I am Leon Gettler. My job is to review and monitor the week’s news in business, finance, and economics. I bring it all to you, every week.
This is episode number forty two in our series for 2019 and today’s date is Friday November 15.
First, I talk to Andrew Maclellan, the CEO of Bluechiip which has a technology that wirelessly tracks the identification and temperature of valuable samples – such as tissue, blood, serum and plasma – which are stored in harsh and aggressive environments like liquid nitrogen. The Bluechiip technology centres on a miniature chip with 52 mechanical beams of different lengths; all responding at different frequencies.
And I’ll be talking to CommSec chief economist Craig James about the week ahead in the markets.
But first, let’s talk to Andrew Maclellan.
In a heavily anticipated speech on the economy on Tuesday, President Donald Trump said the U.S. will increase tariffs on China in case the first step of a broader agreement isn’t reached. “If we don’t make a deal, we’re going to substantially raise those tariffs,” he said in a speech to the Economic Club of New York. “They’re going to be raised very substantially. And that’s going to be true for other countries that mistreat us too.” China is “dying” to make a trade deal with the U.S., Trump said, adding that he’d only sign it if it’s good for American companies and workers.
However, Mr. Trump said, “we’re close” to clinching a “significant phase one trade deal” with China. It “could happen soon, but we only accept a deal if it’s good for the United States, our workers, and great companies”. Taking what amounted to a verbal victory lap on the performance of the US economy, which remains one of his strongest political suits for re-election in 2020, Mr. Trump declared the “theft of American jobs and American wealth is over”. Noting the strength of consumers buoyed by employment and wages growth – which have kept economic growth positive, if well short of his pre-election promises of 4%, 5% or 6%– Mr. Trump hinted he would use that scope to press hard on trade.
The world faces a “relentless upward march” in greenhouse gas emissions from energy production and increasing strains on all aspects of energy security without dramatic changes in energy policy by countries around the globe. In findings that were immediately criticised as too conservative and out-of-touch by environmental groups, the respected International Energy Agency also cautioned in its global energy outlook on Wednesday that even when taking into account countries’ policy intentions and target, emissions fail to peak before 2040 and the world falls far short of sustainability goals.
The IEA found that the momentum behind clean energy, while significant, wasn’t enough to offset the impact of an expanding global economy and growing population and that hundreds of millions of people still would be without electricity in 2040, while pollution-related premature deaths would still be around today’s “elevated” levels. The bleak warnings come after energy-related emissions rose to a record last year because of a “remarkable” 2.3% growth in energy demand, boosted by hotter summers and cold snaps that drove an increased need for cooling and heating, the Paris-based IEA said in the closely watched annual report.
Chinese e-commerce giants Alibaba and JD.com reported a total of more than US$55 billion ($A80 billion) in sales on Monday midway through Singles Day, an annual marketing event that is the world’s busiest online shopping day. The sales are giving the Chinese economy a needed boost amid the US-China trade war Alibaba reported sales of US$1 billion in just over a minute. The day’s sales — the scale of which looks to set yet another record in its 11th year — was a temporary relief to retailers facing fading demand as Chinese consumers anxious over slowing economic growth and the tariff war with Washington tighten their belts. Held annually on November 11, China’s so-called 11.11 Global Shopping Festival is now larger than US equivalents Black Friday and Cyber Monday combined. That figure is equivalent to more than 80% of its US rival Amazon’s online sales.
Speculation is rife Australia is about to start printing money, as RBA governor Philip Lowe prepares to speak on quantitative easing. The RBA has confirmed that governor Philip Lowe will give a speech on unconventional monetary policies like quantitative easing (QE), the buying of government bonds to inflate the money supply. The speech titled ‘Unconventional Monetary Policy: Some Lessons from Overseas’ will be delivered at the annual Australian Business Economists (ABE) dinner in Sydney on 26 November.
Australian wages rose 0.5% in the September quarter 2019 and 2.2% through the year, according to figures released by the Australian Bureau of Statistics (ABS).
