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 thirty-seven in our series for 2019 and today’s date is Friday October 11.
First I talk to Colin Anson, who created pixevety, a photo management system designed to provide families and schools with a secure but accessible means of sharing photos and videos, in a way that protects children’s right to privacy.
And then I talk to AMP Capital chief economist Shane Oliver analysing the RBA’s decision to cut interest rates to 0.75%.
But first, let’s talk to Colin Anson.
Don’t hold your breath waiting for any breakthrough in trade talks between the US and China. Chinese officials are signaling they’re increasingly reluctant to agree to a broad trade deal pursued by President Donald Trump, ahead of negotiations this week that have raised hopes of a potential truce.
It also coincides with America’s commerce department announced that it will add 28 Chinese companies and government bodies to an export blacklist for their alleged role in repression in China’s Muslim-majority western region of Xinjiang. In meetings with U.S. visitors to Beijing in recent weeks, senior Chinese officials have indicated the range of topics they’re willing to discuss has narrowed considerably. Vice Premier Liu He, who will lead the Chinese contingent in high-level talks that begin Thursday, told visiting dignitaries he would bring an offer to Washington that won’t include commitments on reforming Chinese industrial policy or the government subsidies that have been the target of longstanding U.S. complaints.
At the same time, Trump’s extraordinary request for China to investigate the Bidens potentially offers Beijing crucial leverage in upcoming negotiations as it seeks to end the trade war with the US. It also mirrors his 2016 comments as a presidential candidate when he invited Russia to release the emails of his Democratic opponent Hillary Clinton. Any trade deal struck with the world’s second-largest economic power would be subject to immediate scrutiny – and raise questions whether Trump offered Beijing beneficial terms in exchange for dirt on his political rivals. The moves suggest “a whole lot more than tariffs will be on the dinner menu when Chinese Vice Premier Liu He visits Washington for trade talks with his US counterparts.
The decline in house-building eased in September even as apartments and engineering work contracted at a faster rate, collectively pulling the construction industry into its 13th straight month of decline, the latest Performance of Construction Index shows. The index based on a monthly survey of construction industry purchasing managers – a leading indicator of activity – fell 2 points to 42.6 last month, dragged lower by sectors such as weaker apartment construction and infrastructure-related activity.
The index comprises the balance of respondents saying conditions are better than the previous month with those saying they are worse. A score of 50 indicates no change, while above 50 shows growth and below 50 indicates contraction. The further from the 50-median, the faster the pace of growth or decline. And as I said, it’s now 42.6.
After falling 2.6% in August, ANZ Job Ads recorded a small gain of 0.3% in September. This saw the annual decline fall to -10.4%. In trend terms, job ads fell -0.2% for the month and -10.9% for the year.
The Morrison government’s post-election honeymoon with business is over with the respected and long-running NAB business survey finding a drop in business confidence and little change in the below-average conditions in September. Conditions edged up marginally over the month, while confidence dropped. It is the sixth consecutive month business conditions have been stuck below the long-term average and they are well below levels enjoyed a year ago. Business conditions have been below their long-term average for over six consecutive months and are well down on this time last year. Retail, manufacturing, and construction are three sectors that are continuing to struggle. Employment is holding up, but the growth in new jobs is slowing.
Get used to low-interest rates for a long time. A Bank for International Settlements report says interest rates will stay lower for longer and force institutions like the Reserve Bank of Australia into more “unconventional” policy to boost economies. The BIS, known as the central bank to the world’s central banks, has been growing increasingly concerned about the state of the global economy. It found that that a series of substantial global trends would mean central banks were more likely to be forced into ultra-low rates for extended periods of time that would also increase the use of unconventional policies.
Its research into unconventional monetary policies such as negative interest rates and the creation of money to buy government bonds that were used in the aftermath of the global financial crisis follows criticism in some economic circles about their unintended consequences. The bank found that while there were some negative impacts, such as encouraging people not to save, unconventional policies, in general, prevented the financial crisis from becoming a much more deep-seated economic downturn.
