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 one in our series for 2019 and today’s date is Friday June 21.
First I talk to Daniel Lai, the CEO of cybersecurity firm archTIS, which has secured an endorsement from the Digital Transformation Agency for its Kojensi Gov offering which provides security for government networks. It will be a great conversation about hacking and cybersecurity.
And then I talk to AMP Capital chief economist Shane Oliver looking at what investors can expect from July 1.
But first, let’s talk to Daniel Lai.
Facebook has unveiled an ambitious plan to create an alternative financial system that relies on a cryptocurrency that the company has been secretly working on for more than a year. The cryptocurrency, called Libra, will shake up the banking system and will have partners as diverse as Mastercard and Uber.
Facebook hopes to begin it next year with 100 partners. It would be the most far-reaching attempt by a mainstream company to jump into the world of cryptocurrencies and could become the foundation for a new financial system not controlled by today’s power brokers on Wall Street or central banks.
The social network hopes it will help 1.7bn people without a bank account to transfer money instantly and affordably, from their mobile phones. Technology to make transactions with Libra will be available as a standalone app – as well as on WhatsApp and Facebook Messenger platforms – as early as 2020.
It will allow consumers to send money to each other as well as potentially pay for goods and services using the Facebook-backed digital currency instead of their local currency. The Libra digital token will be directly backed by government currencies like the dollar or euro, according to a paper describing the technology. Unlike Bitcoin, the best-known cryptocurrency, it will not fluctuate in value any more than real-world money, and it is not likely to appeal to speculators.
To acquire Libra (a reference to the Roman measurement for a pound, once used to mint coins) through a new Facebook subsidiary, called Calibra, users are likely to have to show government identification like a driver’s license, which would make it unappealing for black market transactions like buying drugs. Facebook said the design of Libra would allow individuals to store, spend and transfer money with close to zero transaction fees. Libra is partly targeted at the $613bn annual market for cross-border remittances. Analysts are suggesting Libra could be a huge moneymaker for Facebook, arriving as its growth slows.
President Trump opened the door Tuesday to possibly firing Federal Reserve Chair Jerome H. Powell, an almost unprecedented attack on America’s central bank just as top Fed leaders are meeting in Washington D.C. to decide what to do on interest rates. “Let’s see what he does,” Trump said when a reporter asked him whether Powell should be removed as chair.
The White House looked into whether Trump could remove Powell as Fed chair in February, according to a Bloomberg report. Trump started asking advisers whether he could fire Powell in December after markets dipped on fears of the escalating trade war with China and the Fed’s plans for more rate hikes in 2019.
Trump’s top economic advisers have told him it’s not legally possible to get rid of Powell and National Economic Council director Larry Kudlow insisted Tuesday that there was no White House push to remove the Fed chair, but the president’s ire about Powell has not subsided. “I want to be given a level playing field and so far, I haven’t been,” Trump said before boarding a plane to Florida to launch his reelection campaign.
While President Trump says he and Chinese counterpart Xi Jinping will have an “extended meeting next week” at the G-20 in Japan, his plan to impose tariffs on virtually all products from China is running into a wall of opposition from the business community, amid fears that what began as a temporary negotiating tool is becoming a permanent feature of trans-Pacific trade.
Hundreds of companies this week testified over seven days of hearings on the president’s proposal to expand tariffs to an additional $300 billion in Chinese imports. After a year-long trade war, those are the only Chinese imports that remain duty-free. USTR has received more than 1,600 written comments on the plan, with the overwhelming majority warning that additional tariffs would raise prices for consumers, cost American jobs and disrupt production at companies across the nation. “If we are forced to move production from China, it will take a long time to make sure that new factories will make the garment correctly and can get the proper materials.
The costs may be too great too, as we are barely profitable now,” wrote Mark Corrado, president of Leading Lady, a bra maker in Beachwood, Ohio, who is scheduled to be among the first witnesses. The avalanche of complaints suggests that industry patience with the president’s tariff-heavy trade policy is evaporating.
His sudden threat last month to impose tariffs on Mexican imports in a dispute over border security coupled with fading prospects for a comprehensive trade deal with China explain the increasingly vocal opposition, according to trade analysts and executives. “The tone has changed since the Mexican tariff episode,” Edward Alden, an economics professor at Western Washington University told the Washington Post. “The level of concern in business is going up and the willingness to challenge the president more directly on this issue is increasing.” Senate Republicans, including Senate Finance Committee Chairman Charles E. Grassley of Iowa, are considering legislation that would limit the president’s ability to impose tariffs.
Trump began imposing import taxes on more than $250 billion in Chinese goods a year ago to compel China to treat American companies fairly, particularly by respecting their intellectual property rights. As the confrontation with China intensified, many industry groups swallowed their tariff concerns in hopes that the president would succeed in forcing Beijing to change its practices.
Until early May, that seemed a good bet, as Trump repeatedly said a historic trade deal with China was imminent. But negotiations abruptly stalled six weeks ago, after the president’s chief trade negotiator, Robert E. Lighthizer, accused China of reneging on a tentative deal. Commerce Secretary Wilbur Ross played down prospects for an early accord.
The RBA in minutes of its meeting has signaled that interest rates could fall below 1% by November. The economy is at risk of descending into a slow long-term decline if governments and business fail to take action on significant economic, social and environmental challenges, a new landmark study has warned.
