asahi for $16 billion. With local beer sales slumping in recent years, the blockbuster takeover may help facilitate a revival of sales locally, industry advocates say. CUB’s previous owner was the Brazilian beer behemoth Anheuser Busch InBev. The deal will “trigger a review” from Australia’s competition watchdog, beginning with an assessment of Asahi’s new combined market share
The Foreign Investment Review Board will take a close look at Japanese brewer Asahi’s financing and tax mitigation practices in Australia before it approves the $16 billion acquisition of Carlton & United Breweries. Judging by the capital structure of Asahi’s Australian business, which makes Schweppes and Pepsi soft drinks, Spring Valley juices, Cool Ridge bottled water and Mountain Goat beer, the Japanese brewer is likely to look at tax-effective ways to maximise returns from its latest acquisition. According to Asahi Australia’s accounts, the company earned $101.5 million before interest and tax on revenues of $1.8 billion in the year to December 30, 2018, but paid $84.8 million in finance costs, reducing its pre-tax profit to just $18.4 million. At least $80 million of the finance cost was interest or ”dividends” on $816.6 million in redeemable preference shares, which were issued on December 29 to repay an $816.6 million interest-free related party loan from Asahi Group.
The chief executive of the world’s largest mining company has endorsed drastic action to combat global warming, which he calls “indisputable”, and an emerging crisis. “The planet will survive. Many species may not,” the BHP chief executive officer, Andrew Mackenzie, told a business breakfast in London on Tuesday. “This is a confronting conclusion but as a veteran geologist once said, ‘you can’t argue with a rock’.” Mackenzie endorsed carbon pricing but said it was not enough to combat the looming threat of mass extinctions and major sea rises. He announced BHP was spending $US400m ($A570m) to create a climate investment program to reduce emissions from its own operations as well as those generated from its resources.
A judge has given Clive Palmer a dressing-down for his absence during the Queensland Nickel (QN) trial, saying other people who represented themselves in court could not afford to hire lawyers and still showed up every day. Despite Mr. Palmer’s personal wealth valued at $4 billion, Mr. Palmer has chosen to represent himself in the trial which is looking at the months leading up to the downfall of the Townsville refinery which went into administration in January 2016. Clive Palmer has been missing in action during some days of trial.
Mr.Palmer sat at the bar table in the court for the first two days of the trial last week but was then nowhere to be found after that. Mr. Palmer says his work as a company director had stopped him from making it to court Justice Mullins said usually company directors hired lawyers so they don’t waste time Liquidators are trying to claw back $200m from Mr. Palmer and his associates The billionaire, who once listed litigation as his hobby in his Who’s Who entry, has missed almost two days of the Supreme Court trial in Brisbane while acting as his own barrister against a liquidators’ bid to claw back $200 million from him and his associates. Mr. Palmer told the court on Monday he was torn between being a self-represented litigant and a busy company director.
Justice Debra Mullins shot back that most people in his position hire lawyers “so they don’t waste time in court”.The businessman also told the court on Monday morning he planned to lodge an application to challenge the claim by a lawyer for liquidators Graham Gibson last week that Mr. Palmer’s mining tenements in the Galilee Basin were “worthless”.He released a statement on Friday describing liquidators as “bloodsuckers and leeches” in their liquidation of Queensland Nickel.
Profit margins at Australian restaurants have nosedived since the arrival of delivery apps like UberEats and Deliveroo. With apps scooping up about 30% of food order totals just in commission, margins have plunged from about 10% to between 2% and 4%, according to the Restaurant & Catering Industry Association. The group also claims Australia’s “urban and restaurant culture” has inexorably shifted: more consumers are beginning to abandon eating in, forcing establishments to strip-out seating and sack wait staff to “survive.”
Online retailer Kogan.com returned to earnings growth in the June-half but growth in new customers, sales and commissions is slowing amid increased competition from Amazon, eBay, Catch Group and omnichannel retailers. Chief executive Ruslan Kogan said that earnings before interest tax depreciation and amortisation had risen more than 25%in the six months ended June 30 after falling 5.7% in the previous half-year, and more than doubling in 2018. Gross transaction values, which includes sales and commissions from verticals such as Kogan Mobile, Kogan Internet, Kogan Insurance and the new Kogan Marketplace, rose more than 9% in the June-half.
This compared with GTV growth of 12.9% in the December-half and 47.3% in 2018. Growth in new customers has also slowed, with active customers rising 4.3% to 1.609 million in the June-half and by just 1.3% in the June quarter, well below the 32.2%active customer growth in the first half of 2019 and 45.3% in 2018.
And that’s it for this week, And next week, I’ll be talking 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.
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.