The NAB Monthly business survey showed a small improvement in the month with conditions edging up 1pt and confidence lifting 2pts – though both conditions and confidence remain below average. Mining, construction, finance, and recreation services all contributed to the monthly gain in business conditions. Manufacturing and transport were the largest detractors. Retail business conditions have been stable for the past few months but remain deep in negative territory
Roy Morgan Business Confidence dropped 4.6pts to 106.0 in October, putting it at its lowest level since the Federal Election in mid-May. The fall was heaviest in forward-looking indicators, with the largest decline concerning business prospects this time next year. Even so, a slim majority of businesses (50.4%) say the coming year is a ‘good time to invest in growing the business. The October 2019 Business Confidence level is 7.1pts lower than it was a year ago and 9.5pts below the long-term average of 115.5.
Australian retailers are in for a bleak Christmas. According to Deloitte’s annual Christmas Retailers Survey report positive sentiment is down re Christmas trading, in strong contrast to 2018, when they were approaching the season with a strong sense of optimism. Only 62% of retailers expect to see higher sales this Christmas compared to last year, down from 80% last year. Just under 40% are expecting to see some form of Christmas period margin decrease. 39% will be discounting pre-Christmas to help drive sales. Digital continues to be a standout, with 58% expecting to see a growth of 10% or more in online Christmas sales. Only 72% expect to see positive sales growth in the calendar year 2020, down from more than 90% for 2019.
The male-dominated finance industry is missing out on more than $700 billion a year in revenue by failing to listen to or tailor products for women, according to management consultancy Oliver Wyman. Many products that appear gender-neutral actually default to men’s needs, with wealth products in particular not consistently designed for women’s financial lives, the report said. For example, if insurers sold life policies to women at the same rate as to men, they could generate $500 million in new premiums, Oliver Wyman estimated. Women also tend to hold more of their assets in cash rather than stocks and bonds, costing wealth and asset managers a potential $25 billion in fees.
The problems are compounded by a lack of women in senior management in the finance industry. Just 20% of finance executives globally are women, up from 16% in 2016, the report said. The industry continues to grapple with many of the same challenges as it has in the past, including the mid-career gap that holds many women back, it said.
Another day, another set of quarterly results from the NBN Co, the company rolling out Australia’s broadband network, but little change from earlier quarters. For the first quarter of FY 2020, the company said it had recorded losses of $1.18 billion, compared to $875 million a year earlier. Revenue reached $876 million, an increase of 41% on the corresponding quarter a year ago.
Commonwealth Bank has confirmed it is facing seven separate class-action lawsuits as the Australian Institute of Company Directors calls for a tighter regulatory regime for companies funding actions brought on behalf of shareholders. CBA deputy chief executive David Cohen said the bank was facing seven class-action lawsuits, including three relating to its Colonial First State superannuation business two over its AUSTRAC money-laundering failures, and one in the United States relating to alleged interest-rate rigging. The bank agreed to provide specific details on the cases to the House of Representatives economics committee after Liberal MP Jason Falinski raised concerns about foreign litigation funders making huge returns on actions in Australia. The new political focus on class actions comes after a landmark decision by Justice Jonathan Beach in the Federal Court last month in a shareholder class action relating to Myer. The court found that investors who paid an inflated price as a result of misrepresentation could receive compensation without needing to prove actual reliance on the misrepresentation, a principle known as indirect or “market-based causation”.
Commonwealth Bank has bucked the trend of weakness that has pervaded the banking sector with a first-quarter cash profit to September 30 up 5% to $2.3 billion. The bank has not revealed any additional customer remediation in the update. The bank has so far provided for $2.2 billion in customer refunds and program costs.
National Australia Bank faces a multimillion-dollar penalty after admitting to 255 breaches of credit laws, as it looks to settle a lawsuit from the corporate cop over a scandal involving its use of mortgage “introducers”. In a case that was launched following scrutiny from the Hayne royal commission, the Australian Securities and Investments Commission (ASIC) in August took legal action alleging NAB broke credit laws in relation to 297 loans after referrals from unlicensed “introducers”
The weak advertising market has pushed Nine to downgrade its full-year earnings forecast and the media business is now expecting low single-digit growth. Nine chief executive Hugh Marks warned investors at the annual general meeting that despite confidence that the company will continue to gain market share in free-to-air television, the ad market remains challenging. In December last year, Nine completed a $4 billion merger with Fairfax Media. The deal brought in a 59% stake in real estate classifieds business Domain, the other 50% of streaming platform Stan it didn’t own, a majority stake in Macquarie Media, which it has now fully acquired, and publications such as The Australian Financial Review, The Sydney Morning Herald and The Age
And competitor Seven West Media says it expects its earnings before interest and tax to be at the lower end of its guided range between $190 million and $200 million. It also expected the metropolitan television market to be down mid-single digits for the financial year.
