This is episode number thirty-five in our series for 2020 and today’s date is Friday, October 2.
First I talk 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 then I’ll be talking to economist Saul Eslake about what to expect in the forthcoming budget.
But now, let’s talk to Jordyn Evans.
Investors are growing jumpier about the risk of a disputed US presidential election, stepping up preparations for a potential period of market volatility as the costs of insuring against turbulence rise. Futures tied to the Vix volatility index, a measure of the expected choppiness of the US stock market based on derivatives prices, have long reflected investor concerns that the result could become contentious.
This has led to what some traders term a “volatility kink” around the November vote. But that kink has grown more pronounced since President Donald Trump indicated he might not concede if he were defeated in the November 3 election. Futures markets suggest that investors now fret that any turmoil could last for several months. Analysts say this represents an extraordinary level of nervousness given that previous votes have rarely caused market upsets.
Daniel Andrews’ cautious easing of the COVID-19 lockdown in Victoria has failed to satisfy business owners and Prime Minister Scott Morrison, who argues the Victorian Premier needs to move more quickly to revive the state’s economy and protect thousands of jobs. Retail shops, cafes and restaurants, gyms, wedding venues, and tennis and golf clubs are among sectors to cry foul over Mr. Andrews’ revised reopening plan revealed on Sunday, a day after his government reels from the shock resignation of his Health Minister, Jenny Mikakos.
Mr. Andrews faced more pressure over hotel quarantine this week as the state’s inquiry wraps up and the Prime Minister receives his independent review of hotel quarantine from Jane Halton. The review singles out NSW in contrast to Victoria for leading the pack in successful hotel quarantine Victoria’s revised reopening plan allows an additional 30,000 workers– bringing the total to 127,000 – to return to work from Monday, largely across the manufacturing and construction sectors, as well as abattoirs, warehouses, and distribution centres.
Sole gardening and landscape workers will also be allowed but business owners and industry groups warned the changes were too modest. Prime Minister Scott Morrison acknowledged in a statement with Victorian federal ministers Josh Frydenberg and Greg Hunt the “small but important step” taken but said quicker action was needed.
Temporary visas will be extended and welfare recipients offered incentives to take farming jobs, as a new report warns of a critical labour shortage. The upcoming Federal Budget will allow JobSeeker and Youth Allowance recipients to earn up to $300 per fortnight from farm work before welfare payments are reduced. Reforms will also allow backpackers, Pacific Islanders, and seasonal workers able to extend their temporary visas, and the age limit of 30 on the working holidaymaker visa will be scrapped.
A report from consultancy EY found growers expected to fill six out of 10 short-term roles in the next six to 12 months as travel restrictions reduce the number of available workers. It comes as a range of inquiries investigates claims of exploitation of workers in seasonal agricultural labour.
Income tax cuts alone in the forthcoming budget won’t be enough to avoid the cash crunch Australia faces as it emerges from the coronavirus pandemic, analysts have warned. Deloitte Access Economic’s 2020 Budget Monitor found the budget had been “badly bent but not broken” by COVID-19. The JobKeeper and JobSeeker programs were particular “standouts”, with poverty going down in Australia at the same time it was rising in other parts of the world.
Money hit people’s pockets faster than during the Global Financial Crisis, and Australia’s success against the virus reduced the cost of its emergency measures. And while around 830,000 jobs were lost when COVID-19 hit, approximately half of those jobs have been reinstated as the country reopens. However, more than three million jobs are relying on the JobKeeper wage subsidy, which starts to roll back from Monday. But as government supports are wound back, superannuation money dries up and mortgage and rent moratoriums end, the nation would face a cash crunch in the next six months.
The Morrison government will pour $800 million into measures it says are designed to help businesses take advantage of digital technologies – but most of the money is dedicated to boosting its online services to facilitate doing business and to crack down on corporate fraud. Of the $800 million, about $420 million will be used to fulfill the 2018-19 budget promise to amalgamate the Australian Business Register and the 31 registers administered by the Australian Securities and Investments Commission “allowing businesses to quickly view, update and maintain their business registry data in one location”.
