This is episode number twenty-five in our series for 2020 and today’s date is Friday, July 24.
First I talk to Hayden Brass from the little known oil company Zea Relief and its offer of a unique range of products that are changing the way people treat arthritis, inflammation, and pain at home.
And then I’ll be talking to Indeed economist Callam Pickering about Australia’s latest unemployment figures.
But now, let’s talk to Hayden Brass.
Small and medium businesses trying to rebuild will have access to cheap, part-guaranteed loans of up to $1 million, while the JobKeeper scheme will be split into a series of tiered payments and its eligibility criteria tightened. The measures were among those announced in Thursday’s economic statement that revealed record debt and deficit forecasts, driven by alarming drops in revenue and massive increases in spending.
The Morrison government will extend the JobKeeper and JobSeeker emergency payments for another six months, but both will be reduced after a Treasury review found they could act as disincentives to work as the economy recovers. A summary of the Treasury review compiled and released by the government also said that while there was a strong case for extending the programs, businesses needed to be weaned off support as conditions improved.
The revamp and extension of the two schemes, which will run from October until the end of March next year, will see the $1500-per-fortnight JobKeeper wage subsidy replaced by two tiers of payment to more closely reflect the incomes of people before the crisis struck. JobKeeper will drop from $1500 to $1200 a fortnight from October this year, for those who were working more than 20 hours a week. It will be $750 a fortnight for those working fewer than 20 hours and a further drop to $1,000 and $650 from January until the end of March.
On JobSeeker, the COVID supplement will be cut to $250 (down from $550) until the end of the year. Mr. Morrison says the so-called mutual obligation rules will be turned back on in August and people will be required to look for jobs and will be penalised for not taking a job. Treasury found that of the 3.5 million workers currently receiving JobKeeper, about one in four, or 875,000 people, were earning on average $550 more a fortnight than they were before the COVID-19 crisis.
Reserve Bank governor Philip Lowe has quashed any suggestions the RBA will start printing cash to cover federal government debts, saying “helicopter money” would ultimately unleash inflation taxes on the country. In his strongest public commentary about the current global debate about the financing of government debts to deal with the coronavirus recession, Dr. Lowe said there was “no free lunch” when it came to the creation of money.
There is a growing push from some economists for central banks to embrace the concept of modern monetary theory, under which governments with control of their own currencies print all the cash necessary to cover their debts. Dr. Lowe, who confirmed the RBA was unlikely to embrace negative interest rates that have been put in place by some central banks, used the annual Anika Foundation address in Sydney to make clear that despite the growing interest in alternative monetary policy approaches, it would not be adopted by Australia.
Dr. Lowe said if a bank created money to be spent by a government, that money would be a liability on the bank’s balance sheet. If the economy responded to the extra money with higher inflation, and the central bank was unable to lift interest rates to curb it, then an “inflation tax” would be paid by the community as people faced higher prices for everyday goods and services.
Authorities will crack down on the way businesses complies with COVID-19 restrictions after it was revealed that 80% of Victoria’s cases since mid-May have been driven by people getting the virus at work. The government has corralled WorkSafe, Victoria Police, and the state’s public health team to ensure that workplaces are obeying stage-three restrictions, including working from home where possible. The renewed focus on employers follows a COVID-19 outbreak at national law firm HWL Ebsworth’s Collins Street office, where at least six employees have the virus.
Australian agriculture is way off the pace as it looks to boost farm gate production to $100 billion a year by 2030 and is falling behind major competitors in investment, productivity gains, and research, according to a major study into the sector’s prospects of reviving the economy in the recovery from COVID-19. The Agribusiness Australia-commissioned analysis found the nation’s farmers were at least 6.3% below the growth trend required to hit $100 billion by 2030 and in danger of falling down the ranks of the world’s leading food and fibre producers.
Luxury is so last year as consumers do without. Consumers say COVID-19 has made them more cautious about spending on premium and luxury products, with many willing to spend less on packaged food, alcohol, apparel, and cosmetics, according to a survey of spending habits by consulting firm BCG. People plan to spend less on holidays and travel, concerts and cinemas, luxury products, jewellry, footwear and accessories, make-up and clothing – and more on food and groceries, apps and video games, and household cleaning and home repair products over the next six months, according to the latest COVID-19 Australian consumer sentiment snapshot.