Floods in Queensland have hit Incitec Pivot’s profits. Incitec Pivot’s fiscal year net profit dropped to $152.4 million, from $207.9 million in the same period a year ago. The firm took $140 million of non-recurring items in the year, mainly related to flooding in north Queensland. Revenue climbed to $3.92 billion, from $3.87 billion.
Qantas has pledged to cut its net carbon emissions to zero by 2050, breaking ranks with its global airline peers at a time when aviation is under unprecedented scrutiny over its contribution to climate change. The Australian carrier will become the second airline group in the world to make a zero net emissions commitment, which it plans to achieve through fuel efficiency and the use of carbon offset schemes.
Qantas’ goals go beyond its previous pledge to cut emissions to half their 2005 level by 2050, which is in line with most other airlines and their global industry body. Qantas chief executive Alan Joyce said the goals would result in the airline group, including budget arm Jetstar, capping net emissions at their current level of about 12 million tonnes from next year and then cut it gradually over the next 30 years. Aviation contributes about 2% of the world’s carbon emissions and that is likely to grow as the number of people flying double every year between now and 2037, according to International Air Transport Association forecasts.
Elders says it can withstand the fall-out from the drought, and still make a solid return in tough times. The company says the drought in New South Wales and southern and western Queensland was impacting earnings in those areas, but the Elders business was diversified across geographies and products, and in a solid position to withstand the worst of it. The summer cropping season was likely to be down by about 30% but Elders expects the winter cropping season to be around average.
Businesses bidding for federal government contracts will have to disclose links to overseas tax havens, part of a plan by Centre Alliance to establish a public register targeting tax avoidance. Senate powerbroker Rex Patrick has introduced legislation requiring any federal procurement deal worth more than $4 million to be subject to new reporting requirements, following advice from the Tax Commissioner. For construction projects, a higher threshold of $7.5 million would apply.
BHP plans to expand in oil and gas after quitting a disastrous foray into U.S. shale, defying investors who want the world’s biggest miner to cast off the business. The company’s petroleum head said the business is set to deliver strong returns and cash flow through the 2020s and beyond, supported by high-potential projects in the Gulf of Mexico, Western Australia and Trinidad & Tobago.
Petroleum, which accounted for about 16% of BHP’s underlying earnings in 2018/19, could potentially generate margins of more than 60% over the next decade, Geraldine Slattery, President Operations Petroleum, told a briefing. Excluding the shale business, the company’s oil and gas arm has long had some of the strongest returns in the group’s portfolio, including iron ore, copper and coal. With projects awaiting approval, the division could support average annual volume growth of up to 3% in the decade to 2030, and deliver average internal rates of return for major projects of around 25%, she said at the company’s first petroleum briefing since 2016. Slattery says in a decarbonising world, deepwater oil and advantaged gas close to established infrastructure can offer competitive returns for decades to come
An office manager who ordered staff to carry bags of cash totalling $4.6 million to a Commonwealth Bank of Australia branch as part of an international money laundering operation has been sentenced to three years and two months in prison. Kit Tang, 42, had pleaded guilty in July to five charges connected to money laundering. Tang ran CC&B International, which purported to be a meat exporting business in Springvale, Melbourne. He was described as the “man on the ground” for siblings Billy and Connie Leung, who ran CC&B from their Hong Kong base.
And that’s it for this week. And next week, I’ll be talking to George Syrmalis, the CEO of iQ Group Global, a group of companies dedicated to developing early-stage bioscience assets. And then I’ll be talking to Indeed economist Callam Pickering, looking at the latest figures for Australia’s unemployment and wage growth.
And of course, I’ll be bringing you all the week’s news. In the meantime, you can find me on Twitter at talkingbizz, on Facebook, and on LinkedIn. And if you want, leave a comment. Have a great week, take care, be good and looking forward to bringing you Talking Business next week.