After soaring as much as 21% in 2019, Australia’s benchmark stock gauge is beginning to stumble. The S&P/ASX 200 Index has broken the uptrend it has been in since the end of last year and has slipped back below its 50-day moving average.
Australia is rich and dumb, and getting dumber. The Australian economy lacks complexity and struggles to develop the industries required to maintain its place in the upper echelons of the developed world, according to Harvard University’s Atlas of Economic Complexity.
Having been “lulled into inaction by the resources boom,” the nation’s companies have struggled to innovate. The enormous wealth generated by iron ore, coal, oil and gas masks, and probably contributes to, an economy that has failed to develop the industries needed to sustain its position among the top ranks of the developed world. On the primary metric used in the database, an index of economic complexity, Australia fell from 57th to 93rd from 1995 to 2017, a decline that is accelerating. Australia’s top trading partner, China, rose from 51st to 19th over the same timeframe. Singapore has broken into 19 new global industries in the 15 years to 2017, while Australia entered just seven.
The Morrison government should increase Newstart by nearly $100 a week, KPMG says, with the accounting giant calling for an even larger rise for welfare groups and arguing the low rate of the payment “tears at our inclusive social contract”. In a submission to a Senate inquiry into welfare allowance payments, KPMG said the current rate was too low to help people meet their material needs, such as eating to a healthy standard, keeping a roof over their heads, maintaining clothes for interviews and traveling to Centrelink appointments. An increase would benefit the economy by stimulating spending, particularly in regional areas, the firm said, because Newstart recipients “spend, rather than save, almost all they receive”. To avoid what is called a “socially damaging state of affairs,” KPMG said the government should raise Newstart to 50% of the minimum wage and 80% of the age pension.
The Federal Government is pushing up power prices for consumers instead of bringing them down with its “picking winners” policy of funding some energy projects, according to the Grattan Institute. In March this year, Energy Minister Angus Taylor announced 12 projects to be underwritten with taxpayer funds, ranging from upgrading coal-fired power stations to building new hydro plants The Grattan report rates six of the projects the Government has picked as dubious.
These include pumped-hydro projects proposed by BE Power in Queensland, Hydro Tasmania and UPC Renewables in NSW, as well as a gas plant in NSW owned by Australian Industry Energy. The report shows none of these yet has development approval, there isn’t a clear need for them, and in three cases it’s unknown how much power they would actually contribute to the grid. Delta Electricity’s Vales Point coal-fired power station upgrade is the only project the Government is underwriting where the Grattan identifies a “clear need”.
BHP has told investors its oddly controversial decision to invest $US400 million trying to mitigate the greenhouse emissions of its customers is all about preserving markets and creating long-term shareholder value. In its address to shareholders in London, Australia’s biggest miner has vowed that “social value” considerations such as climate change and water policies will underpin its future business decisions alongside financial considerations, as the company reinforces its goal to remain sustainable and competitive in a rapidly changing world.
Telstra is the latest company seeking to increase the skills of its workforce by forging university partnerships. As part of a new $25 million training package, the telecommunications giant will use “workplace coaches” to strengthen staff in “skills, practice, and mindset”. But it is the new university partnerships that will lift this training to an industrial level of output. From the end of this year, the University of Technology, Sydney, will begin teaching Telstra employees big data, machine learning and artificial intelligence. From February 2020, micro-credentials in software-defined networking will be offered to staff in partnership with RMIT University in Melbourne. And from next April, micro-credentials in cyber technology will be offered through the University of NSW.
Deliveroo’s new Australian chief executive Ed McManus has grand plans to expand the food delivery platform into groceries. Amazon led a $US575 million ($850 million) funding round for Deliveroo in May and the new CEO said the delivery platform was looking to expand beyond cooked food. Meal-kit platforms like HelloFresh and Marley Spoon already offer home delivery of groceries but Deliveroo believes there is still room to expand. The food platform has invested heavily in its Editions or “dark kitchens” – built specifically for online food deliveries – and recently launched its Restaurant Revival to help restaurants on food procurement and data to curate their menus.
