This is episode number thirty-four in our series for 2020 and today’s date is Friday, September 25.
First I talk to Amar Goel, founder, and CEO of Safeter. Safeter is a mobile app-based technology that enables employers to bring their employees back to work safely. It is offering many of its features for free, to help people be safe and get the economy going again.
And then I’ll be talking to Indeed economist Callam Pickering about the latest unemployment figures.
But now, let’s talk to Amar Goel.
The biggest collapse in Australia’s population growth since World War I will drive a huge fall in new home construction that could hold back the nation’s recovery from the coronavirus recession. Research released by the federal government’s National Housing Finance and Investment Corporation forecast that demand for housing could be cut by between 129,000 and 232,000 dwellings over the next three years in a development that would hit the vital construction sector.
Rents, particularly in the inner suburbs of Sydney and Melbourne, also face a sharp fall as a lack of international students exacerbates an expected fall in the number of migrants wanting to call Australia home. About 60% of the nation’s population growth over the past decade has been driven by net overseas migration, which totals 2.7 million residents.
But the closure of the border, as well as concern globally among people moving between nations, is expected to lead to that collapse. The number of international students, who account for about half of net overseas migration, has also collapsed in a development that has forced some major universities to cut staff. The corporation, which provides advice to the government on housing demand, estimates that in a worst-case scenario there would be 214,000 fewer people in the country than if the coronavirus had not occurred, between 2019 and 2021. It would be the biggest slowdown in population growth since 1916 and 1917 when hundreds of thousands of Australians were overseas involved in World War I.
And Australia’s house prices are set to fall by up to 10% over the next 12 to 18 months, as net immigration weakens sharply, credit agency Fitch Ratings has warned. The agency expects drops to be in the range of 5-10% and is in keeping with recent forecasts by economists who are calling a softer landing for the housing market than initially feared. But the COVID-19 pandemic could cut underlying demand for new private houses and apartments in Australia by between 129,000 and 232,000 over the next three years, the National Housing Finance and Investment Corporation said this week. Fitch said immigration had already been slowing prior to the outbreak of the pandemic but has plunged since the health crisis led to strict controls on international travel.
Six months after the COVID-19 crisis began and business payrolls remain well below pre-crisis levels. They are still down 4.5% compared with March 14, led by the recent deterioration in Victoria and ongoing weakness in New South Wales and Queensland. The impact of Victoria’s second lockdown has been similar, from a jobs perspective to the first lockdown. Victorian payrolls are down 8.3% compared with pre-crisis levels, only slightly above their April low. The result is devastating for the Victorian economy, with recovery certain to be a slow one. Of course, other states aren’t out of the woods either. Payrolls in New South Wales and Queensland are still 3.7% and 3.2% below their pre-crisis level, respectively. That might not seem so bad next to Victoria but declines of this nature are still monumental from an economic perspective.
Scott Morrison has all but confirmed income tax cuts will be brought forward in the budget after slamming a new advertising campaign arguing against the move as “taking money out of people’s pockets”. The Prime Minister’s blunt response was triggered by a new national campaign launched by the left-wing think tank the Australia Institute today urging the Morrison Government not to fast-track income tax cuts in the October 6 budget. The campaign, rolled out on television screens, is arguing against the early introduction of legislated tax cuts worth up to $2565 a year.
The tax cuts, worth $20 billion, were scheduled to come into force in 2022. The campaign against the early introduction of tax cuts is being supported by 40 prominent Australians, including Bernie Fraser, former governor of the Reserve Bank, Stephen Grenville, former deputy governor of the Reserve Bank, and Professor Peter Doherty, Nobel Laureate in Medicine
More than half a billion dollars in unpaid superannuation will be repaid to almost 400,000 Australian workers. Under the Federal Government’s superannuation guarantee amnesty, 24,000 businesses confessed to failing to pay employees their entitlements before the September 7 deadline.
New Australian Taxation Office figures show at least 393,000 employees will have the money paid into their super funds, or their bank accounts if they are no longer working. Employers disclosed and repaid $588 million in unpaid contributions, including 10% interest for each year the money was outstanding. About 55% of businesses that confessed not to making compulsory payments dating back to July 1992 applied in the last week of the amnesty. This included 7000 on the final day, as payments made before the cut-off were tax-deductible. A further $33 million in contributions are subject to payment plans established to help businesses struggling during the coronavirus pandemic.
Hydrogen, batteries, green steel, carbon capture and storage, and soil carbon have been identified by the federal government as the five top- priority, low-emission technologies it will aim to develop over the next decade. The long-awaited technology road map, released by Energy Minister Angus Taylor, ranks energy efficiency, and electric and hydrogen vehicle recharging infrastructure as second-level “emerging” technologies while nuclear power is delegated to a third-order “watching brief” priority. “Mature technologies” including coal, gas, wind, and solar come fourth and last on the priority list.