The Australian Taxation Office will operate the new super registry, which will provide a powerful foundation to manage fraud and reduce red tape. Similarly, another $257 million will be used to improve access to government services by expanding the Digital Identity Program, an opt-in system that already gives 1.6 million people and 1.2 million businesses a single, secure way to use government services online.
As well as expanding access to services such as myGov and welfare payments, this funding will integrate the Digital Identity Program with the Director Identification Number, a lifetime identification number for company directors. The DIN makes it much easier to start a business, enabling someone to do so in as little as 15 minutes, rather than weeks.
Global airline traffic is now expected to fall 66% this calendar year compared with 2019, the International Air Transport Association said; it previously forecasts a 63% drop. IATA said global domestic traffic – revenue passenger kilometres – fell 50.9% in August; a mild improvement compared with a 56.9% decline in July. Domestic capacity – available seat kilometres – fell 34.5% and load factor dropped 21.5 percentage points to 64.2%. The data was much grimmer for Australia: domestic traffic fell 91.5%; domestic capacity collapsed 81.2%, and load factor collapsed to 37.1%. In terms of international travel, global traffic fell 75.3% overall, with capacity sinking 63.8% while the load factor plunged 27.2 points to an all-time low for August of 58.5%.
Iconic brand RM Williams may end up in Australian hands after mining billionaire Andrew Forrest’s investment vehicle lobbed an unsolicited bid for the bootmaker just as private equity firm TPG Capital’s interest was starting to wane. Mr. Forrest’s private investment arm Tattarang is understood to have put in the offer with RM Williams owner L Catterton and its bankers Goldman Sachs.
The move by the mining billionaire comes weeks after private equity firm TPG entered exclusive talks to buy the boot and apparel maker for about $200m, but rumours are swirling that TPG is losing interest and may pull out. With a paper wealth of $22.1bn, Mr. Forrest is now calculated as Australia’s second-wealthiest person after shares in his iron ore miner Fortescue Metals have surged about 80% since March, and he will receive a $1.16bn dividend cheque on October 2. The owners of the iconic RM Williams had hoped to offload it for about $500m last year and launched a sale campaign through Goldman Sachs.
Dreamworld’s parent company Ardent Leisure has been fined $3.6 million over the deaths of four people on the Thunder River Rapids Ride in 2016. Ardent Leisure pleaded guilty to three breaches of workplace health and safety laws. The maximum penalty for each breach is $1.5 million — $4.5 million in total. Cindy Low, Kate Goodchild, Luke Dorsett, and his partner Roozi Araghi died when their raft collided with an empty raft and flipped in October 2016.
Bank of Queensland has taken a sharply dimmer view of the potential economic recovery out of the coronavirus pandemic, as it books a $175 million provision for souring loans following the “increased probability” of “downside and severe case” scenarios in its modeling. The ASX-listed lender revealed $175 million worth of souring loans on its books after it modeled the impact of the coronavirus pandemic on employment, falling house prices, and the “increased duration” of the economic downturn.
In an update to the market on Tuesday, the Queensland-based lender said the loan impairment for its 2020 financial year would equate to 37 basis points of gross loans. The impairment was heavily weighted to the back end of the year, with just $10 million pre-tax booked in the first half, compared to $123 million in the latter half. The bank’s base-case scenario, which it views with a 75% likelihood, involves GDP shrinking 6% over the year through June, before bouncing back by 5% over the coming year and 4% in 2022.
Because people are drinking out of cans and bottles with the lockdown, Visy which has been operating for 72 years has achieved revenue growth in August – in the middle of a pandemic – that would be the envy of most software start-ups. The manufacturing and recycling giant, owned by Anthony Pratt alongside his sisters Heloise Pratt and Fiona Geminder, recorded revenue growth in August of 28% in July, and 33% compared to August 2019. Mr. Pratt said this may be a Visy record, and was certainly the highest month-on-month growth achieved since he had taken over the business after his father Richard’s death in 2009.
