This is episode number thirty-one in our series for 2020 and today’s date is Friday, September 4.
First I talk to Adam Mooney the Australian CEO of global microfinance leader Grameen which is committed to boosting employment through supporting people on low incomes to set up their own small businesses in Australia’s post-COVID future.
And then I’ll be talking economist Nicholas Gruen about how governments and bureaucracies should close the gap for indigenous Australians.
But now, let’s talk to Adam Mooney.
Investors should position for the rising odds of President Donald Trump winning re-election, according to JP Morgan Chase. Betting odds that earlier had Trump well behind challenger Joe Biden is now nearly even — largely due to the impact on public opinion of violence around protests, as well as potential bias in polls, said strategist Marko Kolanovic. Based on past research, there could be a shift of five to 10 points in polls from Democrats to Republicans if the perception of protests turns from peaceful to violent, he said. People giving inaccurate answers could artificially skew polls in favor of Biden by 5%-6%, he added.
Australia is officially in its first recession for almost three decades, with the June quarter GDP numbers showing the economy went backward by 7%, the worst fall on record and a second straight contraction. The quarterly slump is worse than the Great Depression with annual growth now the lowest since World War II after shrinking to negative 6.3% from 1.4% in the March quarter, official Australian Bureau of Statistics figures show.
The June quarter contraction follows a 0.3% fall in the March quarter, locking in two consecutive quarters of negative growth required for a technical recession. The June quarter hit was worse than market economists’ expectations of a 6% fall in the quarter and 5.2% fall annually. Household consumption growth collapsed -12.1% in the quarter, down further from the -1.1% fall in the March quarter and now pulls annual consumption growth down to negative -12.7%. The fall in consumption, which makes up about 60% of GDP, was driven by a 17.6% fall in services consumption for the June quarter due to the introduction of COVID-19 restrictions.
Total private business investment contracted 6.5% down further from the 0.8% contraction in the March quarter and is now down 7.6% for the year. Official figures from the Australian Bureau of Statistics showed exports of services fell by 18.4% in the June quarter, but services imports collapsed 49% %.
The Reserve Bank has kept official interest rates unchanged at a record low 0.25% but expanded a scheme that allows banks to secure cheap funding for banks to $200 billion until June next year. The central bank also gave further indications it would take further action on monetary easing if required and that a recovery in employment would be “some months” away.
Australian house prices fell for a fourth consecutive month in August as a slump in the Melbourne market — the center of a renewed Covid-19 outbreak — weighed heavily on the national picture and expected higher unemployment continues to cloud the outlook. Property values in major cities dropped 0.5% last month, CoreLogic data released Tuesday showed. Prices in Melbourne slumped 1.2%, with the city’s 5 million residents have endured around two months of lockdown conditions to contain the spread of the coronavirus.
Through the course of the pandemic, Melbourne has fallen 4.6%. In Sydney and Brisbane, the rate of decline eased, while prices held up or improved in other major cities, reflecting the link between market performance and the severity of social distancing policies, according to Tim Lawless, head of research at CoreLogic. Sydney’s decline cooled to 0.5% from 0.9% in July. And Lawless warns we could start to see the rate of decline becoming a little bit worse.
Household spending in Victoria has slumped more than 30% since late June and the Morrison government expects more Victorians will soon be on JobKeeper than the rest of the country combined. The number of Victorians on unemployment benefits has also skyrocketed – up by almost 28,000 people since the beginning of the second lockdown – with more than half signing on in the first three weeks of August.
The devastation of Victoria’s second coronavirus wave was laid bare in new Commonwealth Treasury analysis which shows the full extent of Australia’s two-speed recovery and reveals Victoria is being left behind. The analysis showed while all states were showing similar improvements between April and late-June, the number of Victorians on unemployment benefits had since increased by 7.2%, while household spending had plummeted 30%, led by a 45% fall in discretionary spending.
While we’re on the topic of JobKeeper, this week we had revelations that companies on JobKeeper have been accused of paying CEOs hefty bonuses. Andrew Barkla is estimated to be the highest-paid CEO in the country, earning $37 million last financial year. His company, IDP Education, has awarded him a bonus of $683,000 whilst receiving $4.4 million from the federal government to subside workers’ wages.
Accent Group, the company behind Athlete’s Foot and Dr. Martens, received $13 million from JobKeeper and its CEO, Daniel Agostinelli, earned a $1.2 million bonus. The Star Entertainment group benefited from $64.8 million of JobKeeper. Its CEO received an $830,000 bonus. Ferry operator Sealink was paid more than $8 million of JobKeeper. Its CEO was awarded a bonus of $504,000.
Victorians have predictably closed their wallets in lockdown, with the state logging a 22% plunge in overall consumer spending compared to before the pandemic, The spending slump is pronounced in Victoria, with overall spending down by just 5% nationwide — and only 3% in NSW. Victorian cafes have been hit particularly hard, with spending down 42% in the sector; in NSW, cafe spending in late August actually increased. Fashion and leisure spending also plunged in Victoria, down 54% on normal levels — compared to the 25% increase in NSW.
The pandemic has gutted local movie houses with cinemas in the ACT, Adelaide and Perth all having shut for good in recent months. Like many other sectors, the industry’s 15,000 Australian employees have found themselves largely reliant on JobKeeper subsidies. But as blockbuster films begin to slowly trickle out for global release, Melbourne cinemas remain shut and Sydney theatres are limited to 25% capacity. The industry now takes in just 10 to 15% of the typical income.