The latter will no longer warrant government investment “unless there is a clear market failure” and intervention is warranted. This underpins Scott Morrison’s threat last week to build a gas-fired power station in NSW unless the private sector replaces the capacity that will be lost with the closure of the Liddell power station by 2023. The government said it would invest $18 billion in the five priority technologies over the next decade and would “streamline regulation and legislation” to encourage up to $50 billion of private sector investment.
But former Prime Minister Malcolm Turnbull says the Government’s focus on a gas-led economic recovery is “a fantasy” and “crazy stuff” that should not be part of the Coalition’s energy policy. Mr. Turnbull said gas was an expensive fuel and should not be heavily invested in.
Reserve Bank deputy governor Guy Debelle has flagged that a further reduction in rates towards, but not through, zero and buying longer-term bonds remain the most likely policy tools at the central bank’s disposal should the economic recovery falter. Dr. Debelle also warned the unemployment rate could still rise despite a recent unexpected fall while presenting four policy options the central bank has available should the economy need a further lift.
Dr. Debelle says while the fall in the unemployment rate to 6.8% in August was unforeseen, the recovery in the labour market was likely to be “bumpy and uneven” In a speech on Tuesday morning, Dr. Debelle said, “overall, the recovery has not been a rapid bounce but more of a slow grind”. “As the outlook for the Australian economy unfolds, the board will continue to assess the merits of the range of monetary options to best support the economic recovery,” he said. The country’s second most senior central banker repeated that, given the RBA’s forecast for growth out to the end of 2022, it was “highly unlikely” that the cash rate would be lifted over the coming three years. The deputy governor said under its central scenario, it would be more than three years before the economy neared a full employment level that would push inflation toward its target band,
The NBN Co will spend $4.5 billion over the next two years to provide almost 10 million households and businesses with the option of high-speed fibre, in a change of political direction by the Coalition government. Years after building a controversial system that mostly used copper to connect homes to fibre nodes in the street, the government will announce on Wednesday an upgrade which will devote $3.5 billion to laying high-speed fibre cables down streets past homes.
Householders looking for vastly higher web speed will be able to have their homes connected by fibre to the network free of charge. They will, however, pay higher prices for their broadband plan, in line with the $149 a month paid by consumers already connected directly by fibre. These prices will continue to be set by retailers. On Tuesday, NBN announced a similar plan for business. At a cost of $700 million, about 1.4 million businesses would be eligible to have fibre rolled out to their premises free of charge. It will spend an additional $300 million improving internet services in the regions. The three initiatives – businesses, households and the regions – add up to a $4.5 billion investment in faster services.
The money will be borrowed. The government will badge the upgrade as a recession-busting infrastructure initiative that should create 25,000 jobs, including 16,600 in industries such as construction, engineering, project management, transport, and retail trade. With more people working from home, the government also forecasts the upgrade will boost GDP by $6.4 billion a year by 2024. It will also boost the NBN’s attractiveness should the government choose to privatise it.
Macquarie Group and Commonwealth Bank are facing fresh scrutiny of their oversight of anti-money laundering laws after it emerged that overseas banks had reported close to $US167 million ($230m) of potential dirty money transactions flowing through the two Australian banks.
The International Consortium of Investigative Journalism (ICIJ) has released a massive leak of secret bank reports that show the Commonwealth Bank was flagged by overseas banks over millions of dollars of transactions, including some in crime hotspots in far eastern Russia and in Kazakhstan. Data released by the ICIJ on Monday shows more than $US174 million of possibly dirty money flowed through Australian banks. Macquarie accounted for 72% of the suspicious transactions by value, or $US123 million.
The Commonwealth Bank was the next frequently named Australian bank in the data leak, with $US44 million of transactions flowing to or from the CBA, which were red-flagged by other banks. ANZ Bank, when including its Hong Kong branch, made up $US4.7 million. The three banks at the centre of the “FinCEN Files” leak: Bank of New York Mellon (BNY), Barclays, and Standard Charted, all filed the reports with anti-money laundering authorities in the US as part of their reporting requirements. Banks around the world are required to report suspicious transactions to anti-money laundering regulators to stamp out dirty money dealings, including the funding of terrorism and organised crime activities, such as drug dealing and tax evasion. It is not clear whether the Australian banks reported the transactions to the local money laundering regulator AUSTRAC.
This coincides with revelations that global banks faced a fresh scandal about dirty money on Monday as they sought to limit the fallout from a cache of leaked documents showing they transferred more than $US2 trillion ($2.8 trillion) in suspect funds over nearly two decades. Britain-based HSBC Holdings, Standard Chartered, and Barclays, Germany’s Deutsche Bank and Commerzbank, and US-headquartered JPMorgan Chase & Co and Bank of New York Mellon were among the lenders named in the report by the International Consortium of Investigative Journalists and based on leaked documents obtained by BuzzFeed News.
