This is episode number twenty one in our series for 2020 and today’s date is Friday, June 26.
First I talk to Gavin Ward, CEO of Office National, looking at how businesses are coming up with some ingenious ways to entice staff back to work. These include perks, creative activities, wellness equipment, elaborate desktop accessories, parties, and more.
And then I’ll be talking to Indeed economist Callam Pickering about the latest unemployment figures
But first, let’s talk to Gavin Ward.
Former Dow Chemical executive chairman Andrew Liveris says the optimism that has sent global share markets soaring should be ignored and warns that the COVID crisis will not bottom out until 2023 and a recovery is unlikely before 2024-25. And Mr. Liveris, who is a special adviser to Prime Minister Scott Morrison’s National COVID-19 Coordination Commission, says governments will need to step in during the recovery phase and invest in social infrastructure to help solve the problems of inequality that have been exacerbated by the pandemic.
Mr. Liveris has based himself in Sydney in recent months and says Australia’s federal and state governments have done a good job of managing the health crisis and the latest increase in cases in Victoria, while worrying, should be manageable. But it’s a different story in the US, where rising infection rates provide a reminder that the risk of the virus spreading around the world remains great. That will take time, which is why Mr. Liveris cannot see a low point in the crisis until 2023 and recovery until 2024-25.
Wall Street has soared 40% since hitting the bottom in March and the ASX has risen about 30%. Mr. Liveris says this is a repeat of the rally seen after the global financial crisis when central banks and governments pumped stimulus into world economies. The stimulus measures taken this time have been important in getting economies reopened, but he fears the elevated debt levels could cause a fresh crisis down the track.
Mr. Liveris, who has advised both the Trump and Obama administrations on manufacturing policy, also says governments will need to do more to help solve the problems of inequality that have been so dramatically highlighted by the Black Lives Matters protests that have swept the globe. Although the idea of big government has been much criticised in recent decades, he sees an opportunity for governments to follow the model of former US president Franklin D. Roosevelt’s New Deal program in the 1930s, which used massive infrastructure spending to help get the country through the Great Depression. But Mr. Liveris believes governments should focus on social infrastructure this time around and specifically push to improve access to healthcare and education.
The global economy’s fragile recovery is facing a fresh hurdle as a surge in coronavirus cases threatens to keep businesses closed and consumers on edge. Cases of the deadly virus rose by a record for a single day on June 21, according to the World Health Organization, with flare-ups across the U.S. and new scares in Germany and Australia. While China said the latest outbreak in Beijing is under control, other large emerging economies including Brazil, India, and Indonesia continue to see cases soar. The concern comes as high-frequency data tracked by Bloomberg Economics had been showing an improving picture for sectors such as transport and dining out as lockdown restrictions are eased. A sustained pickup in virus cases threatens to undermine or even reverse those trends. While the easing of lockdown restrictions in parts of Europe and the U.S. had led some economists to envisage a V-shaped recovery for the world, the re-acceleration in the virus argues against any swift revival.
The reintroduction of coronavirus restrictions in Victoria will have a major hit to confidence, says IBISWorld senior industry analyst Nathan Cloutman. “The real damage of re-tightening restrictions doesn’t just come from the loss of business in the economy, it also comes from the erosion of business confidence and consumer sentiment,” Mr. Cloutman said. “Businesses are now less likely to re-stock supplies and re-hire employees when social distancing is removed, out of fear that restrictions will be re-imposed before they can generate revenue to cover those costs”. IBISWorld also expects restaurants, and cafes and coffee shops to decline by 25.1% and 22.8% respectively in 2019-20.
IBISWorld expects more than 7000 tourism businesses or 6% of the industry to collapse as a result of COVID-19. It also expects that it will not be until 2024/25 that the roughly 7200 tourist businesses it does not think will survive the health crisis, will be replaced. IBISWorld expects 2019/20 revenue will be about $128 billion — down from $143 billion the year before. Commonwealth Bank modeling says the lack of international travelers alone will cost Australia 0.7% of GDP. A report by the United Nations World Travel Organisation shows it took an average of 14 months for tourist arrivals to return to pre-crisis levels after the Global Financial Crisis, September 11 attacks, and SARS outbreak. Many tourism operators are relying on the reopening of state borders soon to survive.
The $70 billion JobKeeper wage subsidy could be extended for regional areas badly hit by the coronavirus pandemic under a revamp of the scheme as warnings grow there will be a long-term hit to Australians’ wages and jobs. Prime Minister Scott Morrison signaled particular zones, many dependent on tourism, were likely to get support for their economies beyond the late September cut-off for the JobKeeper program. JobKeeper and the $550-a-fortnight coronavirus supplement for JobSeeker recipients are both legislated to end in September, prompting fears of a “fiscal cliff” hitting the economy that will drive up unemployment and force many businesses to the wall. Treasury is reviewing the JobKeeper program, with Treasurer Josh Frydenberg due to the outline of the results of that review plus new forecasts for the economy on July 23.