The research confirmed retailers’ fears that consumers would be more value-conscious after the pandemic, with respondents saying they were likely to trade down and seek value for money when buying clothing, beauty products, packaged food, and alcohol. That was in line with an EY survey this month which found cost-conscious consumers had driven a resurgence in demand for private label or home brands. However, the BCG survey found consumers were prepared to trade up for products such as personal care, fresh food and medicine, and to support local businesses and sustainable causes.
The survey also confirmed the shift to online shopping, with 9% of respondents making their first online purchase during the pandemic and 33% shopping online more than they did before COVID-19. More than 40% of Millennial women intended to increase spending online.
The COVID-19 pandemic is going to have long-lasting consequences on consumer habits with nearly half of Australians expecting the coming years to lead to a heavy financial burden. The changing consumer attitudes and behaviours mean brands will need to rethink the way they market and sell to match the coronavirus-hit world and the recovery. According to a report – Brand New Australia – by research agencies The Lab and Nature, 48% of Australians expect the next few years to be financially difficult, 44% won’t be able to relax until there is a vaccine, 65% believe the COVID-19 pandemic is the reset needed to re-evaluate how we live our lives and 58% want a simpler life when the health crisis is over.
It also found 36% of Australians are excited about opportunities to come after the pandemic, 49% want things to go back to exactly how they where before the virus outbreak and 53% are worried about the future. The research comes from a sample of 6000 people. It found there are five segments of people: Safety Seekers (the largest group at 26% ) who are worried about the future, largely due to health concerns; Strugglers (18%) whose concerns are about their financial security; Opportunists (20%) who are excited about the future; Simplifiers (18%) who are looking to change their lives post-COVID-19; Returners (16%) those who are ready to return to the way life was before.
Australian commercial television networks are facing a problem unique to the pandemic era: as a captivated audience is voraciously consuming their content, advertising revenue is plummeting. Aussie networks are reporting a big dip in ad revenue for the second quarter of this year, as advertisers “spooked by low consumer confidence and a weak economy,” slashed spending, Seven, Nine and Ten logged a combined $465 million in advertising over the past three months, which was 33% less than the same time last year.
Using ABS and federal government data, Deloitte Access Economics estimates around 240,000 businesses in the hospitality, professional services, and transport industries, in particular, are at high risk of failure come September. That’s nearly 10% of all Australian businesses. Under the current federal government arrangements, businesses will receive their last JobKeeper payment on 27 September – around the same time as many rental and loan repayment deferral agreements are also set to end.
This will put enormous pressure on the viability of many businesses, and the economy as a whole. Around 40% of businesses across hospitality, professional services, and transport have indicated their cash reserves can cover less than three months of operations in the current environment. While it’s expected the business environment will improve over the next three months as restrictions are eased (but don’t forget Melbourne), it’s not known whether any improvement will be enough to enable businesses to recover, let alone survive, without JobKeeper support.
Within sectors, it appears smaller businesses, with their higher fixed costs, smaller cash reserves, and barriers to lending will find it more difficult to survive. The ABS Business Indicators survey published on 24 June observed that nearly 30% of small businesses have cash on hand to support operations for less than three months.
The prevalence and severity of cyber attacks are increasing at an alarming rate every year, so much so, that statistics estimate that cybercrime will cost the global economy a colossal $6 trillion per year by 2021 – with Australia among the countries most targeted by significant cyberattacks, according to analysis by one software firm. Password management and authentication solution vendor Specops Software which analysed the latest data from the Centre for Strategic and International Studies and estimates by Cyberscurity Ventures ranks Australia in sixth place of countries across the world that have experienced the most cyberattacks classified as significant.
For Coles and Woolworths, the pandemic era has been good for business. Australia’s two supermarket behemoths have gobbled up another six percentage points of the total Aussie food market in recent months. By nature, larger retailers are better equipped to weather financial turmoil than smaller operators and that has played out globally during the crisis. The soaring supermarket sales will likely continue if the virus persists, as consumers continue to shun eating out. The restaurant and cafe sector’s share of Aussie food sales has slid from 24% to about 19% so far.