The acquisition by IOOF of NAB’s wealth management arm MLC brings to an end one of the most sordid periods in Australian corporate and political history — one in which the biggest and most important companies in Australia systematically ripped off their customers, all while politicians defended them. The major banks’ retreat from the wealth management sector is in the news after wealth group IOOF agreed to snap up National Australia Bank’s MLC division in a deal pegged at up to $1.5bn. acquisition of National Australia Bank’s superannuation and advice business, MLC Wealth, will mean Australia’s four biggest banks have finally jettisoned the financial advice businesses that damaged their reputations and cost them billions in customer remediation.
The first of the tech giants have called the bluff equally of the federal government and old media, with Facebook announcing that it will stop allowing Australian publishers and users from sharing local and international news on Facebook and Instagram if a proposed code requiring Facebook pay for news posts becomes law. Facebook will also exclude Australia from the rollout of the platform’s news tab, which has already seen payments to participating publishers including, in the US, News Corp. Treasurer Josh Frydenberg hit back at Facebook for suggesting the news boycott, while cabinet colleagues dismissed the threat and vowed to proceed with the mandatory code by the end of the year.
Parliament has signed off on an extension to the $100 billion JobKeeper scheme, meaning recipients will begin receiving a lower rate at the end of the month. The payment of $1,500 a fortnight is set to drop and if you are on JobSeeker, you should also expect a decrease in your payments.
From September 28, the payment will fall to $1,200 a fortnight, followed by a further drop at the beginning of January 2021 to $1,000. But that’s only if you were working at least 20 hours a week before JobKeeper was introduced. If you were a part-timer, then your payment will fall to $750 a week from the end of the month, then to $650 a week at the start of next year.
All extensions are due to expire on March 28, 2021. The changes are due to come into effect in less than four weeks’ time, despite the fact Melbourne is currently still under strict lockdown. The Government estimates that from October onwards, more people will be on JobKeeper in Victoria than in the rest of the country combined. Since March, the $550-a-fortnight JobSeeker payment (a rebranded Newstart allowance) has been effectively doubled to about $1,100 a fortnight with the introduction of the coronavirus supplement. But from September 25, the supplement will fall to $250 a fortnight, taking the total JobSeeker payment to just over $800 a fortnight.
Australia’s winemakers have been hit by a second Chinese government probe, as trade tensions between the countries escalate. China has started an anti-subsidy investigation into wines in containers holding two liters or less from Australia, according to a statement on the Ministry of Commerce website.
The announcement comes less than two weeks after China, the biggest international buyer of Australian wine, said it had started an anti-dumping probe into the same product. The investigation is the latest blow to the Australian industry, which has been hit by slower demand amid global Covid-19 lockdowns, drought-affected vintages, as well as smoke taint and damage from the country’s unprecedented bushfire season last summer.
China also slapped a ban on Australia’s biggest grain exporter – a co-operative with about 4000 farmer members – after claims customs authorities found pests in a shipment of barley. China customs suspended barley imports from CBH, based in Western Australia, and run by former BHP iron ore boss Jimmy Wilson. The latest Chinese sanctions sent shockwaves through Australia’s grain growing community as it gears up for what is set to be the best harvest in several years in many regions.
The Future Fund has felt the pain of collapsing share prices and asset values sparked by the COVID-19 pandemic, delivering a return of negative 0.9% for fiscal 2020 as it reported a slight decline in assets over the financial year to $161 billion. However, the nation’s sovereign wealth fund says despite the fall, its 10-year return of 9.2% per annum exceeds its benchmark target of 6.1% per year. The “target return” for 2020 was a positive 3.7%. Handing down its results, the Future Fund said it had rebalanced its portfolio to a neutral stance in the face of volatility and uncertainty in the global economy, and also reduced its risk appetite in its private equity portfolio.
QBE chief executive Pat Regan has departed suddenly after an independent investigation into a complaint by a female employee found he had breached the company’s code of ethics and conduct. No details were provided of the breach, but the company said an external investigation had examined “workplace communications that the board concluded did not meet the standards set out in the group code of ethics and conduct”. Mr. Regan’s departure comes a week after sexual harassment allegations at AMP led to the demotion of the accused, AMP Captial boss Boe Pahari, and the resignation of chairman David Murray.
At the end of reporting season for Australia’s publicly listed companies, it’s clear COVID-19 has been a payday for some but destructive for others. A quarter of ASX 200 companies reported a loss for the 2019-20 financial year Full-year earnings were down 38% and dividends down 36%.
Some retailers and mining stocks saw strong profit growth, travel stocks fared worst Analysis by CommSec reveals 75% of companies reported a statutory net profit in 2019/20, well below the 10-year average of 90% of companies reporting an annual profit. “It is the weakest outcome in the decade we’ve been tracking interim and final reports with an end-June or December financial year,” said CommSec’s chief economist Craig James.
And that’s for this week. And next week, I’ll be talking to John Milionis, Head of Channel APJ who will talk about his company’s survey showing how companies are finding remote work challenging and he’ll be giving advice on how to manage it. And I’ll be talking to CommSec chief economist Craig James about the market in the week ahead.
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.