ANZ’s half-year cash profits will be hit by a $559 million customer remediation bill, the bulk of which relates to products and services the bank is not offloading in its planned wealth business sale to IOOF. The bank informed the Australian Securities Exchange on Tuesday that costs emanating from its remediation program will run to $405 million after-tax for “fee and interest calculation and related matters” in its core retail and commercial banking businesses.
Nine has pushed through the threshold it needs to take over radio broadcaster Macquarie Media. Nine announced on Monday it had increased its holding in Macquarie to 92.8%. This came after venture capitalist Mark Carnegie agreed on Friday to sell his 3.6% stake to Nine at its $1.46 per share offer. Nine, which owns the Financial Review, now has the 90 percent it needs to compulsorily sweep up the rest of Macquarie’s shares.
The media regulator has launched an investigation into the complex set of holdings WIN Corp owner Bruce Gordon has had in rival regional television broadcaster Prime Media. The Australian Communications and Media Authority has been examining Mr. Gordon’s interests in Prime for the past month after the corporate regulator forced the media mogul to sell down his economic holdings to less than 20%. The investigation by ACMA continues but the media regulator would be likely to conclude Mr. Gordon did not intentionally exceed the maximum 15% of voting shares he is allowed to own in Prime. Rather, the breach was an error because of a middleman who did not correctly execute a swap with Swiss bank Vontobel. ACMA is to release its findings soon. Mr. Gordon’s total holdings in Prime had been unclear until the notice in September detailing a request by the Australian Securities and Investments Commission to reduce his exposure. Mr. Gordon is prevented from owning more than 15% of Prime securities by the rule barring an owner holding more than one television license in a market.
A non-bank lender expected to float on the stock exchange by the end of the year signed up 100 real estate agencies nationwide to tap what it sees as a major business opportunity – lending to cash-poor homeowners preparing to sell their properties. MoneyMe, which has positioned itself as a fintech company offering fixed installment personal loans worth up to $25,000, introduced its new ListReady service after identifying a hidden potential in real estate advertising. The move may also motivate more listings as reluctant vendors wait for further house price increases to make their move. MoneyMe’s idea is to allow vendors to borrow up to $25,000 through their real estate agent for minor repairs in the lead up to selling their homes. Repayments would be postponed until after the house is sold.
Clothing prices are set to rise as the trade war between the US and China pushes up retailers’ sourcing costs, compounding the effect of the weaker Australian dollar. Many Australian retailers are hoping the trade war will lead to spare capacity in China and therefore better deals from Chinese suppliers as major US companies such as Macy’s, GAP and PVH Corp shift away from China to cheaper countries such as Vietnam, Bangladesh, and Cambodia. But sourcing costs are likely to rise as Chinese manufacturers close factories and increase prices in an attempt to protect their bottom line and Australian retailers do not have sufficient volumes to replace the loss of sales from major US chains.
Former Bluescope executive Jason Ellis has been charged with two counts of inciting the obstruction of a federal official as part of an alleged cartel case. The Australian Competition and Consumer Commission said Tuesday that charges had been laid by the Commonwealth Director of Public Prosecutions, and related to actions allegedly taken by Mr. Ellis during the ACCC investigation into alleged cartel conduct by BlueScope. That cartel investigation is the subject of separate civil cartel proceedings filed by the ACCC against BlueScope and Mr. Ellis, a former general manager of sales and marketing. ACCC chairman Rod Sims said it was the first time any individual had been charged with inciting the obstruction of a Commonwealth official as part of an ACCC investigation.
And that’s it for this week. And next week, I’ll be talking to Ben Revell, who has introduced winebuyers.com. He has made a difference in e-commerce wine retailing. It’s a case of tech meets old school, with a wine club that offers consumers the chance to buy wine at the same price direct from the supplier and which lists over 50,000 wines and spirits. Working on a completely transparent model, Winebuyers do not mark up prices or charge commission on any item sold, enabling customers to buy wines at exactly the same price as they would from the supplier direct. Winebuyers makes its revenue from charging suppliers a subscription fee and custom-built API’s automate the entire process.
And I’ll be talking to IFM Investor’s chief economist Alex Joiner analysing the RBA rate cuts.
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.