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 eight in our series for 2019 and today’s date is Friday, March 22.
First, I’ll be talking to Mayfair 101 CEO James Mawhinney who will be talking about the Mayfair 101 the IPO Wealth fund, which has raised over $30m from predominantly SMSFs. James believes there’s been an expansion in the breadth of investment scope from SMSFs, and thus is anticipating an uptick in investments in technology, both directly and indirectly.
And I’ll also be talking to RMIT economist Sinclair Davidson, looking at the state of the economy in the lead up to the election and what it means for the Federal Budget due in 10 days’ time.
But first, let’s talk to James Mawhinny.
British Prime Minister Theresa May will ask the European Union to delay Brexit by at least three months after her plans for another vote on her twice-defeated divorce deal were thrown into crisis by a surprise intervention by the Speaker of parliament. Nearly three years after Britain voted to leave the EU, its departure is uncertain. Possible outcomes still range from a long postponement, leaving with May’s deal, a disruptive exit without a deal, or even another referendum. Just days before the March 29 exit date that May set two years ago by submitting a formal “Article 50” request to leave – and two days before a crucial EU summit – she was on Tuesday writing to European Council president Donald Tusk to ask for a delay.
The market has been hit with some U.S. officials fearing that China is reneging on certain trade concessions. People familiar with the talks told Bloomberg that they are concerned China’s pushback and stalling discussions could threaten President Donald Trump’s chance at a boost ahead of his 2020 reelection bid. Beijing negotiators have reportedly shifted their stance because they haven’t received convincing assurances from Washington that U.S. tariffs imposed on Chinese exports would be lifted.
The heat is on Facebook and other social media platforms to stop hosting extremist propaganda including terrorist events, after Friday’s deadly attacks on two mosques in New Zealand were live-streamed. Australia’s Prime Minister Scott Morrison urged the Group of 20 nations to use a meeting in June to discuss a crackdown. At the same time, New Zealand media have reported that the nation’s biggest banks have pulled their advertising from Facebook and Google. “We cannot simply sit back and accept that these platforms just exist and what is said is not the responsibility of the place where they are published,” New Zealand Prime Minister Jacinda Ardern told parliament on Tuesday. “They are the publisher, not just the postman. There cannot be a case of all profit, no responsibility.” Facebook said it had been working directly with New Zealand police and across the technology industry to “help counter hate speech and the threat of terrorism.” The lone shooter accused of killing 50 people in the New Zealand city of Christchurch live-streamed the murders. And the video continued to be widely available on a range of platforms hours after the attack. The suspect, an Australian, uploaded his hate-filled manifesto online shortly before launching his assault. It’s the latest example of social media companies struggling to keep offensive content from sites that they are making money out of, generating billions of dollars in revenue from advertisers. It’s a problem that’s seen Facebook founder Mark Zuckerberg grilled by Congress. The shooting video was viewed fewer than 200 times during its live broadcast, and no users reported the video during that time, Facebook Vice-President and deputy general counsel Chris Sonderby said in a blog post. It was reported to the company 29 minutes after the video started and viewed 4,000 times before being removed, he said.
Deutsche Bank, Europe’s once-dominant financial institution, threw in the towel on years of failed turnaround efforts. It has agreed to begin government-backed merger talks with Commerzbank. Both banks have spent the past decade struggling to cope with the legacies of the financial crisis and making little progress. A merger would probably create the fourth-largest bank in Europe, behind HSBC, BNP Paribas and Credit Agricole By bowing to officials’ desire to forge a durable German lender with global reach out of two troubled firms, Deutsche Bank’s leaders are hardly putting their woes behind them: massive job cuts, political turbulence, a weakening European economy, U.S. probes into its dealings with Donald Trump and a herculean integration – not to mention skeptical clients and investors — lie ahead if they reach a deal. The companies confirmed the move to deeper discussions in statements on Sunday, capping months of speculation and behind-the-scenes talks with the Finance Ministry. Both firms have struggled to restore revenue growth after deep cuts to their investment banking units. An economic slowdown that has pushed back expectations for higher interest rates has added urgency to the situation. For Berlin, combining the two would create a new national champion lender that could support the country’s huge export industry and compete for international business with the giant Wall Street banks. For the lenders, it offers the opportunity to gain financial scale, cut costs and combine technology.
House prices across Australia are falling even faster than they did during the Global Financial Crisis. The Australian Bureau of Statistics on Tuesday reported house prices across the nation’s capitals fell by 2.4 per cent in the December quarter to be down by 5.1 per cent through 2018. In dollar terms, almost $270 billion has been wiped from the value of the nation’s housing stock since March last year. And $179 billion has evaporated from NSW homes. Victorian home values have fallen by $104 billion.
The Australian Taxation Office (ATO) is ramping up its enforcement activities and will undertake 4,500 audits of taxpayers it considers are “high risk” because they overclaim or don’t declare income relating to rental properties such as Airbnb. The ATO audits will relate to their 2017-2018 returns for rental properties. The agency is also improving its data matching and in future will use property management reports from real estate agents. ATO assistant commissioner Adam Kendrick said it would audit 2017-2018 financial year tax returns relating to rental investments that its data analytics systems had flagged as potentially problematic. He said about 85 per cent of about 2.2 million annual tax returns relating to rental properties were lodged through a tax agent, so the ATO would also work with tax professionals to make more taxpayers aware of potential errors.