Construction of utility-scale renewables projects, new public transport infrastructure, and the restoration of threatened ecosystems could see as many as 76,000 new jobs created during Australia’s COVID-19 recovery. A new report from the Climate Council and consulting firm AlphaBeta says projects including organic waste management, energy-efficiency improvements in existing buildings, and new urban green spaces could help secure the best value for government stimulus dollars, helping re-engineer the national energy system and renew key industries.
AlphaBeta economist Andrew Charlton, a key economic adviser to Labor prime minister Kevin Rudd during the global financial crisis, highlighted projects in regional areas and sectors with the greatest number of job losses. The report also prioritises jobs that would require minimal worker retraining, to enable rapid re-employment of laid-off workers during the recession and faster action to address damaging climate change.
A third of the job openings would be in occupations requiring either on-the-job training or less than 12 months of formal education. About 27% of the jobs are specialist roles, while 40% would require one to three years of training. Under the $22 billion plan, major policy opportunities across 12 areas would represent 76,000 potential new jobs, created over three years.
About 70% of the jobs would be in construction and administrative services – sectors already with combined cuts of 80,000 jobs due to COVID-19 – while 40% of the jobs would be based in regional areas. The report shows Australia’s national job shortfall is worsening, with the percentage of the workforce looking for more hours than they now have increased from 3.3% in 1985 to 10.6% in 2020.
Kogan.com has reported a more than 100% increase in its gross profits through the first quarter compared with a year ago, with strong sales and customer increases driving the result. The company reported gross sales in the fourth quarter grew by more than 95% compared with the fourth quarter in 2019 while gross profit grew by more than 115% and adjusted EBITDA rose by more than 149%.
The controversial security company, Paladin, made a profit of $1.3 million a week from its refugee contracts on Manus Island, according to court documents. The revelations, tabled as part of a dispute between former director Ian Stewart and Paladin, will refocus attention on the contract which was the subject of questions in federal parliament, Senate Estimates hearings, and a report by the Auditor-General.
Bauer Media Australia has announced it will close eight of its magazine titles: Harper’s BAZAAR Australia, ELLE Australia, InStyle, Men’s Health Australia, Women’s Health Australia, Good Health, NW and OK! Australia. The publications were put on pause – and the staff was stood down – back in May due to travel restrictions and declining advertising revenue caused by COVID-19.
Ardent Leisure Group is facing potential fines of up to $4.5 million after being charged over the deaths of four people at its Dreamworld theme park in 2016. The listed company confirmed in a statement to the ASX on Monday that the Queensland Work Health and Safety Prosecutor has filed three charges against its subsidiary company, Ardent Leisure Ltd, the operator of Dreamworld.
All three charges are category two charges for alleged breaches of Section 32 of the Work Health and Safety Act 2011. Each charge carries a maximum penalty of $1.5 million. The charges come after a coronial inquest earlier this year found the deaths of the tourists to Australia’s biggest theme park were avoidable. Coroner James McDougall said Ardent Leisure was responsible for systemic safety failures at its popular Gold Coast theme park. Coroner McDougall outlined a litany of safety failures on the Thunder River Rapids ride over 30 years. He said there had been no proper safety assessment of the ride by a qualified engineer since it opened in 1987 and during “ad hoc” modifications.
He said managers at Dreamworld had ignored previous incidents where there had been problems on the ride and not done anything to fix underlying problems. In a 279-page report, the coroner also criticised inadequate training for staff, and non-existent safety features, including an emergency stop button, that could have prevented the tragedy. Coroner McDougall referred Ardent Leisure to the Queensland Office of Industrial Relations for potential prosecution.
One in four community sports clubs fears they will not survive lockdown 2.0, with the Australian Sports Foundation calling for $1.2 billion in government and private funding to survive the pandemic. Lindy Murphy, president of the Melbourne University Lightning which is part of the elite Victorian netball league, said they were experiencing massive financial pressure. She has forgone any payment and coaches have taken a 25% pay cut.
And that’s it for this week. And next week, I’ll be talking to Accommodation Association CEO Dean Long. The Accommodation Association is the peak industry body and represents close to 3500 hotels and nearly 58,000 employees across Australia. They’ve been doing it hard during COVID-19. And I’ll be talking to RMIT Professor Sinclair Davidson about Treasurer Josh Frydenberg’s latest budget outlook.
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.