Universities face a shortfall of up to $7.6 billion for research, which will result in the loss of up to 6100 jobs, or 11% of the research workforce, between now and 2024, according to a CSHE report published on Monday. More than one in 10 research positions at Australian universities are predicted to disappear by 2024 as revenue from overseas students dries up, and prestigious Group of Eight institutions is tipped to lose the most resources.
Some smaller universities, including Deakin University in Geelong, face an “extremely high” risk of recent strong research capacity gains unravelling as COVID-19 wipes out billions in revenue from fee-paying international students. That comes as universities intensify their lobbying of federal Education Minister Dan Tehan for more money for research in next month’s federal budget. The revenue collapse has come from falling international student income. All the Group of Eight universities will suffer badly, but some of the smaller universities that have higher international student income relative to total income now face “serious consequences”. The revenue margin losses for the University of Technology Sydney, Deakin University in Victoria, and Macquarie University in NSW are rated as “extremely high”, according to lead author Frank Larkins.
Embattled wealth manager AMP has been named Australia’s worst-performing superannuation provider on fees and returns, taking the unwelcome mantle off the OnePath funds formerly owned by ANZ. An annual review of the 100 largest super funds by investment adviser Stockspot has found AMP has the highest number of so-called “fat cat funds”, with 12 products featuring on the list of those with relatively high fees and lackluster returns to members. The title of the “worst fat cat fund” provider had been held by the OnePath stable – sold by ANZ to IOOF in January – since the research project began in 2013. More than 600 multi-asset investment options were scrutinised by the robo-adviser’s analysts.
Coronavirus lockdowns are the perfect time for reading. Australian e-commerce group Booktopia has reported a 28% increase in new book sales during the 2020 financial year, with total sales topping $165 million for the first time. Demand for books has seen the company grow its customer database to 4.5 million, with over 1.4 million active customers.
Harvey Norman is making the most of a boom in homewares spending because of the coronavirus pandemic, upping advertising as sales rose more than 30% in the first 10 weeks of 2021. Harvey Norman said that that aggregated sales revenue rose 30.6% during the period from 1 July 2020 to 17 September, compared to the same period a year ago. Comparable aggregated sales for the period 1 July 2020 to 17 September 2020 increased by 30.3% for the furniture and homewares retailer compared to a year ago. Less than a month after reporting a 26% increase in full-year pre-tax profit to $636 million in 2020, Harvey Norman flagged a pre-tax profit of $178 million for the two months ending August, an increase of 186% on the $62.3 million earned in the same period a year ago.
COVID-19 has fuelled an online sales surge at trans-Tasman retailer Kathmandu, but the bounce from bricks to clicks has been unable to offset temporary store closures, with the group’s profit slumping 86% to $NZ8.1m ($7.54m). Online sales soared 63% to $NZ106.4m in the year to July 31, representing 15.7% of direct to consumer sales. Chief executive Xavier Simonet said it was a “transformational year” for Kathmandu which also included the $350 million Australian surf brand Rip Curl and the company tapping into Uber’s network of drivers to streamline its online sales and bolster its omni-channel strategy.
Temporary store closures wiped $NZ50m off the group’s revenue. But it still was able to increase sales 48.7% to $NZ801.5m, thanks to the Rip Curl acquisition which contributed $NZ315.7m, from November 19 to July 20. Meanwhile, its core Kathmandu brand generated $NZ426.4m — a decrease of 9.7% compared with 2019. Revenue from Oboz, a Montana-based footwear brand, fell 15.2% to $US37.8m ($52.8m).
A study of top technology executives at a large number of Australia’s biggest organisations has found they expect 43% of workers will be working from home after COVID-19 restrictions end, and that there are significant plans to increase spending on innovation.
Research firm ADAPT surveyed 220 of the largest local corporate and government organisations about their response to the COVID-19 pandemic and found the surge in remote working was likely to recede once restrictions ease, but to nowhere near the level before March. The report predicts that 43% of an organisation’s staff will be away from their offices at any given time, rather than that percentage working permanently from home. Before COVID-19, ADAPT says this figure was 12%. It has been 73% during the lockdown. Of the organisations surveyed, 69% said they were comfortable maintaining the current distributed workplace indefinitely.
And that’s it for this week. And next week, I’ll be talking to the founder of Mingle Seasoning Jordyn Evans who has just recently launched 3 more seasoning flavours into 850 Coles supermarket, a deal worth around $1million. And I’ll be talking to economist Saul Eslake about what to expect in the forthcoming budget.
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.