AMP chairman David Murray will take a 22 per cent pay cut on account of the embattled wealth company’s shrinking footprint and reduced complexity as new chief executive Francesco Di Ferrari seeks to simplify the business. The AMP board has given in-principle approval to reduce Mr Murray’s annual fee, including superannuation, to about $660,000 from its current level of $850,000. The change will take place on January 1, 2020. The $7 billion company was significantly reduced in size following the sale of its life insurance business to Resolution Life and, according to the annual report released on Wednesday, the board anticipated further “refinement of our strategy in 2019” would justify Mr Murray’s reduced pay package. But Mr Murray’s own re-election at AMP’s shareholder meeting in May is far from assured. And he won’t be the only one taking a pay cut
The Commonwealth Bank has reached a settlement with the Australian Taxation Office, following a prolonged dispute over around $100M in claims it had made for support with research and development related to technology overall. While the terms of the settlement were not disclosed, ATO deputy commissioner Rebecca Saint said it was a reminder to companies that just because a project is large, expensive or risky does not mean it necessarily qualifies as R&D for the purposes of a tax incentive.
In the wake of the Royal Commission, Westpac will exit the troubled personal advice sector and join its big four rivals in abandoning the once-dominant model of vertical integration. Westpac is expecting to cut 900 full-time jobs in the process. The bank said the plan would see it exit a high-cost, loss-making business that would produce $280 million in savings by 2020. The news follows Westpac’s admission that since November 1, 2018, it had received 1800 customer complaints with the majority coming from the wealth division. The bank did not reveal the consideration being paid for the personal financial advice business being sold to boutique Viridian however it is believed to be less than $50 million.
Embattled wealth company IOOF is facing a shareholder class action over its alleged failure to inform shareholders about its fallout with the regulator over the alleged breach of superannuation laws. The shareholder class action, led by former Maurice Blackburn partner Damian /Scattini, now with Quinn Emanuel, and backed by US-based litigation funder Regency Group, is expected to be filed within weeks. Among those who have expressed interest in the class action include sophisticated investors and retail investors, although it will be run as an open class action meaning shareholders who bought the IOOF shares between May 2015 and December 2018 will be part of the action unless they opt out. The class action is based on the Hayne royal commission’s finding of a possible contravention of trustee duties under the ASIC Act. The action will allege IOOF was aware its conduct would have significant legal and regulatory risks, and between May 2015 and December 2018 it breached its continuous disclosure obligations to shareholders and engaged in misleading or deceptive conduct.
Bunnings is launching a full e-commerce store. It has opened its first click and collects service ahead of launching a fully transactional online store within 18 months. After selling about 20,000 “special orders” including bulky goods such as sheds and children playgrounds online last February and establishing a pop-up store on eBay in January, Bunnings is currently testing click and collect at its Craigieburn store in Melbourne. This will be ahead of launching a full e-commerce offer in 2020.
Farm chemicals and seed supplier Nufarm has slumped to a first-half $13.6 million loss on the back of China raising environmental standards and prolonged drought in eastern Australia. Earnings before interest, tax, depreciation and amortisation of $120.9 million were down 2 per cent on the same time as the performance of it’s North American, Latin American and seed technology businesses helped make up for some of the pain in Australia and Europe.
TPG Telecom’s first-half profit plunged 76.3 per after massive impairments to its abandoned mobile network. However, the internet service provider reported a modest rise in earnings and underlying profit once this expensive one-off impairment was taken into account, largely thanks to contracts with Vodafone Hutchison Australia. Net profit in the six months ended January 31 fell to $47.4 million, down from $199.8 million in the year-earlier period.
A food delivery company popular with so-called social media influencers has collapsed, leaving customers without their pre-paid meals. Five Point Four, which at one point said it had 20,000 customers and annual revenue of $12M, said it had entered administration “in the face of increasing competition and our cost to serve”. FivePointFour had more than 200,000 followers on Facebook and almost 30,000 Instagram followers and had relied on social media influencers and sports stars to promote its products.
Coles and Aldi supermarkets across Australia this week increased the price of their milk in support of the nation’s embattled dairy farmers. An extra 10 cents per litre will be added to the cost of Coles Brand and Farmdale fresh two and three litre varieties. The announcement is a back-flip on the supermarkets’ decision last month to keep its milk at $1-a-litre milk. At the time Federal Agricultural Minister David Littleproud savaged the move, dubbing it a “$1 milk disaster.
And finally, the Australian Prudential Regulation Authority is warning banks, insurers and superannuation funds to do more than just to disclose climate risks. They must take action to address them. APRA, the regulator charged with overseeing the soundness of Australia’s financial system, says it will “increase its scrutiny” on how financial services companies are changing their businesses to protect themselves against the physical, regulatory and economic effects of climate change. The warning from APRA’s head of insurance Geoff Summerhayes follows a survey of financial services companies’ attitudes to climate change. APRA probed 38 large banks, insurers and super funds on the issue. A third of respondents cited climate change as a material risk to their business, with reputational damage, flooding, regulatory changes and cyclones the top concerns. It also closely followed a landmark speech by Reserve Bank of Australia deputy governor Guy Debelle that failure to act on climate change could hit the Australian economy with implications for monetary policy. Australia’s three financial regulators – APRA, the RBA and the Australian Securities and Investments Commission – have now all confirmed climate change as an area of major financial concern. And that’s it for this week. And next week, I’ll be talking to Kevin Sherry the Executive Director – Global Business Development, Enterprise Ireland. We’ll be talking about some new deals for Irish companies in Australia and the reality of Brexit for Irish and Australian exporters.
And I’ll be talking to economist Stephen Koukoulas about what’s happening with the Australian economy.
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. Wishing you all a great week, take care, be good and looking forward to bringing you Talking Business next week.