With more than $15 billion drained from super accounts in the space of a few short months, the powers that be are beginning to suspect there might be an issue with the scheme. The Australian Taxation Office (ATO) has revealed it will investigate Australians who dipped into their nest egg despite not being eligible. Culprits will have the amount withdrawn added to their taxable income, likely claiming back around a third of the withdrawn amount for the government’s empty-looking coffers. In instances where applicants can be seen to have deliberately duped the ATO, fines of up to $12,000 may be issued, leaving them worse off than they began. “We have seen some COVID-19 early release of super examples where people are doing the wrong thing,” the ATO said in a statement.
Investigations have revealed how criminals had engaged in identity fraud to trick the ATO and super funds and steal retirement savings. It raised serious questions of how the scheme was being run – not least because it revealed that Australians who did not even satisfy the government’s own eligibility requirements were being allowed to take out $10,000 per person. To be permitted to do so, a person must be deemed to be in need of money. Specifically, they must be unemployed, have recently lost a job, be receiving government support payments, have lost 20% or more of their hours, or have lost 20% or more of their turnover as a sole-trader.
Reserve Bank governor Philip Lowe said the economic shadow of the pandemic could last for years. Speaking at an ANU Crawford School event, Reserve Bank governor Philip Lowe has warned post-pandemic Australians will be more risk-averse and less willing to spend, borrow and invest, and “unless we change something we are going to be in a world of lower (economic) growth”. He said record low-interest rates will remain in place for years and the pace Australia removed itself from this shadow could be driven by a period of accelerated technology adoption as more people worked from home and embraced new work practices. The other area was policy reform in areas like tax and industrial relations. Dr. Lowe said he is worried about a lack of “dynamism” in the Australian economy. He called for governments and businesses to overhaul tax incentives, research and development, and risk-taking to boost dynamism. He also cited the low level of business starts and less job churning as evidence of a less dynamic economy.
Three of former High Court judge Dyson Heydon’s associates will seek compensation over his alleged sexual harassment and are threatening legal action if he does not come to the table. Maurice Blackburn principal Josh Bornstein, representing three of six former associates, said the High Court had indicated it was “willing to entertain negotiations” about settlement and his clients had instructed him to engage Mr. Heydon in the discussions as well.
Businesses will be required to comply with minimum standards of cybersecurity under a federal government plan to harden the nation’s defences of vulnerable computer networks against foreign adversaries and cybercriminals. Firms will also need to ramp up their spending on cybersecurity, including potentially contributing to the cost of the national agencies as part of an updated cybersecurity strategy.
Prime Minister Scott Morrison has confirmed the strategy will also see Canberra lift its spending following revelations a “sophisticated state-based actor” had attempted to hack into Australian networks on an industrial scale. China is being blamed for unleashing the attacks, which began about 18 months ago when Australia rejected Huawei’s participation in the rollout of the 5G network. The attacks have escalated in recent months after the Morrison government angered Beijing over its advocacy of an inquiry into the origins of the coronavirus pandemic.
The attacks have targeted all levels of government plus the private sector, most notable firms in the financial services, defence and healthcare industries, but there has been no major data breach identified. The updated cybersecurity strategy was due to be released in the run-up to the postponed May federal budget but was delayed because of the pandemic. The strategy is expected to require firms to comply with a minimum level of cybersecurity set by the federal government, with those in the critical infrastructure field such as banks, healthcare, and utilities expected to be the top priority. The government would be responsible for setting an industry-by-industry standard to apply to all firms in that sector. The standards would be applied either through a code of conduct, with potentially a regulator to ensure compliance.
The Australian Securities and Investments Commission has acted on a referral from the Hayne royal commission and filed a civil suit against the Commonwealth Bank for making prohibited payments banned under the Corporations Act. During the hearings which took place almost two years ago the bank’s superannuation and investment arm was exposed for paying CBA branches to sell its products in exchange for 30% of the revenue. CBA told Commissioner Hayne in a written submission that it was not reasonable to expect the agreement would influence an employee’s recommendation of the product given they were not “directly” rewarded. Commissioner Hayne referred the case to ASIC – flagging potential breaches related to prohibited payments under Sections 963E and 963K of the Corporations Act – saying he did not accept CBA’s explanation.