He had predicted in last month’s edition of Frontline Fallout that August would be a big month, as the impact of Visy’s acquisition in July of five glass factories, formerly owned by Ohio-based Owens-Illinois (O-I), was felt for the first time. However, he wasn’t quite expecting a 33% revenue uplift, given that O-I had turned over only $754 million in calendar 2019, dwarfed by about $7 billion of sales at Visy. The combined businesses had been forecast to turn over about $8.5 billion in calendar 2020, however, Mr. Pratt describes a multiplier effect that may see that exceeded.
China’s Ministry of Commerce has targeted Treasury Wine Estates, Casella, and Australian Swan Vintage as part of its dumping investigation into Australian wine exports, with the three companies given 37 days to complete “export questions”. The companies were formally advised of the move on Monday. Under China’s processes, a final decision on the level of any dumping duty would be imposed in 12 to 18 months’ time or by August 18 at the earliest next year.
The government then applies a weighted average of the duties charged against the three companies, which will apply to all Australian wine exports. The process is a lengthy one, as reflected by the department’s investigations into Australian barley in December 2018 before hitting it with 80% tariffs in May this year. The timetable puts some context into a perceived ramping up of tension between the two countries. While the three companies notified will do the heavy lifting for the Australian industry, others can participate. China is a crucial market for TWE, accounting for 17% of sales and 35% of its earnings.
And Amazon is primed for a pre-Christmas haul. Amazon Australia’s delayed Prime Day sale will arrive next month as the online shopping behemoth faces increasing competition from “a vanguard of Australian retailers that have struck new-found success online The sales event begins locally on October 13, but as the pandemic has continued, many Australian shoppers have become increasingly comfortable buying online from traditional bricks and mortar stores. Still, it won’t have it all its own way. Plenty of Aussie chains are increasingly competent at online sales. Chains such as JB Hi-Fi and Adairs have witnessed “stunning online growth” in recent months. Amazon also has to contend with local online marketplaces like Kogan.com.
The A2 Milk Company has cut 2021 sales and earnings guidance following a collapse in the daigou market in Australia due to COVID-19 restrictions. In a trading update on Monday, the company said it now expected December-half revenues of $725 million to $775 million, down from $807 million in the first half of 2020, and full-year revenues of $1.8 billion to $1.9 billion, compared with revenues of $1.73 billion in 2020. The earnings before interest tax depreciation and amortisation margin were expected to fall to 31% from 31.7% in 2020. The guidance implies full-year EBITDA between $558 million and $589 million – up from the $549.7 million achieved in 2020 but well below market forecasts around $662 million.
IFM Investors’ global head of infrastructure Kyle Mangini says the economics of renewable energy now “really stack up” after the investment group teamed up with commodities trader Trafigura Group to target $US2 billion ($2.9 billion) of global wind, solar and power storage projects. IFM. which manages $65 billion in infrastructure assets including Melbourne, Brisbane, Darwin, and Alice Springs airports, will save money by powering its assets with renewable energy. A new company, a 50-50 joint venture named Nala Renewables, has a “somewhat aspirational” target of investing $US2 billion in renewable projects over the next five years, Mr. Mangini said.
Telstra has released the details of its much anticipated 5G fixed wireless product, confirming it will use the fifth-generation mobile technology to deliver a high-speed broadband alternative to the national broadband network. The move, which will put Telstra in direct competition with the NBN, has raised the prospect of a dispute over a non-compete agreement signed by Telstra and NBN Co. Telstra’s “5G Home Internet” product, delivered over its mobile network through a wireless modem, will offer download speeds of between 50 and 300 megabits per second for $85 a month, with a monthly data allowance of 500GB.
The pricing and speeds mean it will offer similar value to the NBN’s 50 and 100 Mbps plans. Telstra said it would initially be an “invitation-only” launch, targeting customers in areas where 5G coverage is strong and fixed-line alternative is sub-par. Telstra said it would scale up the offer “as 5G continues to evolve and when millimetre wave is available”.
And that’s it for this week. And next week, I’ll be talking to Erin Brindley, National Programs Manager at Generation Australia on tackling the growing level of youth unemployment. And I’ll be talking to economist Nicholas Gruen about creating better models for forecasting, for economics, for coronavirus.
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.