Real incomes could be almost $40,000 higher or lower by 2060 depending on whether or not political, business and civic leaders take bold steps to face up to a world being disrupted by technology, an aging, and growing population and climate change, the Australian National Outlook says. Informed by more than 50 senior leaders from 23 businesses, non-government organisations and universities, the two-year study led by CSIRO chairman David Thodey and National Australia Bank’s outgoing chairman Ken Henry concludes the country is at a “crossroads”.
It identifies the two most likely scenarios for Australia’s future by 2060 – a “slow decline” where GDP grows an average 2.1 percent, or a more positive and ambitious “outlook vision” where GDP expands 2.8 percent annually. The difference amounts to average real wages either being 40 percent higher than today at about $110,000, or 90 percent higher at about $150,000.
The 80-page report and modeling identify five shifts that need to occur across industry, urban, energy, land and culture. Despite a world-record 28 consecutive years of economic growth and among the highest living standards in the world, the report cautions that Australia’s high dependence on mining exports has left the economy exposed to shocks.
Among the five shifts to deliver a more prosperous society, it calls for industry to be transformed. It identifies growth industries including agriculture, healthcare, cybersecurity, hydrogen exports, food manufacturing, mining and metals, construction and education, partly to take advantage of the rising Asian middle class. Industry must also improve on low adoption rates of technology, invest in skills to ensure a globally competitive workforce that is prepared for technology-enabled jobs and develop export-facing growth industries that draw on Australia’s strengths and build competitive advantage in global markets and value chains.
Second, the report says an urban shift will enable well-connected, affordable cities that offer more equal access to quality jobs, lifestyle amenities, education and other services.
Third, a shift to reliable, affordable and low-emissions technology will allow almost all electricity is generated by zero-emissions renewables within 40 years.
Fourth, a land shift will create a profitable and sustainable “mosaic” of food, fibre and fuel production, carbon sequestration and biodiversity, the report says.
Fifth, a shift in culture will encourage more engagement, curiosity, collaboration, and solutions, and should be supported by inclusive civic and political institutions, it says. This would help rebuild trust and respect in Australia’s political, business and social institutions, which has been damaged in recent years. In line with Western democracies, the percentage of people who say they trust the government had fallen to 26 percent by 2016, from 42 percent in 1993.
A growing number of Australians are falling behind on their mortgage, hit by weaker house prices and high levels of debt as more signs emerge that consumers are leading the economy down. Ratings agency Moody’s on Monday reported that the number of delinquencies on residential mortgage-backed securities rose through the March quarter, with 1.58% behind on their repayments, up from 1.48% in the prior March quarter. Moody’s senior analyst Alena Chen said with household debt at almost 200 percent of annual disposable income, a large number of homeowners were financially exposed.
A world-beating performance from Australian shares has been overshadowed by the re-emergence of geopolitical uncertainty and a wave of risk aversion in global markets, leading to softer performance for super funds in the final stretch of the financial year.
According to estimates from leading superannuation research house SuperRatings, the typical balanced option return was -0.7% in May as funds were dragged down by falls in international shares triggered by the re-emergence of the US-China trade conflict and uncertainty surrounding central bank policy.
The bright side has been the resilience of Australian shares and property, both of which saw a brief boost from the Coalition’s surprise election win, but this was not enough to save super funds from a month of negative performance. Markets have since recovered following May’s weakness, but members should not expect a bumper end to the financial year. The year-to-date return is sitting at 5.1% for the median balanced option, which is below the 8.5% per annum return achieved over the past ten years.
AGL has become the second suitor to walk away from Vocus in as many weeks after the power and gas supplier withdrew its $3 billion takeover offer. Shares in Vocus plummeted on Monday after AGL abandoned its pursuit of Vocus, its second tilt at the business, less than a week after it became public. AGL is the fourth bidder to call off takeover talks with Vocus in two years.
Coles is aiming to cut costs by about $1 billion by 2023 to reinvest in its stores and supply chain and grow sales at least in line with the $100 billion food and grocery market. In a strategy update, the first since Coles demerged from Wesfarmers last November, chief executive Steven Cain said the “refreshed” strategy was based on three pillars – inspiring customers through best value food and drink solutions to make their lives, smarter selling through efficiency and pace of change and winning together with team members, suppliers and communities.
Coles plans to differentiate itself from Woolworths, Aldi and Metcash’s IGA retailers by optimising its store and supply chain network, growing private label brands and becoming a destination for health, and creating Australia’s most sustainable supermarket. Mr. Cain is aiming to grow revenues at least in line with the market over the long term and cut costs by about $1 billion over four years using technology to automate manual tasks and simplifying above-store roles to remove duplication and offset rising energy and labor costs. Coles aims to restore profit growth by 2021.
A proposed $2 billion Indigenous-led coal-fired power station in Collinsville in North Queensland — developed by Brisbane-based Indigenous company Shine Energy and headed by traditional Biri man Ashley Dodd — is set to revive one of the country’s oldest coal towns. The town’s population has declined by 50 percent over ten years and the town is struggling to survive. It will take a decade for construction to be completed generating 2,000 jobs in the region. The project would focus on indigenous employment.
And that’s it for this week, and next week I’ll be talking 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.
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.