Older workers are less likely to have benefited from the shift to remote work and men are looking forward to returning to the office more than women. New research reveals businesses that emerge stronger from the COVID-19 crisis will build their status as an ’employer of choice’ to attract, retain, and grow their talent. A new report from Boston Consulting Group, also found younger employees are also more ready to return to the office with two-thirds of 18 to 30-year-olds feeling enthusiastic about going back.
Meanwhile, people with children at home reported being significantly more productive, engaged, and successful at home, but they also reported fewer positive impacts of remote working according to the survey of more than 1000 people. The research found men are more enthusiastic about returning to the office than their female colleagues, having most missed the distraction-free work environment and in-person formal collaboration with their co-workers. Low-income earners ($40,000 and under) were the most likely to experience no positive impact during this time, tending to work in hard-hit industries such as arts and hospitality.
Deloitte is the latest member of Australia’s ‘Big Four’ consulting firms to announce significant job cuts with 7% of its workforce to be axed, At least 700 jobs will go overall. The move comes as partners at the firm were informed that “growth had collapsed” during the last quarter of the financial year, owing to the coronavirus pandemic. The pandemic has curbed demand for the Big Four’s services and has led to staffing cuts at PWC which has cut 400 staff positions and Ernst & Young which has asked partners and staff not fully utilised on chargeable client work to drop their hours and pay by at least 20% and warned redundancies may be in store. KPMG said staff will lose 5.6% of their pay in its annualised salary cut.
Australia’s largest supermarket chain, Woolworths, will make as many as 1350 workers redundant as it moves to automate its distribution centres. The automated regional distribution centre and semi-automated national distribution centre are expected to open by 2023. The two facilities will replace three existing facilities in Minchinbury and Yennora in New South Wales and Mulgrave in Melbourne. The Minchinbury facility currently employs 515 people, while Mulgrave employs 298 and Yennora employs 540 people. In a statement to the ASX, Woolworths said the decision to develop the facilities will “regrettably impact a number of roles”. The company expects redundancy payments to a total $176 million with redundancies to occur up to 2025.
Myer has cut another 90 roles in its Melbourne head office in a desperate attempt to slash costs as the coronavirus crisis decimates sales. Myer confirmed the latest round of redundancies on Tuesday, saying the job losses represented less than 1% of total staff and included roles in management and store management, business support, administration, and duplicate roles. Another 45 people were redeployed to new or redefined roles. The latest redundancies follow the loss of 35 executive roles in January this year, 50 jobs mainly in marketing and merchandising roles and store administration in March last year and 30 executive and senior management roles in August 2018.
Myer chief executive John King has removed an entire layer of management to reduce costs and simplify the business in an attempt to restore to profit growth amid declining sales. Myer did not name executives leaving in the latest round of job cuts but they are believed to include Sue Price, group general manager womenswear, and Joanne Mercer, the general manager of footwear and accessories. Myer, which closed all its stores for about four weeks in April, has not provided a sales update since its first-half results in March. Total sales for the six months ending January fell 3.8% to $1.61 billion due mainly to store closures and lower sales in womenswear, and like-for- like store sales fell 3.6%.
On the other hand, Harvey Norman has advised the market it’s expecting a pre-tax profit lift of around 20% for fiscal 2020, following a surge in home and tech purchases amidst coronavirus lockdown measures. The furniture and technology retail group are slated to release full-year results on August 28. The news was disclosed in an ASX announcement and follows a sales uptick in whitewoods and kitchen appliance sales by home-bound consumers.
Nestle will change the name of two popular Australian confectionery products, Red Skins and Chicos sweets, the food and beverage giant said on Tuesday, amid a global debate over racial inequality. The move is part of the corporate world’s reckoning with the treatment of African Americans, following anti-racism protests triggered by the death of George Floyd in police custody in Minneapolis late last month.
Redskin is a slang term widely deemed offensive that refers to Native Americans. Chico, which translates to “boy” in Spanish, can be offensive to those of Latin American descent. Last week, PepsiCo said it would change the name and brand image of its Aunt Jemima pancake mix and syrup, which have been criticised as racist. Following PepsiCo’s move, the makers of Uncle Ben’s rice, owned by Mars; Mrs. Butterworth’s syrup, owned by ConAgra Brands; and Cream of Wheat porridge, owned by B&G Foods, also said they would review their packaging.
And that’s it for this week. And next week, I’ll be talking to Aramex Australia CEO Peter Lipinski to discuss the Increased demand for Australia’s transport and the delivery sector as online shopping orders boom with more people self-isolating and working from home, and how the Australian delivery sector is adapting to these unprecedented times. And I’ll be talking to AMP Capital chief economist Shane Oliver about how the market is traveling.
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 safe and healthy week and looking forward to bringing you Talking Business next week.